Hi Scott,
To the layperson, the use of DAF funds or bifurcation on the surface seems complete legit. My presumption is because most people look at these matters in a purely fiscal transactional way, and forget that they’ve received the eligibility of a tax benefit which changes the equation. Here’s my explanation:
First, payment by DAF – When the benefactor originally put their funds into the DAF, the supposition was that they were immediately eligible for a tax deduction on the full amount of the funds they placed there. There was no understanding that they’d be receiving a benefit down the road from attending an event or otherwise. Normally, in such circumstances the FMV of those premiums would’ve been subtracted from the amount eligible for a deduction. So to direct those DAF funds towards an event or charitable gift—after the fact—where they get something of substantial value in return really results in the opportunity for them to receive an impermissible benefit. (i.e., potential deduction on full amount but getting something in return.)
Bifurcation – If the only way to receive the benefits (i.e. dinner, etc.) is to purchase a table for $5,000, then you may not use money that is not legally yours to obtain the opportunity to gain those benefits. As the money is now in the coffers of the advisee, the benefactor no longer has legal control over that money, so for them to direct that money in such a way as to attain the opportunity for a benefit (even if the benefit is paid for by the benefactor) is still an illegitimate way to attain the opportunity. This is why the opportunity must exist for those without making the gift as John states.
Just my 2c, and welcome other perspectives on this.
Eric F. Valdescaro
AVP, Advancement Services
University of Hawaii Foundation
From: Advancement Services Discussion List [mailto:
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Sent: Thursday, March 21, 2019 7:29 AM
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Subject: Re: [FUNDSVCS] [External] Re: [FUNDSVCS] DAF/Events
Thanks
From: Advancement Services Discussion List [mailto:
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Sent: Thursday, March 21, 2019 11:48 AM
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Subject: [External] Re: [FUNDSVCS] DAF/Events
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If anybody else could buy 5 seats at $200 without making a gift, you are fine. If the only way she can buy those seats is because of the DAF gift that's called bifurcation and disallowed by the IRS.
John
John H. Taylor
Principal, John H. Taylor Consulting
2604 Sevier St.
Durham, NC 27705
johntaylorconsulting@gmail.com<mailto:
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919.816.5903 (cell/text)
Serving the Advancement Community Since 1987
On Thu, Mar 21, 2019 at 12:45 PM Scott Lober <
SCOTT.LOBER@phhs.org<mailto:
SCOTT.LOBER@phhs.org>> wrote:
Question:
Board member wants to purchase sponsorship to an event. Cost is $5,000 which includes a table with dinner and other benefits valued at $425 (5 seats @ $85). She indicated she was paying for it through her DAF. We told her she cannot do this. Her response was that every other organization in town lets her do it. (Then she said, maybe they’re doing things wrong.)
Then she suggested that she would make a $5,000 gift to the event, which we allow donors to do. Then she would purchase 5 seats at $200 each.
She is the co-chair of the event and will be recognized at the event as a sponsor of the event at a particular level.
Are there any problems with this?
Thanks
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