Tax Legal Services · Primary-source case analysis

Hernandez: Fixed Payments for Religious Services Were Not Charitable Gifts

By Aneeta Mishra and Timothy Chan

Published August 15, 2026

Hernandez v. Commissioner examined payments made under fixed schedules for specific auditing sessions and religious-training courses, which taxpayers deducted under section 170.

The church charged fixed prices for identified services

Payments varied by the length and level of auditing or training, and participants paid according to published schedules before receiving the selected service.

Section 170 distinguishes gifts from exchanges

A charitable contribution generally requires a transfer exceeding the value of benefits expected in return. Courts examine the transaction’s objective structure rather than relying only on the donor’s religious motivation.

The record showed a direct quid pro quo

The fixed price and corresponding service linked payment to a specific return benefit. The Court therefore upheld disallowance without deciding that religious benefits can never be valued in any setting.

The constitutional challenges failed on this application

Applying the neutral contribution rule neither preferred one faith nor imposed a constitutionally forbidden burden. Current substantiation, acknowledgment, and partial-deduction rules must also be applied.

Key takeaways

• Identify every good or service expected in return for the payment.
• Separate any excess donation from the fair value of return benefits.
• Obtain contemporaneous acknowledgments and required disclosures.
• Apply the same neutral quid-pro-quo analysis to religious and secular recipients.