70 Stewardship for Mission: Where Development and Finance Meet Chapter 6 Gift Acceptance Procedures Suggested Gift Acceptance Policy Issues Laura Fredricks Developing Major Gifts: Turning Small Donors into Big Contributors 2001: Aspen Publishers, Inc., Gaihtersburg, MD, Jones and Bartlett Publishers, Sudbury, MA. www,jbpub.com. Reprinted with permission It is critical to the religious institute to have a gift acceptance policy and clearly defined procedures in this regard. In preparing such a document, Ms. Fredricks suggests that the following issues be considered: 1) What type of gift (outright, life income, deferred, 12) How does the organization invest its named in-kind) will the organization accept? funds? 2) Under what circumstances will a gift be declined? 13) What are the guidelines on how gifts are valued? 3) Are there established gift levels and gift amounts 14) What are the minimum amounts used to for named funds/facilities/programs/services/ establish the various planned gifts? equipment? 15) What are the guidelines for life income and 4) Who will be responsible for soliciting different deferred gifts, such as minimum / maximum pay out, gifts at different levels? number of beneficiaries, and term of years? 5) Who will be responsible for accepting different 16) Under what circumstances will the organization gifts at different levels? serve as trustee for charitable trusts? 6) Who will acknowledge different gifts at different 17) Will the organization require written proof levels? before it will recognize a bequest or gift via a will? 7) How will gifts at each level be recognized? 18) How does the organization recognize / credit 8) Will cumulative gifts / past gifts be credited for gifts that are revocable? larger gift levels? 19) What are the guidelines for accepting gifts of 9) How will matching gifts be recognized for over- real estate transfer, land surveys, appraisals, title all gift levels? search, bills, and taxes? 10) How will the gifts be tracked? 20) Who pays the costs for the real estate transfer, land surveys, appraisals, title search, bills, and taxes? 11) What banks and financial services does the organization use to invest / manage its funds? Chapter 6: Gift Acceptance Procedures 71 Sample Gift Acceptance Policy (continued) 21) Will a gift acceptance policy committee be 23) Will the organization consider exceptions to formed to oversee and carry out the terms of the the policy and, if so, under what circumstances? policy? 24) How and under what circumstances will gift 22) Under what circumstances will the organization agreements be dissolved? use outside counsel? Since 2002, Laura Fredricks, JD, has been Vice President for Philanthropy at Pace University in New York, NY. Ms. Fredricks also teaches nonprofit business management and major gift and planned giving courses at the University of Pennsylvania, Duke University, and the Smithsonian Institute and is a featured speaker at a variety of professional conferences. 72 Stewardship for Mission: Where Development and Finance Meet Sample Gift Acceptance Policy This sample of a Gift Acceptance Policy is printed of Development and several other appropriate with the permission of the religious institute that people (perhaps an attorney, financial planner, etc.). developed the policy. It reflects attention to legal These policies and guidelines should in no way considerations as well as the development be understood as legal or financial advice to the opportunities that are acceptable to this religious donors. All donors are encouraged to seek institute. The policy must be adapted according to appropriate professional advice from their legal the environment and needs of each religious counsels or financial planning advisors. institute. In addition to the following sample Gift Outright Gifts Acceptance Policy, a sample Development Fund- raising Policy is found in the Appendix pp. 100-111. Cash 1. Gifts in the form of cash and checks shall be Introduction accepted regardless of amount unless, as in the case In order to respect the interests of the religious of all gifts, there is a question as to whether the institute and the persons who support its donor has sufficient title to the assets or is mentally programs, these policies are designed to assure that competent to legally transfer the funds as a gift to all gifts to or for the use of the religious institute the religious institute. are structured to provide maximum benefits to 2.All checks should be made payable to the religious both parties. The goal is to encourage funding of institute and should not be made payable to an the religious institute without encumbering the employee, agent, or volunteer representing the organization with gifts which may prove to generate religious institute. more cost than benefit or which are restricted in Publicly Traded Securities a manner that is not in keeping with the mission of Publicly traded securities or other readily the religious institute. The authority to accept gifts marketable securities shall be accepted by the resides with the religious institute’s Board of religious institute unless prohibited by its Trustees. investment policy. An employee or volunteer To optimize funding from individuals and working on behalf of the religious institute should organizations, the religious institute must be capable not commit to a donor that a particular security of responding quickly to all gifts offered by will be held by the religious institute. If the donor prospective donors. It is understood that, except wishes the security to be held, and it is not in the where stated otherwise, these policies are intended religious institute’s portfolio, the gift acceptance as guidelines and that flexibility must be maintained committee will make the determination. since some gift situations can be complex; and decisions can only be made after careful Closely Held Securities consideration of a number of interrelated factors. 1. Non-publicly traded securities may only be The religious institute’s Board of Trustees should accepted after approval of the gift acceptance appoint a Gift Acceptance Committee to judge the committee. merits of accepting certain gifts. It is recommended 2. Such securities may be subsequently disposed that the Committee consist of the religious of only with the approval of the gift acceptance institute’s Treasurer, the religious institute’s Director committee. Chapter 6: Gift Acceptance Procedures 73 Sample Gift Acceptance Policy (continued) 3. No commitments shall be made for the personal property shall be accepted that obligates repurchase of such securities by the religious the religious institute to ownership for a specified institute prior to completion of a gift of securities. period of time. No perishable property or property which will require special facilities or security to Real Property properly safeguard it will be accepted without prior 1. No gift of real estate shall be accepted by anyone approval of the gift acceptance committee. on behalf of the religious institute without prior 3. Only the gift acceptance committee or persons approval of the gift acceptance committee of the authorized by the gift acceptance committee to do religious institute. so may represent to a donor that property will or 2. No gift of real estate shall be accepted without will not be held by the religious institute for a first being appraised by a party chosen by the specific period of time or for purposes related to religious institute who shall have no business or its tax- exempt status. Donors should be notified other relationship to the donor. at the time of receipt of a gift that the religious 3. The gift acceptance committee must determine institute will, as a matter of corporate policy, that the title is good and marketable. It will be cooperate fully in all matters related to IRS necessary to research any potential environmental investigations of non-cash charitable gifts. issues and an environmental audit may be required. 4. No commercial real estate shall be accepted by Other Property anyone on behalf of the religious institute without Other property of any description including prior approval of the gift acceptance committee. mortgages, notes, copyrights, royalties, easements, 5. Real estate shall not be accepted to fund a whether real or personal, shall only be accepted charitable gift annuity without seeking an opinion by action of the gift acceptance committee. as to the permissibility of this action under the laws Appropriate inquiry shall be made and special of the state or states involved and approval by the consideration shall be given to the nature of any gift acceptance committee. gift property and whether it is in keeping with the 6. The religious institute will accept no real estate mission of the religious institute prior to the encumbered by a mortgage. acceptance of any property by the religious institute. Tangible Personal Property Deferred Gifts 1. Jewelry, artwork, collections, automobiles, and Bequests other personal property may be accepted. A 1. Gifts through Wills (bequests) shall be actively qualified appraisal under terms of the Internal encouraged by the religious institute. Revenue Code governing gifts of such property 2. In the event of inquiry by a prospective legator, must be obtained by the religious institute. Such representations as to the future acceptability of property can only be accepted by the gift property proposed to be left to the religious acceptance committee or such other person or institute in a Will, or through any other deferred persons authorized to do so by the gift acceptance gift arrangement, shall only be made in accordance committee. with the terms and provisions of outright gifts 2. The religious institute shall accept no personal included in this document. property unless there is reason to believe the 3. Gifts from the estates of deceased donors, property can be reasonably disposed of. No consisting of property that is not acceptable under 74 Stewardship for Mission: Where Development and Finance Meet Sample Gift Acceptance Policy (continued) these guidelines, shall be rejected only by action of be marketed as tax avoidance devices or as the gift acceptance committee. The legal counsel of investment vehicles. the religious institute shall communicate the Pooled Income Funds decision of the gift acceptance committee to the The religious institute will not accept pooled income legal representative of the estate. If there is any funds. indication that the representative of the estate, or any family member of the deceased, is dissatisfied Charitable Gift Annuities with the decision of the gift acceptance committee, 1. No gift annuity shall be accepted which names this fact should be communicated to the gift an income beneficiary under 60 years of age acceptance committee as quickly as possible. without prior approval of the gift acceptance 4. Attempts shall be made to discover bequest committee. expectancies wherever possible in order to reveal 2. There shall not be more than two income situations that might lead to unpleasant donor beneficiaries for each gift annuity. relations in the future. Where possible, intended 3.The minimum initial contribution for a gift annuity bequests of property other than cash or marketable shall be $5,000. securities should be brought to the attention of 4. The minimum contribution for an additional gift the gift acceptance committee and every attempt annuity by an individual who has previously entered be made to encourage the donor involved to into a gift annuity agreement shall be $5,000. conform his or her estate plans to the religious 5. No deferred annuity gifts will be accepted. institute policy. 6. No gift annuities will be accepted from the following states: California, Florida, Maryland, Maine, Charitable Remainder Trusts Minnesota, New Jersey, New York, North Dakota, 1. The religious institute will not serve as sole or Oregon, Washington, and Wisconsin. co-trustee of a charitable remainder trust for the benefit of the religious institute. Life Estate Gifts 2. The religious institute will not recommend any 1. Donors shall generally not be encouraged to corporate fiduciary to a donor. make gifts of real property to the religious institute 3. The fees for management of a charitable under which they maintain a life interest in the remainder trust will not be paid by the religious property. institute. 2. Such gifts may be accepted by approval of the 4. No representations shall be made by any gift acceptance committee in situations where the employee or other persons acting on behalf of the asset involved appears to be a minor portion of religious institute as to the manner in which the donor’s wealth, and the committee is satisfied charitable remainder trust assets will be managed that there has been full disclosure to the donor of or invested by a corporate fiduciary. the possible future ramifications of the transaction. 5. Charitable remainder trusts and all other deferred Gifts of Life Insurance gifts shall be encouraged as a method of making 1. The religious institute will encourage donors to gifts to the religious institute while retaining income name the religious institute to receive all or a portion which may be needed by the donor or other of the benefits of life insurance policies which they persons chosen by the donor. Such trusts shall not have purchased on their lives. Chapter 6: Gift Acceptance Procedures 75 Sample Gift Acceptance Policy (continued) 2. The religious institute will not agree to accept cases which appear excessive, the summary of fees gifts from donors for the purpose of purchasing shall be submitted to the religious institute’s corporate life insurance on the donor’s life. counsel for review and approval prior to payment. 5. In cases where the persons receiving fees were Payment of Fees Related to Gifts initially employed by the donor and the religious to the Religious Institute institute is asked to pay the fees involved, the donor Finder’s Fees or Commissions shall be notified that the payment of such fees may 1. The religious institute will pay no fee to a person result in taxable income to the donor in the as consideration for directing a gift to the religious amount of the fees paid. institute. 6. In situations where advisors retained by the 2. No commission or finder’s fee will be paid to any religious institute prepare documents or render party in connection with the completion of a gift advice in any form to the religious institute and/or to the religious institute. a donor to the religious institute, it shall be Professional Fees disclosed to the donor that the professional 1. The religious institute will pay reasonable fees involved is in the employ of the religious institute for professional services rendered in connection and is not acting on behalf of the donor and that any with the completion of a gift to the religious institute. documents or other advice rendered in the course 2. Such fees will be paid only following discussion of the relationship between the religious institute with and approval by the donor. and the donor should be reviewed by counsel for 3. Fees shall be reasonable, and directly related to the donor prior to completion of the gift. the completion of a gift. They shall be limited to Restrictions on Use appraisal fees by persons who are competent and and Investment of Gifts qualified to appraise the property involved and who A. Restricted gifts will be accepted by the religious have no conflict of interest, legal fees for the institute. In the case of current gifts prior approval preparation of documents, accounting fees incident of the gift acceptance committee is required. to the transaction, and fees of “fee for service” Subsequent approval by the gift acceptance financial planners. In the case of financial planners, committee is required in the case of gifts received such persons must state in writing that they are after death which have not been previously compensated only through fees for services rendered approved by the gift acceptance committee. and that they are not compensated for the sale of B. Gifts donated with restrictions as to use and/or products to clients. This distinction is vital in avoiding investment will be reviewed by the gift acceptance the payment of commissions which could be committee as to whether the gift will be accepted. construed as triggering securities regulation. C. Restricted gifts which do not receive the 4. In the case of legal, accounting and other approval of the gift acceptance committee will not professional fees, an attempt shall be made by the be accepted by the religious institute. gift acceptance committee to ascertain the reasonableness of these fees prior to payment. An hourly breakdown of time should be requested. In For sample Gift Acknowledgment Letters, see Appendix pp. 112-116 76 Stewardship for Mission: Where Development and Finance Meet New Tax Rules for Donated Vehicles Susan Arvanitis, MST, CPA The American Jobs Creation Act, signed into law • Amount received from sale of car in the fall of 2004, contains provisions that • Warning that the donor’s charitable substantially change the rules for calculating the contribution deduction for federal income tax value of a vehicle donated to charity. Effective purposes is limited to the amount received by the January 1, 2005, tax-exempt organizations (such as organization from the sale of the car. our Retreat Centers and Communities) that receive What is deductible? donated vehicles must provide donors with an entirely new set of detailed information for federal The donor’s income tax deduction is limited to income tax purposes. These new rules apply to the sales proceeds received by the charitable vehicles having a claimed value more than $500. organization for the car. (For vehicles valued at $500 or less, the existing Vehicle is Kept rules still apply.) If your Community or Retreat Center In the past, when an individual or company determines that the car will be kept and used by donated a car to charity, the donor would estimate the religious, then you must provide a written the value of a car donated, and simply report this receipt or letter to the donor within 30 days of amount as a charitable contribution deduction on the date you received the car. The receipt must the appropriate tax return. Sadly, the IRS and state: Congress concluded that this approach encouraged • Name of donor donors to overvalue their vehicles, while the charity • Social Security Number of donor (or FEIN, if later sold the car — for a much lesser value. Under donor is a company) the new rules, a donor’s income tax deduction for • Description of vehicle (make, model, year) a donated vehicle will likely differ, depending on • Vehicle Identification Number (VIN) whether the organization receiving the vehicle • Certification as to how the organization intends decides to sell or keep it. to use the vehicle (e.g., in local ministry, for mission Vehicle is Sold appeals, etc.) and for how long (e.g., for the remaining If your Retreat Center or Community receives a useful life of the vehicle, estimated at “x” years) donated car and decides to sell it, you must provide • Certification that the car will not be transferred a written receipt or acknowledgment letter to the in exchange for money, property or services prior donor within 30 days of the date the car was sold. to the completion of the intended use. This receipt must state: What is deductible? • Name of donor The donor may deduct the “fair market value” of • Social Security Number of donor (or FEIN, if the car as of the date of donation. In this instance, donor is a company) it is the donor’s responsibility to determine the • Description of vehicle (make, model, year) fair market value – your tax receipt to the donor • Vehicle Identification Number (VIN) should not state a value. Donors can obtain • Certification that the sale of the car was an assistance with vehicle values at the Kelly Blue Book arms length transaction between unrelated parties web site, www.kbb.com. Chapter 6: Gift Acceptance Procedures 77 New Tax Rules for Donated Vehicles (continued) Note: Regardless of whether the donated car is For More Information kept or sold by the organization, the donor must Please note that in 2004 the IRS published two attach the tax receipt/acknowledgment letter to guides, Publication 4302, “A Charity’s Guide to Car his federal income tax return (Form 1040 for Donations,” and Publication 4303,“A Donor’s Guide individuals). to Car Donations.” These publications are out of Penalties date – they only apply to vehicle donations made prior to 2005. The IRS is currently working on Organizations that fail to furnish the required tax updated versions of these publications, for posting receipt, or knowingly provide a false or fraudulent on their web site, www.irs.gov. receipt, are subject to significant penalties, up to 35% of the sales price or fair market value of the donated vehicle. For sample Tax Letters, see Appendix pp. 117-118 Susan Arvanitis, CPA is Province Controller for the Congregation of the Passion, Holy Cross Province, a men’s institute based in Chicago. Prior to joining the Congregation, she worked in the Chicago office of Deloitte & Touche LLP as a Tax Senior Manager. She has ten years of experience in public accounting providing tax consulting and compliance services to a variety of nonprofit organizations, and graduated with highest honors from University of Illinois at Urbana-Champaign with a bachelor’s degree in accounting and master’s degree in taxation.
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