Nonprofit Accounting Basics
Mission Trips and the IRS
An important part of outreach for many religious organizations are mission trips. It is an exciting opportunity for missioners to live into their faith by working in partnership with those they serve, be it across the state or across the globe. As spring approaches, the final planning for summer mission trips moves into high gear. Missioners and their churches have many important things to consider, not the least of which is how to properly account for the donations that go to support the trip. There are many questions about deductibility and specific issues that may be best brought to a tax accountant, however there are a few key questions that many people have (and that are often asked of the religious organization’s finance staff).
Is a contribution made by the mission trip participant tax deductible?
According to IRS Publication 526, “Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel.” So, payments by participants are deductible as charitable contributions if the trip involves "no significant element of personal pleasure, recreation, or vacation". This applies whether the trip expenses are paid directly by the participant (for example, purchasing a plane ticket) or indirectly by making a payment to the religious organization, with the organization paying the travel expenses.
Participants' payments can be reported by the organization’s finance staff on contribution acknowledgements. If the expenses are $250 or more, the acknowledgement should include the following:
- A description of the services provided by the donor (such as the purchase of an airline ticket for the trip)
- A statement of whether or not the organization provided the donor with any goods or services to reimburse the donor for the expenses incurred.
- A description and estimate of the value of any goods or services (other than intangible religious benefits) provided to reimburse the donor.
- A statement of any intangible religious benefits provided to the donor.
Is a donation made by someone not going on the trip tax deductible?
Another frequent question concerns the tax deductibility of donations made by someone other than the trip participant. Mission trips, especially ones that are overseas, can be expensive. Missioners are often encouraged to raise funds to support the trip by asking family and friends to support them. If the religious organization is the benefit of the donation (for example, Mike’s mother makes a donation to the church in support of the Youth Mission Trip), then the donation is tax deductible. If mom gives the money to Mike or to the church to specifically buy Mike’s plane ticket, then the deduction is not tax deductible.
Again, donations can be reported by the organization’s finance staff on contribution acknowledgements.
What if a donation is made to support a trip that my child (friend, partner, etc.) can no longer go on?
Based on the deductibility guidelines, a donation to the religious organization for a mission trip is a deductible contribution. It is not refundable if the donation was made because someone the donor knows is no longer able to participate.
So, what happens if the mission group has a sightseeing day or other non-mission work related time during the trip?
IRS Publication 526 is pretty clear about there being “no significant element of personal pleasure, recreation, or vacation in the travel” in order for a donation to be deductible. This means that most of the days of a mission trip must be essentially filled with activities directly related to the purpose of the mission. This does not mean that an afternoon tour of a museum during a mission trip makes the trip non-deductible. What it means is that the expenses surrounding the museum visit are not deductible. Religious organizations need to be mindful of this and should also be careful to disclose what is and is not deductible.
As mentioned above, if there are additional questions from either the organization’s standpoint or the donor’s standpoint, an accountant with specialized knowledge about the proper recording and treatment of charitable contributions should be consulted.