FundSvcs Community

Well, the donor can’t really pledge money that isn’t there’s. So, you don’t even have a pledge. Now, if you want to track those promises to encourage someone else to pay internally on a spreadsheet on your desktop, no one would stop you. —Bill Sent from my iPhone > On Aug 13, 2019, at 9:30 PM, Carper Stephanie <stephanie.carper@us.mcd.com> wrote: > > [EXTERNAL EMAIL] > WARNING: This email originated from outside of SCAD. Do not click links or open attachments unless you recognize the sender and know the content is safe. > > > I’m curious how Finance records a pledge (if at all) when a donor intends to direct gifts from his/her donor-advised fund. The finance team at my organization was not aware that donors cannot use grants from DAFs to pay existing pledges. They would recognize the full amount of revenue in the year the pledge was made and record the gifts from the donor’s DAF as pledge payments. Now that they are aware of these restrictions, we are struggling to determine how to book the pledge (if at all). The advice we received from our auditors regarding a similar situation is that from an accounting perspective it doesn’t matter who pays the pledge. But I am uncomfortable recording gifts from a DAF as a pledge payment in Raiser’s Edge. I would prefer to just reduce the pledge by the amount of the gift from the DAF. However, this will create reconciliation issues between RE and FE, so Finance doesn’t want to do that. > > I would appreciate your thoughts. > > Thanks, > > Stephanie > > Stephanie Carper | Development Manager, Major and Planned Gifts > > Ronald McDonald House Charities, Inc. > 110 N. Carpenter St, Chicago, IL 60607-2101 > Cell: 312.520.8370 > stephanie.carper@us.mcd.com | www.rmhc.org > > <image002.jpg> >

Agreed. Stephanie, locate my paper on Who Can Make a Pledge and Who Can Pay It Off on the download site. It addresses both legal and axxou ting aspects of this. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com Big ideas; small keyboard > On Aug 13, 2019, at 9:41 PM, Bill Wong <wswong@scad.edu> wrote: > > Well, the donor can’t really pledge money that isn’t there’s. So, you don’t even have a pledge. Now, if you want to track those promises to encourage someone else to pay internally on a spreadsheet on your desktop, no one would stop you. —Bill > > Sent from my iPhone > >> On Aug 13, 2019, at 9:30 PM, Carper Stephanie <stephanie.carper@us.mcd.com> wrote: >> >> [EXTERNAL EMAIL] >> WARNING: This email originated from outside of SCAD. Do not click links or open attachments unless you recognize the sender and know the content is safe. >> >> >> I’m curious how Finance records a pledge (if at all) when a donor intends to direct gifts from his/her donor-advised fund. The finance team at my organization was not aware that donors cannot use grants from DAFs to pay existing pledges. They would recognize the full amount of revenue in the year the pledge was made and record the gifts from the donor’s DAF as pledge payments. Now that they are aware of these restrictions, we are struggling to determine how to book the pledge (if at all). The advice we received from our auditors regarding a similar situation is that from an accounting perspective it doesn’t matter who pays the pledge. But I am uncomfortable recording gifts from a DAF as a pledge payment in Raiser’s Edge. I would prefer to just reduce the pledge by the amount of the gift from the DAF. However, this will create reconciliation issues between RE and FE, so Finance doesn’t want to do that. >> >> I would appreciate your thoughts. >> >> Thanks, >> >> Stephanie >> >> Stephanie Carper | Development Manager, Major and Planned Gifts >> >> Ronald McDonald House Charities, Inc. >> 110 N. Carpenter St, Chicago, IL 60607-2101 >> Cell: 312.520.8370 >> stephanie.carper@us.mcd.com | www.rmhc.org >> >> <image002.jpg> >>

I'm curious how Finance records a pledge (if at all) when a donor intends to direct gifts from his/her donor-advised fund. The finance team at my organization was not aware that donors cannot use grants from DAFs to pay existing pledges. They would recognize the full amount of revenue in the year the pledge was made and record the gifts from the donor's DAF as pledge payments. Now that they are aware of these restrictions, we are struggling to determine how to book the pledge (if at all). The advice we received from our auditors regarding a similar situation is that from an accounting perspective it doesn't matter who pays the pledge. But I am uncomfortable recording gifts from a DAF as a pledge payment in Raiser's Edge. I would prefer to just reduce the pledge by the amount of the gift from the DAF. However, this will create reconciliation issues between RE and FE, so Finance doesn't want to do that. I would appreciate your thoughts. Thanks, Stephanie Stephanie Carper | Development Manager, Major and Planned Gifts Ronald McDonald House Charities, Inc. 110 N. Carpenter St, Chicago, IL 60607-2101 Cell: 312.520.8370 stephanie.carper@us.mcd.com<mailto:stephanie.carper@us.mcd.com> | www.rmhc.org<http://www.rmhc.org> [cid:image001.jpg@01D24A50.04D56A20]

And I’ll add that unless your pledge agreement is LEGALLY BINDING ( not uncommon among those outside education and huge 501c3s) you don’t have a problem applying a payment from a DAV as long as you note that’s what it is. Trying to reduce pledge amounts is a recording nightmare and many databases don’t allow soft credits to reduce a pledge. I track pledges like that in the database for a small client who is doing a campaign and is also on a cash basis of accounting, hence not booking pledges as income, only outright gifts and payments when they come in. You have to be consistent and clear of your intent when you are managing the database. Sent from my iPhone Please excuse brevity and misspelling. Donna Rex 904.910.9140 donnafund@gmail.com > On Aug 14, 2019, at 9:29 AM, Clark, David <dclark07@spalding.edu> wrote: > > Stephanie, > > Raiser’s edge should have the ability for you to mark the pledge so that it can be excluded from Finance. It is not a pledge receivable and Finance will not/should not book that pledge. You need to record that pledge in your system, even if it is not legally binding, because that’s what we do. We track the money that is expected to come in. We track the behavior of our donors. That should all be localized to a single system for accuracy if possible. If finance is still concerned about it, some institutions refer to pledges that they know will be coming from DAFs as a different gift type – I’ve seen intentions used instead of pledges. Then there is no chance of Finance booking it as a receivable, but you can still track the expected gift in your donor system and the payment is not really a pledge payment. > > David > > > > David Clark > Manager, Advancement Services & Data Support > Office of Advancement > Spalding University > 845 S. Third Street > Louisville, KY 40203 > > 502-873-4316 > Dclark07@spalding.edu > > Make a gift today at https//www.spalding.edu/donate > > > > > From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor > Sent: Tuesday, August 13, 2019 9:46 PM > To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG > Subject: Re: [FUNDSVCS] How should finance record pledges from donors who plan to use a DAF to pay off the pledge > > Agreed. > > Stephanie, locate my paper on Who Can Make a Pledge and Who Can Pay It Off on the download site. It addresses both legal and axxou ting aspects of this. > > John > > John Taylor > 919.816.5903 > johntaylorconsulting@gmail.com > > Big ideas; small keyboard > > On Aug 13, 2019, at 9:41 PM, Bill Wong <wswong@scad.edu> wrote: > > Well, the donor can’t really pledge money that isn’t there’s. So, you don’t even have a pledge. Now, if you want to track those promises to encourage someone else to pay internally on a spreadsheet on your desktop, no one would stop you. —Bill > > Sent from my iPhone > > On Aug 13, 2019, at 9:30 PM, Carper Stephanie <stephanie.carper@us.mcd.com> wrote: > > [EXTERNAL EMAIL] > WARNING: This email originated from outside of SCAD. Do not click links or open attachments unless you recognize the sender and know the content is safe. > > > I’m curious how Finance records a pledge (if at all) when a donor intends to direct gifts from his/her donor-advised fund. The finance team at my organization was not aware that donors cannot use grants from DAFs to pay existing pledges. They would recognize the full amount of revenue in the year the pledge was made and record the gifts from the donor’s DAF as pledge payments. Now that they are aware of these restrictions, we are struggling to determine how to book the pledge (if at all). The advice we received from our auditors regarding a similar situation is that from an accounting perspective it doesn’t matter who pays the pledge. But I am uncomfortable recording gifts from a DAF as a pledge payment in Raiser’s Edge. I would prefer to just reduce the pledge by the amount of the gift from the DAF. However, this will create reconciliation issues between RE and FE, so Finance doesn’t want to do that. > > I would appreciate your thoughts. > > Thanks, > > Stephanie > > Stephanie Carper | Development Manager, Major and Planned Gifts > > Ronald McDonald House Charities, Inc. > 110 N. Carpenter St, Chicago, IL 60607-2101 > Cell: 312.520.8370 > stephanie.carper@us.mcd.com | www.rmhc.org > > <image002.jpg> >

I think it maybe time to revisit the idea of DAF's not paying off personal pledges since IRS notice 2017-73. It's definitely worth asking your legal department about, but it does seem like it can be at the organization's discretion whether they choose to allow a DAF payment to go to a pledge or not. Even though it's been well over a year since this issue has been commented on, it does seem like it can be applied currently.

the problem with this is that, many DAFs state in their accompanying letter acknowledgment that you cannot use the gift to pay off a LEGALLY BINDING pledge. But yes, I agree they need to address this f Donna Rex donnafund@gmail.com Mobile 904.910.9140 > On Aug 14, 2019, at 10:36 AM, Dariel Dixon <dariel.dixon@UNCHEALTH.UNC.EDU> wrote: > > I think it maybe time to revisit the idea of DAF's not paying off personal pledges since IRS notice 2017-73. It's definitely worth asking your legal department about, but it does seem like it can be at the organization's discretion whether they choose to allow a DAF payment to go to a pledge or not. Even though it's been well over a year since this issue has been commented on, it does seem like it can be applied currently.

That notice has never been resolved. And while you might find gifts from DAFs that will allow payment on a pledge, you must still rely on what the DAF requirements are. If you take a look at the funding applications you will still see the majority of DAFs state clearly their gifts can never be used to satisfy a personal pledge. 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, Aug 14, 2019 at 10:36 AM Dariel Dixon < dariel.dixon@unchealth.unc.edu> wrote: > I think it maybe time to revisit the idea of DAF's not paying off personal > pledges since IRS notice 2017-73. It's definitely worth asking your legal > department about, but it does seem like it can be at the organization's > discretion whether they choose to allow a DAF payment to go to a pledge or > not. Even though it's been well over a year since this issue has been > commented on, it does seem like it can be applied currently. >

I think we're all awaiting the IRS resolving the issues from 2017-73 in new regulations. But the IRS said that you could only consider the payment by the DAF as not having benefit to the individual if the DAF doesn't say the payment is being made in satisfaction of the pledge. Frankly, this would do little to get us out from the wink-and-a-nod world that DAFs have put us in. DAFs would routinely be used to pay pledges, with that intent specifically in mind, and that would be 100% kosher... so long as it wasn't in writing. Is that really a good regulatory regime to live under? Thank you, Isaac Shalev CRM Expert Sage70, Inc. (917) 859-0151 isaac@sage70.com Schedule a *30-minute consultation *now: https://calendly.com/sage70/30min On Wed, Aug 14, 2019 at 10:36 AM Dariel Dixon < dariel.dixon@unchealth.unc.edu> wrote: > I think it maybe time to revisit the idea of DAF's not paying off personal > pledges since IRS notice 2017-73. It's definitely worth asking your legal > department about, but it does seem like it can be at the organization's > discretion whether they choose to allow a DAF payment to go to a pledge or > not. Even though it's been well over a year since this issue has been > commented on, it does seem like it can be applied currently. >

Issac, I agree that the part about not mentioning the pledge is the most ridiculous thing I've read. But in regards to your part about legally binding pledges Donna, I think it's worth thinking about if most of the "pledges" we have. It seems to me that while that language is there on the DAF letter to avoid creating a situation where a benefit may be given, it seems like the may still be at the discretion of the charitable organization whether they decide to apply a gift or not. Regardless, the lack of a decision is disappointing and creates more confusion. I think that this example used by the IRS is helpful. For example, assume that charity Z, an organization described in §§ 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in response to the annual fundraising solicitation, individual B promises to contribute $1,000x to Z. B has advisory privileges with respect to a DAF and advises that the sponsoring organization distribute $1,000x from the DAF to Z. The sponsoring organization makes the advised distribution. Assume further that in its transmittal letter to Z, the sponsoring organization identifies B as the individual who advised the distribution, but makes no reference to a charitable pledge by B or any other person. Z chooses to treat the sponsoring organization’s distribution as satisfying B’s pledge. Z also publicly recognizes B for B’s role in facilitating the distribution from the sponsoring organization, but Z provides no other benefit to B. B does not attempt to claim a § 170 deduction with respect to the distribution. Under these facts, the Treasury Department and the IRS are currently of the view that the DAF distribution does not result in a more than incidental benefit to B under § 4967 merely because Z treats the distribution as satisfying B’s pledge. It seems to me that the goal of this section was to allow a payment to be made towards a pledge. I think the key word in the example is chooses. The organization has the ability, but not necessarily mandated, to apply the payment with to the pledge.

I think you are quoting the IRS Notice and not current law. This is what the IRS proposed. At present, if the organization has a bonafide pledge a DAF payment cannot be applied against it unless the payment meets the three criteria stated in the notice (meaning there cannot be ANY mention of a pledge). Furthermore, as others have stated, even if those criteria are met, if the DAF has a written policy prohibiting any DAF gift from satisfying a pledge, you simply cannot do it. Doing so jeopardize both your donor and the DAF with very significant financial penalties. 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, Aug 14, 2019 at 11:28 AM Dariel Dixon < dariel.dixon@unchealth.unc.edu> wrote: > Issac, I agree that the part about not mentioning the pledge is the most > ridiculous thing I've read. > > But in regards to your part about legally binding pledges Donna, I think > it's worth thinking about if most of the "pledges" we have. > > It seems to me that while that language is there on the DAF letter to > avoid creating a situation where a benefit may be given, it seems like the > may still be at the discretion of the charitable organization whether they > decide to apply a gift or not. Regardless, the lack of a decision is > disappointing and creates more confusion. > > > I think that this example used by the IRS is helpful. > > > For example, assume that charity Z, an organization described in §§ > 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in > response to the annual fundraising solicitation, individual B promises to > contribute $1,000x to Z. B has advisory privileges with respect to a DAF > and advises that the sponsoring organization distribute $1,000x from the > DAF to Z. The sponsoring organization makes the advised distribution. > Assume further that in its transmittal letter to Z, the sponsoring > organization identifies B as the individual who advised the distribution, > but makes no reference to a charitable pledge by B or any other person. Z > chooses to treat the sponsoring organization’s distribution as satisfying > B’s pledge. Z also publicly recognizes B for B’s role in facilitating the > distribution from the sponsoring organization, but Z provides no other > benefit to B. B does not attempt to claim a § 170 deduction with respect to > the distribution. Under these facts, the Treasury Department and the IRS > are currently of the view that the DAF distribution does not result in a > more than incidental benefit to B under § 4967 merely because Z treats the > distribution as satisfying B’s pledge. > > It seems to me that the goal of this section was to allow a payment to be > made towards a pledge. I think the key word in the example is chooses. > The organization has the ability, but not necessarily mandated, to apply > the payment with to the pledge. >

Stephanie, Raiser’s edge should have the ability for you to mark the pledge so that it can be excluded from Finance. It is not a pledge receivable and Finance will not/should not book that pledge. You need to record that pledge in your system, even if it is not legally binding, because that’s what we do. We track the money that is expected to come in. We track the behavior of our donors. That should all be localized to a single system for accuracy if possible. If finance is still concerned about it, some institutions refer to pledges that they know will be coming from DAFs as a different gift type – I’ve seen intentions used instead of pledges. Then there is no chance of Finance booking it as a receivable, but you can still track the expected gift in your donor system and the payment is not really a pledge payment. David David Clark Manager, Advancement Services & Data Support Office of Advancement Spalding University 845 S. Third Street Louisville, KY 40203 502-873-4316 Dclark07@spalding.edu<mailto:Dclark07@spalding.edu> Make a gift today at https//www.spalding.edu/donate<https/www.spalding.edu/donate> From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor Sent: Tuesday, August 13, 2019 9:46 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] How should finance record pledges from donors who plan to use a DAF to pay off the pledge Agreed. Stephanie, locate my paper on Who Can Make a Pledge and Who Can Pay It Off on the download site. It addresses both legal and axxou ting aspects of this. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> Big ideas; small keyboard On Aug 13, 2019, at 9:41 PM, Bill Wong <wswong@scad.edu<mailto:wswong@scad.edu>> wrote: Well, the donor can’t really pledge money that isn’t there’s. So, you don’t even have a pledge. Now, if you want to track those promises to encourage someone else to pay internally on a spreadsheet on your desktop, no one would stop you. —Bill Sent from my iPhone On Aug 13, 2019, at 9:30 PM, Carper Stephanie <stephanie.carper@us.mcd.com<mailto:stephanie.carper@us.mcd.com>> wrote: [EXTERNAL EMAIL] WARNING: This email originated from outside of SCAD. Do not click links or open attachments unless you recognize the sender and know the content is safe. I’m curious how Finance records a pledge (if at all) when a donor intends to direct gifts from his/her donor-advised fund. The finance team at my organization was not aware that donors cannot use grants from DAFs to pay existing pledges. They would recognize the full amount of revenue in the year the pledge was made and record the gifts from the donor’s DAF as pledge payments. Now that they are aware of these restrictions, we are struggling to determine how to book the pledge (if at all). The advice we received from our auditors regarding a similar situation is that from an accounting perspective it doesn’t matter who pays the pledge. But I am uncomfortable recording gifts from a DAF as a pledge payment in Raiser’s Edge. I would prefer to just reduce the pledge by the amount of the gift from the DAF. However, this will create reconciliation issues between RE and FE, so Finance doesn’t want to do that. I would appreciate your thoughts. Thanks, Stephanie Stephanie Carper | Development Manager, Major and Planned Gifts Ronald McDonald House Charities, Inc. 110 N. Carpenter St, Chicago, IL 60607-2101 Cell: 312.520.8370 stephanie.carper@us.mcd.com<mailto:stephanie.carper@us.mcd.com> | www.rmhc.org<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.rmhc.org&d=DwMFaQ&c=pFzAfbLt3uYKe9jAqU5I4g&r=ahC1X8XEbG-zsVOX9kr6hj-7xjYl_64qI8R9iBOffcM&m=aUAsFob67bvVLAgKpXNrEwJpe5x6xqWOqjfxZJNZhCQ&s=wrUi7A0oLCGwxFBPkYIgXiuycBnvpK4gZxJC_Py2vFw&e=> <image002.jpg>

It was worth repeating! I had one DAF company tell me at a conference that "Of course we allow this." I then went online - while they stood there - and showed them their own application form (updated just 2 weeks earlier) stating clearly that they did NOT allow payments on pledges!!! 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, Aug 14, 2019 at 1:52 PM Shearer, Derrick <dshearer@pingry.org> wrote: > One thing that I haven't seen mentioned, and I'm sorry if it was and I > missed it, is that regardless of proposed rules most of these checks (at > least in my experience) are still coming in saying they cannot be used to > pay off any personal obligation, including legally binding pledges. So > even if the IRS says it's ok the DAF's seem to still be saying no. When I > called Fidelity and spoke to them about this over the summer they said they > had no plans to change it either. > > On Wed, Aug 14, 2019 at 2:44 PM Isaac Shalev <isaac@sage70.com> wrote: > >> Yes! Very important to distinguish proposed rules from current law! >> >> I know of cases where organizations chose to write off pledges from the >> donor after DAF contributions, simply because the donor wasn't going to >> fulfill the pledge, since the money intended for that purpose was donated >> to the DAF. There are lots of hoops to jump through here: the process of >> writing off a pledge for one, the decision about appropriate recognition >> for two. >> >> But it crystallizes the point: donors giving through a DAF are, >> typically, identical to donors giving directly, no matter what the law says >> about how to acknowledge, receipt and records. The DAF is an artificial >> vehicle intended to support the tax aims of the donor, and donors see it as >> an extension of themselves, even if legally speaking they've actually >> surrendered their control over the money. We are in the difficult spot of >> needing to honor both the law and the donor, even in the face of these >> incongruities. >> >> Thank you, >> Isaac Shalev >> CRM Expert >> Sage70, Inc. >> (917) 859-0151 >> isaac@sage70.com >> >> Schedule a *30-minute consultation *now: >> https://calendly.com/sage70/30min >> >> >> On Wed, Aug 14, 2019 at 11:37 AM John Taylor < >> johntaylorconsulting@gmail.com> wrote: >> >>> I think you are quoting the IRS Notice and not current law. This is >>> what the IRS proposed. At present, if the organization has a bonafide >>> pledge a DAF payment cannot be applied against it unless the payment meets >>> the three criteria stated in the notice (meaning there cannot be ANY >>> mention of a pledge). Furthermore, as others have stated, even if those >>> criteria are met, if the DAF has a written policy prohibiting any DAF gift >>> from satisfying a pledge, you simply cannot do it. Doing so jeopardize >>> both your donor and the DAF with very significant financial penalties. >>> >>> 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, Aug 14, 2019 at 11:28 AM Dariel Dixon < >>> dariel.dixon@unchealth.unc.edu> wrote: >>> >>>> Issac, I agree that the part about not mentioning the pledge is the >>>> most ridiculous thing I've read. >>>> >>>> But in regards to your part about legally binding pledges Donna, I >>>> think it's worth thinking about if most of the "pledges" we have. >>>> >>>> It seems to me that while that language is there on the DAF letter to >>>> avoid creating a situation where a benefit may be given, it seems like the >>>> may still be at the discretion of the charitable organization whether they >>>> decide to apply a gift or not. Regardless, the lack of a decision is >>>> disappointing and creates more confusion. >>>> >>>> >>>> I think that this example used by the IRS is helpful. >>>> >>>> >>>> For example, assume that charity Z, an organization described in §§ >>>> 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in >>>> response to the annual fundraising solicitation, individual B promises to >>>> contribute $1,000x to Z. B has advisory privileges with respect to a DAF >>>> and advises that the sponsoring organization distribute $1,000x from the >>>> DAF to Z. The sponsoring organization makes the advised distribution. >>>> Assume further that in its transmittal letter to Z, the sponsoring >>>> organization identifies B as the individual who advised the distribution, >>>> but makes no reference to a charitable pledge by B or any other person. Z >>>> chooses to treat the sponsoring organization’s distribution as satisfying >>>> B’s pledge. Z also publicly recognizes B for B’s role in facilitating the >>>> distribution from the sponsoring organization, but Z provides no other >>>> benefit to B. B does not attempt to claim a § 170 deduction with respect to >>>> the distribution. Under these facts, the Treasury Department and the IRS >>>> are currently of the view that the DAF distribution does not result in a >>>> more than incidental benefit to B under § 4967 merely because Z treats the >>>> distribution as satisfying B’s pledge. >>>> >>>> It seems to me that the goal of this section was to allow a payment to >>>> be made towards a pledge. I think the key word in the example is chooses. >>>> The organization has the ability, but not necessarily mandated, to apply >>>> the payment with to the pledge. >>>> >>> > > -- > *Derrick Shearer* > *Director of Advancement Services* > The Pingry School > 131 Martinsville Rd. > Basking Ridge, NJ 07920 > dshearer@pingry.org > 908-647-5555 ext. 1265 > > >

Yes! Very important to distinguish proposed rules from current law! I know of cases where organizations chose to write off pledges from the donor after DAF contributions, simply because the donor wasn't going to fulfill the pledge, since the money intended for that purpose was donated to the DAF. There are lots of hoops to jump through here: the process of writing off a pledge for one, the decision about appropriate recognition for two. But it crystallizes the point: donors giving through a DAF are, typically, identical to donors giving directly, no matter what the law says about how to acknowledge, receipt and records. The DAF is an artificial vehicle intended to support the tax aims of the donor, and donors see it as an extension of themselves, even if legally speaking they've actually surrendered their control over the money. We are in the difficult spot of needing to honor both the law and the donor, even in the face of these incongruities. Thank you, Isaac Shalev CRM Expert Sage70, Inc. (917) 859-0151 isaac@sage70.com Schedule a *30-minute consultation *now: https://calendly.com/sage70/30min On Wed, Aug 14, 2019 at 11:37 AM John Taylor <johntaylorconsulting@gmail.com> wrote: > I think you are quoting the IRS Notice and not current law. This is what > the IRS proposed. At present, if the organization has a bonafide pledge a > DAF payment cannot be applied against it unless the payment meets the three > criteria stated in the notice (meaning there cannot be ANY mention of a > pledge). Furthermore, as others have stated, even if those criteria are > met, if the DAF has a written policy prohibiting any DAF gift from > satisfying a pledge, you simply cannot do it. Doing so jeopardize both > your donor and the DAF with very significant financial penalties. > > 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, Aug 14, 2019 at 11:28 AM Dariel Dixon < > dariel.dixon@unchealth.unc.edu> wrote: > >> Issac, I agree that the part about not mentioning the pledge is the most >> ridiculous thing I've read. >> >> But in regards to your part about legally binding pledges Donna, I think >> it's worth thinking about if most of the "pledges" we have. >> >> It seems to me that while that language is there on the DAF letter to >> avoid creating a situation where a benefit may be given, it seems like the >> may still be at the discretion of the charitable organization whether they >> decide to apply a gift or not. Regardless, the lack of a decision is >> disappointing and creates more confusion. >> >> >> I think that this example used by the IRS is helpful. >> >> >> For example, assume that charity Z, an organization described in §§ >> 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in >> response to the annual fundraising solicitation, individual B promises to >> contribute $1,000x to Z. B has advisory privileges with respect to a DAF >> and advises that the sponsoring organization distribute $1,000x from the >> DAF to Z. The sponsoring organization makes the advised distribution. >> Assume further that in its transmittal letter to Z, the sponsoring >> organization identifies B as the individual who advised the distribution, >> but makes no reference to a charitable pledge by B or any other person. Z >> chooses to treat the sponsoring organization’s distribution as satisfying >> B’s pledge. Z also publicly recognizes B for B’s role in facilitating the >> distribution from the sponsoring organization, but Z provides no other >> benefit to B. B does not attempt to claim a § 170 deduction with respect to >> the distribution. Under these facts, the Treasury Department and the IRS >> are currently of the view that the DAF distribution does not result in a >> more than incidental benefit to B under § 4967 merely because Z treats the >> distribution as satisfying B’s pledge. >> >> It seems to me that the goal of this section was to allow a payment to be >> made towards a pledge. I think the key word in the example is chooses. >> The organization has the ability, but not necessarily mandated, to apply >> the payment with to the pledge. >> >

One thing that I haven't seen mentioned, and I'm sorry if it was and I missed it, is that regardless of proposed rules most of these checks (at least in my experience) are still coming in saying they cannot be used to pay off any personal obligation, including legally binding pledges. So even if the IRS says it's ok the DAF's seem to still be saying no. When I called Fidelity and spoke to them about this over the summer they said they had no plans to change it either. On Wed, Aug 14, 2019 at 2:44 PM Isaac Shalev <isaac@sage70.com> wrote: > Yes! Very important to distinguish proposed rules from current law! > > I know of cases where organizations chose to write off pledges from the > donor after DAF contributions, simply because the donor wasn't going to > fulfill the pledge, since the money intended for that purpose was donated > to the DAF. There are lots of hoops to jump through here: the process of > writing off a pledge for one, the decision about appropriate recognition > for two. > > But it crystallizes the point: donors giving through a DAF are, typically, > identical to donors giving directly, no matter what the law says about how > to acknowledge, receipt and records. The DAF is an artificial vehicle > intended to support the tax aims of the donor, and donors see it as an > extension of themselves, even if legally speaking they've actually > surrendered their control over the money. We are in the difficult spot of > needing to honor both the law and the donor, even in the face of these > incongruities. > > Thank you, > Isaac Shalev > CRM Expert > Sage70, Inc. > (917) 859-0151 > isaac@sage70.com > > Schedule a *30-minute consultation *now: > https://calendly.com/sage70/30min > > > On Wed, Aug 14, 2019 at 11:37 AM John Taylor < > johntaylorconsulting@gmail.com> wrote: > >> I think you are quoting the IRS Notice and not current law. This is what >> the IRS proposed. At present, if the organization has a bonafide pledge a >> DAF payment cannot be applied against it unless the payment meets the three >> criteria stated in the notice (meaning there cannot be ANY mention of a >> pledge). Furthermore, as others have stated, even if those criteria are >> met, if the DAF has a written policy prohibiting any DAF gift from >> satisfying a pledge, you simply cannot do it. Doing so jeopardize both >> your donor and the DAF with very significant financial penalties. >> >> 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, Aug 14, 2019 at 11:28 AM Dariel Dixon < >> dariel.dixon@unchealth.unc.edu> wrote: >> >>> Issac, I agree that the part about not mentioning the pledge is the most >>> ridiculous thing I've read. >>> >>> But in regards to your part about legally binding pledges Donna, I think >>> it's worth thinking about if most of the "pledges" we have. >>> >>> It seems to me that while that language is there on the DAF letter to >>> avoid creating a situation where a benefit may be given, it seems like the >>> may still be at the discretion of the charitable organization whether they >>> decide to apply a gift or not. Regardless, the lack of a decision is >>> disappointing and creates more confusion. >>> >>> >>> I think that this example used by the IRS is helpful. >>> >>> >>> For example, assume that charity Z, an organization described in §§ >>> 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in >>> response to the annual fundraising solicitation, individual B promises to >>> contribute $1,000x to Z. B has advisory privileges with respect to a DAF >>> and advises that the sponsoring organization distribute $1,000x from the >>> DAF to Z. The sponsoring organization makes the advised distribution. >>> Assume further that in its transmittal letter to Z, the sponsoring >>> organization identifies B as the individual who advised the distribution, >>> but makes no reference to a charitable pledge by B or any other person. Z >>> chooses to treat the sponsoring organization’s distribution as satisfying >>> B’s pledge. Z also publicly recognizes B for B’s role in facilitating the >>> distribution from the sponsoring organization, but Z provides no other >>> benefit to B. B does not attempt to claim a § 170 deduction with respect to >>> the distribution. Under these facts, the Treasury Department and the IRS >>> are currently of the view that the DAF distribution does not result in a >>> more than incidental benefit to B under § 4967 merely because Z treats the >>> distribution as satisfying B’s pledge. >>> >>> It seems to me that the goal of this section was to allow a payment to >>> be made towards a pledge. I think the key word in the example is chooses. >>> The organization has the ability, but not necessarily mandated, to apply >>> the payment with to the pledge. >>> >> -- *Derrick Shearer* *Director of Advancement Services* The Pingry School 131 Martinsville Rd. Basking Ridge, NJ 07920 dshearer@pingry.org 908-647-5555 ext. 1265

Yes, John mentioned that important caveat. I imagine that if the IRS changes its rules, DAF sponsors will follow suit. They are mainly motivated by compliance issues, and don't want to allow behaviors that could jeopardize the business model and the charitable designation it relies on. If the IRS loosened this rule, I think DAFs would realign their policies - being able to pay pledges from a DAF would be a nice feature of the DAF that could help drive sales and customer satisfaction. Thank you, Isaac Shalev CRM Expert Sage70, Inc. (917) 859-0151 isaac@sage70.com Schedule a *30-minute consultation *now: https://calendly.com/sage70/30min On Wed, Aug 14, 2019 at 2:52 PM Shearer, Derrick <dshearer@pingry.org> wrote: > One thing that I haven't seen mentioned, and I'm sorry if it was and I > missed it, is that regardless of proposed rules most of these checks (at > least in my experience) are still coming in saying they cannot be used to > pay off any personal obligation, including legally binding pledges. So > even if the IRS says it's ok the DAF's seem to still be saying no. When I > called Fidelity and spoke to them about this over the summer they said they > had no plans to change it either. > > On Wed, Aug 14, 2019 at 2:44 PM Isaac Shalev <isaac@sage70.com> wrote: > >> Yes! Very important to distinguish proposed rules from current law! >> >> I know of cases where organizations chose to write off pledges from the >> donor after DAF contributions, simply because the donor wasn't going to >> fulfill the pledge, since the money intended for that purpose was donated >> to the DAF. There are lots of hoops to jump through here: the process of >> writing off a pledge for one, the decision about appropriate recognition >> for two. >> >> But it crystallizes the point: donors giving through a DAF are, >> typically, identical to donors giving directly, no matter what the law says >> about how to acknowledge, receipt and records. The DAF is an artificial >> vehicle intended to support the tax aims of the donor, and donors see it as >> an extension of themselves, even if legally speaking they've actually >> surrendered their control over the money. We are in the difficult spot of >> needing to honor both the law and the donor, even in the face of these >> incongruities. >> >> Thank you, >> Isaac Shalev >> CRM Expert >> Sage70, Inc. >> (917) 859-0151 >> isaac@sage70.com >> >> Schedule a *30-minute consultation *now: >> https://calendly.com/sage70/30min >> >> >> On Wed, Aug 14, 2019 at 11:37 AM John Taylor < >> johntaylorconsulting@gmail.com> wrote: >> >>> I think you are quoting the IRS Notice and not current law. This is >>> what the IRS proposed. At present, if the organization has a bonafide >>> pledge a DAF payment cannot be applied against it unless the payment meets >>> the three criteria stated in the notice (meaning there cannot be ANY >>> mention of a pledge). Furthermore, as others have stated, even if those >>> criteria are met, if the DAF has a written policy prohibiting any DAF gift >>> from satisfying a pledge, you simply cannot do it. Doing so jeopardize >>> both your donor and the DAF with very significant financial penalties. >>> >>> 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, Aug 14, 2019 at 11:28 AM Dariel Dixon < >>> dariel.dixon@unchealth.unc.edu> wrote: >>> >>>> Issac, I agree that the part about not mentioning the pledge is the >>>> most ridiculous thing I've read. >>>> >>>> But in regards to your part about legally binding pledges Donna, I >>>> think it's worth thinking about if most of the "pledges" we have. >>>> >>>> It seems to me that while that language is there on the DAF letter to >>>> avoid creating a situation where a benefit may be given, it seems like the >>>> may still be at the discretion of the charitable organization whether they >>>> decide to apply a gift or not. Regardless, the lack of a decision is >>>> disappointing and creates more confusion. >>>> >>>> >>>> I think that this example used by the IRS is helpful. >>>> >>>> >>>> For example, assume that charity Z, an organization described in §§ >>>> 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in >>>> response to the annual fundraising solicitation, individual B promises to >>>> contribute $1,000x to Z. B has advisory privileges with respect to a DAF >>>> and advises that the sponsoring organization distribute $1,000x from the >>>> DAF to Z. The sponsoring organization makes the advised distribution. >>>> Assume further that in its transmittal letter to Z, the sponsoring >>>> organization identifies B as the individual who advised the distribution, >>>> but makes no reference to a charitable pledge by B or any other person. Z >>>> chooses to treat the sponsoring organization’s distribution as satisfying >>>> B’s pledge. Z also publicly recognizes B for B’s role in facilitating the >>>> distribution from the sponsoring organization, but Z provides no other >>>> benefit to B. B does not attempt to claim a § 170 deduction with respect to >>>> the distribution. Under these facts, the Treasury Department and the IRS >>>> are currently of the view that the DAF distribution does not result in a >>>> more than incidental benefit to B under § 4967 merely because Z treats the >>>> distribution as satisfying B’s pledge. >>>> >>>> It seems to me that the goal of this section was to allow a payment to >>>> be made towards a pledge. I think the key word in the example is chooses. >>>> The organization has the ability, but not necessarily mandated, to apply >>>> the payment with to the pledge. >>>> >>> > > -- > *Derrick Shearer* > *Director of Advancement Services* > The Pingry School > 131 Martinsville Rd. > Basking Ridge, NJ 07920 > dshearer@pingry.org > 908-647-5555 ext. 1265 > > >

That is correct. What the notice doesn't say is even if all three criteria are met if the DAF states you cannot use their gift as a payment on the pledge then you cannot. And I'd be will to bet that 98% of DAFs disallow such use. So, as someone mentioned earlier, you simply cannot just start applying DAF gifts to pledges as most do not allow it. 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 Thu, Aug 15, 2019 at 8:02 AM Margaret Matteson <mmatteson@delart.org> wrote: > The IRS does say in 2017-73 that “Taxpayers may rely on the rules > described in section 4 until additional guidance is issued.” > > > > > > Margaret Matteson > > Database Administrator > > > > [image: http://www.delart.org/images/logos/signature/color_bar.png] > > > > *Delaware Art Museum* > > *2301 Kentmere Parkway* > > *Wilmington, DE 19806 * > > *302.351.8513* | *(f) 302.571.0220 * > > mmatteson@delart.org > > > > > > > > *From:* Advancement Services Discussion List < > FUNDSVCS@LISTSERV.FUNDSVCS.ORG> *On Behalf Of *John Taylor > *Sent:* Wednesday, August 14, 2019 2:59 PM > *To:* FUNDSVCS@LISTSERV.FUNDSVCS.ORG > *Subject:* Re: [FUNDSVCS] How should finance record pledges from donors > who plan to use a DAF to pay off the pledge > > > > It was worth repeating! > > > > I had one DAF company tell me at a conference that "Of course we allow > this." I then went online - while they stood there - and showed them their > own application form (updated just 2 weeks earlier) stating clearly that > they did NOT allow payments on pledges!!! > > > > 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, Aug 14, 2019 at 1:52 PM Shearer, Derrick <dshearer@pingry.org> > wrote: > > One thing that I haven't seen mentioned, and I'm sorry if it was and I > missed it, is that regardless of proposed rules most of these checks (at > least in my experience) are still coming in saying they cannot be used to > pay off any personal obligation, including legally binding pledges. So > even if the IRS says it's ok the DAF's seem to still be saying no. When I > called Fidelity and spoke to them about this over the summer they said they > had no plans to change it either. > > > > On Wed, Aug 14, 2019 at 2:44 PM Isaac Shalev <isaac@sage70.com> wrote: > > Yes! Very important to distinguish proposed rules from current law! > > > > I know of cases where organizations chose to write off pledges from the > donor after DAF contributions, simply because the donor wasn't going to > fulfill the pledge, since the money intended for that purpose was donated > to the DAF. There are lots of hoops to jump through here: the process of > writing off a pledge for one, the decision about appropriate recognition > for two. > > > > But it crystallizes the point: donors giving through a DAF are, typically, > identical to donors giving directly, no matter what the law says about how > to acknowledge, receipt and records. The DAF is an artificial vehicle > intended to support the tax aims of the donor, and donors see it as an > extension of themselves, even if legally speaking they've actually > surrendered their control over the money. We are in the difficult spot of > needing to honor both the law and the donor, even in the face of these > incongruities. > > > Thank you, > Isaac Shalev > CRM Expert > Sage70, Inc. > (917) 859-0151 > isaac@sage70.com > > > > Schedule a *30-minute consultation *now: > > https://calendly.com/sage70/30min > > > > > > On Wed, Aug 14, 2019 at 11:37 AM John Taylor < > johntaylorconsulting@gmail.com> wrote: > > I think you are quoting the IRS Notice and not current law. This is what > the IRS proposed. At present, if the organization has a bonafide pledge a > DAF payment cannot be applied against it unless the payment meets the three > criteria stated in the notice (meaning there cannot be ANY mention of a > pledge). Furthermore, as others have stated, even if those criteria are > met, if the DAF has a written policy prohibiting any DAF gift from > satisfying a pledge, you simply cannot do it. Doing so jeopardize both > your donor and the DAF with very significant financial penalties. > > > > 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, Aug 14, 2019 at 11:28 AM Dariel Dixon < > dariel.dixon@unchealth.unc.edu> wrote: > > Issac, I agree that the part about not mentioning the pledge is the most > ridiculous thing I've read. > > But in regards to your part about legally binding pledges Donna, I think > it's worth thinking about if most of the "pledges" we have. > > It seems to me that while that language is there on the DAF letter to > avoid creating a situation where a benefit may be given, it seems like the > may still be at the discretion of the charitable organization whether they > decide to apply a gift or not. Regardless, the lack of a decision is > disappointing and creates more confusion. > > > I think that this example used by the IRS is helpful. > > > For example, assume that charity Z, an organization described in §§ > 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in > response to the annual fundraising solicitation, individual B promises to > contribute $1,000x to Z. B has advisory privileges with respect to a DAF > and advises that the sponsoring organization distribute $1,000x from the > DAF to Z. The sponsoring organization makes the advised distribution. > Assume further that in its transmittal letter to Z, the sponsoring > organization identifies B as the individual who advised the distribution, > but makes no reference to a charitable pledge by B or any other person. Z > chooses to treat the sponsoring organization’s distribution as satisfying > B’s pledge. Z also publicly recognizes B for B’s role in facilitating the > distribution from the sponsoring organization, but Z provides no other > benefit to B. B does not attempt to claim a § 170 deduction with respect to > the distribution. Under these facts, the Treasury Department and the IRS > are currently of the view that the DAF distribution does not result in a > more than incidental benefit to B under § 4967 merely because Z treats the > distribution as satisfying B’s pledge. > > It seems to me that the goal of this section was to allow a payment to be > made towards a pledge. I think the key word in the example is chooses. > The organization has the ability, but not necessarily mandated, to apply > the payment with to the pledge. > > > > > -- > > *Derrick Shearer* > > *Director of Advancement Services* > > The Pingry School > > 131 Martinsville Rd. > > Basking Ridge, NJ 07920 > > dshearer@pingry.org > > 908-647-5555 ext. 1265 > > > > > >

Indeed. And when I asked the IRS last year (a year after the public comment period for the Notice expired) what was the status of a formal proclamation, the response was "We are focusing on the TCJA repercussions and fine-tuning those. The Notice is not on the docket." I haven't contacted them since. 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 Thu, Aug 15, 2019 at 8:14 AM Dixon, Dariel < Dariel.Dixon@unchealth.unc.edu> wrote: > I agree with you here John. I’m certain that many of these financial > organizations will fall in line with this. Fidelity Charitable posted > their comments online here: > https://www.fidelitycharitable.org/content/dam/fc-public/docs/fc/fidelity-charitable-comments-notice-2017-73-2018-03-02.pdf > > > > But the quote earlier was from the proposed notice. There does need to be > some further conversation, as I do agree that this proposed change almost > creates more confusion as it is worded here. > > > > *Dariel Dixon* | Business Analyst > > Rex Healthcare Foundation > > 2500 Blue Ridge Road, Suite 325 > > Raleigh, NC 27607 > > Dariel.Dixon@unchealth.unc.edu | (919) 784-7689 > > > > *From:* John Taylor <johntaylorconsulting@GMAIL.COM> > *Sent:* Wednesday, August 14, 2019 2:59 PM > *Subject:* Re: How should finance record pledges from donors who plan to > use a DAF to pay off the pledge > > > > It was worth repeating! > > > > I had one DAF company tell me at a conference that "Of course we allow > this." I then went online - while they stood there - and showed them their > own application form (updated just 2 weeks earlier) stating clearly that > they did NOT allow payments on pledges!!! > > > > 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, Aug 14, 2019 at 1:52 PM Shearer, Derrick <dshearer@pingry.org> > wrote: > > One thing that I haven't seen mentioned, and I'm sorry if it was and I > missed it, is that regardless of proposed rules most of these checks (at > least in my experience) are still coming in saying they cannot be used to > pay off any personal obligation, including legally binding pledges. So > even if the IRS says it's ok the DAF's seem to still be saying no. When I > called Fidelity and spoke to them about this over the summer they said they > had no plans to change it either. > > > > On Wed, Aug 14, 2019 at 2:44 PM Isaac Shalev <isaac@sage70.com> wrote: > > Yes! Very important to distinguish proposed rules from current law! > > > > I know of cases where organizations chose to write off pledges from the > donor after DAF contributions, simply because the donor wasn't going to > fulfill the pledge, since the money intended for that purpose was donated > to the DAF. There are lots of hoops to jump through here: the process of > writing off a pledge for one, the decision about appropriate recognition > for two. > > > > But it crystallizes the point: donors giving through a DAF are, typically, > identical to donors giving directly, no matter what the law says about how > to acknowledge, receipt and records. The DAF is an artificial vehicle > intended to support the tax aims of the donor, and donors see it as an > extension of themselves, even if legally speaking they've actually > surrendered their control over the money. We are in the difficult spot of > needing to honor both the law and the donor, even in the face of these > incongruities. > > > Thank you, > Isaac Shalev > CRM Expert > Sage70, Inc. > (917) 859-0151 > isaac@sage70.com > > > > Schedule a *30-minute consultation *now: > > https://calendly.com/sage70/30min > > > > > > On Wed, Aug 14, 2019 at 11:37 AM John Taylor < > johntaylorconsulting@gmail.com> wrote: > > I think you are quoting the IRS Notice and not current law. This is what > the IRS proposed. At present, if the organization has a bonafide pledge a > DAF payment cannot be applied against it unless the payment meets the three > criteria stated in the notice (meaning there cannot be ANY mention of a > pledge). Furthermore, as others have stated, even if those criteria are > met, if the DAF has a written policy prohibiting any DAF gift from > satisfying a pledge, you simply cannot do it. Doing so jeopardize both > your donor and the DAF with very significant financial penalties. > > > > 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, Aug 14, 2019 at 11:28 AM Dariel Dixon < > dariel.dixon@unchealth.unc.edu> wrote: > > Issac, I agree that the part about not mentioning the pledge is the most > ridiculous thing I've read. > > But in regards to your part about legally binding pledges Donna, I think > it's worth thinking about if most of the "pledges" we have. > > It seems to me that while that language is there on the DAF letter to > avoid creating a situation where a benefit may be given, it seems like the > may still be at the discretion of the charitable organization whether they > decide to apply a gift or not. Regardless, the lack of a decision is > disappointing and creates more confusion. > > > I think that this example used by the IRS is helpful. > > > For example, assume that charity Z, an organization described in §§ > 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in > response to the annual fundraising solicitation, individual B promises to > contribute $1,000x to Z. B has advisory privileges with respect to a DAF > and advises that the sponsoring organization distribute $1,000x from the > DAF to Z. The sponsoring organization makes the advised distribution. > Assume further that in its transmittal letter to Z, the sponsoring > organization identifies B as the individual who advised the distribution, > but makes no reference to a charitable pledge by B or any other person. Z > chooses to treat the sponsoring organization’s distribution as satisfying > B’s pledge. Z also publicly recognizes B for B’s role in facilitating the > distribution from the sponsoring organization, but Z provides no other > benefit to B. B does not attempt to claim a § 170 deduction with respect to > the distribution. Under these facts, the Treasury Department and the IRS > are currently of the view that the DAF distribution does not result in a > more than incidental benefit to B under § 4967 merely because Z treats the > distribution as satisfying B’s pledge. > > It seems to me that the goal of this section was to allow a payment to be > made towards a pledge. I think the key word in the example is chooses. > The organization has the ability, but not necessarily mandated, to apply > the payment with to the pledge. > > > > > -- > > *Derrick Shearer* > > *Director of Advancement Services* > > The Pingry School > > 131 Martinsville Rd. > > Basking Ridge, NJ 07920 > > dshearer@pingry.org > > 908-647-5555 ext. 1265 > > > > > > > *----- Confidentiality Notice -----**The information contained in (or > attached to) this electronic message may be legally privileged and/or > confidential information. If you have received this communication in error, > please notify the sender immediately and delete the message.* >

The IRS does say in 2017-73 that “Taxpayers may rely on the rules described in section 4 until additional guidance is issued.” Margaret Matteson Database Administrator [http://www.delart.org/images/logos/signature/color_bar.png] Delaware Art Museum 2301 Kentmere Parkway Wilmington, DE 19806 302.351.8513 | (f) 302.571.0220 mmatteson@delart.org From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor Sent: Wednesday, August 14, 2019 2:59 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] How should finance record pledges from donors who plan to use a DAF to pay off the pledge It was worth repeating! I had one DAF company tell me at a conference that "Of course we allow this." I then went online - while they stood there - and showed them their own application form (updated just 2 weeks earlier) stating clearly that they did NOT allow payments on pledges!!! 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 Wed, Aug 14, 2019 at 1:52 PM Shearer, Derrick <dshearer@pingry.org<mailto:dshearer@pingry.org>> wrote: One thing that I haven't seen mentioned, and I'm sorry if it was and I missed it, is that regardless of proposed rules most of these checks (at least in my experience) are still coming in saying they cannot be used to pay off any personal obligation, including legally binding pledges. So even if the IRS says it's ok the DAF's seem to still be saying no. When I called Fidelity and spoke to them about this over the summer they said they had no plans to change it either. On Wed, Aug 14, 2019 at 2:44 PM Isaac Shalev <isaac@sage70.com<mailto:isaac@sage70.com>> wrote: Yes! Very important to distinguish proposed rules from current law! I know of cases where organizations chose to write off pledges from the donor after DAF contributions, simply because the donor wasn't going to fulfill the pledge, since the money intended for that purpose was donated to the DAF. There are lots of hoops to jump through here: the process of writing off a pledge for one, the decision about appropriate recognition for two. But it crystallizes the point: donors giving through a DAF are, typically, identical to donors giving directly, no matter what the law says about how to acknowledge, receipt and records. The DAF is an artificial vehicle intended to support the tax aims of the donor, and donors see it as an extension of themselves, even if legally speaking they've actually surrendered their control over the money. We are in the difficult spot of needing to honor both the law and the donor, even in the face of these incongruities. Thank you, Isaac Shalev CRM Expert Sage70, Inc. (917) 859-0151 isaac@sage70.com<mailto:isaac@sage70.com> Schedule a 30-minute consultation now: https://calendly.com/sage70/30min On Wed, Aug 14, 2019 at 11:37 AM John Taylor <johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com>> wrote: I think you are quoting the IRS Notice and not current law. This is what the IRS proposed. At present, if the organization has a bonafide pledge a DAF payment cannot be applied against it unless the payment meets the three criteria stated in the notice (meaning there cannot be ANY mention of a pledge). Furthermore, as others have stated, even if those criteria are met, if the DAF has a written policy prohibiting any DAF gift from satisfying a pledge, you simply cannot do it. Doing so jeopardize both your donor and the DAF with very significant financial penalties. 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 Wed, Aug 14, 2019 at 11:28 AM Dariel Dixon <dariel.dixon@unchealth.unc.edu<mailto:dariel.dixon@unchealth.unc.edu>> wrote: Issac, I agree that the part about not mentioning the pledge is the most ridiculous thing I've read. But in regards to your part about legally binding pledges Donna, I think it's worth thinking about if most of the "pledges" we have. It seems to me that while that language is there on the DAF letter to avoid creating a situation where a benefit may be given, it seems like the may still be at the discretion of the charitable organization whether they decide to apply a gift or not. Regardless, the lack of a decision is disappointing and creates more confusion. I think that this example used by the IRS is helpful. For example, assume that charity Z, an organization described in §§ 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in response to the annual fundraising solicitation, individual B promises to contribute $1,000x to Z. B has advisory privileges with respect to a DAF and advises that the sponsoring organization distribute $1,000x from the DAF to Z. The sponsoring organization makes the advised distribution. Assume further that in its transmittal letter to Z, the sponsoring organization identifies B as the individual who advised the distribution, but makes no reference to a charitable pledge by B or any other person. Z chooses to treat the sponsoring organization’s distribution as satisfying B’s pledge. Z also publicly recognizes B for B’s role in facilitating the distribution from the sponsoring organization, but Z provides no other benefit to B. B does not attempt to claim a § 170 deduction with respect to the distribution. Under these facts, the Treasury Department and the IRS are currently of the view that the DAF distribution does not result in a more than incidental benefit to B under § 4967 merely because Z treats the distribution as satisfying B’s pledge. It seems to me that the goal of this section was to allow a payment to be made towards a pledge. I think the key word in the example is chooses. The organization has the ability, but not necessarily mandated, to apply the payment with to the pledge. -- Derrick Shearer Director of Advancement Services The Pingry School 131 Martinsville Rd. Basking Ridge, NJ 07920 dshearer@pingry.org<mailto:dshearer@pingry.org> 908-647-5555 ext. 1265

I agree with you here John. I’m certain that many of these financial organizations will fall in line with this. Fidelity Charitable posted their comments online here: https://www.fidelitycharitable.org/content/dam/fc-public/docs/fc/fidelity-charitable-comments-notice-2017-73-2018-03-02.pdf But the quote earlier was from the proposed notice. There does need to be some further conversation, as I do agree that this proposed change almost creates more confusion as it is worded here. Dariel Dixon | Business Analyst Rex Healthcare Foundation 2500 Blue Ridge Road, Suite 325 Raleigh, NC 27607 Dariel.Dixon@unchealth.unc.edu<mailto:Dariel.Dixon@unchealth.unc.edu> | (919) 784-7689 From: John Taylor <johntaylorconsulting@GMAIL.COM> Sent: Wednesday, August 14, 2019 2:59 PM Subject: Re: How should finance record pledges from donors who plan to use a DAF to pay off the pledge It was worth repeating! I had one DAF company tell me at a conference that "Of course we allow this." I then went online - while they stood there - and showed them their own application form (updated just 2 weeks earlier) stating clearly that they did NOT allow payments on pledges!!! 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 Wed, Aug 14, 2019 at 1:52 PM Shearer, Derrick <dshearer@pingry.org<mailto:dshearer@pingry.org>> wrote: One thing that I haven't seen mentioned, and I'm sorry if it was and I missed it, is that regardless of proposed rules most of these checks (at least in my experience) are still coming in saying they cannot be used to pay off any personal obligation, including legally binding pledges. So even if the IRS says it's ok the DAF's seem to still be saying no. When I called Fidelity and spoke to them about this over the summer they said they had no plans to change it either. On Wed, Aug 14, 2019 at 2:44 PM Isaac Shalev <isaac@sage70.com<mailto:isaac@sage70.com>> wrote: Yes! Very important to distinguish proposed rules from current law! I know of cases where organizations chose to write off pledges from the donor after DAF contributions, simply because the donor wasn't going to fulfill the pledge, since the money intended for that purpose was donated to the DAF. There are lots of hoops to jump through here: the process of writing off a pledge for one, the decision about appropriate recognition for two. But it crystallizes the point: donors giving through a DAF are, typically, identical to donors giving directly, no matter what the law says about how to acknowledge, receipt and records. The DAF is an artificial vehicle intended to support the tax aims of the donor, and donors see it as an extension of themselves, even if legally speaking they've actually surrendered their control over the money. We are in the difficult spot of needing to honor both the law and the donor, even in the face of these incongruities. Thank you, Isaac Shalev CRM Expert Sage70, Inc. (917) 859-0151 isaac@sage70.com<mailto:isaac@sage70.com> Schedule a 30-minute consultation now: https://calendly.com/sage70/30min On Wed, Aug 14, 2019 at 11:37 AM John Taylor <johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com>> wrote: I think you are quoting the IRS Notice and not current law. This is what the IRS proposed. At present, if the organization has a bonafide pledge a DAF payment cannot be applied against it unless the payment meets the three criteria stated in the notice (meaning there cannot be ANY mention of a pledge). Furthermore, as others have stated, even if those criteria are met, if the DAF has a written policy prohibiting any DAF gift from satisfying a pledge, you simply cannot do it. Doing so jeopardize both your donor and the DAF with very significant financial penalties. 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 Wed, Aug 14, 2019 at 11:28 AM Dariel Dixon <dariel.dixon@unchealth.unc.edu<mailto:dariel.dixon@unchealth.unc.edu>> wrote: Issac, I agree that the part about not mentioning the pledge is the most ridiculous thing I've read. But in regards to your part about legally binding pledges Donna, I think it's worth thinking about if most of the "pledges" we have. It seems to me that while that language is there on the DAF letter to avoid creating a situation where a benefit may be given, it seems like the may still be at the discretion of the charitable organization whether they decide to apply a gift or not. Regardless, the lack of a decision is disappointing and creates more confusion. I think that this example used by the IRS is helpful. For example, assume that charity Z, an organization described in §§ 501(c)(3) and 170(b)(1)(A)(vi), holds an annual fundraising drive, and in response to the annual fundraising solicitation, individual B promises to contribute $1,000x to Z. B has advisory privileges with respect to a DAF and advises that the sponsoring organization distribute $1,000x from the DAF to Z. The sponsoring organization makes the advised distribution. Assume further that in its transmittal letter to Z, the sponsoring organization identifies B as the individual who advised the distribution, but makes no reference to a charitable pledge by B or any other person. Z chooses to treat the sponsoring organization’s distribution as satisfying B’s pledge. Z also publicly recognizes B for B’s role in facilitating the distribution from the sponsoring organization, but Z provides no other benefit to B. B does not attempt to claim a § 170 deduction with respect to the distribution. Under these facts, the Treasury Department and the IRS are currently of the view that the DAF distribution does not result in a more than incidental benefit to B under § 4967 merely because Z treats the distribution as satisfying B’s pledge. It seems to me that the goal of this section was to allow a payment to be made towards a pledge. I think the key word in the example is chooses. The organization has the ability, but not necessarily mandated, to apply the payment with to the pledge. -- Derrick Shearer Director of Advancement Services The Pingry School 131 Martinsville Rd. Basking Ridge, NJ 07920 dshearer@pingry.org<mailto:dshearer@pingry.org> 908-647-5555 ext. 1265 ----- Confidentiality Notice ----- The information contained in (or attached to) this electronic message may be legally privileged and/or confidential information. If you have received this communication in error, please notify the sender immediately and delete the message.