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Gift Cards

  • 1.  Gift Cards

    Posted 05-12-2021 02:33 PM
    Good afternoon All,

    Our affiliated medical center just received 5,000 gift cards from a casino.  Each card has a value of $50.  $25 is for onsite casino play and $25 is for online play.  The hospital plans to give these to staff as part of an employee appreciation event.

    In order to redeem the card on-site, the recipient must have or sign up for a "club card".  The club card is free.  For online play, they complete a registration form and enter a promo code.  

    So, as always, the punchline is, is this a gift?  In the sense that it's redeemable for casino play, it's like cash.  However, it's also clearly a promotion for the casino to bring in new players.

    Thank you all in advance for your collective wisdom.

    ------------------------------
    Marcy Serkin
    Associate Vice President Advancement Operations
    Temple University
    ------------------------------


  • 2.  RE: Gift Cards

    Posted 05-12-2021 03:44 PM
    Good afternoon, Marcy - 

    My personal take is that these aren't gifts and function, at best, as some form of discount coupon which obligates the recipient to use the "services" - so to speak - of the casino to reap any potential benefit. And, speaking of benefit, I have to wonder how does it support the Temple U mission by accepting these cards? Is it a nice gesture on the part of the casino? Maybe? Is it really a gift to Temple? I don't think so...

    Others here may have a different POV on whether this is technically a gift that can be recorded, but even beyond that I have to wonder at the ethics of encouraging employees to gamble by offering such an incentive.

    Good luck and best regards,

    Amy

    Amy J. Phillips
    Director of Advancement Services, Gift Acceptance
    Division of University Advancement
    The Catholic University of America
    620 Michigan Avenue, B016 O'Connell Hall
    Washington, DC 20064
    Phone: 202-319-6919






  • 3.  RE: Gift Cards

    Posted 05-12-2021 03:48 PM
    Can the cards be exchanged for cash without having to gamble?





  • 4.  RE: Gift Cards

    Posted 05-12-2021 04:12 PM
    No, the cards cannot be turned into cash.  I also just noticed the very fine print, which indicates an expiration date, which make me even more doubtful about this.

    ------------------------------
    Marcy Serkin
    Associate Vice President Advancement Operations
    Temple University
    marcy.serkin@temple.edu
    ------------------------------



  • 5.  RE: Gift Cards

    Posted 05-12-2021 04:29 PM
    There are a few issues here, but I think there is a gift.

    Generally, gift cards are viewed by the IRS as taxable income to employees when employers give them out, even though you can only use them at a specific store. You'd have to report these on a W2 as a supplemental wage, which might make the whole thing a moot point anway. But seeing as the IRS does see gift cards as income, they would also be valid as charitable donations, as GIKs. 

    So are these regular gift cards? I think so. If I want to redeem an Amazon gift card, I also have to sign up for an account and surrender some personal information, and Amazon certainly uses the opportunity to market to me. But that doesn't defeat the gift card's value. Note also that the expiration date doesn't mean these are not gifts, or that they are not income - there are some laws at both Federal and State levels about how gift cards may expire, but generally speaking they can, and yet they still count as income for tax purposes.

    It is possible that there are some specific laws/rules here for casino gift cards that I'm not aware of, but based on what you've shared, it seems to me like the gift of cards from the casino to the university is a GIK. How you then use them will have its own implications, but it does look like a gift to me. I would look into whether you can liquidate the gift cards for cash with a reseller/broker and get 50-60% of the value in cash. Some other local business might want to buy them from you for their own purposes, for example.


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  • 6.  RE: Gift Cards

    Posted 05-12-2021 05:18 PM

    Hmmm.  I would have thought that there are two separate issues here, which need to be delineated.

     

    One issue is whether the university giving these gift cards to its employees creates a taxable benefit for the employees.  That's not my area of expertise, but it seems plausible to me that it does.

     

    But why ever would we think that the fact that the gift cards being a taxable benefit to employees means that their contribution to the university would be a deductible contribution for the casino?  Those are entirely separate parts of the tax code.

     

    This seems to me analogous to the issues related to contributions for a charitable auction.  In a charitable auction, there are two separate transactions, the auction purchase of the item and the earlier contribution to the university of that item.  An auction purchase of contributed services or of a partial interest (say, a voucher for airfare that had been donated by an airline, or the use of a vacation home donated by its owner) clearly represents a valuable consideration that reduces the deductible part of the winning bid.  However, when we consider whether the earlier contribution of the service or of the partial interest represents a tax-deductible contribution by the airline or by the vacation home owner, that doesn't matter at all.  Rather, the evaluation of the contribution of the service or partial interest is evaluated like any other contribution of services or of a partial interest, and there is no deductible charitable contribution.  The rules for a charitable contribution say that there must be the non-reciprocal transfer of cash or of property other than cash, and neither contributed services nor a contributed partial interest represents a gift of property.  It might seem like there ought to be a linkage, that if the auction winner has their gift reduced by the value of the service or partial interest, the door ought to get a deduction for contributing it, but that is not the case.  There are two transactions, and each is evaluated separately.

     

    It's no different here.  Regardless of what the university does with the contributed gift cards (though the gift cards would have to be used in support of the mission to meet another requirement of charitable contributions), the contribution to the university of the gift cards has to meet the requirements of 26 U.S. Code § 170 for there to be a tax-deductible charitable contribution, regardless of what some other section of the tax code might say about tax implications of what the university subsequently decides to do with the gift cards.  The tax code that governs tax deductions for charitable contributions says that there must be a contribution of cash or of property other than cash.  In evaluating gift cards, that resolves to the question of what is received when the gift cards are redeemed, and, in this case, the gift cards cannot be redeemed for any sort of property--casino play, whether online or in-person, is not property!  So there is no charitable contribution.

     

    It's the same situation as if a supporter contributed the use of a vacation property and, instead of offering it for a charitable auction, the university decided to award it to an employee as a reward for service or some such.  That might well be a taxable benefit for the employee.  But that doesn't magically make it a tax-deductible charitable contribution--there is still no contribution of property.  And the two events still must be evaluated separately.

     

    (Note that the analysis would be different if an individual unrelated to the casino had purchased and contributed the gift cards.)

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

     

    Alan

     

    Alan S. Hejnal   

    Data Quality Manager

     

    SNAGHTML5cbfa34

     

    Smithsonian Institution - Office of Advancement

    600 Maryland Ave SW Ste 600E

    PO Box 37012, MRC 527

    Washington, DC 20013-7012

    Voice: 202-633-8754 | Email: HejnalA@si.edu