While it may seem intuitive for a 501(c)(3) nonprofit to openly accept gifts without question, certain gifts can result in consequences that harm the nonprofit’s mission, drain its finances, and/or damage the nonprofit’s reputation. In order to avoid such consequences, it’s best practice for nonprofits to adopt a Gift Acceptance Policy that sets forth which gifts it wishes to freely accept, which gifts should require additional consideration before acceptance, and which gifts it may choose to altogether prohibit. The following is a list of considerations to inform your nonprofit’s Gift Acceptance Policy.
Gifts that Require Few Considerations to Accept
Your Gift Acceptance Policy may provide for generally accepting the following:
- Marketable Securities (that are easily sold/converted into cash)
- Unrestricted Bequests
Gifts that Require Additional Considerations Before Acceptance
Your Gift Acceptance Policy may want to provide additional considerations, restrictions and/or agreements to be in place before accepting the following:
- Tangible Personal Property: Gifts of tangible property (e.g., vehicles, jewelry, antiques, coin collections) are not always desirable. Some may be easily converted to cash, while other tangible property may be more of a burden than a benefit. Some items may even have little to no value at all (like a very old used car). Prior to accepting tangible property, considerations should be made including examining its marketability, restrictions on its use and sale, and costs associated with possession, ownership, and sale.
- Real Estate: Real Estate can also prove to be of great value, or of great burden. Gift Acceptance Policies should provide for the examination of the real estate’s usefulness, value, marketability, limitations associated with the property (e.g., restrictions, reservations, or easements), carrying costs (e.g., insurance, property taxes, mortgages, or notes), as well as environmental, hazardous waste, and other risks associated with the property.
- Cryptocurrency: Donations of cryptocurrency such as Bitcoin are becoming increasingly popular among gift-givers, but these gifts come with several issues to consider as well. Such considerations include the currency’s volatility, marketability, its effect on prudent investment rules, as well as reputational risks, and uncertain regulations. Nonprofits may want to consider immediate liquidation of such gifts upon receipt, or, alternatively, they may choose to encourage crypto donors to instead make their gift to a donor advised fund and then subsequently recommend that the funds be granted to the desired nonprofit.
- Gifts with Requests for Naming Opportunities: Donors may request naming rights (e.g., on a building, bench, or statue) in exchange for providing particularly large gifts. However, it is not uncommon for certain wealthy donors to later find themselves in the media for questionable behavior, foul play, or even felony convictions. The Sackler Family, for example, had made many gifts to organizations who later desired to separate from the family after its relationship to the Opioid epidemic was elucidated. To protect a nonprofit from being left in an uncomfortable situation where it’s displaying the name of a person it no longer wishes to give praise to, it may be desired to create a separate agreement that lays out grounds for the revocation of naming rights when donors become associated with purposes or policies that damage the reputation or goodwill of the nonprofit.
- Anonymous Gifts: To protect a nonprofit from a disgruntled anonymous donor, a Gift Acceptance Policy may want to set forth ways to inform the donor of how its donation may be able to remain anonymous, and circumstances under which the nonprofit may not actually be able to provide full anonymity. In addition, your nonprofit may want to lay out steps it wishes to take to ensure the anonymous gift is not being made to thwart the law, public policy and/or principles of the nonprofit.
Gifts to Reject or Accept with Caution
Your Gift Acceptance Policy may want to make stronger considerations, limitations, or even fully prohibit the following:
- Gifts that Go Against the Nonprofit’s Mission: It may be desired to restrict or completely ban gifts that could be perceived as contrary to your nonprofit’s mission and objectives.
- Gifts From Donors that Have Missions Contrary to the Nonprofit’s: Similarly, your nonprofit may want to lay out restrictions against accepting gifts that come from donors with missions that are in contradiction to the nonprofit’s. For example, if your nonprofit promotes environmental welfare, it may choose to prohibit all gifts from oil companies.
- Overly Restrictive Gifts: Certain gifts may come with so many restrictions that they end up diminishing the nonprofit’s ability to further its mission. For example, considerations should be made for gifts directed towards highly narrow and specific missions and activities that may be difficult or expensive to effectuate, gifts for programs that would require new staff and funding to be established, or gifts for programs that would change the nonprofit’s mission or primary focus.
- Gifts From the Cannabis Industry: While some state laws may permit the sale of cannabis, it is still prohibited under federal law. As a result, if a nonprofit receives a gift that derives from the proceeds of cannabis sales, uncertainties exist as to whether federal funding to the nonprofit could be adversely affected. Nonprofits may wish to take certain precautions before accepting such donations, so they don’t risk losing important government funding.
- Gifts with Restrictions on Race, Ethnicity, Religion, Sexual orientation, or Gender: Even well-intentioned gifts with restrictions on items such as race or gender (e.g., a gift restricted to helping Latino children in the Bronx) may be in violation of certain federal or state laws. Section 1981 of the Civil Rights Act of 1866, for example, prohibits contracts with race restrictions.While gifts with such restrictions are often acceptable, it may be wise to examine legal and reputational considerations before accepting them.
In addition to laying out the foregoing considerations surrounding gift acceptance, it is also beneficial for a Gift Acceptance Policy to lay out reporting requirements that the nonprofit must comply with when accepting such gifts. Reporting requirements may include (subject to certain limitations):
- Form 8282. The nonprofit may be required to file IRS Form 8282 (Donee Information Return) upon the sale or disposition of assets when the charitable deduction value of the item is more than $5,000.
- Written Acknowledgments and Disclosures. In general, nonprofits should provide a written acknowledgement to donors who make any single charitable contribution of greater than $250, and provide a written disclosure todonors who receive goods or services in exchange for a single payment in excess of $75. Acknowledgements and Disclosures must contain certain descriptions, including good faith estimates of the value of goods or services, if any, that have been provided, and descriptions of any non-cash contributions made by the donor.
- Form 8283. The donor may be required to file IRS Form 8283 (Noncash Charitable Contributions) to report information about noncash charitable contributions when the amount of their deduction for all noncash gifts exceeds $500. Part V of the Form requires the recipient nonprofit’s acknowledgment.
- Form 990. Nonprofits may be responsible for reporting gifts on its Form 990 (Return of Organization Exempt from Income Tax), including using Schedule M when receiving over $25,000 in noncash gifts.