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    3. Personal Income

    A. Definition—Personal income is salary, hourly wages, tips, commissions, allowances, benefits, individual profits from a business or professional operation, investment income, pension benefits and inheritances, to name only a few. In some cases gifts and services should be included. (Succeeding Guidelines provide additional information regarding these components of personal income).TithPG 22.4

    B. Gross Income—Tithe should be computed on the gross amount of a wage or salary earner’s income before legally required or other employee authorized deductions. This includes federal and state income taxes which provide for services and other benefits of responsible citizenship. Contributions to Social Security may be subtracted—See Guideline III-F.TithPG 22.5

    Notes: Through the years the Seventh-day Adventist Church has taken the position that members should return tithe on their gross personal income before deductions for Social Security, federal and state income tax, etc.TithPG 22.6

    Back in 1879, writing in The Review and Herald, James White made the following comment: “Does the word income mean the gross income of all that comes into one’s hand ...or does it mean net income?” ...After carefully reviewing the subject from all points, we answer, A tithe of all our income. This does not mean a tenth of our annual increase of property after the cost of food and clothing, and other expenses are paid, but that nine parts of our income are to meet all these expenses, while a tenth of our income is the Lords. July 31, 1879.TithPG 23.1

    The General Conference Committee studied this matter at the 1943 Annual Council and the following recommendation was approved: “We advise all our believers that according to our best knowledge we should adhere to the principle under which this denomination has carried forward its work from the early days, and not permit income tax or any other expense from the salary to affect that portion reserved by God for Himself. This would mean the paying of the tithe on the full salary and earnings before any deduction and payment has been made by way of income taxes.”TithPG 23.2

    In an article entitled, “Should the Total Salary be Tithed?”, Elder O A Troy Sr., clearly expressed the position of the church in these words:TithPG 23.3

    “Israel gave the tithe of their increase—whether from the herd or from the field. If the herd increased by ten head of cattle, the tenth animal belonged to the Lord. It was His without any deductions being made. If the income from the field was one hundred bushels, ten bushels belonged to the Lord. This was given to the Lord without any deduction of any kind. (Leviticus 27:30).

    “As Seventh-day Adventists, we have followed this principle in respect to tithing our salaries. Whenever we have received our salaries—daily, weekly, or monthly—we have set aside the tithe as the Lord’s, and have taken it to the storehouse of the Lord, the church. From the remaining nine-tenths we have paid our house rent or payments, food, clothing, taxes, et cetera. That has been our time-honored practice.

    “In recent years, however, as a convenience and as an aid to accuracy, our government has arranged to deduct its tax at the source of our salary. While one may not have as much money in his hand at the end of the week or month, this method does not change the actual amount of salary the individual earns. Essentially his income is the same whether taxes are taken out at the source of the income or paid at a later time.

    “In this connection it is well to note that the government computes the tax to be paid on the basic salary of the wage earner. And although Social Security and other deductions may be made by the employer, the government calculates its percentage on the original base salary. As stewards of God, can we be less faithful in our financial relationship with God than we are with the government? God’s admonition to us is, ‘Honour the Lord with thy substance, and with the firstfruits of all thine increase.’ So as stewards of the Lord’s possessions, we should take out all His portion as soon as it comes into our hands.” R&H, Feb. 7, 1957.

    Certain taxes, such as federal, state and county income tax, are withheld from the salary of wage earners. Other taxes, such as sales, property, and auto, are paid directly by the individual. Even though we do not always approve of the way government at various levels spends tax revenues, we do receive many helpful services from them. These taxes have practically first call on our income and constitute a significant part of our living expenses.TithPG 24.1

    C. Business & Professional Profits—In determining personal income from businesses or professions, accepted accounting procedures applied in a consistent manner from year to year should be followed. The net profit of a personal or closely held corporation used by a profession or business is also personal income.TithPG 25.1

    D. Allowances and Benefits—Allowances and benefits generally fall into two areas: Those provided for the purpose of increasing income and those provided to carry out job requirements. Allowances and benefits are personal income to the extent that they are not offset by actual job-related expenses.TithPG 25.2

    Notes: In addition to hourly wages or a salary, most organizations provide allowances and benefits to their employees. Most of these allowances and benefits are for the personal benefit of the employee and constitute another form of remuneration. Some allowances, however, are provided to cover the expense of carrying out job assignments.TithPG 25.3

    Some job-related allowances are provided as a flat monthly amount. These do not constitute personal income except to the extent that the allowance exceeds the job-related expenses. Example: An employee receives a travel allowance of $300 per month. His expenses during a certain month amount to $250. During that month he would realize personal income of $50 on the travel allowance.TithPG 25.4

    Many organizations, including the Seventh-day Adventist Church, reimburse their employees for the additional expense that they incur because they use their personal automobiles in their employment. Such compensation, if based on the actual miles driven, does not constitute personal income. Reimbursement for other job related expenses, such as motel and airplane tickets, does not constitute personal income.TithPG 25.5

    E. Non-Cash Benefits—Benefits received, such as employer-provided free housing and the personal use of an automobile, constitute personal income to the extent a reasonable value is determined. Other benefits, such as employer contributions to Social Security and the company’s pension plan, payments to Worker’s Compensation, and unemployment insurance, do not constitute personal income until benefits are received from these provisionsTithPG 26.1

    F. Retirement Programs—Payments by individuals or amounts withheld from wages for retirement programs, such as Individual Retirement Accounts, Tax Sheltered Annuities, or other retirement plans, including Social Security, does not reduce personal income. When one begins to receive benefits from such retirement plans, an amount equal to the personal contributions can be subtracted before one begins to return tithe on the benefits received. An exception may be necessary for Social Security, as no record is maintained of the accumulated amount withheld or paid by individuals over the years.TithPG 26.2

    Notes: It is recognized that it is a difficult task to keep records or to obtain information regarding contributions to Social Security over a period of up to 40 years or more. Because of this difficulty many members tithe the full amount of remuneration before deducting payments made for Social Security coverage, and upon receiving Social Security benefits have tithed the total amount of the retirement benefits received. Members may consider two other options as listed:TithPG 26.3

    1. Return tithe on the amount of remuneration in full before deducting payments made for Social Security coverage, and upon receiving Social Security benefits begin to tithe the benefits after the total amount of payments made for Social Security coverage tithed in previous years has been recovered.TithPG 26.4

    2. Return tithe on the amount of remuneration after deduction of payments made for Social Security coverage, and upon receiving Social Security benefits begin to tithe the benefits immediately on the total amount of the retirement benefits received.TithPG 27.1

    In relating to Social Security, members should keep in mind that Social Security is not only a retirement plan but also includes the following income components: Disability benefits and widow and dependent children benefits.TithPG 27.2

    G. Insurance Benefits—There are two basic types of insurance policies available to individuals: 1. Those that provide protection against potential catastrophic losses or expenses, and 2. Those that safeguard future income. Payments received from the first type would not be personal income unless they exceed actual losses and expenses, provided the premium has been paid from tithed income. Payments received from the second type would be personal income when they exceed the accumulated premiums that have been personally paid from tithed income.TithPG 27.3

    Notes: Members are often perplexed to know how to relate to the many different types of insurance coverages that they participate in—some of which are provided as benefits by their employer and others that they pay for themselves. It is hoped that the guidelines that involve various types of insurance will be of help to members in making tithe decisions regarding the payments they receive from insurance policies.TithPG 27.4

    One basic type of insurance provides protection against potential major catastrophic losses or expenses. Examples of this type would be, health care, fire insurance on one’s home, auto collision and liability, etc. The recommendation is that the premiums for this type of insurance be paid from tithed income. On this basis, payments received from any of these coverages would not constitute personal income unless they exceed actual losses and expenses.TithPG 27.5

    Another basic type of insurance safeguards future income. Examples of this type would be, Worker’s Compensation, life, accident, unemployment and disability insurance. The recommendation is that insurance provisions of this kind that are provided by the employer do not constitute personal income until such time as benefits are received from these provisions. If a person participates in the cost or pays the full premium for any of these coverages, the recommendation is that payments received would constitute personal income when they exceed the premiums that have been personally paid from tithed income.TithPG 28.1

    H. Health Care Assistance—Employer paid health care insurance premiums and/or assistance should be considered personal income. In cases where health care expenses are covered by the employer on a self-insured basis, the employee may choose to return tithe on the estimated premium that would be necessary to provide such coverage.TithPG 28.2

    Notes: If an employer provides health care insurance to cover hospitalization and other major medical expenses and grants direct assistance on other health care expenses, such as outpatient services that the employee has incurred on a self-insured basis, the recommendation is that the member consider as personal income the premium for the health care insurance and also tithe the employer-provided assistance.TithPG 28.3

    In situations where the employer provides all health care assistance on a self-insured basis, the member may choose to tithe the estimated cost of the premium that would be required to cover such major medical expenses. On either basis, the payments for major medical expenses that usually would be made to the hospital by an insurance company would not constitute personal income.TithPG 28.4

    Example: An employer provides hospitalization coverage through an insurance company. The monthly premium to cover the member and his family is $150. The member returns tithe on the $150. Last year the member had heart surgery. The total expense was $25,000 and was paid by the insurance company. The member would not be obligated to tithe the $25,000 payment as he was in effect tithing the cost of the insurance that purchased the protection.TithPG 29.1

    During the same year the member was assisted to the extent of $2,200 for dental care and other miscellaneous outpatient services. He would pay tithe on this direct assistance.TithPG 29.2

    In situations where an employer provides hospitalization and other major medical expense protection on a self-insured basis, the principle would be the same. In either type of situation information maybe available from the employer regarding the premium expense if the coverage is through an insurance company or an estimate if the coverage is provided on a self-insurance basis.TithPG 29.3

    Perhaps many members have not looked upon employer-provided health care insurance or health care expense assistance as personal income. However, it is a major benefit that self-employed persons have to pay themselves. It is assumed that most members are paying their share of health care insurance premiums or expenses from tithed income. It seems logical that the full amount of such benefits be considered personal income.TithPG 29.4

    I. Educational Scholarships—Employer-provided tuition assistance for an employee’s children is personal income to the employee. Cash educational scholarships to assist with living expense is personal income to the recipient. Employer reimbursement for an employee’s educational expense that is not related to the employee’s current work constitutes personal income. Such reimbursement that is related to the employer’s current work would not be personal income.TithPG 29.5

    Notes: Employer provided tuition assistance for an employee’s children is a personal benefit to the employee whether it is reported to IRS as taxable income or not The same is true of other tax free benefits such as health care expense assistance. Employees who receive tuition assistance pay the balance of their children’s educational expenses from tithed income and members who do not receive any tuition assistance pay all of their children’s educational expenses from tithed income. In cases where the tuition assistance is granted once a quarter or semester, employees may choose to tithe a portion of the assistance each month.TithPG 30.1

    There are two types of employee reimbursement for employee’s educational expense: 1) Where the employee decides the courses he is going to take with no requirement by the employer that the course(s) be related to the employee’s current work assignment, such assistance constitutes personal income to the employee. 2) When the employer encourages the employee to upgrade his/her qualifications and specifies courses that are related to the present work assignment, such assistance may result in a mutual benefit, but the primary objective is to benefit the employer. If the further training results in enhanced remuneration, the employee will recognize that benefit by tithing the additional remuneration received.TithPG 30.2

    J. Investments—Income from investments received on a recurring basis, such as net income on rental properties, interest and dividends, should be considered personal income when received. The gain from investments such as stocks and property through appreciation which extends over a period of time would not normally be considered personal income until the investment is disposed of and the gain is received.TithPG 30.3

    K. Appreciated Property—The gain on the sale of appreciated property is normally recognized as personal income. A person who is required to move or for personal reasons decides to move and realizes a gain on the sale of the personal home, may choose to tithe the gain. If the total equity is used to purchase a similar home in the new location, the person may choose to defer tithing the gain. If the person does not reinvest the total equity, the difference would be personal income. Individuals/families are encouraged to make provision for the tithing of appreciated equity at an appropriate time, perhaps in an estate plan.TithPG 30.4

    Notes: During recent years the value of residential properties has appreciated significantly. However, this appreciation which has been generated by inflation and/or other factors, has not increased the usefulness of a personal residence to the owner. Many members have lived in the same home for many years.TithPG 31.1

    On the other hand, other church members have moved one or more times during recent years. Many of these persons have been perplexed to know whether they should return tithe on the gain on the sale of their home, even though they had to immediately reinvest the proceeds from the sale in a similar home in the new location.TithPG 31.2

    The position has been taken that the person who is required to move by his employer, or who for personal reasons decides that he needs to move, may not have anymore obligation to tithe equity appreciation on a personal residence than the person who continues living in a residence that has appreciated in value.TithPG 31.3

    However, the responses from the questionnaires indicate that there are two schools of thought on this matter. Some feel that if a gain is realized at the time of a sale, it should be tithed at that time even though the gain is reinvested in another residence. Each person will have to make his own decision in this matter.TithPG 31.4

    L. Inheritances—Inheritances received in cash are personal income. The current value of inherited property or other assets constitute personal income at the time they are received. In some cases, such as the inheritance of land, it may not be possible for the person to return the tithe until a portion is converted to cash.TithPG 32.1

    M. Welfare, Donations & Grants—The ideal would be for all members to be in a position to return tithe on their total personal income regardless of the source or their personal situation. However, those who are receiving government welfare or charity assistance, those who are receiving assistance from relatives or friends, or those who are receiving government educational grants, may only be able to return tithe on the portion of their income over which they have discretionary control.TithPG 32.2

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