All right. We have a jam-packed session, so I'm going to go ahead and kick us off. Welcome to the CASE Regulatory and Legislative Update for 2023. I'm Kristi Grim, Case Director of Online Education. I'm delighted that you could join us today. Before we get started, I just have a few housekeeping notes. This webinar is being recorded and will be provided to all registrants. We'll send an email with directions for accessing the recording once it is ready. The slides for today's sessions are also available for you to download already. You can find those by selecting the course tab on the event page where you found your links to join today. This webinar is approved for one and a half continuing education credits from NASBA. After you've completed the webinar and the evaluation after the event, you will receive a certificate you can use to claim those credits, and you can retrieve your certificate by visiting your transcript from learn.case.org at any time. This webinar is also approved for one and a half CFRE points. We will be taking questions, so please use the Q&A box to submit those as they come up. At the end of the session and throughout, we will be asking those. And without further ado, I'm going to pass it over to Brian to get us started. Great. Thanks, Kristi. It's good to be with you all today. Thank you for taking time out of your busy schedules to join us for this regulatory and legislative update. Always a highlight to talk about what's happening here in Washington, D.C., and also with both up on Capitol Hill and also with the Internal Revenue Service. And as always, I'm really, really delighted to be joined by John Taylor, who's the principal of John Taylor Consulting, also a partner with Alexander Haas, who is a CASE educational partner, which we're grateful for their support as well and for John's many, many contributions to CASE. You can see if you look closely in the background, you can see that he is a Crystal Apple Award winner, which is well, well deserved for his teaching and his presentations, and also a CASE Laureate among many other honors and a CASE alum, worked for CASE as well. So, John, it's always a great, great pleasure to to present with you and appreciate your time and your commitment to keeping our CASE membership updated on the most important issues impacting us on the regulatory side. So that's really what we're going to focus on is we're going to talk a little about first about on the legislative, what's happening up on Capitol Hill, and then we'll talk. John will dig a little bit deeper in on the regulatory side as well. So I'm going to go ahead and share my presentation so we can get started. And we'll start with a little bit of a roadmap of what's happening, a little bit of what's happening here in D.C. And so I'm going to start with, as I always like to do with context, what's happening? Kind of what are they talking about on Capitol Hill? We'd like to, of course, always think they're thinking all the time about our institutions, but they're, of course, not. There are lots of things happening and we'll talk about kind of what's what's going on. We'll share a little about what's happening with charitable giving legislation, a little bit on endowments, the latest that we've seen there, foreign gifts and some other issues to watch and have a little bit of time for questions. Before we go over to John's portion of this presentation, which will focus more on the regulatory side and the IRS. But to get started, we want to ask a polling question. This is just so John and I get a better a good sense of who's with us today. So a polling question will come up and just want you to ask which of the following best describes your discipline. So is it advancement services, alumni relations, communications, development, fundraising, government relations, other? Or if you are in a position where you oversee multiple of these disciplines in your role with maybe your vice president of advancement that serves and oversees alumni relations, fundraising and communications and marketing, hit overall advancement. That's just gives us a sense of of who what disciplines are in the room. So we make sure as we talk about the issues that are affecting our case member institutions that we understand kind of who's here and where we will focus our attention. So let's see what the results look like. So a lot in the advancement services, which is not a surprise. And obviously development, fundraising as well. And if you overall advancement. So it's great to have you with us. We're going to be tackling a lot. But if you're interested in fundraising advancement services, you're going to get a lot of content out of the next hour and a half. So great to have you all here. And thanks for participating in the polling question as well. So let's jump to what's happening here right now in D.C. And I included a picture of the newest member of leadership, which is the house speaker or speaker of the House, Mike Johnson, who's a Republican from Louisiana, who is speaker as of about three weeks ago and has won the opportunity to lead a very, very, very tight Republican majority in the House of Representatives. After the former speaker, Kevin McCarthy, was was kicked out of his position or voted out of his position. Now, Mike Johnson's in position. And what does Speaker Johnson get? He gets a very, very difficult task this week. And that's why I put government shutdown 2.0. If you remember about a month ago, we were talking in D.C. about a potential for a government shutdown when the House Republican leadership and the former speaker, Kevin McCarthy, got together with Democrats and with the White House. And they passed a continuing resolution through November 17th, which is this Friday. So now we are at the next point where Congress has to pass a continuing resolution to keep the government funded. We are already in fiscal year 2024 for the federal government, which fiscal year started October 1st. So we are. Congress either has to pass full year appropriations for this fiscal year or they have to pass a resolution to keep the government funded. They're clearly not going to pass and appropriate all the appropriations bills this week. So they have to pass another resolution that is going to the House. A particular approach that Speaker Johnson is working to try to see if he can get through the House of Representatives this week. If it goes through the House and the Senate signed by the president, we will avoid a government shutdown. It will be a continuing resolution, likely an interestingly structured resolution where some agencies will be funded through January and another set of another set of agencies will be funded through February. So a really interesting strategy. But we'll see if the federal government is funded as of this Friday. And it just goes to show you the fact that we have a new speaker, the fact that we are down to the wire again on funding the government continues to be a narrative of divided government. We obviously have a democratic president, a democratic majority Senate and a Republican majority House. And for any thing to work in our system, all of them have to agree. All of them have to get they have to pass both chambers and get signed by the president. So when you have a Senate that is 51-49 and you have a House that is a three seat majority for Republicans, that means you need about everybody on your team. If your team is Republicans or your team is Democrats in order to get anything through. And it's just been very, very difficult to see things happening this week. So this week, I should say generally, but this week is a really a test for the new speaker. Can you get a continuing resolution through to fund the government to then go on and work on appropriations bills for the full fiscal year 2024 through the end of this year into next year. Now they are going to have to, even if they pass a resolution, there's a few things that are not likely going to be a part of this continuing resolution. And that is aid for the Middle East and for Israel as part of the Israel-Hamas war. And also potentially aid to Ukraine. All of those were put aside in the hopes of getting a continuing resolution passed this week, but likely will be addressed by Congress or at least there'll be a lot of conversation, negotiation about those in the next month after they figure out whether they can fund things by the end of this week. Beyond that, there also is still some hope, and we'll talk about this, of some sort of year-end tax package coming together. And that's where we have a big priority that we're hopefully, we'd love to see be a part of that, but we'll have to see how everything plays out. What you can gather from what I'm saying around divided government is that it's just hard to get anything through right now. It's hard for Congress to pass anything. It's frankly hard even for the parties in each chamber at times to get things, get their own members and their own party to agree on things that pass in each chamber. So it's going to be really, really difficult to see a lot of major legislation for the next couple months. And frankly, looking at 2024, presidential and congressional election year, even more difficult to see major legislation passing. So we're going to see, I think, continued focus on deadlines driving congressional action, whether it's funding, whether it's other things coming to expire. We're going to talk about taxes quite a bit, given the audience. And one thing I want to mention is I mentioned the hope, the desire that we have to see a year-end tax package and hopefully an introduction of some things that have expired. And we'll talk about that in a second. The real tax deadline you should all keep in mind is December 31st, 2025, which is, of course, two years away. The reason I mentioned that is if you remember the Tax Cuts and Jobs Act, which is the Republican tax reform bill that was passed back in 2017, in order to make the budget numbers work and to pass it using those special rules called budget reconciliation, Republicans had to keep the cost of their overall proposal down within the budget, the 10-year budget window. And by doing that, they meant that they made all the corporate tax changes were permanent, but all the individual tax changes were temporary, and they all expired December 31st, 2025. So that means all of the marginal tax rates will go up if Congress doesn't take action by January 1st, 2026. All of the standard deduction will go back to where it was. It will go back down if Congress doesn't take action. So there's a lot of implications and a lot of desire. There's certainly going to be a lot of desire, both among Congress and the administration, to do something on taxes in 2025 to avoid that cliff of going back or that snapback to the way things were pre-2017. So when I say the real tax deadline is there, a lot of the conversation and the work that we're going to be doing on our tax priorities over the next couple years are really with that in mind, with hopefully getting some of these things in permanently when it comes to tax reform in 2025. Let me ask a quick polling question because we're going to jump into charitable giving again. Which of the following best describes your institution's fundraising results as of July 1st, I should say, 2023? I should have updated that from 2022. But have you seen so far in this, since July 2023, a significant increase so far this fiscal year? Slight increase, slight decrease, significant decrease? Or if it's the same, you can just click NA. That'll be also our, is it the same? Since you all are mostly in fundraising and advancement services, you probably have an answer to this question. So let me give it a few seconds. Again, as of July 1st, 2023 here. And let's see if we can see what the results say. So it looks like most folks are seeing a slight increase, which is good. A few folks with a slight decrease, coupled with a significant increase, and a few that were not applicable. So thank you for that. It's good to see that fundraising seems to be increasing for most of you so far this fiscal year. And one of the things that we've really been focused on at CASE as a legislative priority is charitable giving and charitable giving incentives. And I put this 10.5 in an arrow down to show you what GivingUSA, which is the primary data source for fundraising across the U.S. charitable sector, found in 2022 that giving overall was down 10.5% adjusted for inflation. It was about 3.4%, not adjusted for inflation, but a significant decline. The first, the largest decline they've seen since they started collecting data in 1956. So it's a very, very significant decline in individual giving. And there's a lot of reasons for that. And we can talk about the fact that we've started to see a little bit of weakness in giving amongst particularly middle and low income donors. But if you remember, getting back to the legislative context, pre-Tax Cuts and Jobs Act back in 2017, 30% of Americans itemized. And then, as I mentioned, you had the Tax Cuts and Jobs Act, which doubled the standard deduction. The idea of being behind doubling the standard deduction was to simplify, for most Americans, how they do their taxes. But if you simplify it and you take the standard deduction, there's no way to deduct your charitable gifts in current law. So that means you don't have a charitable deduction. So we went from a world of 30% itemizers of those who itemized their tax returns. And post-TAC, TCJA, it's now 10%. And a real significant decline. So really, only 10% of Americans are itemizing their tax returns, which means only 10% right now can deduct charitable gifts on their annual taxes. A real change in our tax code with the significance. The other thing that we're seeing as a trend overall, besides a kind of overall long-term decline in the number of donors overall, that the Indiana University Lilly Family School of Philanthropy has been tracking for a number of years, is that now, if you look at data, this is from the Fundraising Effectiveness Project at the Association of Fundraising Professionals, AFB. But 88% of total giving comes from 13% of donors now. So we're starting to see an even more of a general focus across charity. This isn't just for education, it's across the charitable sector in how critical major donors, mega donors are to our sector and what vulnerability that provides overall to charitable giving. If you remember back in the pandemic, we had a temporary deduction for non-itemizers that was $300 for individuals, $600 for joint filers, that was around for 2020 and 2021. At the end of 2021, the provision expired, and because Congress hasn't really taken up a tax package, a broad-based year-end tax package since then, we've now had not had that on the code now for a couple of years. So we've really been working across to try to see and restore and expand this non-itemizer charitable deduction. And in fact, we had a press conference earlier this year announcing the Charitable Act. You can see at the podium Senator Chris Coons, who's a Democrat from Delaware, along with Senator James Lankford, who's next to him is a Republican from Oklahoma, a bipartisan bill that's meant to bring back that universal charitable deduction, that charitable deduction for non-itemizers. And what the Charitable Act does, it's S. 566 in the Senate, H.R. 3435 in the House, is it would bring back, it restores the non-itemizer deduction. It restores it for two years, so both for 2023 and for 2024. So if we were able to see this get enacted by the end of this year, that means that charitable deduction for non-itemizers would be in the code for 2023 and all of 2024. It increases the cap from $300, $600 that was there during the pandemic up to a third of the standard deduction. So that's $4,600 roughly for individuals, $9,200 for joint filers. Interestingly, the rates, that actually will, the new standard deduction threshold was set a couple days ago, so that actually will go up a bit very soon. I think it's now going to be closer to $1,400 for individuals and $9,400 for, or $9,600 actually for joint filers under this. But essentially it's tied to a third of the standard deduction threshold, which the standard deduction threshold is adjusted for inflation. It also allows gifts to donor advised funds, supporting organizations. Probably not a lot of those gifts going from non-itemizers to those, but particularly as the caps go up from $300 to $4,600, significantly more opportunity to encourage donors to give more and to give more, whether that's to charitable organizations or to their donor advised funds, which of course gives charitable organizations beyond that. Just to show you the bipartisan support for the Charitable Act and also to make sure you know which of your members of Congress are supporting this, in the Senate we have 20 co-sponsors, a really, really good, almost equal divide between Republicans and Democrats. Anybody who's highlighted in green is on the Senate Finance Committee, which is the key tax writing committee on the Senate side. So really, really helpful to have those folks involved and engaged. And you can see a nice mix of Republicans and Democrats as key lead co-sponsors for this, for the Charitable Act in the Senate. On the House side, it's HR 3435. Again, a great list of around 27 or so co-sponsors. All the green folks, since their names are green, are members of the House Ways and Means Committee. And we're just grateful to have the leadership of Representative Blake Moore, who's a Republican from Utah, and Representative Danny Davis, who's a Democrat from Illinois, Representative Michelle Steele, a Republican from California, and Chris Pappas, who's a Democrat from New Hampshire, helping lead the Charitable Act in the House and really building bipartisan support. And that's really what our focus has been generally. It is about building bipartisan support for the Charitable Act, continuing to build support so that when the opportunity arises, when that year-end tax package comes, if it comes or the next tax package comes, we have built so much support, so much critical support from the community around this that it almost becomes inevitable that there's a charitable deduction restored and put back into the tax code. I had the opportunity, along with Case President CEO Sue Cunningham last week, to go to the White House for a roundtable with the Biden and Harris administration on the importance of charitable giving and the importance of restoring and expanding a charitable deduction. It was a great conversation. So getting, obviously, the administration's support where we can, encouraging them to be supportive of the Charitable Act and of this bipartisan legislation that's out there has been very important as well. So a great opportunity to talk about the importance of expanding the charitable deduction. And I'll just say a real advantage of the Charitable Act is we have strong bipartisan support, which I've said, strong support across the charitable community. So not just Case, but organizations who are represented on the charitable giving coalition from United Way to American Red Cross to Jewish Federations to Catholic Charities to Salvation Army. All of us are around supporting the Charitable Act and its importance. And there's obviously, given the data that I shared earlier around giving being down across the charitable sector in 2022 and some weakness so far in 2023, demonstrates there's a strong evidence of need to expand the deduction as well. We know the deduction is not the primary motivator for giving, but the fact that you have a deduction there, it will, I should say, incentive certainly does increase the amount that individuals give. It affects the timing, increases the type of giving that they do. So it's important to have that that incentive to demonstrate to all Americans, regardless of whether you're high income, middle income or low income. It's important to give back to educational institutions and to charity overall. So really, really pushing hard on the charitable act going to the end of the year. I'm going to share once I'm done with the presentation, I'll share it in the chat. So you all have it. A link to a support letter that we put together through the charitable giving coalition that asks tax leaders to support the charitable act. Right now, we have over 700 organizations who've already signed on across the charitable community across the US. We're going to send it on Giving Tuesday, which is Tuesday, November 28th. So if your institution would like to join, whether it's your school, a college or university, please consider adding your name. Though, of course, I'm a government relations person myself. So I always want to make sure you check with your government relations staff before you sign your institution on to the letter. But obviously, a lot of broad bipartisan support, obviously something that will help encourage more Americans to give more to our educational institutions. So hope you can consider and your institution can consider signing on to the letter. I want to talk about a quick couple other things before we turn over to John to get on the regulatory side. There actually is a hearing tomorrow up on Capitol Hill with the Ways and Means Committee. So I talked about some of the positive things coming out of the Ways and Means Committee and some of the positive conversations around the charitable act and expanding the charitable deduction. But there's also a lot of oversight and scrutiny coming of colleges and universities. And in fact, there's a hearing tomorrow called and you can see from the title, not going to be a very positive hearing that will be focused on on universities in particular. What's going on with antisemitism, terror financing from charitable organizations generally. There has not been a witness list that's been that has been at least made public as of me joining this webinar. But we're watching that very carefully and watching to see what comes out of that hearing and what the Ways and Means Committee plans to do. And again, this is most likely the Ways and Means Republicans leading this charge because they're in charge. They're in the majority and interested in doing things around college universities, particularly on this issue. So a very fraught issue. A number of our institutions are managing as best they can right now. Clearly, an effort to provide some additional oversight or institutions that we have to be very, very watchful of. In addition, there has been some movement on the foreign gift disclosure side, again, related to the war in the Middle East between Israel and Hamas, bringing more attention to this, but also some of the focus on China as well. Last week, the House Education and Workforce Committee marked up the deterrent act, which is H.R. 55933. The biggest takeaways from the deterrent act, and there is it does have a spelled out acronym, but I won't go through each of what each of the letters mean and deterrent. But essentially what the bill does is it requires college universities who already have to report each year any gifts of $250,000 or above from a foreign source. Now, we'll have to report those if this gets into law, would have to report them for any gift above $50,000. For some countries of concern, which are not defined in legislation, you have to report all of your gifts that you receive from foreign donors from those countries. There's additional investment disclosures as well for how your endowments are investing as a part of this, and some pretty strict enforcement, including penalties, including loss of tax-exempt status, potentially, or loss of the ability to seek federal financial aid or offer federal to be a part of the federal student aid program for your students. So some pretty draconian penalties. As you can imagine, we are working, and we joined a letter with the American Council on Education and a number of other higher ed associations last week asking them to make some changes, the House Ed and Workforce Committee, to this bill to make it more workable. We obviously don't like to see an arbitrary decision to lower a disclosure threshold, particularly when all that's going to do is require more institutions to report more gifts without really getting at the gifts that are of most concern, which would be larger gifts, which is why the threshold's at $250,000. But in this environment, some lowering of the threshold is likely once and if Congress can move on this. This was in the House. The Senate has not taken this up, though the Senate in the past has shown a bipartisan interest in lowering the reporting threshold as well. So we'll have to watch whenever there's a larger year-end bill for funding or any sort of year-end or larger tax package. We'll have to watch very closely to see if this gets added and, of course, in the meantime, work to make this minimize the amount of administrative burden on institutions as much as we possibly can. Also, another issue, of course, that a number of you have probably been following and watching, there have been a couple of bills introduced on legacy admissions, both essentially working to prohibit the practice. Last week, a bipartisan bill, the first time we've seen a bipartisan bill on this issue, the Merit Act, introduced by Senator Todd Young, Republican from Indiana, Tim Kaine, a Democrat from Virginia, would actually essentially prohibit institutions from using both legacy status and donor status. As quote, unquote, determinative factors in admissions. So that's a bipartisan bill that's been introduced in the Senate. There's also a bill that's been supported both by a Democratic senator, Senator Merkley from Oregon, and a Democratic member of the House, Representative Jamal Bowman from New York, that also would prohibit colleges and universities from using legacy admissions or donor status in making admissions decisions. There's a lot of legal parsing that has to go through, particularly with the Merit Act, which was just introduced, which said legacy or donor status as determinative factors, but it's important for you all to know these bills have been introduced. Our position at CASE has been that it should be up to the institution to determine how best to build the most diverse class as they possibly can through their admissions process. But we've encouraged institutions in the wake of the Supreme Court's decision earlier this year to review their admissions policies and practices, but our position is really that it should be up to the institutions to make those decisions. But you should be aware that these bills have been introduced and there's still a lot of interest based on the Supreme Court decision in issue of legacy admissions. Finally, a couple quick things. Obviously watching name, image, and likeness for those of you who are at colleges and universities with athletic programs, a lot of interest on the Hill. Again, as with anything, it's hard to see much major legislation making it through this Congress with how divided it is, but obviously watching that issue. Then of course watching some things at the states. I mentioned in Kansas, there's a donor intent bill that was introduced that affected educational institutions in the state. But thanks to some of the colleges and universities in Kansas who worked with some of the proponents of this bill, got this to a place where it's much better than it was. But when one donor intent bill is introduced in one state, you can often see it in other states. So we're watching that very, very carefully. And obviously a lot of concern about some of the legislation that's been introduced around diversity, equity, inclusion, and belonging in the states as well. So we're watching those updates and the concerns about what that will mean, both for the autonomy of institutions and obviously the value that both we as case provide and support for diversity, equity, inclusion, and belonging and our institution support for that. So watching that carefully as well. With that, let me just pause before we turn over to John to see if we have any questions on anything. I know that was a quick run through, but want to make sure we take a couple minutes for questions before we jump into the regulatory side. So Christy, do we have any questions? We don't yet and I'll give everyone a minute to file in there. I did get a lot of messages. I know some of you guys are having trouble downloading the PDF. If you are, if you want to shoot me an email at kgrim.case.org, that's Grim, like Grim Reaper, G-R-I-M. I will send those over to you so you can follow along. And so I still don't see any questions. I think maybe we continue on to John's. And then for anyone who hasn't sent in a question, but you do have one, please put those in the Q&A box. Thanks, Christy. And yes, please do keep asking questions. I'll share that link to the sign on letter shortly and I'm happy to turn it over to John. Thanks a lot, Brian. Let's see if we can make this technology work. I need to find the share screen. That work for you? That looks great. Very good. Thanks. Thanks, everybody. I really appreciate this opportunity and I really enjoy co-presenting with Brian. We've been doing this for, gosh, I don't know how many years. It really, it seems that over the years, there has always been a pickup in topics that we want to discuss. I remember back in the mid-1990s, there was the Omnibus Tax Reconciliation Act that really changed the way we do receding. Also, that's when FASB came out with some of their pledge rulings. We'll talk about that a little bit later. The mid-2000s, it was the Pension Protection Act. There's been some recent, obviously, Brian touched on the COVID-related changes. But quite honestly, it's like every 10 years, there's a pickup. I imagine that's going to be true again come 2026. As Brian pointed out, so many of the provisions that the Tax Cuts and Jobs Act provided, all go away if something doesn't change. I use instead of any new changes in tax law during these interim periods, the LISRs to see what is on people's minds. Some of you who have participated in this session in the past may have seen some of the information we're going to cover today but the hot topics on both the AASP and CASE LISRs over the last several months have been state registrations, and that's the 40 states, donor-advised fund issues, IRS pertaining to donor-advised funds regarding quid pro quo, and we're going to talk about that. I've been getting a lot of questions regarding donor influence and control. Fortunately, the case standards issued some good guidance on that when the first global edition came out. So we'll touch on that a little bit. As I mentioned, we're going to talk about quid pro quo and bifurcation, and I came prepared to talk about a few additional topics if time permits. Again, these are topics that seem to percolate most on the various LISRs. However, I was sharing with Brian just 45 minutes or so ago, in the last 24 hours, I've received six different inquiries pertaining to IRA distribution. So I thought I'd quickly jump in. This was not part of the original plan, so I don't have any slides other than this one, but I thought since it seems to be a hot topic right now for many of you, I would quickly talk about these. The key here is not what the details are about, how much money you can withdraw and when can you withdraw it. It is the donor's responsibility to determine if and when they are eligible to take a required minimum distribution, that's the RMD, and how much. The IRS will let you know how much you can take, versus a QCD, a Qualified Charitable Distribution. These are the donor's responsibility in consultation with the agent that they are using for managing their IRAs. They have to decide whether or not they are eligible to take an RMD or QCD. It's really important for us, though, to be mindful of what we are receiving when we get a check from an IRA. This is particularly confusing these days because some financial institutions permit the individuals, the donors, to write their own checks. Our responsibility, then, is to make sure that we know which we have received because our receipt needs to reflect whether or not it's an RMD versus a QCD. We'll talk about why that's important in a second. Let me talk very briefly about what is the difference. An RMD is a required minimum distribution, which means once you achieve a certain age and the age limits change, the Tax Cuts and Jobs Act, I think, is the one, maybe, it doesn't matter. There will be indexing and changing on this over time, as well as the QCDs, which were previously limited to $100,000 per year. That's now allowed to be adjusted for inflation. But an RMD is a required minimum distribution. You have to take a certain dollar amount out of your IRA every year. And when you do, you pay taxes on it, and then it's your money. You can do anything you want to with it. You can make a gift to charity with that. You can tell the IRA custodian to cut a check to you as a gift. I can also take the RMD and buy a new car or make a down payment on a house. It's my money. I can do anything I want to. There's nothing quirky about it. When you receive it as a nonprofit organization, you issue a standard receipt. In fact, you issue a standard receipt for both of these, simply indicating that this was a required minimum distribution, if, in fact, it was a check from an IRA. QCDs, on the other hand, are newer in construct than the RMDs. It stands for Qualified Charitable. Did you hear the emphasis? Charitable distribution, where a donor can make a tax-free withdrawal from the IRA. That's the big difference. RMD, you pay taxes. QCD, you don't. Both get receipts. Both are on an individual's tax return. But the RMDs are included if you are itemizing as part of your charitable deductions. Whereas a QCD cannot be used as a charitable contribution for reducing your tax liability. It is reported on your individual tax return. But because you did not pay taxes on the withdrawal, it, number one, cannot be used to claim a deduction. And number two, absolutely no benefits can be realized as a result. That's why that C is in there, Qualified Charitable Distribution. 100% of the withdrawal, if you are eligible, must be used for charitable purposes. So it cannot be used to pay for admission at some gala. You can't receive a tangible benefit as a result. You can't use that payment to qualify to receive a benefit. And we'll talk about bifurcation in a little bit. It has to 100% be used for charitable purposes. You can use $50,000 as a one-time payment, if you will, to fund a CGA. But that's it. Other than that, 100% of the contribution must be used for charitable purposes. We care simply because when we process these contributions, we need to indicate on the receipt whether or not it was an RMD or a QCD. Again, it's the donor's responsibility to prove that they were eligible to take an RMD to apply for a QCD. But our receipt needs to indicate the RMD versus QCD. Because as I mentioned, one can be used for tax reduction purposes. The other cannot, but is also required to be reported on the tax return. So I wanted to cover that to help address some of the questions I received in the last few days. So without further ado, let's move on to state regulations. I had an interesting phone call yesterday from a colleague who was asking me about a state regulation that they had in their state regarding conducting a RAPL. We're not going to get into that level of detail. The state regulations are not that that I want to talk about. There are some weird and bizarre ones out there. I gave you a few examples here of still on the books state regulations. But the state regulations I want to talk to today are the ones where we must, in most states, apply for or register to conduct fundraising activities in that state. So here's some of the commentary on this. The legal requirements obviously vary from state to state. But in general, 40 states require some kind of registration for you to have permission to solicit donors in that state. A good number allow for you to file for an exemption. The exemptions apply to educational institutions, not necessarily to affiliated foundations. Some states will allow that. Some will not. So if you happen to work at a public university or college and your fundraising activity is conducted by the foundation, you may or may not be eligible for an exemption to the same extent as the university itself is. And a quick sidebar here, many of you know that for five years I was at North Carolina State University. We had a centralized operation at NC State, something like nine foundations. That included the Alumni Association, the Athletic Foundation, and then six or seven, I don't remember the number right now, college-based foundations. Plus, we also had the university. Every single one of those legal entities had to register in those states in which they wanted to conduct fundraising activity. It was not sufficient for NC State University as a public university to register and cover all of the others under its umbrella. Every foundation had to register as well. We agreed at the time. I'm not sure what has transpired in the last 10 years, that I, as the Associate Vice Chancellor of Advancement Services, would handle the registration on behalf of the North Carolina State University Foundation, the Alumni Association, and the university. But all of the other separate foundations had to register for themselves. So just keep that in mind. If you are a foundation working with the university, you may, in fact, need to register twice. The second bullet here is really important. If you offer online donations, essentially anybody in the country can make a contribution because they have received the online invitation by virtue of your website. So if you do accept donations online, you will want to ensure that you are registered in every state. I had a question last week from somebody who said that they only had one major gift donor in a particular state that they were working with, solicitation purposes. Did they have to register in that state only simply because there was just that one individual? And the answer is yes. If you are doing in-person fundraising in that state, even if it's just for one person, you do need to register. And it doesn't have to be a solicitation by an employee of the organization. It can be anybody affiliated or even without your knowledge soliciting funds. So we're not going to get into the topic of third party fundraising policies, but this is where those are extremely important. The last bullet here is really relevant for those of you that may, in the future or currently, hire a vendor to help you with solicitation activities. They must also register on your behalf before they conduct any fundraising, a phone-a-thon firm or direct mail firm. They have to register in every state as a vendor or an agent for you. That does not get you off the hook for registering. That's the solicitor requirement, but you as the organization that will receive those funds must also register. Some of the details, excuse me, and the details, in fact, Case twice has issued a really excellent document that's something like 30 or 40 pages long that goes into really good detail on the various state requirements. That's the good news. The bad news, if there is any, is that states change their rules frequently. Some states will start requiring registration when they weren't requiring it previously. Some will cease the requirement. Some may change the registration requirements. Some may change the reporting requirements. Every year, you have to stay on top of this. Finding what those changes are, it's hard. Going back to my North Carolina State reference, I ultimately found that this was much more than one person could manage. I say one person is really the responsibility of my assistant to do a lot of this legwork. It was nearly a full-time job. The good news then is that there are vendors out there that will handle the registration requirements for you. It doesn't make it a nothing job for you. There's still, you have to produce copies of your annual report in your 990 and write checks and that kind of thing, but it makes it a lot easier. But anyway, 40 states, including the District of Columbia, have specific rules and requirements for registration. Thirty-four, I'm jumping ahead here, but many of you in higher education are familiar with the Common App for college admissions. Well, that's what this unified registration statement is. So most of the states that have a registration requirement will accept the multi-state registration or, excuse me, the unified registration statement. That's great, but 11 of those 34 states, last time I checked, again, things change. We have additional. Just like a Common App, there may be an additional requirement, an essay or two other pages. I know at NC State, we did have two other pages of application information that we asked for. So you can't just do the registration statement. You have to take a look at what the individual state requirements are. It's not free. The registration always costs money. Sometimes it's a fairly hefty dollar amount. Some require that you provide semi-annual reports to those states. There is no consistency on when the filing requirements and responsibilities are. I should also mention that this does not cover the requirement for registration in a state to issue charitable gift annuities. That's a completely different registration requirement. So if you're registered for solicitation purposes, that's great, but it doesn't give you authority to solicit for CGAs or write CGAs in that state. That's a separate registration requirement. I'm often asked in everything having to do with IRS and state regulations, you know, can we register and plead, can we not register and plead ignorance? And the answer is not really. Now you're not ignorant. You do want to probably after today's presentation, if you're not sure about who is doing the registration, you'll want to ask around because this can come back to haunt you. And NC State, I wasn't sure if we were registered anywhere. In fact, I received a letter from an attorney general saying that we had violated the state registration requirements and we were gonna need to pay a very heavy fine. It's first I actually heard of these rules back in 2008, I think it was 2009. It was right after the recession. And that's when a lot of states were out of money and they really were being aggressive on collecting on these fees. I asked around at NC State, asked the business office, I asked the foundation, I asked the CFO and the treasurer, you know, who was doing the registration and it turned out nobody was. And so in consultation with university council, we number one agreed that we must register. And that's when we came up with this distributed process where I registered for some of the foundations and everyone else was responsible for themselves. If you don't register and are caught and continue to violate a particular state rule, there are fines and penalties as severe as potentially losing the right to solicit in that state. One thing I will mention and the reason why this has come up recently on the listservs and people have been reaching out to me is that one state will let another state know. The attorney generals talk amongst themselves. So more recently, the inquiries I've been receiving about state registration requirements seem to be focused on the Southwest. Now, I don't know if there has been a Southwest regional meeting of the attorney generals or what, but that seems to be where the inquiries have been coming from most recently anyway. So be mindful of the fact that if you get one letter if you get one letter from an attorney general, don't be surprised if you receive some additional letters. One of the biggest problem areas is restrictions on direct mail pieces, not restrictions on being able to do direct mail, but restrictions regarding the kind of information that you're required to put on the direct mail piece. The restrictions are, well, I'll show you, they're insane. Every single one of these states requires specific language that must go on each solicitation, each solicitation. I'll give you an example of here in North Carolina. In theory, what the law says to solicit in North Carolina is that middle paragraph, that statement in quotes is required to be on every solicitation piece issued in the state of North Carolina. It has to be in nine point type, has to be conspicuous using underlining, a border or bold type. This is the state law. I didn't make this up, I didn't make this up. The award for the most extreme solicitation rule goes to New Jersey. And there's that paragraph in the second bullet. Every single character that you see there is supposed to go on the solicitation pieces that are issued to anyone living in South Carolina, I mean, in New Jersey. So the question is, how do we handle this? I'm gonna go back again to all of these states. All of these states have very specific language that must go on your direct mail pieces. It's unlikely that your annual giving office or your direct mail firm is going to want to print different direct mail pieces for every single one of these states. You will want to talk to your attorney regarding how are we going to accommodate these solicitation requirements? They are state law, there can be fines and penalties for failing to accommodate these rules. I'm going to tell you right now that I'm not an attorney. That I'm not an attorney. And so my suggestion may not hold water, although I do know that many of my clients and other institutions across the country have taken similar action as to what I'm going to describe when it comes to these various solicitation descriptions that must go on a direct mail piece. But the suggestion simply is to put on your direct mail piece a very clear statement that says, our state regulation scripts can be found at the following URL or something like that. And provide a link, obviously you can't click on it because it's a direct mail piece. You can certainly put it in email. That takes you to a website that lists all of the requisite language for every single one of the states. Otherwise, in theory, according to the various state laws, you have to put the specific language that I just shared on your direct mail piece. John, we have a follow-up question related to this. I was going to say, we're at the point where we're good for that. Oh, perfect. So Jennifer asked, are the solicitation requirements the same for digital mailings or limited to post mailings? Yes. The answer is, it depends on the state. Some states have been very clear that these have to do with that solicitation that is distributed through the U.S. mail. Others have been less specific. So it really depends on the state in question, which is why you really need an attorney to help you with that. I think the answer, the gospel according to John, is I would put that disclaimer on every single mail piece and email piece, as well as on the online donation site that says, click here to see the various state registration requirements. And then for those 30 or whatever states, have those direct quotes listed there. You can't go wrong with that. It's one line. And I've not heard of anyone who has been challenged by a state by having that one line versus the entire text. Great, thank you. There were no other questions in the Q&A. So if you want to continue on, I think you're good. Very good. Then we will motor along. That's it for state registrations. We'll have time at the end if there's anything percolates by all means, but now we'll get into the really scary stuff. And it's scary only to the extent that donor advised funds continue to be this unknown quirky thing that's actually been around since the 1950s. They gained prominence more so in the 80s and 90s. The laws have not changed. There've been some proposed law changes, but for all practical purposes, the rules regarding donor advised funds haven't changed at all. So, but we're going to talk about it because the topic keeps on coming up and the topic has a lot more to do with what can you do with a donor advised fund gift? The short answer is you can apply it as an outright gift from the donor advised fund, period. That's it. You can't use it to satisfy a pledge. You can't use it to pay for admissions. It's like a qualified charitable distribution. It's just a gift from a different entity, but clearly it has some repercussions when a donor makes a gift through a donor advised fund and they have an outstanding pledge. So let's briefly talk about what is a pledge. And I'm not going to read all of this. We've got too much material to go through, but a pledge is a legally binding contract between you and the nonprofit organization. I've got quotes here from FASB, the Financial Accounting Standards Board, and I've got another, some quotes here from the newest edition, the Case Global Reporting Standards issued in 2021. These are very similar quotes, by the way, to what was in the fourth edition of the Case Standards 2011. So there hasn't been any change there at all. An individual cannot make a pledge that encumbers or binds another entity, period. I can only pledge what I am going to give. So we really shouldn't have an issue with donor advised funds because I can't make a pledge that is against fidelity. Only fidelity can make a pledge of their assets. So remember, a donor advised fund, I have made a tax deductible contribution to the donor advised fund. It's no longer my money. I can make recommendations to the donor advised fund to make a gift to a nonprofit organization. They have no legal obligation to honor my requirement. Therefore, I can only make a pledge of my own assets, period. People will ask the question, well, what about non-binding pledges? What if we tell a donor, look, because of the donor advised fund rules, we can't take gifts from donor advised funds and apply them against pledges. So let's call this a non-binding pledge. Well, number one, I don't get it. I mean, why do you want a donor to make a commitment that they can't guarantee? You can't book it as an asset. And by the way, that's one thing I would be very cautious about because starting in 1996, your CFOs, your treasurers, your business offices started booking pledges as assets thanks to FAS rule 116 or 117, one or the other. These are now assets. They're accounts receivable, if you will. If you don't like that because of donor advised fund issues and decide, well, we'll just tell donors to make a non-binding commitment to the institution, you're actually reducing the value of your institution by eliminating those pledges from being on your general ledger. I personally just let donors make pledges of their own assets. And when a gift comes in from a donor advised fund, great. Then you can apply a soft credit to the individual because they had something to do with it. It's kind of like matching gifts. You can't make a pledge that depends on a matching gift either. In fact, most matching gift forms will say you cannot use our match to satisfy a pledge. Why? Because the donor can't make a pledge on their employer. Only their employer can make a gift, make their own gift. The IRS has issued a few rulings. I've cited some language here. This came from a private letter ruling. The IRS simply saying if a gift is made from a donor advised fund and it satisfies a personal pledge, then that's an impermissible benefit, which means it's really income to the individual. And the IRS has in fact ruled in a couple of cases on this, requiring the individual to pay back taxes and penalties for not reporting the income. You don't want to do this. You certainly don't want to do this. You know, a little sidebar here. The problem here is we just don't talk to our donors about what they can and can't do. Sure, it's great, we'll record your intent here, but you know, the gift has to be recorded on the record of a donor advised fund and just move on. But anyway. So can you use a gift from a donor advised fund to satisfy a pledge? Absolutely not. Positively, no. Well, maybe way. And this is one of the quirky things that I keep on being asked about from the IRS. Back in 2017, the IRS issued this notice that said, okay, well, maybe, maybe we can let gifts from donor advised funds satisfy pledges only if these three conditions are met. Well, they're pretty strong conditions. So that's number one, kind of hard to beat. And the IRS said, and by the way, you know, if this is true, you can go ahead and act on this now until we issue further guidance. But the thing that everyone seems to overlook is donor advised funds are still in charge of their own money. Every single donor advised fund except two that I've seen in the last five years have language in their grant applications and in their rules that say our gifts cannot be used to satisfy personal pledges. So even if all three of these criteria are met, if the donor advised fund says you can't use our gifts to satisfy a personal pledge, then you can't use their gifts to satisfy a personal pledge. By the way, the IRS has not issued further guidance. So in theory, you can follow these rules and allow gifts from donor advised funds to satisfy a personal pledge if those three conditions are met, but not if the donor advised fund says you can't do that. So let's take a quick pause here and do a quick poll to see what you are doing. Do you allow donor advised funds to pay off pledges? Never? Only if the pledge is non-binding, the example I gave a few minutes ago, pretty much all the time, or I'm not gonna tell you because the IRS might be listening. So curious to see what the trajectory has been. I've been doing this polling question for a number of years now, and I'll tell you after I see the results, what the trajectory has been in this answer, but if you would answer that question and the reason, yep, never, thank you. The trajectory has been in this direction. Interestingly, there was a period when the I refuse to say was very popular, but early on, early on being 10, 15 years ago, people were pretty much ignoring the IRS rules. Now I have been noticing pretty much everybody is following the IRS law as the poll has suggested. And here's why. Again, this is the most recent copy of the Fidelity Charitable Gift Fund application. You can pull down applications from other donor advised funds. Fidelity's just happens to be really easy to find. The donor has to sign this statement. I'll also mention that the first bullet we'll talk about in a second that they're attesting to is that they're not gonna get any benefits either. But here, they're certifying that the grant will not fulfill all or a portion of the pledge to a charitable organizations. So, one possible way to have your cake and eat it too is to create safe pledge language. Now, I'll share this with you and then you'll wanna talk to your attorneys to see whether or not this works. The safe language allows you to record the full amount of a pledge. So, remember I said you can't encumber a donor advised fund or a third party to make a payment on the pledge. But you could use language like this that basically says, I'm on the hook. I'm on the hook for the entire amount. However, if I cause a gift to be made from another party that is clearly related to my efforts and tied not directly to my pledge, then you, the nonprofit organization, may voluntarily reduce their personal obligation by a like amount. The word voluntarily is critical here. They can't be obligated to do so. And so, this is how that would look in a typical pledge form. So, you can, in this particular case, record on the individual record the full amount of the pledge. However, that's all you can do. If a gift comes in from a donor advised fund, you must record the gift on the record of the donor advised fund. And if you wish, not wish, you should give soft credit to the individual and then manually reduce the pledge by a like amount. And again, this is just in education. The key here is education of our donors. Just make sure they understand, if this happens, your pledge amount is gonna be reduced. And therefore, the next time you receive a pledge reminder, you're gonna see a different pledge amount. It doesn't mean that anything nefarious has occurred, nefarious has occurred, but rather we are following the law. John, someone asked a question about donor advised funds. Please. How would you handle a situation when the donor pledges in one year and his donor advised fund makes a payment in a subsequent year? We were not informed that a DAF payment would be made. There's two scenarios here. And you do need to talk to your attorney because back in the olden days, it was kind of evenly split on what your counsel would have you do. Now, usually what you need to do is do what I just described for the previous example, reduce the pledge by the amount that the donor advised fund provided and record the gift on the donor advised fund record and give soft credit to the individual. Some attorneys, and it's becoming less and less true, some attorneys have required that you delete the original pledge that was not accurate, quote unquote, and record the gift on the donor advised fund record, soft credit to the individual and have the individual execute a new pledge agreement for the amount they will pay, not what somebody else will pay. Great, thank you. Yep. I keep on going back and forth. Donor advised fund and family foundation rules are essentially the same. They just are called different things. Donor advised funds would call a gift from a donor advised fund satisfying a pledge to be an impermissible benefit. In the case of family or private foundations, they use the phrase self-dealing. It's the same, essentially. I'll talk a little bit about the big difference in a second, but I wanna talk about benefits. As I pointed out in the fidelity charitable gift form, absolutely no way can you provide a tangible benefit, not a tchotchke, you can do the tchotchke thing, the token benefits, which we'll talk about in a second, but a gift from a donor advised fund, as well as a gift from a family foundation can not result in any tangible benefit going to anybody as a result of that gift. The distinction on self-dealing is simply with private foundations, you, more individuals are affected, and it lists here these disqualified persons that cannot engage in these transactions, whereas with the donor advised fund, it's just me and the donor advised fund. With a private foundation, I can't use a gift from the private foundation to satisfy or return benefits to anybody affiliated with the family foundation. I wanna talk, that's it on the donor advised fund stuff. We'll come back to quid pro quos in a second. I did wanna quickly touch on, because this has been coming up frequently in the listeners, fortunately, CASE has addressed issues of donor influence and donor control, and here's direct quotes out of the CASE global reporting standards regarding donor influence. I think, no one asked me, but I think this came up as a result of some of the issues out in the Pacific West a few years ago, where individuals were trying to influence admissions decisions and that type of thing. So CASE has simply articulated here, this is, you can't use a contribution to influence the activities of an organization. And on the donor control side, the same thing applies. I think here, we see this most often with that first bullet and contribution from individuals who want to establish a scholarship and then name the scholarship recipient. A donor's involvement in creating a scholarship ends with the contribution and the signing of a scholarship agreement that has legally acceptable criteria for selecting the individual, but cannot have any part in the selection of the person for whom the scholarship is named. The same thing applies to faculty and endowed chairs and that type of thing. Also regarding donor control, and this is all outlined in IRS publication 526, a donor can't ask for their gift back. A gift is only a gift if it is irrevocably given. There are gonna be instances where in the interest of donor relations, if a donor is mad at you, you may want to give the gift back. You can't un-gift a gift. So if it's over $600 and you wish to return money to an individual, you've actually created an income event and will need to issue a 1099. Instead, what you really want to do is have an escape clause in any gift agreement that essentially says, if for whatever reason, the purpose for which your gift is being given ceases to exist, we will reuse the gift for similar related purposes, something along those lines. Donor can't make you do something you would otherwise not do. And then again, you must make sure that you do not allow donors to have any involvement in the scholarship selection process. That includes vetting the application saying, include these, don't include these, or giving the donor the top three and asking them to pick the top one. They just can't be involved. When they sign the endowment agreement saying, these are the criteria, that's when their criteria, that's when their involvement ends. Christy, do we have any questions before we go into the quid pro quo stuff? We do not have any questions right now. Very good. So we're running down to the wire here, but I wanted to cover the quid pro quo basics. You'll be happy to know that this week, the IRS issued the 2024 limits for giving benefits. There are essentially two different rules we can follow for giving donors benefits in exchange for their contribution without the donor's gift amount being reduced by the value of the benefit. So the big quote unquote benefit rule is that you can provide the donor up to $125 in benefits or 2% of the amount they gave, whichever is less without them having to reduce their gift or without you reducing the gift on the receipt. 2% of the gift amount or $125, whichever is less, that 125 figure goes up to 132 next year. There's the tchotchke rule. I wanna pay very close attention to this one here because I think two thirds of the organizations I visit missed this first bullet. In order to be able to receive a tchotchke, a token gift, valued at no more than $12.50, and that's the combined value of the tchotchkes in this year, $13 next year, a donor must make a minimum gift of $62.50, $66 next year. I cannot tell you how many annual giving programs I've encountered that give tchotchkes to donors of any dollar amount or at least $25. $25 to get a coffee mug. That's fine, but it doesn't fall within the IRS criteria for tchotchkes, and therefore the 2% rule applies, whichever is less. So if you wanna give a donor a coffee mug that's worth $12 in exchange for the $25 contribution they made, that's fine, but you have to reduce the $25 by the value of that coffee mug, $12, so the net gift amount is only 13. Again, you can only provide these low-cost articles, these tchotchkes, in the event that a donor makes a contribution of $62.50 or more this year, $66 or more next year, but only these token benefits can be given to a donor-advised fund or a Family Foundation donor. They cannot receive anything else, and that includes invitations to attend donor recognition events, galas, dinners, receptions, none of that. The only thing that a donor-advised fund donor or a Family Foundation donor can receive period, are tchotchkes, and of course they have to give at least the $62.50. Air market value is really important when we talk about quid pro quo here. For the tchotchkes, it's really low cost. That's how much would you pay to acquire these tchotchkes wholesale, but if you're talking about a recognition event, a gala, a reception, a party, or you have to take a look at IRS Publication 561, which provides a definition for fair market value, but it's essentially what is the retail value if there is one, or what would a willing buyer pay a willing seller? Those apply, so fair market value applies to the big benefits, low cost applies to the tchotchke benefits, and all apply to events where our online giving or virtual participation, there's no real distinction, unless it's just you get to watch a video. There are different benefits that are associated with $75 and below memberships. You can give these for a membership fee, like discounted admission, discounted parking, a 10% card for purchases at the bookstore. Those all are fine, as long as the membership fee is $75 or less for which you can receive those benefits. You must issue a receipt at $75 and up. If there is a benefit associated with the gift, that doesn't mean that you can give away anything for gifts of under $75. The IRS simply says, you absolutely must issue a quid pro quo receipt that says, this is how much you gave, this is what you received, a line item valuation information for those benefits, and then a statement indicating that the difference between the amount paid and the value of the benefits is how much you can claim for tax purposes. Many institutions will simply do the math for the donor and say, therefore your net tax deductible gift amount is X. So a quick example here, we invite a $1,000 donor to a recognition event that has a fair market value of $85. That's a quid pro quo, yes, because $85 is above that 2% limit, the 2% limit obviously being 20 bucks. However, under no circumstance can a donor advised fund or family foundation donor be invited. If we raise the minimum amount to go to that event to $4,500, then you can invite them because 2% is $90. The answer is of course, yes, but that's only for one ticket if you give them two tickets, then you are again over that limit and you must issue a quid pro quo receipt. And again, donor advised fund and family, it sounds like a broken record, don't I? Donor advised fund and family foundation donors cannot be included in those invitations. And don't ask me, I'm sure there's a good question. Well, what if we invite other people like VIPs and board members? And the answer is doesn't matter. If you're inviting the donor to a recognition event because of their gift from a donor advised fund or family foundation, you cannot. The fact that you invite other people that didn't give it all is not relevant. If these individuals received an invitation because of their gift, then you can't issue the invitation. Time for one more polling question. And it pertains to whether or not you are following the IRS quid pro quo rules. Again, I think I know what the trajectory is, but curious quickly to see, do you strictly adhere to the IRS quid pro quo rules? Always pretty much, not so much, I refuse to say. Always pretty much, except maybe for the donor advised fund and family foundation things, not so much. And the answer is, good. Again, this is pretty much the way the trajectory has been. Most people are always following it. There's a large percent, in this case, 21, that don't wanna say. It's probably because they're not following the rules and they just don't wanna be caught. And by the way, I will say that a number of charities have been caught and you just don't wanna have to pay those fines. But that's, I said it before and I'll say it again. These are not my rules. These are IRS rules. Only your attorney, your counsel, can help you determine whether or not you should follow these rules. Ralph McConn, when I was at Duke University, he was general counsel there, used the phrase material risk. I would ask him whether or not we could do something and he would always evaluate whether or not not following a particular rule represented a material risk to the university. I don't have a set definition as to what material risk is or means, but that's what you need to talk to your counsel about. You know what the rules are. You know that the IRS has fines and penalties. $5,000 per receipt that's issued that misstates what the deductible value of a gift was. You know, that's, I think, material. You know, do whatever your counsel says and get it in writing. Now. John, there's a follow-up question concerning quid pro quo. This person says, we face pushback that some of the benefits donors receive are for donor stewardship instead of gift recognition. How do you navigate this conversation? I asked my attorney because it's a matter of semantics. You can call it a stewardship gift, but would you have given it to them if they hadn't made the gift? That's the question. If it's tied directly to the amount that they gave, the frequency that they gave, their lifetime giving, then it's a quid pro quo. If they've never made a gift to the organization, ever, ever, ever, and you want to take them to a football game, that's up to you. I mean, that clearly it's not a quid pro quo because they've not made a gift. I would take the particulars of that situation to counsel to say, you know, we want to do this. Are we violating the IRS rules? And then it's, you know, get it in writing. I can't answer a blanket on this stewardship issue. Great, thank you, John. Yep. I want to quickly, we only have five minutes, quickly go over three things that the IRS doesn't explain. I've not found it. I've had to contact the IRS on three different occasions to ask them, how do you handle these particular situations? Because the way the rules were written when it comes to quid pro quo makes it read like you get something as a result of a gift. Well, for many of us, we encourage donors to set up recurring gifts or sustaining gifts. So how do you handle that? And here were the choices that the IRS said we could apply. Obviously, you need to tell the donor in advance to the extent that you can that they're going to receive anything. If they're set up for reoccurring giving or sustaining giving, then it's really easy if you just issue a single annual receipt for those gifts and then subtract the benefit from the aggregated amount. Or if you don't do that, but the benefit is not that big and it is under the value of whatever that first payment might be, then you could reduce that first payment by the value of the benefit. Or the nightmare for the gift administration people is you divide the benefit value by the number of anticipated payments and do a pro rata reduction of every gift. Oh, that is a pain. And then what happens if the donor ends up not paying on the pledge and they've received a benefit? That's your call. Then there's the unanticipated benefit. The IRS could care less if you didn't tell the donor about a benefit or that you came up with the idea of a benefit after a gift had been made. The IRS requires that you still have to one way or another advise a donor to take account for the value of the benefit that they receive. Again, I referenced Ralph McConn at Duke University. He required all of our receipts to include the language on this particular statement. Here's the exact statement that was on the back of a receipt that I received for a gift I made in 2005. Again, these are all things that you will want to discuss with your attorney. But yes, even if the donor didn't know they were going to get a benefit and you decide to give them a benefit, number one, you should ask them if they want it so they can opt out. Two, if they don't opt out and it's valued at more than $600, you may need to issue a 1099 for the value of the benefit. And third is the issue of lifetime benefits. I really can think of only two cases where this might be meaningful for you. A number of organizations have plan giving societies for donors that make a plan gift. Others have scholarship programs where they invite donors to an annual luncheon or dinner. What the IRS essentially says is you have to estimate what the lifetime value of that benefit is. So I've given you an example here for a plan giving society. This is fictitious, but the point is that per the conversation I had with the IRS, you have to somehow calculate what the value of that lifetime benefit is and reduce the amount given by the fair market value of what that estimated benefit is. Or better yet, you don't give lifetime benefit. And here's a reference if you need it about benefits going to donor advised funds and family foundation donors. I wanna quickly jump to bifurcation. Bifurcation is where, okay, we'll get around these rules for donor advised funds and family foundations by letting the individual pay for the benefit value that they are receiving as a result of a gift from a donor advised fund. And just wanna tell you that the IRS says, nope, can't do that. You know, that's called bifurcation. So you cannot allow the separation of the benefit, individual paying for it and the gift, the donor advised fund or the family foundation paying for it. In the case of the self-dealing family foundation issue, they call that a self-dealing scenario. And I've got to stop. I've got one whole minute left. We're not gonna get to the additional topics, but they will be in the slides that you will download. But I'll quickly take a question if there is one, because I know we're out of time. We are, and I don't see any questions in the Q&A box right now. So if anyone wants to quickly add one in, I'll just add a reminder that this has been recorded. So if you wanna watch back or if someone on your team wasn't able to make it, that recording will go up on the event page, the same place that you found the slides for this event as well. All right. I am still not seeing any questions. So John or Brian, do you have any final words before we hop off? Thank you very much. In the slides, you'll see email addresses and phone numbers. If anything comes to mind after today, don't hesitate to reach out. And let me just take a moment to thank John for his presentation and also you, Christy and team for all the work behind the scenes, but appreciate everybody attending and your questions and appreciate your support. Thanks. Thanks everyone. Thank you.

state regulations

fundraising activities

register

exemptions

type of organization

affiliated foundations

comply

legal entity

donor-advised funds

quid pro quo

IRS guidelines

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IRS regulations