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An alumni donor is giving annually to support a tuition scholarship/self-care award for a student in the $3-$5,000 range. We have been counting these gifts as charitable. We have recently learned that the awarding process is as follows: The Admissions team reviews applicants, and presents a recommended student for the scholarship/award to the donor for approval each year. The donor has “veto” ability and can override the recommendation by the Admissions team, or approve, so has final decision-making ability. If no student is selected in any given year, the donor does not give the scholarship/award funds. The donor is not concerned with her gift being charitable/tax-deductible and is adamant she be a key part of the selection process. We are fairly certain this is not a gift we can count as charitable toward our fundraising totals, as we believe it conflicts with the IRS regulations around donor control, but is there any workaround to this we haven’t considered? We’d like to be able to count this toward our fundraising totals if possible. Thank you, Cecily Macy VP of Development Pennsylvania Academy of the Fine Arts

You are correct and there is no work-around. Any work-around attempts should be approved in writing by your lawyer. Also, as it currently stands, this might represent taxable income to the student so involve your CFO, too. John Taylor 919.816.5903 johntaylorconsulting@gmail.com Big ideas; small keyboard > On May 14, 2019, at 11:06 AM, Cecily Macy <cecily.mandl@gmail.com> wrote: > > An alumni donor is giving annually to support a tuition scholarship/self-care award for a student in the $3-$5,000 range. We have been counting these gifts as charitable. We have recently learned that the awarding process is as follows: The Admissions team reviews applicants, and presents a recommended student for the scholarship/award to the donor for approval each year. The donor has “veto” ability and can override the recommendation by the Admissions team, or approve, so has final decision-making ability. If no student is selected in any given year, the donor does not give the scholarship/award funds. The donor is not concerned with her gift being charitable/tax-deductible and is adamant she be a key part of the selection process. > > We are fairly certain this is not a gift we can count as charitable toward our fundraising totals, as we believe it conflicts with the IRS regulations around donor control, but is there any workaround to this we haven’t considered? We’d like to be able to count this toward our fundraising totals if possible. > > Thank you, > > Cecily Macy > VP of Development > Pennsylvania Academy of the Fine Arts

Thanks, John. A follow up question: This year, there was only one student applicant, and the Donor went along with Admissions' recommendation, not vetoing and not asking to go back to the drawing board. In this circumstance, can we count this year's gift as charitable?

You need to ask your lawyer. As I noted in response to your first email I am not convinced that any of these payments are tax-deductible. John 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 Wed, May 15, 2019 at 11:27 AM Cecily Macy <cecily.mandl@gmail.com> wrote: > Thanks, John. > > A follow up question: > > This year, there was only one student applicant, and the Donor went along > with Admissions' recommendation, not vetoing and not asking to go back to > the drawing board. In this circumstance, can we count this year's gift as > charitable? >