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Commission-based "Donations"

  • 1.  Commission-based "Donations"

    Posted 08-25-2020 12:19 PM
    Good afternoon. 

    I searched the archives, but am looking for specific language to include in our policies regarding not accepting  "commission-based donations". 

    For example, XYZ donor wants to give us a necklace for our auction but wants 40% of the proceeds of the sale price. I don't like commission-based arrangements. They are not transparent.   

    Ready for your advice! 






    ------------------------------
    Amy Towery, CFRE
    Vice President of Development
    Meals on Wheels Plus of Manatee, Inc
    atowery@mealsonwheelsplus.org
    ------------------------------


  • 2.  RE: Commission-based "Donations"

    Posted 08-25-2020 12:26 PM
    I believe that such a deal negates the ability to sell the item during a charity auction.

    The purpose of a charity auction is for all proceeds to go to the charity and NOT a third party.  That is why you often see bids higher than FMV as the buyer is making a tax-deductible gift of the difference.  Otherwise, the donor of the item could have friends bidding to jack the price up above FMV so that they get a bigger piece of the action.  In fact, if the original donor gets 40% of the proceeds you would have to say that the winning bid establishes the FMV making it impossible for the bidder to claim a deduction.

    There likely are UBIT issues, too.

    I'd talk to my attorney.

    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: Commission-based "Donations"

    Posted 08-25-2020 12:45 PM
    Thanks, John.  You always have great advice.  How have you navigated this in policy?  

    It is entirely possible that I am not thinking about this in the right way, but for us, it's not as clear as saying we do not accept commission-based items.  We use Winspire for our online auction where we sell multiples of trips and then keep the proceeds above the Winspire nonprofit pricing.  We have to be very clear, ethically, about how much we are paying for the trips so that we are transparent to donors.  So I need the words to add to our gift acceptance policy that would still allow us to use products like Winspire offers, but not get tied to people's jewelry, wine sales, etc. 




    ------------------------------
    Amy Towery
    Vice President of Development
    Meals on Wheels Plus of Manatee, Inc
    atowery@mealsonwheelsplus.org
    ------------------------------



  • 4.  RE: Commission-based "Donations"

    Posted 08-25-2020 12:52 PM
    I think you should be fine by clearly stating that ALL proceeds go to charity.

    But to your point, I believe that auction participants understand there are costs associated with conducting the auction.  If you state something like, "100% of all proceeds, net of our expenses, will go to XYZ", should be all you need to say.

    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







  • 5.  RE: Commission-based "Donations"

    Posted 08-25-2020 04:34 PM
    Winspire is a tricky wicket, imo.

    Generally, the UBIT exception for auctions requires that "substantially all" the merchandise sold is donated, which typically means at least 85%. If you sell a mix of donated and purchased items, your revenue has to be at least 85% from donated items. A Winspire package is clearly not a donated item, however else we might characterize it, so you'd need to factor that in when creating these auctions.

    Regarding the policy, I think the key distinction here is between "consignment" and "commission." You might specify that at the org's discretion, you may accept consigned items for sale, where the seller sets a reserve price that they will receive if the item sells, but that you do not accept commission-based items, where the seller receives a percentage of the final sale price. In case of consignment, however, the item will typically not be considered a donation, unless the reserve price is itself a bargain sale (eg I donate my 100k diamond tennis bracelet for a reserve price of $20k).




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