Gift Acceptance Policies

Transcription

1 Gift Acceptance Policies (Approved by the Gift Acceptance Committee September 27, 2012 Approved by the ACF Executive Committee October 10, 2012) The Asset Acquisition program of the Arizona Community Foundation (ACF) encompasses the solicitation and acceptance of outright gifts with income dedicated immediately to the charitable needs of the community, planned gifts with split interest of income and principal reserved to charitable or non-charitable beneficiaries, and testamentary gifts created by bequest for all purposes consonant with the objectives of ACF. ACF endorses and subscribes to A Donor Bill of Rights, Appendix A. AUTHORIZATION It is the policy of ACF Board of Directors (hereinafter Board) to encourage donors to make outright, planned and testamentary gifts. Planned and testamentary gift types include bequests, charitable gift annuities, charitable remainder trusts, charitable lead trusts, retained life estates, gifts of life insurance or retirement assets, interests in business entities such as partnerships or closely-held stock, and such other gift arrangements as the Board may from time to time approve. It is the Board s directive that staff shall aggressively seek such gifts, and that adequate staff and resources for a fully effective program are maintained. All programs, solicitation plans, and activities shall be subject to the oversight of the Board. PURPOSE OF GIFTS The purposes of all gifts to ACF must relate to the mission of ACF, Appendix B. The purpose of the gift and the procedures for its administration shall, when feasible, be defined in a letter or agreement signed by the donor. ROLES AND RESPONSIBILITIES OF THE ACCEPTANCE COMMITTEE An Acceptance Committee shall be appointed by the Board, and must include at least one Director and other qualified persons. The primary responsibilities of the Acceptance Committee shall be to review proposed gift transactions specified below. The Acceptance Committee shall have the authority to propose additional acceptance policies, subject to approval by the Board or its designee. POLICIES The policy of ACF is to inform, serve, guide or otherwise assist donors who wish to support ACF s activities, but never under any circumstances to pressure or unduly persuade. 1

2 All information concerning donors and prospective donors shall be held in strict confidence by ACF, subject to legally authorized and enforceable requests for information by government agencies and courts. All other requests for or releases of information concerning a donor or prospective donor will be honored or allowed only if permission is obtained from the donor prior to the release of such information. Persons acting on behalf of ACF shall encourage the donor to discuss the proposed gift with the legal and/or tax advisors of the donor s choice, at the donor s expense. This is to ensure that the donor receives a full, accurate and independent explanation of all aspects of the proposed charitable gift. Persons acting on behalf of ACF shall advise the donor that it is the donor s responsibility to obtain any necessary appraisals, file appropriate personal tax returns, and defend against any challenges to claims for tax benefits. Any officer of the corporation, senior philanthropic advisors, regional managers and consultants retained by ACF for review/acceptance of gifts are authorized to negotiate planned gift agreements with prospective donors, following program guidelines approved by the Board. All planned giving agreements requiring execution by ACF shall first be reviewed and approved as to form by ACF s legal counsel. However, each agreement need not be reviewed provided it is based on a prototype agreement that has been reviewed and approved. ACF will accept charitable gift annuities but only under conditions described below. ACF may employ agents and advisors to facilitate the investment of annuity assets. ACF may serve as trustee of irrevocable charitable remainder trusts and charitable lead trusts created by individual donors when it is irrevocably named as the sole charitable beneficiary. However, it may serve in select circumstances when it is not the sole beneficiary if, in the judgment of the Acceptance Committee, the interests of ACF will be best served. In addition, ACF may serve as co-trustee with an individual or trust institution, subject to review by ACF of the circumstances and agreement by the parties involved as to the respective roles of each trustee. ACF will not serve as trustee or co-trustee of any revocable trusts or of other trusts that are not qualified charitable remainder trusts or charitable lead trusts created by individual donors. ACF may serve as trustee of a revocable trust created by an organization recognized as taxexempt under Section 501(c)(3) of the Internal Revenue Code when ACF and the other organization are named as beneficiaries of the trust, and in select circumstances when, in the judgment of the Acceptance Committee, the interests of ACF will be best served. ACF may employ one or more financial managers for the administration and investment of trust assets. Expenses related to investments and administrative services shall be charged to the respective trusts. 2

3 PROCEDURES FOR REVIEW OF GIFTS In reviewing gifts to ACF, the Acceptance Committee and/or staff will consider the following criteria: The charitable intent and ultimate community benefit The nature of any restrictions The permanency of the gift; or in the case of a non-permanent fund, the amount of time the fund will remain with ACF Projected costs of managing the gift asset Fee revenues to ACF for administering the gift Acceptance by staff of gifts consistent with the purposes, bylaws and procedures of ACF shall not require review by the Acceptance Committee if the gifts are in any of the following forms: Marketable securities Cash Checks Gifts of usable furniture and equipment for the offices or programs of ACF Gifts of precious metals, where the value is easily established Charitable remainder trusts, charitable lead trusts, or charitable gift annuities, if funded with cash or publicly traded securities Gifts requiring review and approval of the Acceptance Committee include the following: Gifts of real estate. The donor will be required to provide an independent appraisal and an environmental review (in most cases a Phase I) as well as a description of the property. The Committee will review these documents as well as consider any liabilities, restrictions or other conditions related to the gift. These policies also will apply to any other asset that has real estate holdings as an element of its value, e.g., certain limited partnerships or other business entities. Interests in business entities, i.e., closely-held securities, partnership and limited liability company interests, where, in the opinion of staff, there may be concerns about the following: valuation, long-term disposition, income production, business partnership, prohibited transactions, charitable intent, requirements or limitations, tax deductibility or other questions which indicate that a review of the Acceptance Committee is necessary. Charitable remainder trusts, charitable lead trusts, or charitable gift annuities, if funded with assets other than cash or publicly traded securities. Retained life tenancy in a residence, ranch or farm. Arrangements where the donor receives fees for services to ACF. Other property that may be unusual or fall outside the type of gifts usually handled by ACF, including tangible personal property unrelated to ACF s charitable purpose. Gifts to establish funds for a purpose that may fall outside the mission, bylaws and procedures of ACF. 3

4 Gifts requiring committee review will be handled promptly. ACF staff will deliver to the committee all information necessary to make a decision. If a gift is not accepted, the donor will be notified in writing by staff immediately. All gift reviews will be handled with confidentiality. Gifts requiring immediate action, e.g., gifts on December 31, or pending sale of property, may be exempted from full Acceptance Committee review if, in the judgment of the President, in consultation with designated members of the Acceptance Committee, that gift may be accepted without significant reservations or in any way jeopardizing ACF s tax-exempt status. Note: While ACF strives to be flexible and is able to accept complicated gifts, some proposed gifts may present issues which require legal review by ACF s counsel. Donors, who are contemplating complicated gifts, are strongly encouraged to involve ACF in the planning process as early as possible so that ACF may consult with counsel if necessary. FUNDS ACF establishes component funds and supporting organizations in response to community needs and donors charitable concerns. The Board of ACF has responsibility for acceptance, management and disposition of component funds. Options for fund structures at ACF include the following: Named Funds for the Common Good Named funds for the common good are available to ACF for any of the charitable purposes encompassed by ACF s mission. The Philanthropic Services Committee determines how these funds are used. Field of Interest Funds Field of interest funds are restricted in their use by the donor s preference for a limited charitable purpose, without designation of recipient organizations or program through which such charitable purposes may be served. The Philanthropic Services Committee determines which organizations and programs receive grants from field of interest funds and the amount and timing of such grants. Examples of field of interest funds include but are not limited to: Children, youth and families Arts and culture Education Community and neighborhood development Social justice Health and medicine Animals Environment 4

5 Donor Advised Funds Donors establish advised funds for unrestricted charitable purposes. The donor, or person(s) identified by the donor, maintains the ability to offer recommendations to ACF regarding the recipients and amounts of grants from the fund. Advised funds typically treat donations as permanent endowments and do not permit grants to be made from the donation corpus. In some cases, however, donors may choose to establish an advised fund that permits the invasion of corpus for grant-making purposes. Further details related to the Excess Business Holdings Rule for Donor Advised Funds and Supporting Organizations are included in Appendices F and G. Collaborative Funds Groups of unrelated individuals, associations and businesses can create and contribute to collaborative funds and recommend grants by a committee typically representing all of the donors. These funds enable donors to support cherished causes and local needs in an informed, active way without incurring the paperwork and expenses of maintaining a private foundation or other nonprofit organizations. Scholarship Funds Scholarship funds are dedicated to providing grants for educational purposes to assist individuals within an identified class, such as residents of a particular region, students attending a specific university or undertaking a selected course of study. Designated Funds (and Nonprofit Funds) Designated funds are earmarked for one or more charitable organizations or programs, and all grants made from such funds must be made to or for the use of the designated recipient organization(s). If the recipient organization(s) ceases to exist or changes its status or mission as a charitable organization, ACF s Board of Directors may exercise its variance authority, selecting an alternate use for the fund compatible with its original charitable purpose. Supporting Organizations Donors establish supporting organizations at ACF as independently incorporated taxexempt nonprofit organizations with separate governance. A supporting organization is a grantmaking organization that avoids private foundation status by being operated, supervised, controlled by, or in connection with ACF. This requirement can be met in part if the Board of ACF appoints a majority of the board of directors of the supporting organization. Further details related to the Excess Business Holdings Rule for Donor Advised Funds and Supporting Organizations are included in Appendices F and G. 5

6 Affiliate Community Foundations Affiliate community foundations are established for the support of a variety of charitable purposes and organizations within a specific community or region. A local advisory board is appointed within each affiliate community, which has grantmaking and asset acquisition responsibility for that area. Affiliate community foundations enable smaller communities to enjoy many of the benefits of a community foundation while taking advantage of ACF s services, staff and expertise and avoiding the costs and administrative burdens of a separate community foundation. Affiliate community foundations must abide by ACF s gift acceptance policies. GIFTS Asset Types ACF will accept gifts in the form of the following assets, subject to the conditions described below. In order to provide written substantiation for gifts, the donor s name and address must be provided. Wire Transfers Gifts of cash should be paid to ACF accompanied by a written document (fund agreement, letter or other written instruction) signed by the donor indicating to which fund the contribution should be credited. Checks Must be made payable to Arizona Community Foundation. The specific fund for which the check is intended should be noted in the bottom left corner of the check, or in attached correspondence. Marketable Securities Publicly traded stocks and bonds may be electronically transferred, re-registered in the name of ACF, or conveyed through use of a stock power form. ACF also will accept interests in mutual funds. Generally, these securities are sold upon receipt. Stock controlled under Securities and Exchange Commission Rule 144 will be held until the restriction on sale expires and then will be sold. Gifts of bonds that require a holding period may be accepted and cashed when the holding period has expired. Securities that shall not be accepted include those which are assessable or which in any way may create a liability; those which, by their nature, may not be assigned (such as series E savings bonds); those which have no apparent value. Pledges Written pledges to make gifts may be made applicable to any fund at ACF. A schedule of pledges payable should be included in the fund agreement, letter or other written instruction from the donor. Preferred pledge minimum is $1, over no more than 3 years. 6

7 Tangible personal property Gifts of such assets as boats, airplanes, automobiles, artwork, furniture, equipment, jewelry, gems, and metals valued in excess of $5,000 must be accompanied by a qualified appraisal. i Unless the property is to be used in connection with ACF s tax-exempt purpose, it will be sold at the highest possible price as soon as possible after conveyance. No commitment will be made to keep gifts of personal property. ACF discourages gifts of personal property which cannot readily be sold or which require unusual expenses prior to sale. If a lengthy selling period is anticipated, ACF may ask the donor to cover such expenses with a cash gift. A completed IRS Form 8283 ( Non-cash Charitable Contributions ) must accompany gifts of tangible personal property with values in excess of $5,000. If IRS Form 8283 is required, then an IRS Form 8282 will be filed by ACF upon the sale of the asset if sold within three years of the date of the gift. For vehicle donations, IRS Form 1098-C will also be filed for all vehicle donations without regard to value. Intellectual Property, royalties, distribution rights ACF may accept gifts of intellectual property including, but not limited to, royalties or distribution rights on published works (such as books or films) where there is clear evidence of marketability or assurance of an income stream. A qualified appraisal is required. ii A completed IRS Form 8283 ( Non-cash Charitable Contributions ) must accompany gifts of intellectual property with values in excess of $5,000. If IRS Form 8283 is required, then an IRS Form 8282 will be filed by ACF upon sale of the asset if sold within three years of the date of the gift. In addition, IRS Form 8899 will be filed by ACF reporting any income earned from donated intellectual property for a period of 10 years from the date of the gift or the legal life of the property, whichever occurs first. Life Insurance Policies and Proceeds This section contemplates a donor transferring the ownership of a life insurance policy to ACF. These guidelines are intended to assist donors and their insurance advisors in their planning, but they are not binding on the Gift Acceptance Committee or ACF. Given the variety of life insurance policy types, each insurance policy is reviewed based on its particular circumstances. ACF recommends that donors and their insurance advisors consult with ACF representatives early in the gift planning process. ACF does not provide insurance advice. Donors and their insurance advisors are encouraged to monitor the status of a gifted policy. 7

8 Criteria At the time of the donation, the insurer shall be rated no less than an A by 2 of the following services: o A.M. Best o Standard & Poors o Moody s o Fitch In order for ACF to accept a policy, it must be the sole owner and sole beneficiary. To determine the viability and performance of the life insurance policy for ACF s mission, a new policy sales illustration or an in force ledger illustration must be submitted to ACF for review. In a whole life policy, the dividend-crediting rate should be shown at the current level and.75% below the current crediting rate. Should the policy be a universal one, an illustration should show the current crediting rates and the guaranteed rate with current charges. If the policy is Variable or Indexed, a net 5% rate of return should be illustrated. Furthermore, where applicable, ACF may request an illustration assuming the entire account value is invested in the general account with the carrier and run at the current crediting rate for that product. All interest rate assumptions should be at net rates. Generally, ACF will not accept gifts of a life insurance policy with an outstanding loan against it. Fees Upon ownership transfer to ACF, the policy is retained at the ACF office. ACF will require an annual administrative fee of at least $500 to manage the donated life insurance policy. The fee is determined on a case-by-case basis. Premiums A gifted policy may subsequently require premium payments. At least ninety days prior to the annual premium due date, the donor shall send a tax-deductible contribution if sufficient cash is unavailable in the fund directly to ACF, and ACF makes the payment to the insurance company. If the donor s contributions do not cover the premiums and the administrative fee, ACF may at its sole discretion use the cash surrender value of the policy to make the premium payment and cover the administrative fee. ACF may in its sole discretion surrender the policy or allow a policy to lapse if a donor fails to make sufficient or timely contributions. The cash available from surrendering the policy will be added to the Fund for the Common Good in the donor s name or the donor s other named fund. Management Discretion As the policyowner, ACF will have sole discretion to manage the policy. ACF reserves the right to change the policy if necessary. 8

9 Proceeds To achieve the donor s philanthropic goals, upon death or surrender of the policy, the proceeds may establish a new fund or contribute to an existing fund at ACF. Such funds are governed by a signed fund agreement and its corresponding terms and conditions. Tax Deduction Qualification The donor is responsible for claiming any applicable deductions upon the transfer of a life insurance policy. A donor may qualify to take a charitable income tax deduction equal to the lesser of the policy s fair market value or the donor s basis in the policy. ACF does not provide personal tax, legal or financial advice, and donors should direct their questions about personal financial consequences to their personal professional advisors regarding a deduction or any action regarding a gift of a life insurance policy. Authority Staff may consult with a life insurance professional when reviewing proposed policies. Prior to acceptance, staff shall submit proposed policies to the Gift Acceptance Committee for approval. However, gifts requiring immediate action may be exempted from full Gift Acceptance Committee review if, in the judgment of ACF s CFO and with the recommendation of a life insurance professional, the policy may be accepted without significant reservations or in any way jeopardizing ACF s tax-exempt status. Interests in Business Entities Donors may make gifts of interests in business entities (i.e., closely-held marketable securities, partnership interests iii, interests in limited liability companies iv ). Gifts of interests in business entities can be accepted if ACF assumes no liability or obligations in receiving them. In evaluating a gift proposal of such assets, the Acceptance Committee may consider the terms of the agreements to which ACF will be subject (such as bylaws, partnership agreement or operating agreement), probability of conversion to a liquid asset within a reasonable period of time, projected income that will be available for distribution and administrative fees, reporting requirements, and the nature of the business from which the asset is derived. A completed IRS Form 8283 ( Non-cash Charitable Contributions ) and a letter from the attorney of the business must accompany gifts of limited partnership interests or interests in limited liability companies, providing the following information: o independent qualified appraisal v of value of the subject entity and statement of the percentage of the entity to be gifted to ACF; o assurance that ACF will have no obligation to make capital contributions or additional investment in the entity; o assurance that ACF will be held harmless in the event the entity becomes bankrupt or is otherwise unable to satisfy its obligations; o assurance that ACF will be held harmless in the event the entity is sued. An IRS Form 8282 will be filed by ACF upon the sale of the asset if sold within three years of the date of the gift. 9

10 ACF does not accept gifts of general partnership interests due to potential unlimited liability. ACF can work with donors and their professional advisors on charitable gifts of S corporation stock, using a third-party intermediary organization. Donors and their professional advisors are encouraged to contact ACF early in any discussion of such gifts to determine if appropriate. When an interest in a business entity cannot be promptly liquidated, and the documented present value of the interest is $100,000 or more, that interest may be credited to a new, named component fund at ACF. The fund may be treated as an advised, designated, scholarship, field of interest, or unrestricted fund as requested by the donor. Grants may be made only from income generated by the business interest or from other liquid assets in the component fund, provided the fund s documented present value remains at least $100,000. In cases where an interest gifted to ACF is promptly liquidated, but its value is less than $100,000, the interest will be treated as an unrestricted contribution to ACF, and income generated by the business interest will be treated as unrestricted income to ACF. In the alternative, the donor may direct the contribution to an existing, named component fund at ACF or combine the business interest with other assets sufficient to bring the total present value of the contribution to at least $100,000. Further details related to gifts of limited partnership and limited liability company interests are included in Appendix C. Further details related to the Excess Business Holdings Rule for Donor Advised Funds and Supporting Organizations are included in Appendices F and G. Note: Gifts of family limited partnership or family limited liability company interests are complex and may present issues when gifted to a charity. Therefore, professional advisors are strongly encouraged to contact ACF as early as possible in their discussions with clients about these gifts so that ACF may consult with counsel on a case-by-case basis. Real property Generally, gifts of real property in Arizona should result in a contribution to ACF of at least $100,000. Gifts of real property outside Arizona should result in a contribution of at least $500,000. Unencumbered real property will be accepted at fair market value as established by at least one qualified appraisal, provided by the donor. Evidence of clear title to the property must be provided by the donor to the Acceptance Committee; property with multiple owners will be accepted only if all owners of the property agree in writing to the gift. 10

11 Real property that is encumbered will be accepted only in exceptional circumstances, with the Acceptance Committee taking into consideration any benefits the donor may receive from gifting encumbered real property (such as release of personal guarantees on loans secured by the real property). Prior to acceptance of a gift of real property, ACF and the donor must agree, in writing, on arrangements for paying expenses associated with the property, including taxes and assessments, insurance coverage, and maintenance costs. In order to avoid potential liability for environmental cleanup and toxic and hazardous materials issues related to real estate, ACF requires inspection through an environmental audit of all proposed gifts of real estate and assets related to real property. In addition to the considerations listed above, commercial properties and businesses will be examined in relationship to the potential for exposure of ACF to unrelated business taxable income. A completed IRS Form 8283 ( Non-cash Charitable Contributions ) must accompany gifts of real property. A qualified appraisal, vi among other documentation must accompany gifts of real property. Further details related to the required documentation for gifts of real property are included in Appendix D. Retirement assets Account type retirement plans, in which a balance accumulates as principal, may be gifted to ACF. These include Individual Retirement Accounts (IRA), 401(k), 403(b), and defined contribution plans. (Annuity plans, such as defined benefit plans, in which retirement benefits are paid out as income and principal does not accumulate, generally cannot be used for charitable gifts.) Methods for gifting retirement assets include: naming ACF as successor or contingent beneficiary for all or part of the assets upon death of either the retirement asset owner or spouse; creating a testamentary charitable remainder trust upon the death of the asset owner, naming ACF as remainder beneficiary and noncharitable heirs as income beneficiaries. Promissory Notes Donors may make gifts to ACF of promissory notes under which they are due money as the holder of the promissory note. 11

12 When a promissory note s present value is $100,000 or more, the promissory note may be credited to a new, named component fund at ACF. The fund may be treated as an advised, designated, scholarship, field of interest, or unrestricted fund as requested by the donor. Grants may be made only from income generated by the payments of principal and interest of the promissory note (and the donor may gift additional assets to the fund) provided the fund s documented present value remains at least $100,000. In cases where the promissory note s present value is less than $100,000, the promissory note will be treated as an unrestricted contribution to ACF, and income generated by payments of principal and interest will be treated as unrestricted income to ACF. In the alternative, the donor may direct the contribution to an existing, named component fund at ACF or combine the promissory note with other assets sufficient to bring the total present value of the contribution to at least $100,000. Further details relating to the factors ACF must consider and the required documentation for gifts of promissory notes are included in Appendix E. PLANNED AND TESTAMENTARY GIFTS ACF s planned and testamentary giving program encompasses all forms of gifts whose benefits do not fully accrue to ACF until some future time (such as the death of the donor or other income beneficiaries or the expiration of a predetermined period of time), or whose benefits to ACF are then followed by the interests of noncharitable beneficiaries. Donors using planned and testamentary gift techniques may establish any of the fund types listed above. Will, trust, or other documents should specify ACF as the charitable recipient and name the fund to which the donor s gift will contribute. The type of fund and purpose of the fund may be described in detail in a separate fund agreement. Bequests Bequests may be from a will or trust and may be specific or contingent in nature. Representatives of ACF are authorized to solicit direct testamentary charitable contributions through wills or trusts, as well as testamentary contributions to establish gift annuities and charitable remainder and lead trusts. Advice offered by representatives of ACF must be accompanied by a written recommendation that the prospect consult his/her own attorney and/or tax counsel. A bequest through will or trust to ACF should include the following: the name of the Arizona Community Foundation, an Arizona nonprofit corporation located at 2201 E. Camelback Rd., #405B, Phoenix, Arizona 85016; the name of the fund to which the bequest is made (this may be a new or existing fund). In the case of a new fund, ACF will, upon notification that the bequest has been included in a will or trust, prepare a separate fund agreement defining the purpose for which the fund has been created. 12

13 Charitable Remainder Trusts A. Description: Unitrusts The basic form of Unitrust provides for payment to the donor and/or beneficiary of an amount equal to a set percentage of fair market value of the assets of the trust, valued annually. The percentage is determined at the time the trust is created, is stated in the trust and is permanent. The payout must equal no less than 5% of the fair market value of the assets placed in the trust when it is created, and may be made quarterly, semiannually or annually. If the annual income and/or realized capital gains do not equal the committed Unitrust percentage, principal is used to supplement the short fall. If there is any excess income or appreciation in excess of the stipulated payment, it is added to the principal. Additional contributions may be made to Unitrusts. The present value of the remainder interest must be equal to or greater than 10% of the original contribution to the trust. A variation of the basic Unitrust, known as the Net Income with Make-Up Unitrust, may be used if the donor and ACF agree on its use. When the trust is created, it includes a provision which defines the Unitrust s payments to be the lesser of the specified payout rate or the actual annual income generated from the investments in the Unitrust. In subsequent years, any income generated from the Unitrust in excess of the specified payout percentage is used to make up any deficit from previous years and is paid to the income beneficiary/donor prior to being added to the Unitrust corpus. The Unitrust also can be structured to be a Net Income Unitrust. In this case, the payout is made from income only and principal is not accessed for income payout. Another variation of the basic Unitrust is known as the Flip Unitrust. A Flip Unitrust starts as a Net Income Unitrust or a Net Income with Make-Up Unitrust. Upon the occurrence of certain specified events (e.g., a specific date, sale of real property, etc.), a Flip Unitrust flips to function as a basic Unitrust. A flip provision typically may be attractive to donors who intend to fund their Unitrust with assets that are not producing income, such as undeveloped real property. B. Description: Annuity Trusts Donor and/or beneficiary annually receive a payout that is fixed irrevocably at the time of the gift and stated in the trust agreement. The payout must equal at least 5% of the fair market value of the assets placed in the trust when it is created. Income in excess of the annual payment is added to principal. If the income in any year is less than the annual payment, the difference is derived from realized capital gain or principal. Additions may not be made to Annuity Trusts. The present value of the remainder interest must be equal to or greater than 10% of the original contribution to the trust. 13

14 C. Policy 1. Representatives of ACF are authorized to solicit gifts in the form of Charitable Remainder Trusts (including basic Unitrusts, Annuity Trusts, Net Income Unitrusts, Net Income with Make-Up Unitrusts and Flip Unitrusts) with annual payout rates ranging from 5% to 9% of fair market value of trust assets; payout rates of more than 9% must be reviewed for approval by the Acceptance Committee. (Net Income Unitrusts do not require this approval). 2. Donors who elect to self-trustee must be informed of the administrative and taxreporting responsibilities entailed by their trusteeship. ACF representative may provide information on vendors providing administrative and tax reporting services. 3. ACF prefers to serve as trustee only when: a. The income beneficiary is age 55 or older; b. The assets initiating the trust are valued at a minimum of $300,000; c. ACF is named as irrevocable remainder beneficiary, for endowment purposes, for a minimum of 50% of the remaining assets. d. The annual trustee fee is typically 1% of the asset value of the trust, but with a minimum of $2, Sample trust agreements provided by ACF to the donor shall be accompanied by a letter indicating that the sample does not constitute legal advice and strongly advising that the donor seek legal counsel prior to completing the trust. 5. Any agreements that name ACF as trustee shall be ratified by the Executive Committee or Board Charitable Lead Trusts A. Description Income earned from the assets within the Charitable Lead Trust is donated for a period of years, or for the remaining life of the donor or beneficiary. The remainder interest is either retained by the donor or given to a non-charitable beneficiary. B. Policy A contribution of the income generated from the assets within the trust must be in the form of either an annuity or unitrust interest. 1. Representatives of ACF are authorized to solicit gifts for Charitable Lead Trusts. The donor may select any annuity or fixed pay out percentage. 14

15 2. Sample trust agreements provided by ACF to the donor shall be accompanied by a letter indicating that the sample is not a completed legal document and strongly advising that the donor seek legal counsel prior to completing the trust. 3. Any agreements that name ACF as trustee shall be ratified by the Executive Committee or Board. 4. Exceptions to the above must be approved by the Acceptance Committee prior to execution of the agreement. Pooled Income Fund A. Description B. Policy The Pooled Income Fund is a trust maintained by ACF, which pays out income to donors on the basis of the amount contributed. A donor s gift, at fair market value, is placed in a pool with similar gifts from other donors. The donor receives units based on the fair market value of the gift relative to all other funds in the pool. All income received in the pool during the year must be paid out to donors during that same year on the basis of units held. Income is paid to new donors from date of gift. Only income is paid to the donor; there is no invasion of principal. 1. Representatives of ACF are authorized to solicit gifts for the Pooled Income Fund. 2. Disclosure to the donor must follow state and federal regulations. 3. Income from any single donor s shares is limited to two beneficiaries. 4. Minimum age of beneficiaries shall be 55 years. 5. Minimum initial gift to the pool is $5,000. Minimum additions shall be $ The remainder beneficiary of the Pooled Income Fund must be ACF. Other nonprofit organizations may be designated as income recipients of an endowment fund resulting from Pooled Income Fund remainder. Charitable Gift Annuities A. Description ACF and the donor enter into a contract providing a fixed dollar return for life to the donor and/or other beneficiaries, in exchange for a contribution to ACF. The amount of payment is dependent upon the age of the donor and the size of the gift. The date that income payments to the beneficiary begin may be deferred. The annuity contract is a general obligation of ACF. The American Council on Gift Annuities sets and publishes recommended annuity rates and anticipates that the residuum, i.e., assets remaining upon the death of the annuitant(s), will be 50% of the initial contribution. 15

16 B. Policy 1. Representatives of ACF are authorized to solicit gift annuity agreements. The gift annuity remainder must be placed into an endowment fund at ACF. 2. The Uniform Annuity Rates as published by the American Council on Gift Annuities will not be exceeded without Acceptance Committee approval. 3. Disclosure to the donor must follow state and federal regulations. 4. The minimum gift for an annuity agreement is $25,000. If the donor s objective is to create a named component fund with the residuum, then the donor should consider funding the gift annuity with $50,000 to ensure that the residuum will meet the $25,000 minimum to create a named fund. If the residuum is less than $25,000, then it may be added to an already existing ACF fund. 5. Agreements may provide for income payments to no more than two successive life beneficiaries. 6. With the exception of a Deferred Payment Gift Annuity, the minimum age of income beneficiaries shall be 55 years. Deferred Payment Gift Annuities should begin annuity payments after age 55. i The Pension Protection Act of 2006 (PPA) made significant changes to the qualifications necessary to perform tax related appraisals and in the valuation standards relied on to determine the fair market value of tangible and intangible property for tax purposes. The PPA made the changes in tax-related appraisal practice effective when the new law was signed on August 17, 2006, and governs valuations performed for business valuation, real property and personal property, including fine arts, machinery and technical specialties and gems and jewelry. Specifically, the new law raises the bar on the valuation qualifications individuals must possess to be eligible to perform such appraisals, i.e., objective indicators of valuation competency, such as an ASA designation, now are required. The PPA also requires that generally accepted valuation standards be followed in determining the fair market values of tangible and intangible property in connection with non-cash charitable contributions. Any appraiser used to value a proposed gift to ACF should be familiar with the PPA and should follow the requirements of this new legislation. ii See i above. iii Gifts of family limited partnership or family limited liability company interests are complex and may present issues when gifted to a charity. Therefore, professional advisors are strongly encouraged to contact ACF as early as possible in their discussions with clients about these gifts so that ACF may consult with counsel on a case-by-case basis. iv See iv above. v See i above. vi See i above. 16

17 APPENDIX A A DONOR BILL OF RIGHTS PHILANTHROPY is based on voluntary action for the common good. It is a tradition of giving and sharing that is primary to the quality of life. To assure that philanthropy merits the respect and trust of the general public, and that donors and prospective donors can have full confidence in the nonprofit organizations and causes that they are asked to support, we declare that all donors have these rights. I. To be informed of the organization s mission, of the way the organization intends to use donated resources, and of its capacity to use donations effectively for their intended purposes. II. To be informed of the identity of those serving on the organization s governing board, and to expect the board to exercise prudent judgment in its stewardship responsibilities. III. To have access to the organization s most recent financial statements. IV. To be assured their gifts will be used for the purposes for which they were given. V. To receive appropriate acknowledgment and recognition. DEVELOPED BY AMERICAN ASSOCIATION OF FUND RAISING COUNSEL (AAFRC) ASSOCIATION FOR HEALTHCARE PHILANTHROPY (AHP) COUNCIL FOR ADVANCEMENT AND SUPPORT OF EDUCATION (CASE) NATIONAL SOCIETY OF FUND RAISING EXECUTIVES (NSFRE) VI. To be assured that information about their donations is handled with respect and with confidentiality to the extent provided by law. VII. To expect that all relationships with individuals representing organizations of interest to the donor will be professional in nature. VIII. To be informed whether those seeking donations are volunteers, employees of the organization or hired solicitors. IX. To have the opportunity for their names to be deleted from mailing lists that an organization may intend to share. X. To feel free to ask questions when making a donation and to receive prompt, truthful and forthright answers. ENDORSED BY INDEPENDENT SECTOR NATIONAL CATHOLIC DEVELOPMENT CONFERENCE (NCDC) NATIONAL COMMITTEE ON PLANNED GIVING (NCPG) NATIONAL COUNCIL FOR RESOURCE DEVELOPMENT (NCRD) UNITED WAY OF AMERICA 17

18 APPENDIX B ACF S MISSION To lead, serve and collaborate to mobilize enduring philanthropy for a better Arizona. 18

19 APPENDIX C LIMITED PARTNERSHIP (LP) AND LIMITED LIABILITY COMPANY (LLC) GIFT ACCEPTANCE POLICIES Note: Gifts of family limited partnership or family limited liability company interests are complex and may present issues when gifted to a charity. Therefore, professional advisors are strongly encouraged to contact ACF as early as possible in their discussions with clients about these gifts so that ACF may consult with counsel on a case-by-case basis. Gifts of Limited Partnership interests or Limited Liability Company interests may be accepted by ACF. The following steps should be followed to facilitate a smooth gifting and asset management process: 1) An officer of the corporation or a senior philanthropic advisor must discuss with the donor and donor s representative the charitable intent of the donation, the underlying class of assets that will fund the partnership, the percentage payment of the income to ACF from the LP or LLC and other terms of the partnership. 2) Cash or marketable securities are preferred assets in an LP or LLC that is proposed as a gift to ACF. Other assets may be considered if accompanied by requested documentation, including a current appraisal, which meets the requirements of the Pension Protection Act of A statement of investment policy for assets is required, if applicable. 3) ACF must have adequate opportunity to review a copy of the entity documentation (such as the partnership agreement and certificate or limited liability company operating agreement), which includes review by ACF legal counsel and/or Gift Acceptance Committee. Gifts of LP or LLC interests offered to ACF may be accepted or declined based on the response to this review. 4) In addition to the partnership document, the following is required: A listing of all partners, including names and contact information; A history of distributions from the partnership (if existing) or a projection of distributions if the partnership is new; A succession plan for the General Partner and, if the General Partner is an entity, the names and contact information of the owners of the General Partner; A tax distribution policy; Exemption of ACF from liability or additional capital contributions. 5) Generally, if the documented present value of an LP or LLC interest is $100,000 or more, that LP or LLC interest may be credited to a new, named component fund at ACF. The fund may be treated as an advised, designated, field of interest, or unrestricted fund as requested by the donor. Grants may be made only from income generated by the LP or LLC interest or from other liquid assets in the component fund, provided the fund s documented present value remains at least $100,

20 6) Generally, if the documented present value of an LP or LLC interest is less than $100,000, that LP or LLC interest will be treated as an unrestricted contribution to ACF, and income from the LP or LLC interest will be treated as unrestricted income to ACF. In the alternative, the donor may direct the contribution to an existing, named component fund at ACF or combine the LP or LLC interest with other assets sufficient to bring the total present value of the contribution to at least $100,000. ACF s administrative fees will be as follows: Named component funds are charged an administrative fee on ACF s standard published fee schedule, which generally is 1% of asset value or contributions to the fund, declining as ACF-managed assets in the fund exceed $3 million. In addition, a fee of $1,000 per annum is charged on the partnership interest owned by ACF; If the LP or LLC interests do not produce sufficient income to pay the fees, ACF reserves the right to invoice for annual fees; If the LP or LLC interests are contributed to a support organization, the minimum fee schedule applies plus an additional $3,000 per year. 7) ACF must annually receive: A copy of the entire partnership return form 1065; A letter answering the following questions: Should ACF interests be redeemed or the ownership interest continued? Has there been an appraisal or can the General Partner estimate current value? Has there been any material event, such as a sale, refinance, or death of a partner, which might affect the assets or the current valuation? Has there been a significant change in the investment philosophy? Is a 754 election in place? 8) The donor s professional advisor (e.g., attorney or accountant) must provide ACF with documentation that the donor of LP or LLC interests has been fully informed regarding the following: Tax implications of the gift of LP or LLC interests, including the non-income tax deductibility of the annual income payments to ACF as an owner of the LP or LLC interests; The requirement to distribute at least annually to ACF for fees and grantmaking. 20

21 APPENDIX D REAL ESTATE GIFT ACCEPTANCE PROCEDURES Guidelines When Donors Express their Desire to Donate Gifts of Real Estate: 1. ACF staff and the donor should meet to evaluate the property and develop appropriate gift arrangements with the donor, subject to proper approval. The approval process includes consulting with and officer of the corporation and review and approval by ACF s Acceptance Committee. 2. An appraisal (MAI, FHA, or equivalent) is to be performed by an independent appraiser according to IRS guidelines. 3. The attached Checklist for Real Estate Gifts should be followed, if applicable. 4. Gifts of real property should result in a gift to the Foundation of $100,000 if the property is in Arizona or $500,000 if out of state. 5. Depending on the complexity and value of the property being donated, the staff should discuss an appropriate fee/gift arrangement with the donor to help cover the overhead costs of accepting the gift. These may include realtor commissions, title insurance policy, appraisal, closing costs, legal fees, property taxes, insurance and environmental assessments. 6. The following agreements with the donor may be required: fund agreement; expense reimbursement and fee agreement; deed execution; title insurance policy; and in the case of a life estate gift, a maintenance, insurance and taxes agreement. 7. Recording of the title change to real estate should not be made until ACF notifies the donor or the donor s representative in writing that the gift has been accepted. Considerations for Accepting Real Estate Gifts: 1. A financial analysis must be performed prior to acceptance to determine whether the gift is a financially sound investment for ACF, especially if commercial or income-producing property is involved. ACF must weigh carefully whether or not it has the desire and ability to manage the property for whatever length of time is necessary to consummate the sale. If the property produces income, ACF must consider the amount of income it receives against the ongoing cost of the encumbrances. ACF must also consider the costs of carrying the property, such as annual property taxes, privilege taxes (if the property generates rental income), and property/liability insurance. Member, Appraisal Institute Federal Housing Administration 21

22 2. ACF will take into account the depreciation of real estate in considering gift proposals. If the donor has taken accelerated depreciation in excess of straight-line prior to making the gift, the donor will be responsible for making any recapture payments to the IRS. 3. ACF will consider encumbered property for acceptance only if the evaluation convincingly demonstrates that the property can be sold at a price that substantially exceeds the aggregate amount of the encumbrances and any costs associated with satisfying them. The Acceptance Committee will take into consideration any benefits the donor may receive from gifting encumbered real property (such as release of personal guarantees on loans secured by the real property). 4. ACF will not pay for appraisals, broker s/agent s/finder s fees, title insurance policies; environmental assessments, or the drafting of legal documents without approval of the Acceptance Committee. Disposition of Property: Generally, ACF will sell property as quickly as possible after the gift is completed. Considerations: 1. ACF should consider its investment objectives before selling. 2. ACF should avoid selling property at a distressed price. A quick distress sale may jeopardize the donor s charitable contribution deduction and might negatively impact the market values in the area. Environmental/Pollution Concerns: A Phase One Environmental Assessment must be completed and certified to ACF prior to acceptance of any gift of vacant land, agricultural land, commercial real property (e.g., office building, condominium/apartment complex, industrial property, shopping center) or residential real property on which agricultural, livestock or horse activities have been conducted. The Phase One Environmental Assessment must include at least the following: Review of Regulatory Agency Records: EPA/NPL Site List, EPA-CERCLIS Site List, EPA- RCRA Generator Site List, State DEP Hazardous Waste List, State DEP Land Fill List, State EEP Leaking UST List, and an interview with the local fire department. Review of Physical Setting: USGS Topographical Map, USDA Soil Survey, State or USGS Groundwater Map, USDI Wetlands Map, Aerial Photographs, and Building or Site Plans. Review of Owner History: Tax Assessors records, chain of title review and interview with previous owner(s). 22