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Can credit be considered an in kind gift

  • 1.  Can credit be considered an in kind gift

    Posted 12-22-2021 11:50 AM
    Hello. We find ourselves in a bit of a unique situation and I have tried to search for posts that may answer my question and am not finding what I need. A parts supplier has agreed to provide in kind donations to us on a monthly basis. They have chosen to extend a set dollar amount up front as a total credit and then we are essentially ordering specific goods on a monthly basis. Does the credit count as an in kind donation, or do we have to wait until we receive the goods and document that on a monthly basis? Any input is appreciated.

    ------------------------------
    Laura Young
    Finance and Fundraising Assistant
    The Lift Garage
    laura@theliftgarage.org
    ------------------------------


  • 2.  RE: Can credit be considered an in kind gift

    Posted 12-22-2021 12:36 PM
    This might not be a gift at all.  This might be considered a corporate incentive program to get your business - similar to affinity credit card programs and pouring rights.  I would need to dig deeper.  Either way, until you actually own something (or the credits have a cash value), there is nothing to count.

    John

    John H. Taylor 
    919.816.5903 (Cell/Text)

    Big Ideas; Small Keyboard



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  • 3.  RE: Can credit be considered an in kind gift

    Posted 12-22-2021 01:04 PM
    If the credits do not expire (or expire after a very long time), have a cash value, or are transferable, they generally would be recorded as an asset on your financial books, and would be an in-kind donation, assuming they qualify as a donation at all. 


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

    Schedule a 30-minute consultation now:





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  • 4.  RE: Can credit be considered an in kind gift

    Posted 12-22-2021 06:52 PM
    Assuming there are no strings attached, this is a nice deal for you if the purpose is to ensure donations are exactly what you need and directly support mission. It minimizes the possibility of getting goods that you kinda maybe will need and then go unused. However, I don't see any way the credit itself can be considered a gift. In fact, I think the IRS would frown on it as opening the door for being able to load up charitable donations in one year but deliver the donated goods in another. Likewise, I could see it becoming a clever ploy to meet fundraising goals this year by counting charitable contributions where the donor has told you they can't deliver until a subsequent year.

    Hoy. I've been in this business too long. :)

    John Smilde



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  • 5.  RE: Can credit be considered an in kind gift

    Posted 12-22-2021 06:56 PM
    I should clarify that by "you" I mean fundraising units in general, not your shop specifically.



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  • 6.  RE: Can credit be considered an in kind gift

    Posted 12-22-2021 07:41 PM
    A pledge is a countable gift that suits does not yield a tax deduction to the giver until it is fulfilled. The question is whether this credit is countable as a gift to the organization now. That can still be true even if the gift is not tax deductible to the donor, now or ever. 

    Isaac Shalev
    Data Strategy Expert
    (917) 859-0151
    isaac@sage70.com

    Autocorrect was used in composting this email, please excuse any typos




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  • 7.  RE: Can credit be considered an in kind gift

    Posted 12-23-2021 08:00 AM
    I might book it as a "deep discount" if indeed it was not something regularly offered to other customers. Also, it could not be an exclusive relationship where you agree to only order certain goods from them and not other vendors. If both those conditions are met, then upon your institution's payment for the order you could book what was "credited" (i.e. discounted) as a gift-in-kind. I would never ever book it as a pledge. I know others may differ from this approach.   : )




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  • 8.  RE: Can credit be considered an in kind gift

    Posted 12-23-2021 08:20 AM
    Thank you for weighing in, I really appreciate it. I'm gathering the insights shared and will review all of this with our director.

    ------------------------------
    Laura Young
    Finance and Fundraising Assistant
    The Lift Garage
    laura@theliftgarage.org
    ------------------------------

    Original Message


  • 9.  RE: Can credit be considered an in kind gift

    Posted 12-23-2021 09:58 AM
    Lesley, totally agree. I would not book it as a pledge either, but as a GIK. To me this is most analogous to the issuing of a gift card, though as you and others have rightly pointed out, there are other considerations that must be cleared. 

    One angle I hadn't originally considered that I don't think has been brought up is that this may end up being a gift of inventory. That will impact the deductibility of the gift to the donor, but it is important to the org to preserve the GIK character of the gift in receipting. It is likely that the credit amount is based on the MSRP or FMV of what is being sold, and it would not be appropriate to characterize that dollar amount as a donation. 


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

    Schedule a 30-minute consultation now:





    Original Message


  • 10.  RE: Can credit be considered an in kind gift

    Posted 12-23-2021 10:20 AM
    These responses are really helpful as we consider this gift. The credit has already been extended and we will be ordering fluids from the business on an as-needed basis. So I suppose the FMV of the product may change depending on when we order it. The product will also be given to us over the course of 2 years, as we will not use up the credit by the end of 2021, so will be ordering fluids off of this credit well into 2022. But it sounds like there is pretty solid agreement to count this credit as a gift in kind as we have done.

    ------------------------------
    Laura Young
    Finance and Fundraising Assistant
    The Lift Garage
    laura@theliftgarage.org
    ------------------------------

    Original Message


  • 11.  RE: Can credit be considered an in kind gift

    Posted 12-23-2021 10:34 AM
    I remain unconvinced this is a gift.  CASE issued guidance a number of years ago discouraging the "counting" of this sort of corporate "partnership" as in many cases there wasn't any philanthropy - only a future inducement to purchase products from a particular vendor.

    As previously stated, unless these credits have a cash redemption value or can be transferred or sold to another organization, I am not certain these credits qualify as either deductible gifts or countable assets per CASE.  Of course, as a non-CASE organization, you are not bound by their counting standards.  However, those standards might shed some light on what is philanthropy and what is a sales promotion.

    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





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  • 12.  RE: Can credit be considered an in kind gift

    Posted 12-23-2021 10:54 AM
    Thank you for voicing that again, John. I should probably have our director on here instead as she is the one who has had the direct contact with this donor (although that may not matter). I'm looking through communications and mainly see reference about wanting to offer some in-kind products, supplies, and/or services to support our work (at this time it's products/supplies). But I do see how that could be a fuzzy line between philanthropy and inducement. And even though in this case it "feels" like philanthropy, I see how it could easily turn from one to the other. I think we will be having a robust conversation about how to proceed with our counting of this gift. I'll also look around and see if I can find the CASE issued guidance around this sort of issue.

    ------------------------------
    Laura Young
    Finance and Fundraising Assistant
    The Lift Garage
    laura@theliftgarage.org
    ------------------------------

    Original Message


  • 13.  RE: Can credit be considered an in kind gift

    Posted 12-23-2021 11:22 AM
      |   view attached
    I am attaching the CASE supplement from 2011 speaking to "corporate partnerships."  See the second page of this memorandum.

    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





    Attachment(s)

    pdf
    2011 06CASEClarificationCountingIssues.pdf   465 KB 1 version
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  • 14.  RE: Can credit be considered an in kind gift

    Posted 12-23-2021 12:12 PM

    I think there are three questions that arise from the scenario:

     

    1. Can the credit be recorded as a gift? Assuming it is non-transferable, which I suspect it is not, I am pretty strongly on the side of that it cannot be receipted as a gift. As John T pointed out, you are probably not obliged to follow CASE guidelines, so you can do what you want internally. However, I would not send out an acknowledgment with standard tax language at the bottom even without an amount, because as soon as you ad that, you are answering to IRS standards. At most, I would send out a donor relations style thank you confirming the agreement without the IRS language.
    2. Can you record gifts-in-kind as you receive the product/supplies? Assuming it is not a Corporate Partnership, I think you could record each shipment at FMV when you take possession.
    3. Can you record it as a pledge? I can see arguments both ways and you certainly might find it beneficial to record it as a pledge in order to keep track of the remaining credit or to keep track of fundraising targets. Many organizations have a pledge type of "non-binding" that can be used for these purposes, even if it cannot be recorded as an asset on GL. But a pledge is not a gift, it's a pledge to make a gift in the future.

     

    Thanks,

    John

     

     




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  • 15.  RE: Can credit be considered an in kind gift

    Posted 12-23-2021 12:22 PM
    For John's second point - if we agree there is a countable gift here - I like the earlier suggested idea of treating the donation as you would a bargain sale.  So it's still an in-kind entry but associated with the amount of the discount allowed with the credits.

    BTW, another stipulation of CASE is that even if this is not a "corporate partnership," if the credits or discounts are similar to those offered to all nonprofit organizations, that disqualifies the counting.

    The above clarification came from CASE some twenty years ago, mostly in response to standard discounts some of the largest technology providers offered.  IBM was one.  They automatically gave a 10% discount to any educational institution.  That 10% discount was not considered a gift - neither by CASE nor the IRS.

    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





    Original Message