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Gift purpose change to priority seating -- substantiation issue

  • 1.  Gift purpose change to priority seating -- substantiation issue

    Posted 18 days ago

    A donor has requested that a series of gifts in the second half of 2020 and first half of 2021 be re-designated to pay for priority seating charges for athletics season tickets.  We understand that making such a change means the gifts are no longer gifts... but, we have already receipted them as gifts.  

    If we honor the request, what is to be done to address the past substantiation?   Do we need to send a "corrected" acknowledgement letter, or is that for him to sort out with the IRS (assuming he itemized his deductions)?    

    Also, are even in the position to honor the request if we wanted to?  

    Thanks, 

    Tom 



    ------------------------------
    Tom Yates
    Temple University
    Executive Director of Gift Planning
    215-926-2545
    tyates@temple.edu
    ------------------------------


  • 2.  RE: Gift purpose change to priority seating -- substantiation issue

    Posted 18 days ago
    Not only are they not gifts, but they are purchases, subject to sales tax!

    You will want to talk to your CFO, but in this case it is very likely that a 1099 might be needed.  There is often debate on whether 1099s are needed when "returning" a gift - but this feels different.

    Issac may have a better take on this.

    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: Gift purpose change to priority seating -- substantiation issue

    Posted 17 days ago

    To keep it clean from an audit perspective, I'd refund the gifts, issue a 1099, and kindly put them in touch with the ticket purchasing folks. Here, such refunds must be approved by VP only. We are not allowed to make that decision in Advancement Services. My thoughts.

     

    Aaron

     

    Aaron Forrest CPA

    Senior Director Gift and Donor Services

    University of Rochester Office of Advancement

    Larry and Cindy Bloch Alumni and Advancement Center

    300 East River Road

    Rochester NY 14627

    Office 585.275.2799 / Fax 585-273-4558

    Email aaron.forrest@rochester.edu

     

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  • 4.  RE: Gift purpose change to priority seating -- substantiation issue

    Posted 17 days ago
    Thanks John and Aaron.  Just to clarify a point made:  there is a sales tax on contributions for the right to purchase tickets?   I don't see the literature on that... or this one of those unresolved questions and organizations should seek their own counsel?

    ------------------------------
    Tom Yates
    Temple University
    Executive Director of Gift Planning
    215-926-2545
    tyates@temple.edu
    ------------------------------



  • 5.  RE: Gift purpose change to priority seating -- substantiation issue

    Posted 17 days ago
    It's a purchase now, Tom.  There's no charitable donation.

    While your CFO is the one to consult, I have been informed that if you assess sales tax on ticket purchases (in states that have such taxes), you likely need to assess a sales tax on the purchase of priority points.

    Much like with a charity auction, you do not necessarily need to assess the tax on the purchaser.  Rather, you can calculate and pay the taxes from your total proceeds.

    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







  • 6.  RE: Gift purpose change to priority seating -- substantiation issue

    Posted 17 days ago
    I need to add that a couple of years ago during the CASE webinar on this topic, one CFO mentioned that the tax law change would result in the generation of unrelated business income.

    John

    John H. Taylor 
    919.816.5903 (Cell/Text)

    Big Ideas; Small Keyboard





  • 7.  RE: Gift purpose change to priority seating -- substantiation issue

    Posted 17 days ago
    Good to know, thanks.  Going back to earlier comment, are we talking about an actual refund (a check sent to donor) along with a 1099, or an "equivalent" refund whereby the money is kept by university, but with permission from donor it is reapplied to priority points cost (and re-classified on the books)?   For the latter, a 1099 would also be issued.

    ------------------------------
    Tom Yates
    Temple University
    Executive Director of Gift Planning
    215-926-2545
    tyates@temple.edu
    ------------------------------



  • 8.  RE: Gift purpose change to priority seating -- substantiation issue

    Posted 17 days ago
    Regarding the 1099 (or the equivalent), do whatever your CFO directs.  My CFO at Duke had us issue 1099s at the direction of Counsel when we refunded donations from prior tax years.  However, that was 20+ years ago.  Some have pointed out that a 1099 is possibly not required for a refund, as you are not paying the individual for services.

    The decision here on what tax documents are needed should be left to our good friends in the Business Office!

    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







  • 9.  RE: Gift purpose change to priority seating -- substantiation issue

    Posted 17 days ago
    Tom, I don't think it matters whether the money is refunded in practice or not - there's no need for the money to actually change hands to effectuate the outcome you're looking for.  

    As to 1099, I don't believe that one is required, but it is the decision of the business office. If we're talking about a refund of a charitable contribution within the same tax year, I'm even more confident about not needing a 1099. 

    Some useful links:
    http://www.cpaatlaw.com/2017/05/reporting-refunds-of-charitable.html (if you don't know if they took a deduction, no need to 1099 the refund)
    https://www.irs.gov/pub/irs-wd/0704004.pdf (PDF link of a private letter ruling that references this issue)

    We had a longer conversation about this earlier in the year, if you'd like to go down the rabbit hole: https://connect.advserv.org/communities/community-home/digestviewer/viewthread?MessageKey=b45a66bc-97ea-4265-959a-6f41f90ddcb8&CommunityKey=f8ef77b1-79ed-4528-88d7-8866d65196aa&tab=digestviewer#bmb45a66bc-97ea-4265-959a-6f41f90ddcb8

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

    Schedule a 30-minute consultation now: