In our continuing series “Nonprofit Tools for Success,” we take a look at Gift Acceptance Policies. As always, here’s my disclaimer: I am not an attorney nor accountant, but I do base my opinion and recommendations on experiences with a number of nonprofits of all shapes and sizes over my career. Always check with your organization’s professional advisors before making any final decisions.
Like all policies, your nonprofit needs one in place before you need to use it. And just like it sounds, when a donor approaches you with a donation (gift), under what terms will you accept it?
At first this may sound a bit goofy. What? Donations are donations. Why wouldn’t we take any donation that comes our way? Why do I need a policy? Two main reasons: a) donors are getting more sophisticated with their charitable planning and are finding better tax advantages to donating items other than cash, and b) donors may want a benefit that is out of line with IRS regulations.
Donors can be very bold about what they want their donation to 1) be and 2) do, and a Gift Acceptance Policy helps you to be prepared as well as demonstrate your nonprofit’s governance and transparency.
For “be,” your Gift Acceptance Policy needs to spell out all of the types of assets that your organization will accept, so spend time with your board to brainstorm all of the items you’ve heard about over the years, how you would assess its market value, if and how you would sell it, and how labor intensive it is to evaluate and sell that gift. To quote Jim Baum, “Is the juice worth the squeeze?”
Some assets such as cash, stock, insurance policies, and IRA distributions are pretty straightforward and easy to assess a market value. Other assets are more complicated, might be difficult to sell, and might simply be a way for a donor to get it off their hands and dump the work onto you. This can include gifts of art, jewelry, autos, real estate, bitcoin, cemetery plots, and equipment. Proceed with caution and consult a variety of independent experts, such as art and antique dealers as well as real estate appraisers.
Language in your Gift Acceptance Policy around “be” can be as simple as: “Gifts of cash and appreciated securities are accepted at any level with no board review. All gifts of appreciated securities shall be liquidated upon receipt. All gifts other than cash and stock shall be reviewed and approved by the Board of Directors before acceptance.”
As for “do,” we take a look at what donors want charities to do with their gift, which can be frustrating for the charity and can void the charitable tax receipt for the donor.
Donors may approach your nonprofit and say they want their donation to only go toward a particular program or project. This would be a “restricted” gift, which might be great timing because that program needs growth or the restriction might be limiting because that program is already well-funded and the nonprofit could better use that money elsewhere in the organization. In a perfect world, donors would make all gifts “unrestricted” so that the charity has the flexibility to apply it where it is most needed. Your Gift Acceptance Policy should state how restricted gifts are evaluated before acceptance.
A big caution for charities to watch for is the donor who has a plan for not only gifting you an asset but also how you can liquidate it quickly. Proceed with caution as the IRS has rules about donor control and benefit. If a donor (or someone close to them or their company) benefits from the gift, then it really isn’t a charitable act. An example of this could be “I’m gifting you a piece of land but I’ve got it set up for my child to buy it from you at half price.” Your Gift Acceptance Policy could include language straight from the IRS about donor control and benefit, as well as an outline of your board procedures for reviewing non-cash asset proposals.
Of course there are situations where a donor benefits from a gift – a Donor Advised Fund (DAF) here at the Community Foundation allows a donor to get full tax advantages for donations into the DAF and then they get to advise the Community Foundation where to make grants from that DAF. There is a difference between donor benefit and donor control.
A Gift Acceptance Policy is an excellent tool for standardizing an activity of the charity, as well as helping an organization envision the future. If there is a particular asset that your nonprofit wants to pursue, you can use excerpts from the Gift Acceptance Policy in your marketing and communications with donors to encourage the donation of that asset type.
The topic of Gift Acceptance Policies is too detailed for a short column, so I encourage readers to search the internet for additional resources. One of my favorite resources for policies and governance is the Council of Nonprofits, which has great articles and links to even more resources. And, as always, you can reach out to us at 815-941-0852 or [email protected].
Again, donors are getting more sophisticated in their choice of assets to donate (which can often have a higher value than a cash gift), so get your Gift Acceptance Policy adopted so that you are prepared to either accept or refuse gifts – you don’t have to accept every gift that comes your way!
— Julianne Buck is the Executive Director of Community Foundation of Grundy County