Short-Term Mission Trips

Ministries may fund short-term mission trips in a variety of ways. First, a sponsoring organization can pay part or all of a trip’s expenses from the ministry’s general budget. Second, trip participants can cover a trip’s costs directly without any financial involvement of the sponsoring ministry. The most common approach, however, is for supporters (trip participants or other givers) to fund a short-term trip through charitable gifts to the sponsoring ministry. These gifts may be restricted by givers for a particular trip or project conducted by the sponsoring ministry. Givers may also indicate a preference to support the work of an individual trip participant, but givers who restrict gifts for specific trip participants jeopardize the tax-deductibility of their charitable contributions.

If a giver makes a single contribution of $250 or more towards short-term mission trip expenses, the giver must have—and the ministry should provide—a written contemporaneous acknowledgment.

Funding from the Sponsoring Ministry’s General Budget

Expenses related to short-term mission trips may be funded in full by the sponsoring ministry. This use of funds from the sponsoring ministry’s general budget is appropriate if short-term mission trips are consistent with the ministry’s tax-exempt purposes.

Funding Directly Expended by the Trip Participant with No Financial Involvement of the Sponsoring Ministry

A participant in a short-term mission trip may partially or totally fund trip expenses by making direct payments for airfare, lodging, meals, and other expenses. If a trip is sponsored by a ministry, the trip is consistent with the tax-exempt purposes of the ministry, and there is no significant element of personal pleasure, recreation or vacation,[1] expenses related to the trip are generally deductible as charitable contributions on the taxpayer’s Schedule A, Itemized Deductions. The deduction will not be denied simply because the taxpayer enjoys providing services to the ministry.[2]  Personal expenses related to “side-trips” or vacation days unrelated to the mission trip included in the trip are generally not deductible.

Funding Based on Gifts for the Trip But with No Preference for Any Specific Trip Participant

Givers may make gifts restricted for a short-term mission trip. Gifts for the trip could be solicited by the ministry, or the giver might make an unsolicited gift. These gifts generally qualify as charitable contributions, and it is appropriate for the sponsoring ministry to provide a charitable gift acknowledgment.

If a ministry accepts gifts that are giver-restricted for a short-term mission trip, the ministry is obligated to spend the funds for the intended purpose.

It is true that a giver can change the gift restriction by redirecting the gift for another specified purpose or unrestrict the gift. This scenario presumes the donated funds have not already been expended or obligated for the mission trip.

Additionally, a ministry can establish, and disclose with gift solicitation information, a board policy regarding the possible redirection of giver-restricted gifts if a mission trip event is canceled or oversubscribed (more funds are received than needed).

Funding Based on Gifts Preferenced for Particular Trip Participants

Generally, mission trip participants are responsible for soliciting gifts to cover part or all of the expenses necessary for the particular trip.

When mission trip participants raise part or all of the funds required for a trip, the sponsoring ministry generally accounts for the amounts preferenced for particular participants. This process allows the ministry to monitor whether sufficient funds have been raised to cover the expenses for each individual’s trip.

There is generally no basis for refunding gifts when the individual for which gifts have been preferenced does not go on the trip. Refunding gifts demonstrates that the sponsoring ministry does not have adequate discretion and control over the gifts and may raise a question of the tax-deductibility of the gifts.

When a worker or a volunteer (a short-term mission trip participant typically qualifies as a “volunteer”) raises some of his or her own support, the IRS has suggested the following two tests to determine whether a tax-deductible contribution was made to or for the use of a ministry, or whether the gift was a nondeductible, pass-through gift to a particular individual who ultimately benefited from the contribution.[3]

  1. The intended benefit test. The purpose of this test is to determine whether the contributor’s intent in making the donation was to benefit the ministry or the individual.

    The IRS has formally indicated that ministries should avoid the use of conflicting language in their solicitations for contributions and conflicts in understandings between the parties. This is to demonstrate that:
  1. The ministry has exercised the necessary control over contributions;

  2. The giver has reason to know that the ministry will have the necessary discretion and control over contributions; and

  3. The giver intends for the ministry to be the actual recipient of the contributions.

The authors recommend the following statement be used in solicitations for contributions:

Contributions are solicited with the understanding that [insert name of sponsoring ministry] has complete discretion and control over the use of all donated funds.

  1. The discretion and control test. The IRS uses the phrase “discretion and control” to indicate a ministry’s obligation regarding charitable gifts. The IRS has stated that ministries receiving funds for the support of mission endeavors can demonstrate discretion and control with the following factors:

    1. Reimbursement of legitimate ministry expenses are approved by the ministry, consistent with the governing body’s guidelines. Reimbursement should be set by considerations other than the amount of money collected by the individuals who raise funds.

    2. Potential trip members are screened according to qualifications established by the ministry.

    3. Trip members are given meaningful training, development, and supervision.

    4. The ministry assigns trip members to programs and project locations based upon its assessment of each individual’s skills and training, and the specific needs of the ministry.

    5. Giver acknowledgments communicate the ministry’s full discretion and control over its programs and funds.

    6. Since the ministry should not accept contributions restricted to or for a particular person, communication by potential trip participants to potential givers should not indicate otherwise. A giver may indicate a preference that the ministry use a gift to support a certain individual’s trip, and the ministry may track the dollars based on that preference. However, the ministry and the potential trip participant should refrain from any inference that the contributions will be paid as expenses to or for a particular worker.[4]

Even if the intended benefit and discretion and control tests are met, there may be charitable tax-deductibility issues based on the age of trip participants (see Scenario 2 below), ministry authorization, and the pursuit of pleasure or personal gain. Two potentially tax-deductible scenarios follow.

Scenario 1:  Trip participants are adults. These two examples illustrate different funding patterns when trip participants are adults:

  • Participants contribute to the ministry to cover part or all of the trip expenses. The payments by the participants to the ministry are deductible as charitable contributions if the trip involves no significant element of personal pleasure, recreation, or vacation. These trip contributions may be acknowledged by the ministry as charitable contributions.

  • All trip expenses are paid by the ministry, and non-participants make contributions to cover trip expenses. If the ministry has pre­authorized the mission trip, the trip furthers the exempt purposes of the ministry, and if the trip involves no significant element of personal pleasure, recreation, or vacation, then gifts to cover the trip expenses are generally tax-deductible, even if the givers indicate a preference that gifts be applied to the trip expenses of a particular participant.

Scenario 2:  Trip participants are minors. If a trip participant is a minor, the minor must actually provide ministry services to carry out the tax-exempt purposes of the trip. The minor’s age and development may be important factors in determining the minor’s capability of providing services to the ministry.

If parents, relatives, and/or friends contribute to the ministry with a preference for a child’s trip expenses and the ministry pays the trip expenses, these contributions are generally tax-deductible, assuming the minor significantly contributes to the ministry purposes of the trip.

Funding Based on Gifts Restricted for a Particular Trip Participant

A giver may express a preference for a particular trip recipient, but if a giver expresses a restriction for a certain trip recipient, the gift is generally an earmarked gift. Therefore, the gift may not qualify for a charitable deduction and should generally not be accepted (or not acknowledged as a charitable gift if accepted).

Sponsors of short-term mission trips generally should not accept gifts earmarked for individuals because the gifts are not consistent with the ministry’s tax-exempt purposes. An earmarked gift is a transfer that is intended to benefit an individual, not the ministry (“for Joe Smith’s trip costs”). It is a transfer over which the ministry does not have sufficient discretion and control.

Accounting for Short-Term Mission Trips

Gifts that qualify for the issuance of charitable gift acknowledgments by a ministry should be recorded as charitable gift revenue by the sponsoring ministry. If earmarked gifts are accepted by the sponsoring ministry, the amounts should generally be treated as agency funds and reflected as a liability on the ministry’s statement of financial position.

Some sponsoring ministries initially record gifts preferenced for particular trip participants as a liability until the trip is complete and then reclassify the transaction as a charitable gift. This is done in an effort to justify any refunds for gifts preferenced for potential trip participants who did not go on the trip. This practice is inconsistent with the need to exercise discretion and control over the gifts and can jeopardize the tax deductibility of the gifts; therefore, the practice is not recommended.

Gifts for short-term mission trips will generally qualify for recording as donor-restricted revenue. This is because a short-term mission trip usually represents a purpose that is more specific than the broad limits imposed by the ministry’s purpose and nature.

 

[1] I.R.C. § 170(j). IRS Publication 526 further explains that a trip participant can take a charitable contribution deduction for travel expenses only if he or she is “on duty in a genuine and substantial sense throughout the trip.” A deduction will not be allowed for a trip participant with only nominal duties or no duties at all for significant parts of a trip.
[2] IRS Publication 526, Charitable Contributions, 5.
[3] IRS Publication 526, Charitable Contributions, 5.
[4] Letter from IRS, Exempt Organizations Division, January 2000. See also Shoemaker, “Donor Control.

 


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.

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