Correct Payee in church donations

I'm a fairly new ward clerk. A counselor in the bishopric has told me that we should encourage members to write checks to the local unit, not "The Church of Jesus Christ of Latter-day Saints." He says it has something to do with the IRS. Can anyone help me understand the implications, if any, of accepting checks written to the church? I've never seen a check rejected by the bank because of it, but I've also always heard that writing checks to the unit is what should be done.

mlindquist wrote:I'm a fairly new ward clerk. A counselor in the bishopric has told me that we should encourage members to write checks to the local unit, not "The Church of Jesus Christ of Latter-day Saints." He says it has something to do with the IRS. Can anyone help me understand the implications, if any, of accepting checks written to the church? I've never seen a check rejected by the bank because of it, but I've also always heard that writing checks to the unit is what should be done.

I'm not a lawyer, and I don't see what it has to do with the IRS.

It seems to me that the main reason checks should be made out to the local unit is that the bank account where the donations are deposited is in the name of the local unit, not the name of the Church (in the case of deposit concentration, the technical details are somewhat different, but the name of the Church is still never involved). In general, banks have no obligation to accept a check made out to a different payee from the name on the depository account; in fact, they subject themselves to some risk if they do so. I've seen banks accept checks made out to the Church, to the BSA, and even to the bishop, but that doesn't make any of those right. It also doesn't mean that banks will always accept checks made out to the wrong payee.

So if a ward accepts checks made to a payee other than the ward, they are taking on some risk that the check will be refused by the bank. There's no need for that risk.

This is a question I had asked years ago, long before the new Handbook was published. Since I do not have Handbook 1 readily available I cannot check it. I checked Handbook 2 and there is nothing mentioned there. It may not be in the Handbook but I do recall reading somewhere about this. From what I recall the instructions depended on the type of bank account being used. For units using a concentration account one of three payees was acceptable - the name of the Church, the unit name, or a combination of the two such as "LDS Church - [unit name]". For deposit accounts the name on the account (unit name) was the only acceptable payee.

Side information -[INDENT]The issue with concentration accounts is U.S. authorities (IRS, Dept of Justice, Dept of the Treasury, State Dept, etc.) scrutinize these accounts due to the possibility of money laundering. This is generally not an issue for the Church since detailed records of deposits are maintained for inspection and the source of the funds is readily identifiable. As long as the Church or units of the Church are listed as payee for deposits then there is little issue with U.S. authorities.
[/INDENT][INDENT]In the U.S. banks normally will accept as payee for a concentration account any name that is provided on the concentration agreement. For Church deposits in the U.S., bank local branch offices verify payees listed on a deposit authorization letter. Both the Church's name and the unit's name appear on the deposit authorization letter on file with the branch office to which the deposits are made. The Church is the owner of the concentration account and the ward/branch is a deposit agent of the Church.
[/INDENT]

In the UK we have been told that we should use the full name of the church on any cheques and that we should expect any alternatives to be rejected by the bank. The UK does use a concentration account.

Handbook 1, 14.6.1 gives the answer: checks should be made out to the local unit, not the church. But it doesn't say what to do if the check is made to the church. I've never had problems with depositing it, or accepting it for deposit when I worked in a bank. If they're made out to the bishop, I try to have him sign over his *tips* before submitting them.

allenjpl wrote:If they're made out to the bishop, I try to have him sign over his *tips* before submitting them.

This is not a good practice. Any checks not made out to the Church or the unit should be returned and instructions given to the donor for completing a valid donation.