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May private foundation designate use of grant to church?

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May private foundation designate use of grant to church?

My husband and I have a small foundation and want to make a grant to our church for our at-risk youth mentor program. The pastor says I can’t specify where the money is to be used. Is that true?

There is no federal tax reason you can’t specify the use of your grant.  Foundations do that all the time.

The church may have its own internal policy against accepting restricted grants, but you don’t have to make the gift if you aren’t satisfied that it will be used for the charitable purpose you desire.  That’s the other “golden rule.”

If others are involved with church governance, you ought to talk with them.  The pastor may not have the last word on the subject, or may be convinced to change the position if others agree that the money would be valuable for an existing program.

Sunday, October 2, 2011


Perhaps this church knows about the Karoly case (gift to his church in Allentown PA directed to his own foundation which was not a 501c3, effectively turning a non-charitable transaction into a charitable transaction on the surface). It seems the church did nothing illegal, but Karoly is in trouble with the IRS. And if I were a member of that church I'd be feeling a mite uncomfortable... --C.M. via e-mail

I am not familiar with the case you cite, but as you describe it, the donor designated the gift for a non-charitable purpose outside of the church.  That is obviously different from designating it for a charitable use within the church. --Don Kramer

In a church where everyone should have a voice, it is perhaps unwise to "talk to others" about going against set policy.  This can create everything from hurt feelings to church splits.  Going against set policy sets new precedents which have been put in place for a reason.  If rules have been set up within the church that disallow specifying use of gifts, that should be honored.  If the rule needs to be changed, it should go before the entire church, not just a chosen few.  Talk with the pastor to see if this is possible, but don't go behind his back.  He is the leader.  Honor that. --B.E. via e-mail

Perhaps the pastor is confusing a grant with a Qualified Charitable Distribution from an IRA where the donor can't specify how the funds are used.

Don speculates that there may be a church policy against accepting restricted grants, but the writer does not know that is the case. The first step would be to clarify whether the church really does have such a policy. If they don't, then the pastor is in error, and that should be discussed with him. If they do, then Don's advice holds -- you don't make a donation unless you are sure it will be used for the purpose you intended. If the church wants to block itself out of this kind of cooperation, that is their choice.

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