FundSvcs Community

Aloha, So I've re-read John's "Who Can Make a Pledge - And Who Can Pay It Off?" about three times and this is what I'm dealing with. About 18 months ago local professionals who each work for a local corporation each individually made pledges (but at the same time as a group). So the agreement lists 7 individuals who are each making their own pledge of $5,000. Even the agreement states, "As these are individual pledges..." Last year, the professionals all made their first installment with personal checks. Of course, yesterday we get a check from the corporation paying $7,000 on behalf of all 7 professionals. It's a four year pledge and there is still an outstanding balance. I don't believe the professionals are all owner-partners in the corporation. If not, we enter a classic conundrum. If we accept the corporation's payment towards the pledge obligations of the individuals and commensurately write down their pledges, we may be providing the individuals with a prohibited benefit per Treasury regulations. Yet, if we accept the gift but do not write down their pledges, the development officer will get upset when, down the road, we claim the pledge as unfulfilled and risk upsetting the individual donors because they feel like they satisfied their obligation. Does this boil down to whether or not we want to consider legally enforcing our pledges? There is no detrimental reliance at stake here and for this amount of money we wouldn't consider legal enforcement. Any recommendations? Thanks, Eric AVP, Advancement Services University of Hawaii Foundation

A few rambling thoughts: - My paper speaks to donor-advised funds and private foundations paying down pledges. Not corporations. I am not sure that I have read anything from the IRS regarding third-party payments from those. And what about parents/siblings/cousins paying off your pledge? I'm not sure there's a prohibition there. Regardless, I always play it safe and treat the check as an outright gift unless the donor specifically states it is a pledge payment (unless from a DAF or private foundation), and manually lower the pledge. - One thing is clear that someone cannot legally bind another. But it sounds like in this instance the individuals bound themselves. So see bullet above. - If you do not treat your pledges as binding, then you cannot book them as an asset. Your CFOI might have something to say about that. - And if you do not treat your pledges as binding then you cannot count them in fundraising totals per CASE. John H. Taylor Principal, John H. Taylor Consulting 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Tue, Feb 12, 2019 at 2:38 PM Eric Valdescaro < eric.valdescaro@uhfoundation.org> wrote: > Aloha, > > So I've re-read John's "Who Can Make a Pledge - And Who Can Pay It Off?" > about three times and this is what I'm dealing with. > > About 18 months ago local professionals who each work for a local > corporation each individually made pledges (but at the same time as a > group). So the agreement lists 7 individuals who are each making their own > pledge of $5,000. Even the agreement states, "As these are individual > pledges..." > > Last year, the professionals all made their first installment with > personal checks. Of course, yesterday we get a check from the corporation > paying $7,000 on behalf of all 7 professionals. It's a four year pledge > and there is still an outstanding balance. > > I don't believe the professionals are all owner-partners in the > corporation. If not, we enter a classic conundrum. > > If we accept the corporation's payment towards the pledge obligations of > the individuals and commensurately write down their pledges, we may be > providing the individuals with a prohibited benefit per Treasury > regulations. Yet, if we accept the gift but do not write down their > pledges, the development officer will get upset when, down the road, we > claim the pledge as unfulfilled and risk upsetting the individual donors > because they feel like they satisfied their obligation. > > Does this boil down to whether or not we want to consider legally > enforcing our pledges? There is no detrimental reliance at stake here and > for this amount of money we wouldn't consider legal enforcement. > > Any recommendations? > > Thanks, > Eric > > AVP, Advancement Services > University of Hawaii Foundation >

The way we handle this type of thing is to record the gift as a gift not a pledge payment and reduce the pledge(s) accordingly. Elizabeth Jensen Elizabeth Jensen Manager of Gift Services The Principia 13201 Clayton Road St. Louis, MO 63131
Original Message----- From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of Eric Valdescaro Sent: Tuesday, February 12, 2019 1:38 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: [FUNDSVCS] Here we go again... third parties paying off pledges Aloha, So I've re-read John's "Who Can Make a Pledge - And Who Can Pay It Off?" about three times and this is what I'm dealing with. About 18 months ago local professionals who each work for a local corporation each individually made pledges (but at the same time as a group). So the agreement lists 7 individuals who are each making their own pledge of $5,000. Even the agreement states, "As these are individual pledges..." Last year, the professionals all made their first installment with personal checks. Of course, yesterday we get a check from the corporation paying $7,000 on behalf of all 7 professionals. It's a four year pledge and there is still an outstanding balance. I don't believe the professionals are all owner-partners in the corporation. If not, we enter a classic conundrum. If we accept the corporation's payment towards the pledge obligations of the individuals and commensurately write down their pledges, we may be providing the individuals with a prohibited benefit per Treasury regulations. Yet, if we accept the gift but do not write down their pledges, the development officer will get upset when, down the road, we claim the pledge as unfulfilled and risk upsetting the individual donors because they feel like they satisfied their obligation. Does this boil down to whether or not we want to consider legally enforcing our pledges? There is no detrimental reliance at stake here and for this amount of money we wouldn't consider legal enforcement. Any recommendations? Thanks, Eric AVP, Advancement Services University of Hawaii Foundation

It’s been my understanding that while foundations and donor advised funds are subject to specific limitations to ensure that they are acting in support of a charitable purpose and not impermissibly acting to support their donors or other disqualified persons, that concern and those limitations don’t apply to businesses. (It’s also worth noting that, while there are commonalities between the restrictions on private foundations and donor advised funds, those are actually separate provisions, not the application of a general rule, which is also consistent with the possibility that other sorts of organizations might not be subject to the same restrictions, since it’s not a broadly-applicable rule.) Also, you don’t say what kind of business you have in view, but with partnerships in particular, it would make a difference whether the check came from the partnership’s contribution account or the drawing accounts of the respective partners, in terms of who the legal donor(s) would be. So it’s not immediately clear to me that there is any issue here. Of course, you’d want to check with your own counsel! My US$0.02 worth; the usual disclaimers apply. Good luck! Alan Alan S. Hejnal Data Quality Manager Smithsonian Institution - Office of Advancement 600 Maryland Avenue SW, Suite 600E P.O. Box 37012, MRC 527 Washington, DC 20013-7012 •: 202-633-8754 | •: HejnalA@si.edu<mailto:HejnalA@si.edu> [SNAGHTML5cbfa34]<https://www.si.edu/> [AASP_FundSvcs_LOGO-01(040pct)(mark)] From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of Eric Valdescaro Sent: Tuesday, February 12, 2019 2:38 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: [FUNDSVCS] Here we go again... third parties paying off pledges Aloha, So I've re-read John's "Who Can Make a Pledge - And Who Can Pay It Off?" about three times and this is what I'm dealing with. About 18 months ago local professionals who each work for a local corporation each individually made pledges (but at the same time as a group). So the agreement lists 7 individuals who are each making their own pledge of $5,000. Even the agreement states, "As these are individual pledges..." Last year, the professionals all made their first installment with personal checks. Of course, yesterday we get a check from the corporation paying $7,000 on behalf of all 7 professionals. It's a four year pledge and there is still an outstanding balance. I don't believe the professionals are all owner-partners in the corporation. If not, we enter a classic conundrum. If we accept the corporation's payment towards the pledge obligations of the individuals and commensurately write down their pledges, we may be providing the individuals with a prohibited benefit per Treasury regulations. Yet, if we accept the gift but do not write down their pledges, the development officer will get upset when, down the road, we claim the pledge as unfulfilled and risk upsetting the individual donors because they feel like they satisfied their obligation. Does this boil down to whether or not we want to consider legally enforcing our pledges? There is no detrimental reliance at stake here and for this amount of money we wouldn't consider legal enforcement. Any recommendations? Thanks, Eric AVP, Advancement Services University of Hawaii Foundation

Thanks all for the responses. -Eric From: Advancement Services Discussion List [mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG] On Behalf Of John Taylor Sent: Tuesday, February 12, 2019 10:01 AM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] Here we go again... third parties paying off pledges A few rambling thoughts: * My paper speaks to donor-advised funds and private foundations paying down pledges. Not corporations. I am not sure that I have read anything from the IRS regarding third-party payments from those. And what about parents/siblings/cousins paying off your pledge? I'm not sure there's a prohibition there. Regardless, I always play it safe and treat the check as an outright gift unless the donor specifically states it is a pledge payment (unless from a DAF or private foundation), and manually lower the pledge. * One thing is clear that someone cannot legally bind another. But it sounds like in this instance the individuals bound themselves. So see bullet above. * If you do not treat your pledges as binding, then you cannot book them as an asset. Your CFOI might have something to say about that. * And if you do not treat your pledges as binding then you cannot count them in fundraising totals per CASE. John H. Taylor Principal, John H. Taylor Consulting 2604 Sevier St. Durham, NC 27705 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> 919.816.5903 (cell/text) Serving the Advancement Community Since 1987 On Tue, Feb 12, 2019 at 2:38 PM Eric Valdescaro <eric.valdescaro@uhfoundation.org<mailto:eric.valdescaro@uhfoundation.org>> wrote: Aloha, So I've re-read John's "Who Can Make a Pledge - And Who Can Pay It Off?" about three times and this is what I'm dealing with. About 18 months ago local professionals who each work for a local corporation each individually made pledges (but at the same time as a group). So the agreement lists 7 individuals who are each making their own pledge of $5,000. Even the agreement states, "As these are individual pledges..." Last year, the professionals all made their first installment with personal checks. Of course, yesterday we get a check from the corporation paying $7,000 on behalf of all 7 professionals. It's a four year pledge and there is still an outstanding balance. I don't believe the professionals are all owner-partners in the corporation. If not, we enter a classic conundrum. If we accept the corporation's payment towards the pledge obligations of the individuals and commensurately write down their pledges, we may be providing the individuals with a prohibited benefit per Treasury regulations. Yet, if we accept the gift but do not write down their pledges, the development officer will get upset when, down the road, we claim the pledge as unfulfilled and risk upsetting the individual donors because they feel like they satisfied their obligation. Does this boil down to whether or not we want to consider legally enforcing our pledges? There is no detrimental reliance at stake here and for this amount of money we wouldn't consider legal enforcement. Any recommendations? Thanks, Eric AVP, Advancement Services University of Hawaii Foundation This message (including any attachments) is covered by the Electronic Communications Privacy Act, 18 U.S.C. 2510-2521. It is the property of the University of Hawaii Foundation. It may contain confidential information intended for a specific individual and purpose. If you are not the intended recipient, you must delete this message. You are hereby notified that any disclosure, copying, or distribution of this message is prohibited.