Benevolence: IRS Requirements & Best Practices

Church benevolence is a critical ministry expression that helps people in times of crisis, hardship, or unexpected need. In many churches, benevolence practices have simply been “the way things have always been done,” and it’s very common for churches to be unaware of the specific IRS requirements involved. Because benevolence often involves giving away tax-free funds, the IRS pays close attention to how these programs are structured and administered. Rules and interpretations do change over time, and there is no better moment than the present to ensure your church is aligned with current guidelines. A properly administered benevolence program not only protects your church’s 501(c)(3) tax-exempt status, it also preserves the tax benefits for donors and ensures recipients are not inadvertently taxed.


1. Benevolence Must Serve a Charitable Purpose

The IRS expects a church’s benevolence program to be rooted in its charitable purpose and to operate consistently with that purpose. Giving money to people experiencing hardship is generally considered charitable and not taxable income to the recipient, provided it meets IRS criteria. This type of support typically addresses basic needs like shelter, utilities, food, medical or transportation expenses. 


Key points:

  • Beneficiaries should be part of a broad charitable class (e.g., persons in financial distress). 
  • The church needs a written benevolence policy that defines eligibility criteria, documentation, approval processes, and allowable types of assistance. 
  • Contributions to a benevolence fund should not be earmarked by donors for a specific individual—doing so can jeopardize the deductibility of the donation and potentially the church’s exempt status. 

2. Documentation and Recordkeeping Are Critical

For IRS compliance and audit protection:

  • Maintain records of each benevolence request, including the nature of the need, supporting documentation (invoices, notices, etc.), and committee or board approval.
  • Keep benevolence funds separate from general operating funds with proper accounting and tracking. 
  • Record disbursements directly to service providers (e.g., landlords, utility companies) when possible. This helps ensure assistance is tied to a bona fide need rather than a direct cash transfer. 

3. Tax Treatment of Beneficiaries

General rule (Non-employees):

Benevolence payments to individuals who are not employees or staff, and who meet the church’s criteria for financial need, are typically not taxable income to the recipient and do not require a Form 1099. 

Key IRS compliance considerations:

  • The IRS does not treat bona fide benevolence given to needy individuals as taxable income when it is clearly documented and meets the qualifying criteria.  

4. Benevolence to Church Staff and Employees

This is one of the most important areas for compliance, and the IRS has clear rules:

  • Benevolence payments made to current staff members are treated as taxable income. These payments must be included on the employee’s Form W-2 (for employees) and subject to appropriate withholding, just like wages. 
  • It does not matter whether the church pays the money directly to the staff member or pays a third party on their behalf—if the person is a church employee, the IRS treats it as compensation. 

Why this matters:

The IRS is particularly cautious about preventing nonprofit organizations from using benevolence as a way of compensating staff without reporting and withholding payroll taxes. 


Exception – Qualified Disaster Relief:

Under Internal Revenue Code Section 139, certain disaster relief payments can be tax-free to individuals (including employees) if they are made to cover reasonable and necessary expenses related to a federally declared disaster. However, this is a special exception and comes with specific requirements in IRS Publication 3833. 


5. Internal Revenue Code and IRS Guidance References

For churches administering benevolence programs, these are the most relevant IRS references:

  • IRS Publication 1828 – Tax Guide for Churches & Religious Organizations provides an overview of tax rules applicable to exempt religious organizations. 
  • IRS Publication 3833 – Disaster Relief: Providing Assistance Through Charitable Organizations details requirements for disaster and emergency hardship relief, including when tax exemptions apply under IRC Section 139. 
  • IRS guidance regarding churches and 501(c)(3) exemption rules reinforces that charitable distributions must align with exempt purposes and not provide undue private benefit. 

6. Best Practices Summary

To protect your church and your benevolence ministry:

✔ Establish and follow a written benevolence policy. 

✔ Define the charitable class you intend to serve. 

✔ Keep detailed documentation on needs and disbursements. 

✔ Pay vendors directly when possible. 

✔ Treat all benevolence to employees as taxable wages. 

✔ Understand qualified disaster relief exceptions via IRC Section 139.