The Institute welcomes gifts and bequests to support its research, conservation, and education programs. Please contact Jon Michael (firstname.lastname@example.org) to discuss the many options that are available.
Below are the policies that guide the Institute in managing such gifts.
Planned and Memorial Giving
Manual of Policies and Procedures
1. IRC Section 501(c)(3) Purposes
This corporation is organized exclusively for one or more of the purposes as specified in Section 501(c)(3) of the Internal Revenue Code, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under Section 501(c)(3) of the Internal Revenue Code.
2. Specific Objectives and Purposes
The purpose of this corporation shall be to protect and conserve the cultural legacy and genetic integrity of the authentic Bedouin-bred horse of Arabia Deserta. This purpose shall be accomplished through historical and scientific research, the development of conservation standards and practices, and the sponsorship of educational forums, events and opportunities for collaboration among scholars and breeders in this country and abroad.
B. THE BOARD OF DIRECTORS
The By-laws of The Institute for the Desert Arabian Horse establish the Board of Directors and an Executive Committee and provide for the creation of such other committees as are needed for the purpose of governing the Institute and for directing the Planned and Memorial Giving Program of the Institute.
The officers of the 2005-2006 Board of Directors are the following individuals:
Chairman: Bruce Johnson
Vice-Chairman: Mark Rustebakke
Treasurer: Jon Michael
Secretary: Debra Shrishuhn
1. Executive Committee
The Executive Committee shall constitute a standing committee of the Board of Trustees and shall consist of members as set forth in the Bylaws of the Institute: The Chair shall preside over the meetings of the Executive Committee; provided that in the event of the absence or incapacity of the Chair, the Vice-Chair shall preside. In the event of the absence or incapacity of the Vice-Chair, another member of the Executive Committee elected by a majority of those members present shall preside.
The charge of the Executive Committee is to assist the chair, officers and members of the Board of Directors of the Institute in coordinating and overseeing the work of the organization. The Executive Committee is also authorized to act, when necessary, on behalf of the full Board of Directors. Subject to such limitations as may be imposed from time to time by the Board of Directors, the Executive Committee shall be authorized to conduct the business of the Institute and to exercise any and all powers and responsibilities of the Board of Directors in the interim between meetings of the Board; provided, however, that neither the Executive Committee, nor any other committee of the Board may
- authorize distributions;
- approve dissolution, merger, or the sale, pledge, or transfer of all or substantially all of the Institute’s assets;
- elect, appoint, or remove Directors or fill vacancies on the Board;
- adopt, amend, or repeal the Articles of Incorporation or the Bylaws of the Institute.
At each meeting of the Board of Directors of the Institute, the Executive Committee will report on actions taken by the Executive Committee since the last meeting of the Board of Directors. Meetings of the Executive Committee may be called by the Chair or the Vice-Chair or by a majority of members of the Executive Committee.
2. Investment Committee
The Investment Committee shall constitute a standing committee of the Board of Directors, composed of at least three Directors elected by the Board at its annual meeting for a term of one year. The Chair shall appoint a member of the Committee as the Committee Chair. The Investment Committee shall meet from time to time to review the investments of the Institute and make recommendations to the Board on all matters pertaining to the investment of the Institute’s assets, including, but not limited to, the selection of financial advisors and investment managers, the structure of the Institute’s investment portfolio and financial institutions with whom to deposit Institute funds or with whom the Institute shall make investments. The Chair of the Investment Committee may not serve in such office longer than four consecutive one-year terms.
3. Finance Committee
The Finance Committee shall constitute a standing committee of the Board of Directors, composed of the Treasurer and at least two other Directors selected by the Board at its annual meeting for a term of one year. The Chair shall appoint a member of the Committee as a Committee Chair. The Finance Committee shall meet from time to time to review the budget, financial affairs, and financial condition of the Institute, to make recommendations to the Board regarding the budget of the Institute and programs for the acceptance of gifts, the collection of revenue, and expenditures of resources and to recommend annually to the Board the compensation of the employees, if any, of the Institute, provided that such compensation recommendations shall be presented to the Executive Committee prior to presentation to the Board. The Chair of the Finance Committee may not serve in such office longer than four consecutive one-year terms.
4. Development Committee
The Development Committee shall constitute a standing committee of the Board composed of at least three members elected by the Board at its annual meeting for a term of one year. The Chair shall appoint a member of the Committee as Committee Chair. The committee shall meet from time to time to provide advice to the Board for the fundraising activities of the Institute in support of its institutional priorities. The Development Committee participates in the identification and cultivation of private fund-raising prospects and may enlist volunteers and other support as needed for external initiatives and shall advise and make recommendations to the Board on these activities. The Development Committee shall approve only those gifts or gift arrangements that are, in its considered judgment, structured on a sound business basis and serve the best interest of the Institute. Outside expertise and opinion shall be sought when it is deemed necessary to reach a sound decision. The program shall be conducted in a manner that does not conflict with any stated policies of the Institute and that protects the interests of the Institute. Concurrently, the interests of each donor shall be protected, and the Institute shall not knowingly enter any arrangement that would jeopardize the donor’s financial or estate planning interest. The Chair of the Development Committee may not serve in such office longer than four consecutive one-year terms.
5. Audit Committee
The Audit Committee shall constitute a standing committee of the Board composed at least three members elected by the Board at its annual meeting for a term of one year. The Chair shall appoint a member of the Committee as Committee Chair. Employees of the Institute are not eligible to serve on this Committee. The Committee shall meet annually to review the financial reports of the Institute, and shall from time to time meet to recommend for approval of the Board an accountant or firm of accountants to audit the financial operations of the Institute and review the audit of the Foundation. The Chair of the Audit Committee may not serve in such office longer than four consecutive one-year terms.
6. Other Committees
The Board may appoint such other committees as it determines appropriate to carry out the policies and procedures for the Institute’s Planned and Memorial Giving Program. The rights and responsibilities of such other committees shall be established by the Board. Unless otherwise specified, the Chair shall appoint a chair of each such committee.
7. Use of Legal Counsel
All prospective donors shall be encouraged to seek their own professional counsel regarding planned gifts to the Institute and shall be encouraged to have all proposals and illustrations presented to them reviewed by their own advisors. Should a prospective donor seek a recommendation from an officer as to competent counsel, the donor shall be provided with the names of at least three (3) professionals known to be aware of charitable giving within financial and estate planning.
Neither the Development Committee nor officers of the Institute shall present or accept for final execution any gift agreement between the Institute and a donor which has not been reviewed thoroughly by the Institute’s legal counsel.
C. PURPOSE OF THE MANUAL
The purpose of the Policy & Procedures Manual is to set forth the tools of internal control and sound business practices to be used by The Institute for the Desert Arabian Horse personnel in operating their programs. It is designed primarily for use by officers of The Institute for the Desert Arabian Horse, volunteers and staff.
D. RESPONSIBILITY FOR PREPARATION AND MAINTENANCE OF MANUAL
The Treasurer of The Institute for the Desert Arabian Horse is ultimately responsible for the preparation and maintenance of this policies and procedures manual. All policies and procedures are subject to approval by the Institute Board of Directors. The manual’s accuracy will be examined annually and necessary revisions will be made.
The following steps shall be followed in suggesting revisions, deletions, or additions to this manual:
- A proposed revision, deletion, or addition will be prepared by the individual initiating the policy action.
- All proposed revisions, deletions, or additions will be submitted to the Treasurer for review and recommendations.
- All proposed revisions, deletions, or additions will be presented to Institute Board of Directors for approval.
- All approved procedures will be incorporated into the manual and will be distributed to the Board of Directors and/or posted on the secure Web site of the Institute.
- The implementation of current policies is the responsibility of the Treasurer. The Chair of the Institute will ensure that the policies are followed according to the guidelines set forth.
A. AUTHORITY, RESPONSIBILITIES, AND DUTIES
The Institute for the Desert Arabian Horse has designated the Development Committee as its fund-raising arm. The Development Committee is responsible for the coordination of all fund-raising activities, including the overall supervision and management of fund-raising programs, administration of staff if any, and management of the cultivation, solicitation, and proper stewardship of all donors on behalf of the Institute.
For purposes of these policies, the term “gifts” refers to private contributions (such contributions are sometimes called “grants” by foundations and corporations). Gifts are outright or deferred contributions received from private contributors (individuals, partnerships, corporations, foundations, and organizations), sometimes referred to herein as “donors,” in which neither goods nor services (other than general reports and/or fulfillment of donor intent) are expected, implied, or forthcoming for the donor.
The Internal Revenue Service defines a donor as someone who makes a contribution directly to a “qualified organization” or legal representative of that qualified organization for the use of a legally enforceable trust for that organization or in a similar legal arrangement (fund agreement). It must NOT be set aside for use by a specific person.
The Institute shall hold in confidence all information obtained from or about donors or prospects. The Institute shall not publish information about a gift without the prior approval of the donor and where, relevant, the beneficiaries.
All gifts or grants, whether for current use or endowment, solicited in the name of and treated as a gift to any part of the Institute, must be recorded by The Institute for the Desert Arabian Horse.
The following policies and procedures set forth the guidelines for the Institute fund-raising program. Exceptions to these policies may be granted, where appropriate, by the Board of Directors or its Executive Committee.
B. POLICY ON ETHICS IN FUND-RAISING
The Institute for the Desert Arabian Horse is dedicated to the highest standards of ethical conduct in fund-raising. Directors, volunteers, and staff advocate these standards by incorporating them into all fund-raising activities and by serving as models of professionalism to others. The Institute supports and encourages its Directors, volunteers, and staff in these efforts by providing appropriate opportunities for training, education, and leadership. Directors, volunteers, and staff through training and orientation are expected to be familiar with and abide by professional standards of ethics.
C. APPROVAL OF SOLICITATIONS
- The fund-raising program of the Institute encompasses all gift solicitations on behalf of the Institute, its units, and its several activities.
- The fund-raising program generally supports and encourages both unrestricted gifts to the Institute and designated gifts to the Institute to benefit constituent units, activities, and programs of the donor’s choice.
- Proposals for solicitations equal to or exceeding $25,000 will routed through the Executive Committee as will all planned gift proposals regardless of origin.
- The Development Committee maintains a Tracking and Solicitation Management System that records and manages the contacts with and solicitation of prospects in order to avoid multiple solicitations that could confuse the prospect and/or diminish the effectiveness of the solicitation. All contacts and solicitations with donors will be recorded and coordinated through the solicitation management system.
- The Development Committee maintains a clearance system to help the Institute move prospective donors through the development cycle and at the same time ensure prospects are not “hoarded” by a particular unit or program. The Development Committee oversees clearance assignments and changes. There are four main clearance levels.
- Prospect Clearance is the least restrictive level of clearance assigned. It represents a group of individuals believed to be prospects for a particular area. These people normally have never been contacted and need a face-to-face visit to qualify them as a legitimate prospect. Prospects are identified through Development Committee or Board efforts or via planned screening sessions. Any Board officer or Development Committee member may make the qualification contact with a prospect. The prospect list ensures that the Institute has a pool of potential prospects ready to be rotated on to its Primary cultivation list.
- Primary Clearance represents prospects currently under cultivation for a major gift solicitation. Primary clearance is established for one year. If no progress has been made within that time period, primary clearance will be dropped. If progress is being made, clearance can be extended past one year.
- Soliciting Clearance is the most protective level of clearance allowed. This indicates a solicitation strategy or plan has been filed, and the solicitation is currently in progress. Under no circumstances should any contact with the prospect be initiated without approval of the Development Committee. Soliciting clearance is monitored carefully to ensure appropriate movement is being made to close the gift. These efforts are recorded in the Tracking and Solicitation Management System.
- Stewardship Clearance is assigned after a major gift or commitment has been received. Normally, this level of clearance is assigned for a two-year period; however, this period can be adjusted as warranted by individual circumstances.
OPTIONS FOR GIVING
A. DEFINITION OF A GIFT
A gift is the irrevocable transfer of property or money to a qualified organization, and has no donor imposed conditions or control. A gift must be voluntary and must be made without the donor receiving, or expecting to receive, anything of equal value.
In order to protect the interests of the Institute, and the persons and other entities who support the programs of the Institute, these policies are designed to ensure that all gifts to or for the use of the Institute are structured to provide maximum benefit to both parties.
The goal is to encourage funding of the Institute without encumbering the organization with gifts that may prove to generate more cost than benefit or that are restricted in a manner that is not in keeping with the goals of the Institute.
To optimize funding from individuals and other entities, the Institute must be capable of responding quickly, and in the affirmative when possible, to all gifts offered by prospective donors. It is understood that, except where stated otherwise, these policies are intended as guidelines and that flexibility must be maintained since some gift situations can be complex. Decisions can be made only after careful consideration of a number of interrelated factors. Therefore, these policies will in some instances require that the merits of a particular gift are considered by a gift acceptance committee identified by the Board of Directors, and a final decision be made only by that body.
B. PLANNED GIVING INSTRUMENTS
The following are identified by The Institute for the Desert Arabian Horse as acceptable planned giving instruments. Not all of the following, however, are presently available to donors nor does the list limit the options available to donors.
1. Deferred Gifts
- Will Bequest
A will is defined as the legal declaration of a person’s wishes as to the disposition of property to take effect upon the individual’s death.
A bequest is defined as a gift of any amount or form made to the Institute in a donor’s will. There are three types of bequests.
- A specific bequest can be for a specific dollar amount or for particular securities, tangible items, or properties.
- A residual bequest provides for distribution of assets remaining after payment of all debts, expenses, and specific bequests.
- A contingent bequest provides for distributions of assets if certain conditions or circumstances exist at the time of death.
- Living Trust Bequest
A revocable living trust is defined as a legal entity that allows the trustor (grantor) the benefits of property while being relieved of the burdens, through the administration of a Trustee. It can include provisions for asset distribution at death, including bequests as defined above.
- Testamentary Trust
A testamentary trust as defined here is created under the terms of the donor’s will. Such a trust typically reflects the donor’s desire for continued management of the assets by a Trustee after death, and the Institute may be named as an income or principal beneficiary for a defined period, or as a remainder beneficiary at the conclusion of a defined period.
- Life Insurance
Life insurance is defined as an arrangement in which an individual manages the inherent risk of death, and its attendant financial implications. A life insurance policy, if purchased, provides the security of financial recovery at the death of the insured person. The policy itself is an asset and can be a tool in charitable giving and estate planning.
- Retained Life Estate Deed
A deed is defined as a legal, public document which conveys ownership of real estate from one party to another. Through a retained life estate deed, a donor may donate a personal residence or farm to the Institute, while retaining the right to live on and use the property during his or her lifetime. Through a retained life estate deed, the donor makes an irrevocable gift and gets an immediate income tax deduction.
- Retirement Assets
Retirement assets are those held in “qualified” plans which enable individuals to save and grow assets on a tax deferred basis. The following options are qualified plans.
- Defined contribution plans – profit sharing plans, employee stock ownership plans (ESOP), 401(k) plans, and money purchase pension plans.
- Individual Retirement Accounts (IRAs) and Simplified Employee Pensions (SEP).
- Tax sheltered annuities and custodial accounts.
2. Income Producing Gifts
Policies and procedures for the instruments listed below are further described and discussed herein.
- Charitable Remainder Unitrusts (CRUTs)
A donor can transfer assets into a charitable remainder unitrust, with the Institute holding a remainder interest. Under the terms of such a trust, periodic payments, based on a percentage of the trust market value, will be made to the donor or a designated beneficiary, until the donor’s death or for a term of years not to exceed (20) twenty. The payout percentage cannot be less than 5% and cannot be changed once established. The trust is typically revalued on an annual basis to determine the payout amounts for that year, with amounts typically differing from year to year. At the death of the donor or the end of the trust term, the Institute receives the assets remaining in the trust.
- Charitable Remainder Annuity Trusts (CRATs)
A donor can transfer assets into a charitable remainder annuity trust, with the Institute holding a remainder interest. Under the terms of such a trust, a fixed payment amount is established based on a percentage of the initial trust market value, and payments in that fixed amount are made to the donor or a designated beneficiary, until the death of the donor or the end of the trust term, a period not to exceed twenty years. At the death of the donor or the end of the trust term, the Institute receives the remaining assets.
- Charitable Gift Annuities
A charitable gift annuity is a contract, under the terms of which the donor makes a gift to the Institute in exchange for the Institute’s promise to make annuity payments of a fixed amount to the donor, or a designated beneficiary. Such annuity payments shall begin within one year of the date of the gift.
- Deferred Charitable Gift Annuities
A deferred charitable gift annuity is a contract, under the terms of which the donor makes a gift to the Institute in exchange for the university’s promise to make annuity payments of a fixed amount to the donor, or a designated beneficiary, for life. For a deferred charitable gift annuity, such payments are scheduled to begin at some future date, at least one year after the date of the gift.
- Charitable Lead Unitrust
A donor can transfer assets into a charitable lead unitrust, with the Institute as current beneficiary. Under the terms of such a trust, periodic payments, based on a percentage of the market value of the trust, will be made to the Institute until the donor’s death, or for a period of years not subject to limitation.
- Non-grantor charitable lead unitrust – at the death of the donor or the end of the trust term, the remaining assets pass to designated non-charitable beneficiaries, such as the donor’s children or grandchildren. This option will provide the donor with a gift or estate tax deduction, which is beneficial in passing property to heirs. This option is the most common form of charitable lead unitrust.
- Charitable Lead Unitrust
- Grantor charitable lead unitrust – at the end of the trust term, the remaining trust assets pass back to the donor. The donor is considered throughout the trust term the owner of the trust assets, so trust income is taxable to the donor. However, in the year that the trust is established, the donor does receive an income tax deduction based on the present value of the income stream that will be paid to the Institute over the term of the trust.
- Charitable Lead Annuity Trust
A donor can transfer assets into a charitable lead annuity trust, with the Institute as a current beneficiary. Under the terms of such a trust, a fixed payment amount is established based on a percentage of the initial trust market value, and payments in that fixed amount are made to the Institute until the donor’s death or for a period of years not subject to limitation.
- Non-grantor charitable lead annuity trust – the same as defined above for charitable lead unitrusts, allowing for the difference between unitrust payments and annuity payments to the current or “lead” beneficiary.
- Grantor charitable lead annuity trust – the same as defined above for charitable lead unitrusts, allowing for the difference between unitrust payments and annuity payments to the current or “lead” beneficiary.
C. SUBSTANTIATION REQUIREMENTS FOR CHARITABLE GIFTS
While the legal requirements for substantiating the value of a contribution to the Institute are primarily the responsibility of the donor, it shall be the policy of The Institute for the Desert Arabian Horse to provide the donor and his/her agents with whatever assistance and guidance they may need to fulfill IRS Requirements.
1. Cash Contributions
The Treasurer shall acknowledge on official stationery receipt of all cash contributions in a timely fashion, indicating the name of the donor, the date of the contribution and the amount of the contribution.
2. Property Contributions (other than publicly traded securities)
The Treasurer shall acknowledge on official stationery receipt of all contributions of tangible, real or personal property, indicating the name of the donor, the date and location of the contribution, and a description of the property in detail reasonably sufficient under the circumstances. In the case of securities, the name of the issuer, the type of security, and whether the security is regularly traded on a stock exchange or on an over-the-counter market.
If the fair market value of the contribution is readily available or can be computed using IRS tables, the Treasurer shall determine the value of the charitable deduction, the method used to determine the fair market value and, if the valuation was determined by appraisal, a copy of the original report by the appraiser.
The terms of any agreement or understanding entered into with the donor which relates to the use, sale or other disposition of the contributed party.
3. Contributions in Excess of $500
If the claimed value for a single gift of all property contributions exceeds $500 (regardless of their individual values), the donor must complete Form 8283, “Non-cash Charitable Contributions,” and attach it to his tax return. The Treasurer, or in his absence, another officer of the Institute, shall sign Part I, “Donee Acknowledgement.”
4. Qualified Appraisal Requirements
When a donor makes a contribution of property (other than cash or publicly traded securities) with a value in excess of $5000, certain additional requirements must be met by the donor.
- A qualified appraisal shall be obtained by the donor for the property contributed.
- An appraisal summary shall be completed and attached to the tax return on which the deduction is first claimed.
- Records for property contributions shall be maintained.
Note: The Development Committee or the Treasurer shall assist the donor in hiring an appraiser who is qualified to submit an appraisal acceptable to the Internal Revenue Service. A designated member of the Committee or the Treasurer shall mail to the appraiser, selected by the donor, the information of Qualified Appraisal provided hereafter in this document, and the IRS Form 8283, which is to be completed by the appraiser and returned to the Business Office of the Institute along with a copy of the appraisal.
An appraisal summary is the summary of the qualified appraisal with the following elements.
- Made on the IRS Form 8283.
- Signed and dated by the appraiser who prepared the qualified appraisal.
- Inclusive of such information as is required by the Internal Revenue Service.
The Appraisal Summary is described hereinafter in greater detail (see III, C, 6).
The Treasurer shall include the Appraisal Summary Form 8283 with other materials pertaining to the gift when they are mailed to the donor for his/her tax records.
The Treasurer shall be authorized to sign IRS Form 8283 on behalf of the Institute. It is understood that this does not constitute the Institute’s concurrence in the value placed on the contributed property by the qualified appraiser. It represents only the Institute’s acknowledgement that the property described in the summary has been received by the Institute on the date specified. The signature also acknowledges that the Treasurer understands the additional reporting requirement (Form 8282) to which the Institute is subject should the property be sold, exchanged or otherwise disposed of within two (2) years after the date it was received.
The Treasurer, if so authorized by the Board of Directors and if not prohibited by stipulations of these policies, may but is not obliged to offer to pay all or part of the appraisal costs. However, the donor shall be informed in writing that the IRS may regard such payment by the Institute to be income to the donor on which the donor will have to pay tax. Since the donor has the legal requirement for obtaining the appraisal, but is relieved of this financial obligation by the Institute’s payment, under the general principles of income taxation, the donor would be in receipt of income equal in amount to the appraisal costs paid by the Institute. Should the Institute choose to obtain a second appraisal, the fee for the second appraisal should be the obligation of the Institute alone and not the donor.
5. Qualified Appraisal Description
The information to be included in a qualified appraisal is the same as that which would be contained in an ordinary appraisal, with certain exceptions. The following is a checklist of requirements to substantiate the gift value of a charitable contribution.
- The date of the appraisal is not more than 60 days prior to the date of contribution.
- It is prepared, signed and dated by a qualified appraiser.
- The property is described in sufficient detail that person not familiar with the donated property would conclude that the appraised property and donated property are one and the same property.
- In the case of tangible personal property, a description of the property’s physical condition is provided.
- The date (or expected date) of the contribution to the Institute is noted.
- The terms of any agreement or understanding entered into (or expected to be entered into) by or on behalf of the donor are listed, which relates to the Institute’s use, role or other disposition of the property, including any agreement that restricts temporarily or permanently the Institute’s right to use or dispose of the donated property or reserves to or confers upon any individual any right to the income from the donated property, the possession of the donated property, the right to buy the property, in the case of stock the right to vote the stock, or earmarks the property for a particular use.
- The name, address and taxpayer identification number (TIN) of the qualified appraiser and also the name, address and TIN of any individual, partnership or corporation, if any, that employs or engages the qualified appraiser.
- The qualifications of the qualified appraiser who signs the appraisal, including the appraiser’s background, experience, education and membership in any professional appraisal associations.
- A statement that the appraisal was prepared for income tax purposes.
- The date or dates on which the property was valued.
- The appraised fair market vale of the property on the date or expected date of the contribution.
- The method of valuation used to determine the property’s fair market value.
- The specific basis for the valuation, if any, such as any specific comparable sale.
- A description of the fee arrangement between the donor and the appraiser.
6. Appraisal Summary Description
An appraisal summary must include the following information.
- The name and taxpayer identification (Social Security, if an individual) number of the donor.
- A description of the property in sufficient detail to clearly identify the donated property as the appraised property.
- A brief summary of the overall physical condition of the property at the time of the contribution (personal property).
- The manner by which the donor acquired the property; e.g., purchase, exchange, gift, or bequest; and the date on which the property was acquired. If the property was created, produced, or manufactured by or for the donor, a statement to that effect shall be included as well as the approximate date on which the property was substantially completed.
- The cost or other basis of the property.
- The name, address and taxpayer identification of The Institute for the Desert Arabian Horse.
- The date on which the Institute received irrevocably all rights to the property.
- The appraised fair market value of the property on te date of the contribution.
- The declaration by the appraiser stating that the fee charged for the appraisal is not of a type prohibited and that the prepared appraisal is not being disregarded for tax purposes.
- Any such other information as may be specified by IRS Form 8283 or its instructions.
- Items (e) through (j) need not be included at the time the Institute completes the donee portion of IRS Form 8283 and may be added later by the donor.
D. GIFTS OF CASH
- Gifts in the form of cash and checks shall be accepted regardless of amount unless there is a question as to whether the donor has sufficient title to the assets or is mentally competent to legally transfer the funds as a gift to the Institute.
- All checks must be made payable to The Institute for the Desert Arabian Horse and shall in no event be made payable to an officer, employee, or volunteer who is soliciting on behalf of the Institute.
- The donor should clearly indicate, in writing, how the gift is to be designated. This designation can be done in the memo portion of the check or in other documentation that accompanies the check.
E. CREDIT CARD GIFTS
- The Institute currently accepts Master Card, and Visa for credit card contributions. A donor who wishes to make a gift in this manner must provide the Business Office with a valid account number, expiration date, and the name of the cardholder. Also, to ensure proper crediting, the donor should indicate the dollar amount and designation of the gift.
- The same credit cards identified above may also be used to make a gift on-line by taking steps to be identified by the Finance Committee.
F. GIFTS OF MARKETABLE SECURITIES
It is the policy of The Institute for the Desert Arabian Horse to sell all securities as soon as is practicable after the securities have been received by the Institute. In order to expedite this process, the Institute has established an account with an appropriate brokerage to handle these transactions. The preferred method of transfer is for the securities to be transferred through the use of the Depository Trust Company (DTC). An alternate means of transfer is for the actual certificate to be transferred to the Institute and registered in the name of The Institute for the Desert Arabian Horse, but this method is much slower. After the broker has received the securities, the broker will immediately sell the securities and forward the proceeds to or for the benefit of the Institute as designated by the donor. The instructions for both methods are at the end of this section.
In certain circumstances, the donor(s) may request that another broker be used to sell the securities on behalf of Institute. In this situation, to be done on an exception basis, the broker will establish an account in his/her firm in the name of the Institute. The broker will work with the Institute Treasurer to obtain the necessary corporate information to open the account.
1. Processing Gifts of Stock when stock certificates are in the donor’s name.
- Donor does not sign the certificate(s).
- Donor shall sign one (1) Stock Power for each stock issue making extra copies as necessary. Signature on the form shall be exactly as indicated on the stock certificate.
- Donor shall mail stock certificate(s) to The Institute for the Desert Arabian Horse unsigned and in a separate envelope from the Stock Power(s).
- Donor shall mail the Stock Power(s) to The Institute for the Desert Arabian Horse at the following address:
The Institute for the Desert Arabian Horse
2410 Sam Browning Road
Lebanon, KY 40033
2. Processing Gifts of Stock when the stock certificates are in the name of the Institute.
- The donor shall mail or deliver the certificates(s) to the Institute at the address above.
- The Treasurer or the Business Office will handle all details.
3. Valuation Process
For all gifts of marketable securities, the Treasurer or the Business Office will obtain the high and low price for the date the gift is officially transferred into the name of the Institute. The valuation is based on the average of the high and low price quoted for that date. The average price sets the price per share for gift valuation.
In many cases, there is a period of time between the date of gift and the date of sale. It is common that a gain or loss may be recognized on the sale of the stock. The gain/loss will be booked to the fund receiving the gift. The gift valuation for the donor is not adjusted. For split gifts of donated stock (designated to benefit more than one fund), all gains/losses will be split according to the original gift designation unless otherwise requested in writing by the donor.
G. GIFTS OF TANGIBLE PERSONAL PROPERTY
- Tangible personal property can only be accepted by the Development Committee or other persons authorized to do so by the Board of Directors of the Institute. A gift of tangible personal property may be accepted under the following conditions.
- Such a gift is consistent with the mission of the Institute.
- Acceptance of such a gift will not involve significant additional expense in its present or future use, display, maintenance, or administration.
- No financial or other burdensome obligation or expense is or will be directly or indirectly incurred by the Institute as a result thereof.
- The receipt and acceptance of gifts of tangible personal property by authorized officers shall be reported in detail promptly to the Board of Directors for confirmation and formal acceptance. Unless otherwise specified as a condition of the gift, the Institute, in assuring that the donor’s intent for the gift is honored, is empowered to retain the gift of property, or liquidate it for the benefit of the Institute.
- It is the intent of Institute that its policies conform with and correspond to requirements of the IRS Code Section 170 and related sections. It is further the intent of the Institute to amend the guidelines to conform with and correspond to any relevant changes in IRS law or related regulations.
- Definition of Tangible Personal Property
Examples of tangible assets include works of art, livestock, equipment, etc. The Institute generally accepts the value provided by the donor for items valued at less than $5,000. However, the donor must complete Part I of IRS Form 8283 for gifts valued between $500 and $4,999 to qualify as a charitable contribution for Income Tax purposes. In addition, for gifts valued at greater than $5,000, the donor must also provide an appraisal or other third party verification of the value. Upon receipt of appropriate documentation, the Treasurer or the Business Office issues a Gift Receipt describing the item(s) donated and a signed IRS Form 8283 that the donor may use when filing his/her taxes. This receipt does not include a dollar value.
a. Works of Art
Works of art may be accepted by the Institute. In addition to the noted policies on gifts of tangible personal property, the Institute, in accepting works of art, will adhere to the following approach.
- Works of high quality, individually or in whole collections, will be given to the Institute and accessioned by the Institute or a designated official collector and keeper of important works of art for the Institute. “Accessioned” refers to the Institute’s commitment to care for and to use the work for archival or museum purposes. Art accepted by the Institute at this level must meet the following conditions.
- It must not be encumbered by any restrictions as to use, attribution, exhibition, and disposal. The Institute will, however, honor the donor’s wishes regarding gift recognition.
- It must be approved by the Board of Directors of the Institute prior to acceptance and, if appropriate, the Institute’s Advisory Committee on Collections. The principal criteria for acceptance, besides quality, are condition, authenticity, and relatedness to the purpose and collections of the Institute.
- Works of art must also be accompanied by a bill of sale or other proof of ownership and a complete provenance (the work’s history of ownership).
- A work of art will not ordinarily be accepted with the provision that it be kept permanently.
- A work of art will not ordinarily be accepted with the provision that it be exhibited permanently.
- A collection of works of art will not ordinarily be accepted with the provision that it be kept intact.
- Works not meeting Institute standards at the highest level may still be of value for decorative, instructional, or resale purposes. However used, title to these works remains with the Institute and decisions regarding disposition rest with the title.
- It is recommended that proof of ownership be a condition of acceptance for any artwork because of the increasing problems of repatriation lawsuits for certain ethnic and cultural categories.
- For further guidance for giving works of art, consult (xxx).
- Gifts of works of art must be recorded by the Treasurer or the Business Office in order for the donor to receive a charitable tax deduction. A Gift Transmittal Form shall be completed by the donor. The transmittal form requires complete donor information and the gift’s value to be stated. If the value of the gift is not stated and the donor is not receiving a charitable tax deduction from the gift, then it is the responsibility of the Treasurer to request an appraisal for the object. After receipt of the transmittal form, together with the appropriate documentation, the gift will be recorded and the donor notified of the charitable deduction, if applicable. Procedures for valuing gifts are outlined herein.
- An Art Inventory Report Form shall should be completed by the Treasurer.
GUIDELINES FOR THE VALUATION OF WORKS OF ART
Guidelines for the valuation of gifts of works of art are established by the Internal Revenue Service and are applied to each donor who wishes to claim a charitable deduction. Copies of the IRS guidelines may be obtained from an IRS office or from a tax attorney or tax accountant.
- Property worth $500 or less
The donor establishes the value of the gift based upon records he or she must maintain to support the charitable deduction for the gift. An appraisal is not required for gifts valued at less than $500.
- Property worth over $500 but less than $5,000
The donor establishes the value of the gift based on the property’s cost or other basis. The donor must complete Part I of IRS Form 8283 to receive a charitable deduction for the gift. A qualified appraisal is not required for gifts valued between $500 and $4,999. The gift is accepted and recorded based upon the value substantiated by the donor from either receipts, a statement from an art dealer, or some other proof of value and a copy of IRS Form 8283.
- Property worth over $5,000 but less than $20,000
The donor must comply fully with appraisal guidelines as stated herein above. The appraisal rules apply to single gifts of works of art or to the aggregate value of a group of similar items of art for which a charitable deduction is claimed. The gift is accepted and recorded provided the donor meets the following substantiation requirements.
- Obtains a qualified appraisal for the property contributed, and
- Provides a copy of IRS Form 8283 on which the donor claims the charitable deduction.
- Property worth over $20,000
The donor must comply with strict appraisal guidelines as previously described and must include an 8 X 10 inch color photo or a 4 x 5 inch color slide of each item donated (this data must be attached to the donor’s tax return.) The appraiser must sign part III of IRS Form 8283.
The gift is accepted and recorded provided the donor meets the following substantiation requirements.
- Obtains a qualified appraisal for the property contributed.
- Attaches photographs of the subject works of art.
- Provides a copy of IRS Form 8283 on which the donor claims the charitable deduction.
Whenever possible, the Institute shall request the transfer of the work of art to that unit by a Deed of Gift signed by the donor.
GUIDELINES FOR REQUESTING TRANSFER OF COPYRIGHT FOR A WORK OF ART
Whenever possible, the Treasurer shall request a transfer of the copyright to the work of art.
Under federal law, copyright protection is available to all works of authorship that have been fixed in a tangible medium (including pictorial, graphic, and sculptural works; photographs, prints, and art reproductions; maps, globes, charts, diagrams, models, technical, and architectural drawings).
Owners of copyright have the following exclusive rights: to reproduce the work, to prepare derivative works, to distribute copies to the public, and to perform/display the work publicly. These rights are divisible and may be conveyed separately or in entirety. Ownership of the copyright of a work of art is distinct from ownership of the material object. Ownership of copyright remains with the artist unless copyright was conveyed by written agreement.
Copyright protection for a work created after January 1, 1978, endures for the life of the artist, plus another fifty years. Works created prior to 1978 were granted two 28-year terms of protection, with renewal required after the first 28-year term. Once copyright protection has expired, the work falls into the public domain and can be used freely by anyone.
Works of art protected by copyright are available to anyone for “fair use,” such as for criticism, teaching, or research. “Fair use” is determined on a case-by-case basis, based upon four factors: the purpose and character of the proposed use, the nature of the copyrighted work, the amount and substantiality of the portion used, and the effect of the proposed use upon the potential market for, or value of, the work.
Federal copyright law has a provision pertaining exclusively to visual artists. It grants the creator of a work of visual art a limited right to maintain control over the work even after it has been sold. The artist has the right to claim authorship of the work and the right to prevent any intentional distortion, mutilation, or other modification of the work. These rights belong to the artist, even if the artist is NOT the copyright holder. They extend for the life of the artist and cannot be transferred, although they can be waived.
All questions on the complex issues of copyright should be referred to the Treasurer and the counsel for the Institute.
GUIDELINES FOR APPRAISAL OF WORKS OF ART
The term “qualified appraisal” means an appraisal by a professional appraiser no earlier than sixty days before the contribution of the appraised property, and no later than ninety days after the contribution date. To be independent of the donor, the qualified appraiser cannot be the donor or the recipient of the donation, a party to the transaction in which the donor acquired the property, a person employed by any of the foregoing parties, a person related to any of those parties, or have any other financial interest in the works being appraised.
The appraisal must be signed and dated by an appraiser who charges an appraisal fee. An appraisal of a collection or a work of art must include the following items of documentation.
- A detailed description of the object, including title, size, subject matter, medium, name of the artist, approximate date created, and interest transferred.
- The physical condition of the property.
- The date, or expected date, of the contribution, the date on which the property was valued, and the manner of acquisition.
- The terms of any agreement or understanding entered into, or expected to be entered into, by or on behalf of the donor, that relates to the use, sale, or other disposition of the property contributed.
- The name, address, and taxpayer identification number of the appraiser.
- A detailed description of the appraiser’s background and qualifications.
- A statement that the appraisal was prepared for income tax purposes.
- A history of the item, including proof of its authenticity and a record of any exhibitions at which the particular art object was displayed.
- A photograph of the subject, of a size and quality sufficient to identify the subject matter fully.
- A statement of the factors on which the appraisal was based. This statement should include the following elements.
- The specific basis for the valuation, such as any specific comparable sales transactions, particularly sales of other works by the same artist on or around the valuation date.
- Quoted prices in dealers’ catalogs of works by the artist or comparable artists.
- The appraised fair market value of the property and the method used to determine the fair market value, particularly with respect to the specific property.
- A statement as to the standing of the artist in the profession and in the particular school, time, or period in which the work was produced.
b. Real Property
The Institute welcomes and actively solicits gifts of real property. If the real property gift is intended to be used by the Institute, not sold in order to fulfill its mission, then it is recommended the gift be made directly to the Institute. The following policies have been adopted by the Institute relating to the acceptance, management, and liquidation of real property gifted to the Institute.
- No gift of real property shall be accepted without prior approval of the Board of Directors of the Institute.
- Real property donated to the Institute will generally be disposed of immediately and the proceeds used as directed by the donor. The Institute in accepting the gift agrees in writing to pay all expenses associated with keeping the property such as, taxes, insurance, maintenance costs, and all other holding and carrying forward costs until the property is disposed.
- Real property will be considered for acceptance only after meeting the following qualifications.
- Title will be transferred to the Institute by general warranty deed unless transfer is by a trustee, personal representative, or other fiduciary who will provide a deed appropriate to its capacity.
- The property must be appraised by a qualified appraiser.
- Property must appraise for a value equal to or in excess of $10,000.
- The appraisal may not be made more than 60 days prior to the date of the contribution.
- The appraisal cannot be a percentage of the property.
- The Institute may not pay for the appraisal.
- The appraisal must be made by an “independent” appraiser.
- In the absence of an appraisal, the property will be valued at $1.00.
- The property must pass a qualified Environmental Audit.
- No interest in real property, whether outright, in trust, by request, as a secured interest, or otherwise will be accepted by or on behalf of the Institute without first complying with the following procedures.
- An environmental review as described below will be performed on every potential real property asset prior to acceptance by the Institute.
- If the environmental review indicates areas of significant concern, an additional investigation, including a Phase I, Phase II, or Phase III audit, as recommended, will be performed by an approved consultant prior to acceptance of the real property.
- If the above procedures disclose risk of liability, the real property will only be accepted with the written approval of the Executive Committee.
- All contracts for environmental audits will be prepared and reviewed by Institute attorneys or its designee.
- Rural, or Agricultural: For real property located in a rural area, or an agricultural area, an Environmental Risk Assessment will be performed by an approved consultant.
- Industrial: For real property located in a developed area where manufacturing or any class of industrial activity may have taken place, a Phase I audit will be performed by an approved consultant.
- An environmental review as described below will be performed on every potential real property asset prior to acceptance by the Institute.
- The donor will be encouraged to pay for any assessments and audits.
- The property, if currently income producing, must be able to substantiate the annual net income.
- The property must have a clear title that is substantiated through a title search.
The Institute rarely accepts mortgaged property and never accepts mortgaged property into a charitable remainder unitrust. However, when real property is acquired subject to a mortgage, the mortgage will be current and assumable, and will only be accepted with the approval of the following conditions by the Board of Directors prior to its acceptance:
- A clearly established method for the payment of the debt will be determined.
- An MAI appraisal will be required.
- Not more than 50 percent loan to value ratio will be met.
When real property is acquired subject to a lease, leases will not be in default and will be assignable by landlord. Commercial property acquired subject to a lease will only be accepted following approval by the Board of Directors. Following these approvals, the leases will be assigned to the Institute and all deposits, advance rents, and other monies transferred to the Institute or otherwise accounted for as required by law.
SPECIAL DEED CLAUSES
The Board of Directors must approve any special deed clauses.
Unsolicited deeds will not be accepted. Upon the receipt of unsolicited deeds, the Treasurer will immediately notify the grantor (in writing) that the real property has not been accepted and will not be accepted until the requirements of this policy are met.
The following information, if available, would be very helpful to assist with the acceptance of real property by the Institute:
- Deed, including legal description, showing ownership of the donor.
- Prior appraisal.
- Prior survey.
- Prior title policies or abstracts.
- Prior environmental assessments.
- Tax parcel identification number.
- Copy of most recent tax bill.
IRS REPORTING REQUIREMENT
The donor must submit the Form 8283 to the Treasurer or the Business Office. The signature of the Treasurer of the Institute will be obtained and the form will be returned to the donor. The form also must be signed by the appraiser for gifts in excess of $5,000.
The donor must submit IRS Form 8283 with his or her federal income tax return in order to obtain the tax deduction.
SELLING OF PROPERTY WITHIN TWO YEARS OF GIFT DATE
If contributed property subject to the appraisal summary rules is sold, exchanged, or otherwise disposed of within two years of the date of the gift, the Institute must file Form 8282, an information return, with the IRS (and the donor) within 90 days of the disposition. Serious penalties may be assessed against the Institute for failure to comply with the requirements.
c. Gifts of Livestock
In addition to the noted policies on gifts of tangible personal property, additional criteria apply to the acceptance, valuation, and appraisal of livestock.
- Criteria for accepting livestock
For all gifts of livestock, in addition to those outlined above for the gift acceptance entity, the following minimum requirements must be met.
- No livestock will be accepted sight unseen and all livestock accepted must be healthy animals (for horses a current health certificate and negative Coggins test are required).
- It is recommended that proof of ownership be a condition of acceptance for any gift of livestock. The donor must also complete the Horse Donation document.
- For all gifts of livestock that may be resold or auctioned, the following additional requirements must be met.
- If the gift of livestock is being accepted for use in an auction, this must be communicated to the donor along with a written gift receipt advising the donor of the intent.
- By advising the donor of this it will eliminate the completion of IRS form 8282.
- Private sale of donated livestock may be permitted under certain terms.
- A qualified appraisal must be completed on each piece of livestock being sold.
- The minimum bid must be based on the qualified appraisal and be able to cover any costs associate with the caring of the livestock.
- If the gift is disposed of within two years from the date of the gift, the Institute must report this event to the IRS by filing a Form 8282. The items sold at auction are exempt from this as long as the donor made the gift with that intention.
- Gifts of livestock must be recorded by the Business Office for gifts made direct to The Institute for the Desert Arabian Horse in order for the donor to receive a charitable tax deduction.
- A Gift Transmittal Form shall be completed.
- The transmittal form requires complete donor information and the gift’s value to be stated.
- If the value of the gift is not stated and the donor is not receiving a charitable tax deduction from the gift, then it is the responsibility of the Treasurer to request the appropriate documentation of appraisal to substantiate the gift value.
- If an appraisal is necessary, it must obtained from an independent, qualified appraiser.
- After receipt of the transmittal form, together with the appropriate documentation, the gift will be recorded and the donor notified of the charitable deduction, if applicable. Procedures for valuing gifts are outlined in Section c.ii.
- Guidelines for the valuation of livestockThe guidelines for the valuation of gifts of livestock are established by the Internal Revenue Service and are applied to each donor who wishes to claim a charitable deduction. Copies of the IRS guidelines (publications 526 and 561) may be obtained from an IRS office or from a tax attorney or tax accountant.
- Property worth $500 or less
The donor establishes the value of the gift based upon records he or she must maintain to support the charitable deduction for the gift. An appraisal is not required for gifts valued at less than $500. A Gift Transmittal Form must be completed.
- Property worth over $500 but less than $5,000
The donor establishes the value of the gift based on the property’s cost or other basis. The donor must complete Part I of IRS Form 8283 to receive a charitable deduction for the gift. A qualified appraisal is not required for gifts valued between $500 and $4,999. The gift is accepted and recorded based upon the value substantiated by the donor from either receipts or some other proof of value and a copy of IRS Form 8283. A Gift Transmittal Form must be completed.
- Property worth over $5,000 but less than $500,000
The donor must comply with strict appraisal guidelines. The gift is accepted and recorded provided the donor meets the following substantiation requirements.
- Obtains a qualified appraisal for the livestock being donated.
- Provides a copy of IRS Form 8283 on which the donor claims the charitable deduction. The appraiser must sign part III of IRS Form 8283.
- Property worth $500 or less
- Guidelines for appraisal of livestockThe term “qualified appraisal” means an appraisal by a professional appraiser no earlier than sixty days before the contribution of the appraised property, and no later than ninety days after the contribution date. To be independent of the donor, the qualified appraiser cannot be the donor or the recipient of the donation, a party to the transaction in which the donor acquired the livestock, a person employed by any of the foregoing parties, a person related to any of those parties, or have any other financial interest in the livestock being appraised (see IRS publication 561 for more information).
The appraisal must be signed and dated by an appraiser who charges an appraisal fee. An appraisal of the livestock must include the following elements.
- A detailed description of the livestock including name and address of the donor along with breed, age, and pedigree of the livestock.
- The physical condition of the livestock.
- The date, or expected date, of the contribution, the date on which the livestock was valued, and the manner of acquisition.
- The terms of any agreement or understanding entered into, or expected to be entered into, by or on behalf of the donor, that relates to the use, sale, or other disposition of the livestock contributed.
- The name, address, and taxpayer identification number of the appraiser.
- A detailed description of the appraiser’s background and qualifications.
- A statement that the appraisal was prepared for income tax purposes.
- A history of the livestock, including name and address of the donor, breed, and age of the livestock along with any pedigree information.
- Photograph(s) of the subject sufficient to identify the subject matter fully.
- A statement of the factors on which the appraisal was based. This statement should include specific elements.
- The specific basis for the valuation, such as any specific comparable sales transactions, particularly sales of similar livestock on or around the valuation date.
- The appraised fair market value of the livestock and the method used to determine the fair market value, particularly with respect to the specific livestock.
IRS REPORTING REQUIREMENT
The donor must submit the Form 8283 to the Institute Treasurer or Business Office. An authorized signature of the Treasurer will be obtained and the form will be returned to the donor. The form also must be signed by the appraiser for gifts in excess of $5,000.
The donor must submit IRS Form 8283 with his or her federal income tax return in order to obtain the tax deduction.
SELLING OF PROPERTY WITHIN TWO YEARS OF GIFT DATE
If contributed property subject to the appraisal summary rules is sold, exchanged, or otherwise disposed of within two years of the date of the gift, the Institute must file Form 8282, an information return, with the IRS (and the donor) within 90 days of the disposition. Serious penalties may be assessed against the gift receiving entity for failure to comply with the requirements.
d. Deferred gifts
Deferred gifts, although given today, will not realize their benefit to the Institute until some years into the future. Large deferred gifts have a major impact on the Institute and its mission. All donors of deferred gifts make their gifts to The Institute for the Desert Arabian Horse. Since deferred gifts are integrally connected to donor’s financial and/or estate plans, deferred gifts are often referred to as planned gifts.
Life income gifts and estate gifts are two general categories of deferred gifts. Life income gifts provide either an income or the use of some assets for the duration of the donor’s life. Estate gifts are normally associated with donors’ wills or final distribution of estates. All donors who have documented a deferred gift to the Institute are eligible for membership in the Heritage Society.
- Gifts with retained life income
The donor may wish to make a substantial capital gift to the Institute but feels that he or she cannot afford to give up the annual income produced by the property. The Institute offers the following ways to make such a gift while retaining an income for life.
The benefits vary, but all arrangements have the following attractive features:
- Pooled Income Funds
At this time there is no pooled income fund provided by the Institute.
- Charitable Gift Annuity
A charitable gift annuity is a contract between a donor and the Institute. No provision is made at present by the Institute for charitable gift annuity agreements.
- Charitable Remainder Trusts
The charitable remainder trust is similar to other types of trusts except that it has a charitable beneficiary. A donor transfers property irrevocably to a trust and specifies how trust income and principal are to be distributed. The trust may be created to become effective during life or at death. A minimum gift of $100,000 is required by the Institute for charitable trusts.
- Charitable Remainder Unitrust (“CRUT”)
The primary feature of the unitrust is that it provides for payment to the income beneficiary in an amount that may vary. The payment must equal a fixed percentage of the new fair market value of the trust assets valued annually. The donor determines the fixed percentage upon creation of the unitrust.
The unitrust payment must be made annually or at more frequent intervals to the donor and/or another beneficiary for life. Or, the unitrust may be set up for a term of years not exceeding 20.
The donor is allowed an income tax charitable contribution deduction equal to the present value the Institute’s remainder interest in the unitrust that is determined by reference to Treasury Regulations. The deduction is based on the fair market value of the asset transferred, the payout rate chosen, and the age and number of beneficiaries.
The unitrust can be funded with cash or — ideally — with long term, highly appreciated capital gain securities or real estate.
- Charitable Remainder Annuity Trust (“CRAT”)
The annuity trust shares many common features with the unitrust with two exceptions.
- The annuity trust provides for fixed income payments that may not be less than 5% of the initial fair market value of the gift in trust.
- Additional contributions are not permitted.
- Charitable Lead Trust
This trust is the reverse of a Charitable Remainder Trust in that the income generated from assets placed in trust is paid to the Institute for a period of years, after which time the property either returns to the donor or is transferred to a named beneficiary or beneficiaries (typically, children or grandchildren). By establishing such a trust the donor is, in effect, “lending” the asset to the Institute for the term of the trust and in doing so may obtain substantial tax benefits.
- Charitable Remainder Unitrust (“CRUT”)
- Satisfaction of providing for the Institute’s future.
- Income for life paid to the donor and/or another beneficiary such as a spouse or another family member.
- An income tax charitable contribution deduction for the portion of the transfer that represents the gift to the Institute.
- Elimination or deferral of some or all capital gains tax if the gift is in the form of securities or real estate that has appreciated in value.
- Potential for increased income.
- Assets are professionally managed for the donor.
- Reduction or elimination of estate and inheritance taxes.
- Pooled Income Funds
- Estate gifts
The largest gifts to the Institute are likely to be estate gifts, which may be used for restricted or unrestricted purposes.
Gifts from the estates of deceased donors consisting of property that is not acceptable shall be rejected only by action of the Development Committee. The legal counsel of the Institute shall expeditiously communicate the decision of the Development Committee to the legal representative of the estate. If there is any indication that the representatives of the estate or any family member of the deceased is dissatisfied with the decision of the Development Committee, this fact shall be communicated to the Committee or to the Board of Directors as quickly as possible.
Attempts shall be made to discover bequest expectancies whenever possible in order to reveal situations that might lead to unpleasant donor relations in the future. When possible, intended bequests of property other than cash or marketable securities should be brought to the attention of the Treasurer or the Development Committee and every attempt be made to encourage the donor involved to conform his or her plans to Institute policy.
Gifts by will may be an attractive gift option to donors who are unable to make a current gift but would like to contribute to the Institute in a meaningful way. These gifts may be restricted or unrestricted for the use of funds. Specific, residual, or contingent bequests will be recorded by the Treasurer. A documented (copy of Will, portion thereof, or Bequest Provision Form) specific or residual bequest will be counted for Heritage Societymembership. The Institute accepts four types of bequests.
- Specific bequest — usually a dollar amount. It may also be a gift of real estate or tangible personal property (for example, artwork, antiques, jewelry, or coin/stamp collections).
- Residual bequest — names the Institute to receive all or a percentage of the remainder of the estate after specific bequests have been fulfilled.
- Contingent bequest — takes effect only if all primary beneficiaries named in the will have predeceased the donor. Declaring the Institute a contingent beneficiary can prevent the property from going to the state if there are no heirs.
- Testamentary trust — designates that part or all of the estate is to be left in some form of trust with a bank or individual trustee with income and/or principal to be paid to the Institute.
For insurance to qualify as a gift, whole life or certain universal life insurance policies should be purchased according to specific criteria.
- The Owner and the Beneficiary of the policy must read “The Institute for the Desert Arabian Horse.
- The insured must be at least 21 years of age.
- The insured party must be the donor or spouse.
- The life insurance policy must be a $25,000 whole life policy or a $25,000 universal life policy — endowing at age 95 assuming a 4-6% rate of return (supporting documents required).
- The original insurance policy application should be reviewed in advance by the staff of the Institute. The original policy should then be forwarded to the Institute. when issued.
- The Institute prefers an annual premium payment rather than semi-annual, quarterly, or monthly payments because of the additional documentation required.
- Premium payments must be paid by a direct cash payment by the donor or by the dividends generated by the policy (accumulated cash values may not be utilized to pay the premiums).
- The insurance company will bill The Institute for the Desert Arabian Horse for the annual premium payments with the Institute that will then bill the donor for the premium. Annual premium payments are income tax charitable deductions as allowed by law.
- Life insurance policy premium payments paid directly to the insurance company by the donor do not qualify for Institute gift credit. In order to obtain Institute gift credit, the premium payments must be made payable to “The Institute for the Desert Arabian Horse.” If the donor pays further premiums on the policy to the insurance company directly, the charitable deduction and gift credited to the donor shall include only the annual increases in cash surrender value of the policy.
- When the donor has given up all incidents of ownership in the policy and the Institute is named as both the beneficiary and the irrevocable owner of the policy, the charitable deduction will be
- The replacement value for a paid-up policy, or
- The interpolated terminal reserve for a policy on which premiums remain to be paid. In most instances, these values will be approximately equal to the cash surrender value.
- In those cases in which the Institute is named as the beneficiary of a policy but not the owner, this is not a completed gift until the death of the insured. At that time, the full amount of the death proceeds will be reported as a gift, and for the purposes of donor recognition, will be regarded as part of the donor’s cumulative gifts.
- The cash value of insurance polices owned by the Institute are assets at the disposal of the Institute and, therefore, shall be carried on the balance sheet of the Institute. At the discretion of the Development Committee and with the acknowledgement of the donor, these cash values may be borrowed against and used in a capital campaign or for the acquisition of specific capital equipment.
- It is the donor’s obligation to continue to make gifts to the Institute for premium payments upon request by the Institute. If the Institute has made three requests for such gifts and has failed to receive a gift to continue the premium payment, it is the policy of the Institute to terminate the life insurance policy and apply any cash value received to the stated purposes of the donor
- Retained life estate
The retained life estate, by which a donor gives away the real estate in which s/he lives but keeps the right to live in and enjoy the property for her/his lifetime, the lifetime of a surviving spouse, or for a term of years, is the exception to the general policy that all gifts of partial interests to the Institute should be in the form of a qualified trust such as a unitrust.
The property funding the gift must be a personal residence, vacation or second home, or a farm. The donor may not use investment property for this purpose.
Because the donor has given away only the future or remainder interest, s/he is obliged to maintain the property and pay real estate tax assessed on it.
If the gift is made irrevocable, the donor receives a charitable contribution deduction based on the present value of the remainder interest in the property, adjusted by depreciation of improvements, possible depletion, and discounted at an annual rate determined by applicable IRS regulations.
A. AUTHORITY, RESPONSIBILITIES AND DUTIES
The Business Office of the Institute for the Desert Arabian Horse serves as the central location to receive and deposit all gifts to the Institute, and also, to record all philanthropic grants to the Institute.
B. RECEIPT OF GIFT
A gift to the Institute is considered to have been received on a particular date according to the following criteria.
- For cash gifts
- If by mail, the postmark determines the date for receipting.
- If by overnight delivery service, the date delivered determines the date for receipting.
- If hand delivered, the date received in the Institute Business Office is the day of receipt.
- For marketable securities
- If the stock is a DTC transaction, the date the stock is recorded to an Institute-owned account is the date of receipt.
- If the stock certificate is in the name of the Institute, the date the certificate was issued is the date of receipt.
- If the stock certificate is delivered in the name of the donor, the date the irrevocable stock power is signed is the date of receipt.
- For personal or tangible property
The date on the deed of gift, warranty deed, or other legal instrument transferring ownership shall be the date of receipt.
C. DOCUMENTATION OF CHARITABLE CONTRIBUTIONS
Written Acknowledgement for Contributions Over $250: Internal Revenue Code 170(f)(8) provides that no charitable income tax deduction will be allowed for any taxpayer who contributes $250 or more, unless the taxpayer can substantiate the contribution with a contemporaneous, written acknowledgement (receipt) from the charity.
1. Donor’s Responsibility
The responsibility for substantiating the charitable contribution is placed squarely on the donor. It is the donor’s responsibility to secure a receipt from the charity.
2. Responsibility of The Institute
The acknowledgement must be in writing and must be “contemporaneous” with the contribution. “Contemporaneous” is the earlier between the date when the donor files an income tax return for the year in which the contribution was made or the due date for filing such return e.g. April 15 or later if appropriate extensions are secured.
It is the policy of The Institute for the Desert Arabian Horse to acknowledge and thank donors for their gifts in an efficient and timely manner.
A gift receipt is generated once the gift transaction is posted. It is the policy of The Institute for the Desert Arabian Horse to create a gift receipt for each transaction regardless of the value. (IRS requires a gift receipt for any gift from a donor of $250 or more.)
For gifts of tangible property and real property, the gift receipt will not state the value of the gift.
The acknowledgement must include the following items.
- The amount of the contribution and the date of the gift (if the contribution is property other than cash, then the acknowledgement must include a description of the property e.g. stock).
- A statement indicating whether or not goods or services were given by the charity in exchange for the gift.
- If goods or services were provided, then a description of the goods or services and a good faith estimate of their fair market value.
D. DISCLOSURE REQUIREMENTS FOR QUID PRO QUO CONTRIBUTIONS
- Contributions in excess of $75
Internal Revenue Code 6115 is a disclosure statute that requires a charity to disclose certain information to any donor who makes a quid pro quo contribution in excess of $75.00. A quid pro quo contribution is a gift made by a donor for which the donor receives something of value from the Institute in exchange for the gift. Only goods or services considered to have insubstantial value may be disregarded for the purpose of determining the amount of a payment that is deductible as a charitable contribution. To qualify as insubstantial, such goods or services must meet one of the following criteria.
The dollar amounts indicated reflect calendar year 2008 limitations, adjusted annually for inflation.
- Low cost token items: For gifts of $41 or more, the total cost of all items received must not exceed $8.20 and the items must bear the institution’s name/logo.
- More substantial benefits: The fair market value of all items cannot exceed 2% of the amount given up to a maximum of $82, whichever is less.
- Disclosure Requirement
The charity must make the disclosure to the donor who makes the quid pro quo contribution.
- Disclosure Statement
- The charity can either make the disclosure in its solicitation materials or in a receipt for the contribution. The disclosure must be made in a manner reasonably calculated to be seen by the donor.
- The Institute requires that any solicitation for fund-raising events or memberships for which goods or services are provided disclose the fair market value of the good or service and reflect the amount which will be considered as a charitable tax deduction on the solicitation material.
- The charity must provide the donor with a disclosure statement that includes these elements.
- A description of the goods and services provided to the donor in exchange for the donor’s gift.
- A good faith estimate of the fair market value of those goods and services.
- If only insubstantial (safe harbor) goods and services are provided in return for the contribution, then a statement must be made to the donor that “the estimated value of the benefits received is not substantial; therefore, the full amount of the payment is a deductible contribution.”
The statute provides that upon receiving a quid pro quo contribution the charity must make the disclosure. This provision has been widely interpreted to mean any time during the year in which the donor makes the contribution up to the date on which the donor files an income tax return for the taxable year in which the contribution was made.
- Penalties for Failure to Disclose
The IRS can impose a penalty on a charity that fails to meet these disclosure requirements. The penalty can be as much as $10 per contribution, not to exceed $5,000 per fund-raising event or mailing.
E. GIFT ACKNOWLEDGEMENT
A gift receipt or acknowledgement required to satisfy the IRS requirements should not be confused with the acknowledgement of specific kinds and levels of giving. It is the policy of the Institute that all gifts to the Institute are acknowledged in a personal and timely manner.
MEMORIAL AND IN-HONOR GIFTS
Description of Memorial and In-Honor Gifts
The Institute accepts donor gifts made in remembrance of deceased family members, friends or loved ones (memorial gifts) as well as those gifts made in honor of living individuals (in-honor gifts). Memorial gifts are often made in response to announcements in obituaries or memorial service programs. In-honor gifts are often made in recognition of personal/professional accomplishments or important life occasions such as birthdays or retirements.
To promote proper recording and stewardship such gifts should be forwarded directly to the Institute Business Office. All gifts made to a memorial will be deposited into the general fund of the Institute. The Treasurer will earmark these funds so the gifts that were donated to the memorial may be tracked. After one (1) year (unless the minimum endowment is reached earlier) if the minimum endowment for the memorial is met, the Institute will proceed with establishing an endowed fund in the name of the deceased. If the memorial has not met the minimum for an endowed fund after one (1) year, all the proceeds from the memorial will stay in the general fund and support the mission of the Institute.
Processing Memorial and In-Honor Gifts
When processing memorial and in-honor gifts, the Business Office will assign an additional designation of “M” or “H” to each such gift received by the Institute. Such designations will permanently identify the contribution as having been made in memory, or in honor, of the individual(s) designated. This documentation is especially important in properly stewarding gifts of this type.
Memorial Gift Receipting, Acknowledgement, and Notification
The Business Office will provide gift receipts for all memorial gifts received by the Institute. These gift receipts will follow the same format as other gift receipts, with the exception that receipts for memorial gifts will feature an additional field indicating the name(s) of the individual(s) being memorialized. These acknowledgements also will confirm that a family member has been notified of the donor’s gift and will include the name(s) of the individual(s) memorialized, the fund to which the gift was credited, the name and address of the family contact.. A corresponding memorial gift notice will be sent to the designated family contact. This notification will include the name of the individual memorialized, the fund to which the gift was credited and the name and address of the donor. The family notification further indicates that the Institute has thanked the donor. Actual gift amounts are not included on the family contact’s gift notifications. In all instances, the donor’s actual gift receipt will indicate the amount contributed.
In the event that a large number of memorial gifts are made in remembrance of any one individual, the Business Office may provide the designated family contacts with periodic reports providing the donor names and addresses. These reports would be provided in lieu of, or in addition to, the individual gift notifications mentioned above.
In-Honor Gift Receipting, Acknowledgement, and Notification
The Business Office will provide Institute gift receipts for all “in-honor” gifts received by the Institute. These gift receipts will follow the same format as other gift receipts, with the exception that receipts for “in-honor” gifts will feature an additional field indicating the name of the individual(s) being honored. Following a similar process to that outlined above for memorial gifts, these acknowledgements will confirm that the honoree has been notified of the donor’s gift and will include the name of individual honored, the fund to which the gift was credited and the honoree’s mailing address number A corresponding in-honor gift notice will be sent to the honoree. This notification will include the name of the individual being honored, the fund to which the gift was credited and the name and address of the donor. The honoree notification further indicates that the donor has been thanked by the Institute. Actual gift amounts are not included on the honoree’s gift notifications. In all instances, the donor’s actual gift receipt will indicate the amount contributed.
In the event that a large number of in-honor gifts are made in recognition of any one individual, the Business Office may provide the honoree with periodic reports providing the donor names and addresses. These reports would be provided in lieu of, or in addition to, the individual gift notifications mentioned above.
Memorial and In-Honor Gift Reporting
The Business Office will, upon request, provide memorial/in-honor gift reports to family members, officers of the Institute, or members of the Development Committee. Such reports will include the name and address of each donor who received primary gift credit for a contribution made in memory of, or in honor of, the specified individual. Development Committee members and officers of the Institute may request an additional memorial/in-honor report that provides the donor names and actual gift amounts associated with a specified individual. This more detailed financial report is intended for Institute use only and is not intended for distribution to family members or other contributors.
Establishing Named Memorial and In-Honor Funds
Should sufficient funds exist, either through the accumulation of numerous smaller contributions or the receipt of several larger gifts, the donor, the Treasurer, or the Institute Board of Directors may request that a permanent fund be established with the Institute in memory/in-honor of the specified individual(s).
Many corporations have donation programs through which the corporation will supplement gifts made by their employees to educational and other non-profit organizations. These gifts from corporations are called matching gifts. They are generally made in a fixed ratio to the gifts of the employee, i.e., 1:1, 2:1, etc. on an annual basis. The Institute encourages its members and friends to avail themselves of their employer’s matching gift program. The Institute also encourages donors to examine carefully the guidelines established by their company and to adhere to these guidelines.
Matching gift guidelines
The Institute for the Desert Arabian Horse will strictly adhere to the matching gift guidelines of each employer and to the policies that each company has established for its employees. When there is an ambiguity in the program concerning any specific gift, the business office will consult directly with the company for a correct interpretation of its policy, and will abide by the interpretation provided by the company.
By virtue of the completion of the matching gift request and submission of this request to the company, the institute is confirming that the donation received from the employer will be committed to the educational, research, or preservation mission of the institute. Where an individual makes payment for the services of the institute (for example, registration fees, tickets to equine events, etc.) or where such services and benefits are provided to the donor or family members in exchange for the gift, the institute will not submit a matching gift form for that gift.
Business office responsibility
To ensure consistency and integrity in its administration of all donor contributions for company matching gifts, the Institute has designated the gift accounting office to be responsible for handling matching gift affairs. The Business Office will:
- Review and verify all donor contributions for which matching gifts are requested to ensure that they conform with the guidelines for donations, with respect to the stated company policy and the designated purpose of the gift.
- Maintain records of donor contributions and matching gifts under audit control so that there is a clear record of the individual’s dollar contribution, the purpose for which the donation is made, and the related company’s matching gift program guidelines. Matching gifts are credited to the gift record of the donor. They can be identified on the ascend system.
- Sign and transmit all matching gift requests, thereby ensuring consistency and control in complying with company regulations.
- Be available and responsive to questions from participating companies concerning transactions and acknowledgment of gifts to donors.
A. FUND GROUP STRUCTURE
The Institute accounting system is designed to identify and provide the necessary accounting and reporting information applicable to the funds of the organization. Three separate and distinct fund groups are tracked.
- Unrestricted fundingis designed to support two types of accounts.
- The operating fund represents the basic ongoing operational budget of the Institute. This group is budgeted and funded by gifts not restricted in their use and other revenue sources designed to support the general operations of the Institute.
- The discretionary funds are funded by the Institute operating fund for special projects, and other purposes in support of the Institute’s mission. Each project is budgeted separately.
- The restricted fund group is funded primarily by gifts that have been restricted by the donors as to the purpose for which the funds may be used. There are four classifications of funds in this group.
- Endowed funds are the perpetual funds held in trust by the Institute. Only the investment return can be expended for purposes specified in the respective trust agreements. These funds are subject to both outside investment management fees and internal administrative fees. This group of funds is invested for long investment performance (long-term portfolio), and, as such, is at risk.
- Non-endowed funds consist of funds of which both principal and income may be expended but only for purposes specified in respective trust agreements. Funds in this group receive short-term earnings and are assessed an internal administrative fee.
- Quasi-funds consist of funds that may expend the principal or retain the principal of gifts as though they are endowment assets. Amounts within each fund are invested in the long-term portfolio and therefore are subject to investment risk. These funds are assessed an internal administrative fee and outside investment management fees.
- Non-endowed “in and out” funds are designed to handle gifts of relatively small amounts made for a specific purpose, to be disbursed on a one-time basis. These are generally expected to be expended within twelve months of the fund’s establishment, as set forth in the agreement. The restricted funds earn no return from investments and are assessed no fees.
- The deferred fund group refers to those gifts that involve estates, trusts, or life insurance policies that are not yet realized. Once realized, they generally establish a new fund based on the deferred giving arrangement. This new fund could be an unrestricted or restricted fund, as described above.
Each new fund that is established in the Institute requires a fund agreement. The type of fund agreement depends on the purpose of the fund and the total amount anticipated. If the purpose of the fund is for it to continue into perpetuity, the fund will be established as an endowment.
B. FUND AGREEMENTS
A Fund Agreement is created to document the donor(s) gift intent when the donor wishes to restrict the gift and a current fund does not exist for this purpose. Gifts that cannot be deposited into an existing fund of the Institute for the Desert Arabian Horse are generally used to establish a new fund if certain requirements are met. The Development Committee or the Board of Directors will determine this through their work with the donor(s) and/or donor representative(s) at the time the gift is made. The Treasurer acts as the facilitator in this process to answer questions and prepare the fund agreements for approval.
The following steps shall be followed:
- The Development Committee works with the donor(s) or donor representative(s) to develop a purpose statement and criteria. The amount of the gift and the purpose of the gift will determine the type of agreement to use. The Treasurer is available to assist with this determination.
- The information should be forwarded from the Development Committee to the Treasurer. The Development Committee may use a sample agreement or provide information in writing via email or hard copy for the Business Office to complete a draft agreement for the donor/donor representative to review. Sample agreements may be obtained by calling the Business Office.
- Each fund will require the following:
- Name of the fund,
- Donor or the donor representative’s complete name.
- Program that it benefits,
- Purpose of the fund.
- Biographical information on donor or fund honoree, if desired for named fund.
- The Business Office will prepare a draft and return it to the Development Committee within three weeks of receipt of all the required information.
- The Business Office will share the draft with the appropriate Institute officers, if needed, for their comments before returning it to the Development Committee.
- The Development Committee will share the draft with the donor/donor(s) representative(s).
- The Development Committee returns the draft with revisions marked to the Business Office or indicate written approval of the draft. The Business Office will incorporate the recommended changes/corrections and complete a redrafted or final fund agreement.
- The final fund agreement will be forwarded to the Development Committee so that the donor/donor representative and Treasurer signatures may be obtained. Two final originals will be prepared unless otherwise instructed.
- After the signatures are obtained from the donor/donor representative and Institute Treasurer, the Development Committee will forward the signed fund agreement to the Business Office.
- The Business Office will obtain any remaining signatures required by the Institute.
- After the fund agreement has been returned to the Business Office with all signatures in place, the Business Office will maintain one original for their files, and the second original will be forwarded to the Development Committee for the donor/donor representative. If additional originals were requested, they will be forwarded at that time.
FUND AGREEMENT CRITERIA
- Endowed Funds
An endowed gift is one in which the original principal is never invaded and the gift exists in perpetuity. Endowments are generally funded within five years of the initial contribution. Income is distributed annually pursuant to policies adopted by the Institute for the Desert Arabian Horse.
The type of endowment determines the type of fund agreement required. (See the next section “Endowment Levels” for the various kinds of endowed funds and the minimum funding required to establish each one.) There are generally four endowed fund agreement formats. They are:
- Endowed – This agreement is used when the initial gifts are sufficient to meet the minimum endowment balances. This type of fund is subject to administrative fees, investment fees, and earnings from both short-term and long-term investments.
- Time-Period Specification – This agreement is used when the total gifts will be received over a time-period. This time-period is generally three to five years. The time-period is indicated in the fund agreement and expenditures from the fund are prohibited until the minimum funding has been reached.
- Lectureships, Awards and Honors – Lectureships, awards and honors established by the Institute are generally created as an endowment.
- Declaration of Trust – This agreement is used when the gifts are received through a deferred mechanism. The donor(s) is deceased and the gift(s) has been received through a deferred gift or from the estate. A planned gift agreement or will is usually the source for drafting this type of agreement (a declaration of trust may also be a non-endowed agreement).
- Non-endowed Funds
A non-endowed gift allows for both the gift as well as any investment earnings to be spent to support the purposes or intent of the donor. There are three types of formats for non-endowed fund agreements. They are:
- Non-Endowed – A non-endowed fund that generates interest earnings is established when the fund will be able to maintain at least a $5,000 minimum balance. This type of fund will generate earnings from short-term investments and will also be subject to administrative and short-term investment fees.
- In and Out – This agreement is created when gifts are received annually, spent annually, and a minimum balance of $5,000 cannot be maintained. This type fund generates no investment earnings and is not assessed any administrative or investment fees.
- Declaration of Trust – This agreement is used when the gifts are received through a deferred mechanism. The donor(s) is deceased and the gift(s) has been received through a deferred gift or from the estate. This fund follows the same criteria as the endowed declaration of trust, except that the donor’s intent is for the entire gift to be expended for the purpose indicated by the gift transmittal, a deferred gift arrangement, a planned gift agreement, a will, or any other document which transfers the estate gift to the Institute.
An amendment is required when the donor/donor representative requests a change to the original purpose of the fund; and the requested change does not change the type of fund; i.e., non-endowed to endowed. These requests must be in writing and approved by the Treasurer of the Institute.
Types of requests that require a new agreement, not an amendment are:
- Change from non-endowed (in and out) to non-endowed interest-bearing fund
- Change from non-endowed to an endowed fund.