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  • 1.  Transferring Endowment to another 501(c)3

    Posted 06-13-2023 12:46 PM

    We are in a unique situation where it is in the donor's and the Foundation's best interest to transfer the corpus of an endowment (the donor's gift) to another 501c(3) that can better accomplish what they desire.  I know if we refund the gift back to the donor, that is a tax event, 1099s, etc.  If we transfer directly to another 501c(3) would that be considered "Constructive Receipt" and still be a tax event for the donor? 



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    Jeff Baynham
    NC State University
    jtbaynha@ncsu.edu
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  • 2.  RE: Transferring Endowment to another 501(c)3

    Posted 06-13-2023 01:02 PM
    Provided the transfer is between two qualified nonprofit organizations, there is no NEW tax-related transaction for the individual. They claimed a deduction back when they made the original gift. You are now the irrevocable owner of the asset, which is staying within the nonprofit world.

    BTW, the new nonprofit may "count" these funds as new revenue in official fundraising totals. Had you counted the gifts in a current campaign, it would be prudent to reduce your campaign total by a like amount.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: Transferring Endowment to another 501(c)3

    Posted 06-13-2023 01:16 PM
    Jeff, it's going to depend on the details. From 10k feet, it looks like your org owns the money, and is choosing to donate it to another org, and that shouldn't give rise to a tax issue for the donor. However, if the donor is exercising undue control to bring about this transfer, then it could well be a case of constructive receipt, where it really is a refund to the donor who is then making a new contribution to another org. By exercising control over the money, the donor is voiding the original donation, which requires relinquishing control. However, the new donee organization should receipt the donor for the donation. In theory, the income your org would report on the 1099 for the donor will wash against the deduction for the new donation, but that may not work for the donor's specific tax situation. Regardless, I think that the determination turns on the question of donor control over the funds, based on the facts and circumstances of the situation.


    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:






  • 4.  RE: Transferring Endowment to another 501(c)3

    Posted 06-13-2023 01:22 PM

    Great thoughts. Both parties would agree to transfer the funds because our foundation cannot administer the endowment as the agreement was originally written, and the donor is unwilling to amend it. The donor would be determining the receiving 501(c)3. 



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    Jeff Baynham
    NC State University
    jtbaynha@ncsu.edu
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    Original Message


  • 5.  RE: Transferring Endowment to another 501(c)3

    Posted 06-13-2023 02:56 PM
    I think you have to go to counsel with this one. There may be some opportunity to act on the donor's advice, similar to a DAF, rather than giving the donor the right to choose the successor org outright. 


    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:





    Original Message


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