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Hard Credit Guidelines

  • 1.  Hard Credit Guidelines

    Posted 11 days ago
    Hello,

    I am in the process of assessing any needed changes in the new tax year for the way we record hard credits, specifically with relation to funds disbursed to us by a third-party org on behalf of an individual. DAF gifts or IRA gifts I understand to be a "hard credit to the org, soft credit to the inidividual", but there are some other situations we don't encounter every day (maybe once or twice a year), and I'd like to refine my knowledge and understanding of these. We recently received a check from Ameritrade Clearing on behalf of an individual donor. We recorded it with a hard credit to the individual donor's record. I tried to view some information on Ameritrade Clearing's website but what I found wasn't very helpful. My questions are as follows:

    1. Does anyone have guidance in this particular case of "who should receive hard credit"?
    2. Is there a summary document/guideline, or definitive document from the IRS somewhere in our aasp library that addresses hard credits vs. soft credits for different situations? I saw that someone in the community uploaded what looks like their institution's Hard Credit Guidelines document, but as I don't see reference to an IRS statute or rule, it seems slightly arbitrary.

    ------------------------------
    Melissa Rufener
    Coordinator of Advancement Services
    Life Pacific University
    mrufener@lifepacific.edu
    http://www.lifepacific.edu
    ------------------------------


  • 2.  RE: Hard Credit Guidelines

    Posted 11 days ago
    Ameritrade is a financial service provider, much like other financial institutions and brokers.  Unless these third parties also operate a DAF (Ameritrade does not - their partner Schwab Charitable does), the gifts received are from the account owned by the individual.  Usually, the notice that comes with the check gives you enough information to make the legal donor call.  When in doubt, you really haven't any alternative but to contact the service provider - or donor.

    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: Hard Credit Guidelines

    Posted 11 days ago
    Hi Melissa,

    The rules regarding who should get tax credit is straightforward - it's the last entity that legally owned the money. The typical complication is when we get a check from an entity and it's not clear if the entity owned the money, like a DAF, or acted as an agent for the owner, like when a bank sends a payment on behalf of an account-holder (or even a regular old credit card payment). 

    When things get hairy is usually when someone is fundraising on your behalf, and the issues of whether agency existed, and between whom, arise. Usually, the best approach, operationally speaking, is to default to the rule that whomever gave you the money gets tax credit, unless documentation is procured by the entity wanting credit that established why they should get it. If those documents don't exist and you're evaluating facts and circumstances, get you CFO or legal counsel involved. Agency is a very complicated topic!

    This is not the same as the question of how to use the hard credit and soft credit features of a donor management system. The IRS has nothing to do with this, and your institution's policies may align closely or differ substantially from how tax credit is assigned. 


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

    Schedule a 30-minute consultation now:







  • 4.  RE: Hard Credit Guidelines

    Posted 11 days ago
    Thank you Isaac for the added detail!

    For my second question, I'm not referring to DMS operations but resources ! can use as a reference tool in our processes. I'm just wondering if something exists in the library or if there's a specific IRS statute or doc that's usually suggested as a guideline that notes specific types of donors/third parties. We do closely review any attached documentation when we get DAF and other such checks, but sometimes that information just isn't present.

    ------------------------------
    Melissa Rufener
    Coordinator of Advancement Services
    Life Pacific University
    mrufener@lifepacific.edu
    http://www.lifepacific.edu
    ------------------------------



  • 5.  RE: Hard Credit Guidelines

    Posted 11 days ago
    Thank you John, that's helpful!

    ------------------------------
    Melissa Rufener
    Coordinator of Advancement Services
    Life Pacific University
    mrufener@lifepacific.edu
    http://www.lifepacific.edu
    ------------------------------