Year End Processing

The month of December can be a time where churches receive a variety of checks…blank, predated and postdated. Should the church treat these checks as charitable contributions? If so, as of what date? The information below should assist leadership in determining what checks to accept, and what calendar year contribution credit should be given.

Blank checks

A blank check is a check that is complete in all respects except for the designation of a payee. The person issuing the check specifies the date and an amount, and signs the check, but does not identify a payee. Occasionally a church will receive a blank check in the offering or in the mail. This can occur for a number of reasons. Some church members may simply forget to complete the check. Others may assume that the church will insert (or "stamp") its name as payee, so why bother? Can church members claim a charitable contribution deduction for a blank check? Possibly not. Consider the following example.

Example. A husband and wife claimed a charitable contribution deduction on their tax return for contributions they made by check to their church. The IRS audited the couple’s tax returns, and questioned the contributions. The couple attempted to substantiate their deductions with canceled checks and carbon copies of checks from their two personal checking accounts on which they left the payee lines blank. The Tax Court ruled that "because these canceled blank checks fail to list [the church] as the donee, these checks do not establish" that the couple made tax-deductible charitable contributions to the church.

Canceled checks may be used to substantiate charitable contributions of less than $250. This case suggests that persons who make contributions of blank checks to their church may not be entitled to a charitable contribution deduction--unless the church immediately prints or stamps its name on the payee line of each check.

Predated checks

Can a member who contributes a personal check to a church during the first worship service in January claim a contribution deduction for the prior year by simply "predating" the check as December 31 of the prior year? Many churches advise their congregations during the first one or two worship services in January that checks can be credited to the previous year if they are dated December 31st of the previous year. This advice is wrong and should not be given. The income tax regulations specify that "ordinarily, a contribution is made at the time delivery is effected. The unconditional delivery or mailing of a check which subsequently clears in due course will constitute an effective contribution on the date of delivery or mailing."

According to this language, a check dated "December 31" of one year but physically delivered in January of the following year is deductible only on the donor’s federal tax return for the current year (the year the check was delivered). This is so whether a donor "predated" a check to read "December 31" or in fact completed and dated the check on December 31 of the previous year but deposited it in a church offering in January of the following year.

The only exception to this rule is a check that is dated, mailed, and postmarkedin December of the previous year. The fact that the church does not receive the check until January of the current year does not prevent the donor from deducting it on his or her federal tax return for the previous year.

Postdated checks

Churches occasionally receive a postdated check. A postdated check is a check that bears a future date. For example, Frank writes a check for $100 on March 1 that he dates April 15. Such checks often are received at the end of the year when some donors decide they will be better off for tax purposes if they delay their contribution until the following year. Other donors make gifts of postdated checks before leaving on an extended vacation or business trip.

A postdated check is treated like a promissory note. It is nothing more than a promise to pay a stated sum on or after a future date. It is not an enforceable obligation prior to the date specified. Since a postdated check is no different than a promissory note, it should be treated the same way. If someone issues a note to a church, promising to pay $1,000 over the next year, no charitable contribution is made when the note is signed (assuming the donor is a "cash basis" taxpayer). Rather, a contribution is made when the note is paid. Until then, there is only a promise to pay. Like a promissory note, a church ordinarily should simply retain a postdated check until the date on the check occurs. There is no need to return it. A bank may be willing to accept such a check for deposit before the date on the check has occurred, with the understanding that the funds will not be available for withdrawal.