Giver Restrictions or Giver Preferences

In charitable giving, there is a distinction between a giver’s restriction and a giver’s preference. This distinction can make a difference between the giver’s eligibility for a charitable tax deduction and no tax deduction.

Although most giver-preferenced gifts are for a specified purpose or project and, therefore, are temporarily restricted, the preferencing of a gift does not dictate whether the gift is unrestricted or restricted. When a gift is preferenced to support a particular worker, the preferencing, instead of a restriction, may qualify the gift for a charitable tax deduction, but other factors must be reviewed to determine whether the gift is unrestricted or restricted for accounting purposes.

Example 1:  Accompanying a gift, a donor communicates: “My preference is that the gift be used for scholarships. However, I give the charity permission to use the gift for any exempt purpose consistent with the ministry’s mission statement.” This gift is an unrestricted gift because the ministry has full discretion as to the use of the gift.

Example 2:  A prayer letter or appeal letter from a ministry that conducts works in several countries describes the need for religious workers in India. The request is for funds to enable a particular worker employed by the ministry to carry out certain work in India. A gift in response to this appeal is temporarily restricted for the ministry’s program in India and the gift is preferenced to support a particular worker.

Donor restrictions. A giver’s restriction on a gift limits the ministry’s use of the funds to the purposes specified by the giver, e.g., “This gift is made on the condition that,” or “This gift is restricted for XYZ project.” This type of gift is generally tax-deductible as a charitable contribution.

It may be inappropriate for a ministry to accept a gift if:

  • the restrictions prevent the ministry from using the donation in the furtherance of its charitable purposes. For example, if a giver restricts a gift for the benefit of a specific individual in a way that prevents the ministry from exercising discretion and control over the gift (such as a gift restricted for a particular benevolent recipient, an employee of the ministry, etc.), the gift is generally not deductible as a charitable contribution.
  • the restrictions are incompatible with the mission of the ministry. Even though a restricted gift is exclusively charitable, it would be inappropriate for a ministry to accept a gift requiring the expenditure of funds outside the mission of the charity. For example, if a ministry with the sole purpose of international child sponsorship is offered a gift restricted for inner-city evangelism in the U.S., the gift should not be accepted by the ministry because it is inconsistent with the mission of the ministry (the overall mission of the ministry is generally described in the ministry’s governing documents).
  • the restrictions mandate that the funds be used in part for the benefit of the giver’s relatives. By requiring that part of a gift be used to benefit the giver’s relatives, the restriction results in the gift being used for noncharitable purposes, and therefore does not qualify as a charitable contribution.
  • the restrictions are at odds with the best interests of the ministry. A restricted gift could be exclusively charitable and compatible with the mission of the ministry and still not be in the best interests of the ministry. A ministry might not have the capacity to comply with gift restrictions. For example, the amount of funds raised for a particular disaster may exceed the ministry’s capacity to effectively spend the funds in a reasonable period of time.

Alternatively, the administrative requirements of a restricted gift could consume an inordinate amount of the ministry’s resources. For example, the gift of a time share property could be offered to a ministry. However, the ministry may decide the time share is not in the best interest of the ministry because (1) time shares are often unmarketable properties laden with annual costs, and (2) even when sales are made, the low resale market prices can minimize or erase profits.

Donor preferences. A giver’s preference communicates a desire or suggestion which is advisory in nature. A desire or suggestion does not restrict the use of the gift and allows the ministry full discretion to use the gift in relation to the desire or suggestion or use the funds for any other purpose. Factors that imply a ministry has received a giver-preferenced gift and not a restricted gift include the following:

  • The giver intends to only express a desire or make a suggestion with respect to a gift.
  • Both the solicitation letter and response form (and perhaps the gift acknowledge­ment) from the ministry clearly communicate to the giver that preferenced gifts are sought. Materials include statements such as: “We appreciate your suggestion as to the use of the funds. While we will endeavor to use the funds as you desire, we may use the gift for another purpose.” This is very different from the statement: “Gifts made to our ministry are under the discretion and control of the ministry.” All gifts must be under the discretion and control of the ministry so making that statement does not turn an otherwise giver-restricted gift into an unrestricted gift.


  • The giver communicated in writing or verbally a desire or suggestion as to the use of the funds, but the giver did not restrict the funds to a certain purpose.

The right of the ministry to redirect restricted gifts should be based on an explicit contingency policy in the event a restriction cannot be fulfilled. It is inconsistent for internal policy and records to treat gifts as preferenced when the solicitation literature and giver expectations indicate gifts will be restricted for specified purposes and the charity fails to explicitly disclose that the gifts may be redirected and used for any exempt purpose.

If the giver preferences a gift, even when the preference is for the funds to go to a particular individual, the gift may qualify for a charitable tax deduction if the ministry exercises adequate control with respect to the gift. For example, a gift restricted for missions and preferenced for missionary endeavors involving a certain identified individual or a gift for benevolence preferenced for a particular benevolent recipient may qualify for a charitable tax deduction if the ministry exercises adequate control related to the gift.

Some ministries tell givers not to place the name of a preferenced worker on the memo line of the giver’s check. This practice may send an inappropriate message to givers—e.g., improperly implying that hiding information from the IRS is an acceptable or desirable practice. If a giver wants to use the memo line on the check to indicate a preference to support the work of a particular individual (preferenced for the ministry of Jill Smith), this should be no more problematic for IRS purposes than checking a box on the response form which contains similar wording.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.