Soft credit is a way to make a note that a Donation credited to one Donor record was caused by another Donor. It is especially useful in situations where there is no Pledge Campaign involved. It is primarily used for the most complex giving scenarios and it impacts some of the largest and most sophisticated givers at the church.
Soft Credit Donations will appear on the Donating entity's statement. Therefore, they will not display on the Standard Contribution Statements for the Soft Credit Donor.
Crediting Soft Donors
The Donation Distribution supports a Soft Credit Donor field for setting a Donor that receive soft credit for the Donation.
Donors Who are Always Soft Credited
Some companies/organizations may send the church a check and each check may need to soft credit different donors (for example, employer charitable giving matching programs). Some companies/organizations may be tied very closely to a Donor (for example, a family foundation), so it is realistic to have a rule that says "always soft credit donor x when donor y gives." Either way, soft credit is the right answer to link back to the Donor who initiated the gift even though that initiating Donor shouldn't have the gift on their statement. This is particularly true in situations where there is no Pledge to credit.
Soft credit is not related to Pledge credit even though they serve a similar function of indicating a 3rd party was involved. Set the "Always Soft Credit" on the Donor record for a routine that runs daily to ensure any Donation Distribution by that donor is soft credited to the initiating Donor listed under Always Soft Credit. Always Soft Credit is a pick list of Donors.
Applying Multiple Soft Credit Donors to a Single Donation Record
To apply multiple Soft Credit Donors to a single Donation, create multiple Donation Distributions, one for each Soft Credit Donor (even if each Donation Distribution is for the same Program). For example, ABC Company makes a Donation of $400 to the Operating Fund. $100 of that is based on the request of their employee (and your attendee), Jane Smith. The remaining $300 is based on the request of their employee (and your attendee) John Jones. The Donation would be credited to ABC Company, with two Donations Distribution, both to the Operating Fund Program, one with Soft Credit of Jane Smith, and the other with Soft Credit of John Jones.
Creating and assigning multiple Donation Distributions to Soft Credit Donors may be completed in the Platform or Batch Manager Manager.
Handling IRA Donations
Withdrawals from traditional IRA accounts are taxed unless the withdrawn funds are donated directly to charity. However, IRA accounts differ in both account types and age restrictions; together these two factors determine whether a withdrawal is taxed. Special consideration should be given to how your church will handle these donations.
In regards to recording an IRA Donation in MinistryPlatform, a church can:
- Credit the brokerage firm and give soft credit to the Donor (assuming the Donation was most likely not taxed).
- A year end contribution statement can be sent to the brokerage firm "Donor" at the church's discretion or provided upon request.
- or, Create a Program (fund) for "IRA Distribution" and assign Donations accordingly.
- If the "IRA Distribution" Program is set as tax deductible = True, Donations will appear on the Donor's year end contribution statement.
- If the "IRA Distribution" Program is set as tax deductible = False, Donations will not appear on the year end contribution statement.
- A year end summary (e.g. Selected Donor Donation Listing report) can be sent to the Donor at the church's discretion or provided upon request.
- Or, a per Donation acknowledgement (e.g. Selected Donation Letter) can be sent to the Donor at the church's discretion or provided upon request.
- or, Create a Payment Type for "IRA Distribution" that, like the Non-Cash/Asset payment type, has Omit Amount On Statement = True and assign Donations accordingly.
- This will display these type Donations on the Donor's year end contribution statement as going to the desired Program, but with a $0 value.
Churches who include all IRA Donations on their statements in any form place the responsibility on the Donor to report this Donation correctly given their own age and IRA account type. We recommend that such Donations be given a memo stating this (i.e. that it is the responsibility of the Donor to determine if their IRA withdrawal is tax deductible or not) and a statement be used that includes the memo column.
Note: This does not constitute tax advice. Please consult a tax professional to determine the appropriate approach for your specific church and scenario.
When not to Use Soft Credit
- Soft Credit is not the right choice for "payroll deductions" where the employer sends the church a check on behalf of their employees. In this case, the employer is merely a conduit. The employer will not issue the employee a statement. In this particular situation, we recommend making explicit actual donations on the employee records. The most common case will be when your church is the employer who is doing this for your own employees.
- Soft Credit is not an alternative to putting "Non-deductible" donations in MinistryPlatform. If someone makes a gift that must credit a Pledge, but is not to have an explicit amount calculated into their statement total, then this is a Donation that should either be distributed to a Non-deductible Program or it should be a "Non-cash/Asset" donation.
