FundSvcs Community

This does not work for the IRS. It is called bifurcation. Please look in the download site for the Council on Foundations document discussing the limitations on gifts from Family (private) foundations. 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 Mon, Jul 8, 2019 at 1:36 PM Cecily Macy <cecily.mandl@gmail.com> wrote: > A donor who is hosting an event on behalf of the institution in their home > recently proposed the following: > > They would like to give the institution one check which will cover the > expenses of the event, and in turn, the institution will pay all of their > vendors directly (catering, tent, valet, etc). This gift would come from > their family foundation. > > The donors mentioned that since they will be in attendance, they will use > a personal check to cover the expenses directly tied to their attendance > (assuming they mean cost per individual for catering). > > For many reasons, this does not seem to comply with IRS regulations. Has > anyone encountered a similar circumstance? How did you explain to the donor > that this is not a possible option? Is there an option I am not thinking > of? The donors shared that they have done this exact thing with other > institutions, and that their tax advisor is comfortable with doing so. > > Thank you, > Cecily > > VP of Development > Pennsylvania Academy of the Fine Arts >

Thank you. I will reference that source. If they paid with a personal check for the whole thing, is it legal to accept the check as a donation and then use those funds to pay the host's vendors directly?

Thank you. I will reference that source. If they paid with a personal check for the whole thing, is it legal to accept the check as a donation and then use those funds to pay the host's vendors directly?

If the donor makes an unrestricted gift to your organization, then how you use the money is not of concern as long as it is for mission-related activities. 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 Mon, Jul 8, 2019 at 1:51 PM Cecily Macy <cecily.mandl@gmail.com> wrote: > Thank you. I will reference that source. > > If they paid with a personal check for the whole thing, is it legal to > accept the check as a donation and then use those funds to pay the host's > vendors directly? >

If the donor makes an unrestricted gift to your organization, then how you use the money is not of concern as long as it is for mission-related activities. 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 Mon, Jul 8, 2019 at 1:51 PM Cecily Macy <cecily.mandl@gmail.com> wrote: > Thank you. I will reference that source. > > If they paid with a personal check for the whole thing, is it legal to > accept the check as a donation and then use those funds to pay the host's > vendors directly? >

We’ve encountered this situation with private/family foundations as well, more frequently in recent years. It is bifurcation. However, this is not for us to enforce. There’s also a very thin line between educating your donors and providing tax advice, a big no-no. So, once we have confirmed with the donors that it is indeed what they want to do, we issue them a customized receipt that lists the details of both payors/payments, and confirming the benefits received. So, in a sense, we ‘allow’ it. It’s up to the donor, of course, to work with their tax advisor and the IRS. Hope that helps! Rebecca Weitz Senior Director, Gift Management University of Colorado Foundation rebecca.weitz@cufund.org<mailto:rebecca.weitz@cufund.org> (303) 541-1206 [cid:image003.png@01D045E3.37C9F720] From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor Sent: Monday, July 8, 2019 11:46 AM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] Family Foundation Gift This does not work for the IRS. It is called bifurcation. Please look in the download site for the Council on Foundations document discussing the limitations on gifts from Family (private) foundations. John 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 Mon, Jul 8, 2019 at 1:36 PM Cecily Macy <cecily.mandl@gmail.com<mailto:cecily.mandl@gmail.com>> wrote: A donor who is hosting an event on behalf of the institution in their home recently proposed the following: They would like to give the institution one check which will cover the expenses of the event, and in turn, the institution will pay all of their vendors directly (catering, tent, valet, etc). This gift would come from their family foundation. The donors mentioned that since they will be in attendance, they will use a personal check to cover the expenses directly tied to their attendance (assuming they mean cost per individual for catering). For many reasons, this does not seem to comply with IRS regulations. Has anyone encountered a similar circumstance? How did you explain to the donor that this is not a possible option? Is there an option I am not thinking of? The donors shared that they have done this exact thing with other institutions, and that their tax advisor is comfortable with doing so. Thank you, Cecily VP of Development Pennsylvania Academy of the Fine Arts

We’ve encountered this situation with private/family foundations as well, more frequently in recent years. It is bifurcation. However, this is not for us to enforce. There’s also a very thin line between educating your donors and providing tax advice, a big no-no. So, once we have confirmed with the donors that it is indeed what they want to do, we issue them a customized receipt that lists the details of both payors/payments, and confirming the benefits received. So, in a sense, we ‘allow’ it. It’s up to the donor, of course, to work with their tax advisor and the IRS. Hope that helps! Rebecca Weitz Senior Director, Gift Management University of Colorado Foundation rebecca.weitz@cufund.org<mailto:rebecca.weitz@cufund.org> (303) 541-1206 [cid:image003.png@01D045E3.37C9F720] From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor Sent: Monday, July 8, 2019 11:46 AM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] Family Foundation Gift This does not work for the IRS. It is called bifurcation. Please look in the download site for the Council on Foundations document discussing the limitations on gifts from Family (private) foundations. John 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 Mon, Jul 8, 2019 at 1:36 PM Cecily Macy <cecily.mandl@gmail.com<mailto:cecily.mandl@gmail.com>> wrote: A donor who is hosting an event on behalf of the institution in their home recently proposed the following: They would like to give the institution one check which will cover the expenses of the event, and in turn, the institution will pay all of their vendors directly (catering, tent, valet, etc). This gift would come from their family foundation. The donors mentioned that since they will be in attendance, they will use a personal check to cover the expenses directly tied to their attendance (assuming they mean cost per individual for catering). For many reasons, this does not seem to comply with IRS regulations. Has anyone encountered a similar circumstance? How did you explain to the donor that this is not a possible option? Is there an option I am not thinking of? The donors shared that they have done this exact thing with other institutions, and that their tax advisor is comfortable with doing so. Thank you, Cecily VP of Development Pennsylvania Academy of the Fine Arts

The way they're proposing doing this is a problem - here's a good article explaining the issue, https://www.pbwt.com/exempt-org-resource-blog/keeping-it-together-foundations-dafs-and-the-problem-of-bifurcated-payments A few things are worth considering. First, there's nothing illegal about making these payments, or about your org receiving them. They may result in an excise tax for the Foundation, assuming they are properly reported, but it's not your role to give tax advice. You can caution that you're not certain the gift would be tax deductible, but ultimately, it's not your place to advise or to represent whether a gift is deductible or not. Just be careful about issuing letters saying you gave nothing in exchange for the gift! In any case, even if the Foundation paid for the whole thing, and the individual didn't pay at all, it might still be a problem. A single Foundation officer attending an event paid for by the Foundation is reasonable in terms of monitoring and ensuring the event furthers the nonprofit purpose of the Foundation. But if they're buying a table and bringing the entire family, that's a problem. However, there does appear to be a way through this issue. You CAN bifurcate, so long as the individual portion of the contribution is on par with what the general admission charge would be. In other words, the IRS only dislikes this if the attendance of the connected person would not have been possible but for the Foundation's gift (the 'but for ' formulation is critical). Thus, to do this right, the check from your individual donor should be for the full price of a ticket, not the FMV of the meal. They would then reduce their charitable deduction by the FMV, as per usual. Isaac Shalev President www.sage70.com

The way they're proposing doing this is a problem - here's a good article explaining the issue, https://www.pbwt.com/exempt-org-resource-blog/keeping-it-together-foundations-dafs-and-the-problem-of-bifurcated-payments A few things are worth considering. First, there's nothing illegal about making these payments, or about your org receiving them. They may result in an excise tax for the Foundation, assuming they are properly reported, but it's not your role to give tax advice. You can caution that you're not certain the gift would be tax deductible, but ultimately, it's not your place to advise or to represent whether a gift is deductible or not. Just be careful about issuing letters saying you gave nothing in exchange for the gift! In any case, even if the Foundation paid for the whole thing, and the individual didn't pay at all, it might still be a problem. A single Foundation officer attending an event paid for by the Foundation is reasonable in terms of monitoring and ensuring the event furthers the nonprofit purpose of the Foundation. But if they're buying a table and bringing the entire family, that's a problem. However, there does appear to be a way through this issue. You CAN bifurcate, so long as the individual portion of the contribution is on par with what the general admission charge would be. In other words, the IRS only dislikes this if the attendance of the connected person would not have been possible but for the Foundation's gift (the 'but for ' formulation is critical). Thus, to do this right, the check from your individual donor should be for the full price of a ticket, not the FMV of the meal. They would then reduce their charitable deduction by the FMV, as per usual. Isaac Shalev President www.sage70.com