Gift Acceptance Policies
The Community Foundation of Louisville (the "Foundation") has established a development program to further the charitable purposes and mission of the Foundation. Specifically, the development program seeks to help donors meet their charitable goals while benefiting the communities and organizations served by the Foundation. This requires an active effort on the part of the Foundation's governing board and staff to promote the programs and opportunities offered by the Foundation and to respond promptly and appropriately to the needs and circumstances of donors and prospective donors to the Foundation.
The following Gift Acceptance Policies outline the guidelines to be followed by staff in managing the acceptance of various types of gifts. The Foundation will operate in compliance with all federal, state and local laws and regulations. After review and recommendation of the Finance Committee, these policies may be amended from time to time by a vote of the Foundation's Board of Directors.
II. GENERAL FOUNDATION RESPONSIBILITIES
Advising Donors. The role of Foundation staff shall be to inform, guide and assist a donor in fulfilling his or her philanthropic wishes, but never to pressure or unduly influence a donor's decision.
In particular, donors should be advised of:
- the irrevocability of a gift,
- the Foundation's variance power, where applicable,
- prohibitions on donor restrictions,
- items subject to variability (market value, investment return, and income yield),
- the Foundation's responsibility to provide periodic financial statements on donor funds, and
- the Foundation's fees.
Donors should be advised to seek the advice of independent financial, investment and legal counsel prior to making a gift. The Foundation does not provide legal or tax advice. Any proposals and tax calculations prepared by the Foundation are for illustrative purposes only.
Confidentiality. The content of all agreements and all information concerning donors and prospective donors shall be held in strict confidence by the Foundation, subject to legally authorized and enforceable requests for information by governing agencies and courts, unless the donor has authorized the Foundation to release such information.
III. GENERAL GIFT ACCEPTANCE POLICIES
Gift Acceptance Committee: Given the increasing complexity of IRS regulations, state and federal laws, and donors' interest in making gifts of assets other than cash and marketable securities, the Foundation recognizes the importance of screening proposed gifts carefully. It is important that the Foundation's staff and board ensure that gifts accepted do not place other assets of the Foundation at risk and that such gifts can be converted into assets that are consistent with the Foundation's investment portfolios.
Additionally, there must be a substantial likelihood that such assets can be liquidated within a reasonable period of time, and will have an ultimate benefit to the community.
Before acceptance, all gifts will be reviewed by the Foundation's Vice President for Development and Stewardship. Complex or hard-to-value gifts will be reviewed by a Gift Acceptance Committee composed of the President, the Chief Financial Officer, the Vice President of Development and Stewardship, and the Director of Gift Planning, with the assistance of the Foundation's legal counsel as deemed necessary by the Gift Acceptance Committee. Complex or hard-to-value gifts would include but are not limited to closely-held or thinly traded securities, illiquid gifts, real estate, tangible personal property, limited liability company interests, partnership interests or shares of a Subchapter S corporation. The Board of Directors grants to the Gift Acceptance Committee the authority to accept such gifts.
The Gift Acceptance Committee shall act by a majority vote. The President, in his or her sole discretion, may make the acceptance of a gift subject to approval by the Finance Committee of the Board of Directors.
Assets Accepted by the Foundation: The Foundation may accept the following types of contributions:
- Real Estate Asset Legacy Foundation of Kentucky, Inc: Real estate that a donor wishes to contribute to the Foundation and that the Gift Acceptance Committee approves will be accepted by the Real Estate Asset Legacy Foundation of Kentucky, Inc. (the "REAL Foundation"), a supporting organization of the Foundation. The Foundation will not directly accept title to real property. Real estate may also be contributed by a donor to create a Charitable Remainder Trust. In such cases, the Foundation will generally not serve as trustee until the real estate is sold.
- Unencumbered real property will be accepted at fair market value as established by at least one qualified appraisal (qualified appraiser is defined as one that meets "generally accepted standards" and follows the principles of Uniform Standards of Professional Appraisal Practice (USPAP)).
- Real property will only be accepted if there is reasonable expectation that it will be sold within one year.
- Real property that is encumbered by a trust deed loan or mortgage will be accepted only in exceptional circumstances and upon advice from the Foundation's legal counsel.
- Before acceptance of real property as a gift, the REAL Foundation and the donor must agree in writing on arrangements for paying expenses associated with the property, such as commissions, taxes and assessments, appraisal fees, environmental evaluations, insurance coverage, and maintenance costs. Generally, the REAL Foundation will not make advance payment of such expenses.
- The administrative fees charged by the Foundation will be assessed and will be netted from the sales proceeds of the property.
- In order to avoid potential liability for environmental cleanup and toxic and hazardous waste issues relating to real estate, in most cases the REAL Foundation will require a Phase One Environmental Assessment of all proposed gifts of real estate and assets relating to real property (such as real estate held by a limited partnership) prior to final acceptance.
- Gifts of real estate may be used only to create an endowment fund.
Bargain sale: After legal review of the transaction and the REAL Foundation's approval of the proposed sale price, the REAL Foundation may purchase real property as part of a bargain sale. In a bargain sale, the property is sold to the REAL Foundation at a price below its fair market value. Therefore, the transaction is part sale and part charitable gift to the REAL Foundation. The donor is entitled to a charitable deduction in accordance with the IRS statutes and regulations. Funds used by the Foundation to purchase the real estate are reimbursed upon sale of the property.
Income-producing property: Acceptance of income-producing property that is not related to the non-profit purpose of the REAL Foundation may result in the REAL Foundation having to pay unrelated business income tax (UBIT). For this reason, the REAL Foundation will not normally accept such donations of real property unless special circumstances consistent with the REAL Foundation's purposes justify paying the tax. The REAL Foundation may also accept this type of property if the property can be liquidated so that no tax is owed. The fund will be assessed any UBIT incurred by the Foundation.
Testamentary gifts of real property: Upon becoming aware that the Foundation or the REAL Foundation has been named to receive a gift under any Will that has been admitted to probate or any trust arrangement, the Foundation will contact the estate's executor, trustee, or other legal representative and determine if the Foundation's gift consists of real property; or, if the Foundation is a residuary beneficiary of the estate, whether the residue passing to the Foundation will contain any real property. If the Foundation will or may receive real property, then it will, as a general rule, request that the executor, trustee, or legal representative sell the property and transfer the proceeds to the Foundation. If the property cannot be sold and the Foundation wishes to accept the testamentary gift in kind, the Foundation will require the executor, trustee or other legal representative to transfer title to the REAL Foundation. In all respects, a testamentary gift of real property shall comply with the guidelines set forth in this Section 3 for intervivos gifts of real property. The Foundation always reserves its right to decline the testamentary gift.
Oil, Gas and Mineral Interests: The REAL Foundation may accept oil and gas property interests, where appropriate. Prior to acceptance of an oil and gas interest the gift shall be approved by the Gift Acceptance Committee. Criteria for acceptance of the property may include, but not be limited to:
- Gifts of surface rights should have a value of at least the minimum set by the Foundation for endowment funds.
- Gifts of oil, gas and mineral interest should generate at least $3,000 per year in royalties or other income (as determined by the average of three years prior to the gift).
- The property should not have extended liabilities or other considerations that make receipt of the gift inappropriate.
- If the interest is a working interest, the Gift Acceptance Committee should determine the impact on the Foundation so that it may develop a plan to minimize that impact if accepted.
- The property should undergo an environmental review to ensure that the Foundation has no current or potential exposure to environmental liability.
- The Foundation reserves the right to determine on a case by case basis whether the fund created by such a gift will be endowed or non-endowed.
Certain Non-Liquid Assets. A non-liquid asset is an asset that is not easily or quickly converted to cash. A non-liquid asset may also meet the criteria described in other numbered paragraphs of IIIB, and thus the gift must also comply with those respective sections. When a donor expresses the desire to donate a gift of a non-liquid asset (other than closely held stock and real estate) the following guidelines will be followed:
- Gifts of non-liquid assets will be accepted in funds only if there is substantial likelihood that such assets can be liquidated within a reasonable period of time, do not place other Foundation assets at risk, can be converted into assets that are consistent with the Foundation's investment portfolios, and will have an ultimate benefit to the community.
- Expenses incurred by the Foundation (i.e. insurance, additional audit fees, appraisals, commissions, etc.) while holding or disposing of the asset will be charged to the fund.
- The Foundation will charge its administrative fees from the date the gift is accepted. All such fees and expenses will be accumulated and netted from the sales proceeds of the property.
- If the fund created by the gift is to be non-endowed, the Foundation will require funds generated by liquidation to remain on deposit for 60 days.
Tangible Personal Property. Tangible personal property includes but is not limited to art, furniture, coin and stamp collections, livestock, jewelry, equipment, cars, boats, and clothes. Gifts of personal property should be examined in light of the following criteria:
- Does the property fulfill the mission of the Foundation?
- Is the property marketable within a reasonable period of time?
- Are there any undue restrictions on the use, display, or sale of the property?
- Are there any carrying costs for the property?
The Gift Acceptance Committee has the discretion to accept such gifts on a case by case basis. The Gift Acceptance Committee should consider whether the gift will be used or sold and shall be sensitive to the special tax issues that may affect the donor
Closely Held Securities. Gifts of closely held securities will be reviewed prior to acceptance to determine that:
- There are no restrictions on the security that would prevent the Foundation from ultimately converting those assets to cash;
- The security is marketable; and
- The security will not generate any undesirable tax consequences for the Foundation.
Every effort will be made to sell closely-held securities as quickly as possible. The Foundation will not guarantee or pre-arrange a sale or make any other agreement that might imply or cause a material restriction to be imposed upon the contribution.
Gifts of closely held securities to a fund shall be made and administered in accordance with the following guidelines:
- The Foundation may request a copy of a qualified appraisal complying with IRS regulations when the value of the asset(s) exceeds $5,000.
- As a general rule, gifts of closely-held securities are sold as soon as possible. The donor's fund is then credited with the proceeds from the sale, after commissions and expenses, if any. The Foundation's administrative fees will be charged to the donor's fund from the date of acceptance of the gift and netted from the sale proceeds.
- All paid dividends will belong to the Foundation and will be used to offset all or a portion of the fee charged to the account in the same year ending with the anniversary date of the gift. Any excess dividend income will not be applied to the following years. Dividends will be credited to the donor's fund only to the extent that they exceed offsetting fees.
- As closely held stock is sold, proceeds net of fees and expenses will be added to the donor's fund.
Life Insurance Policies. The Foundation must be named as both beneficiary and irrevocable owner of an insurance policy before a life insurance policy can be recorded as a gift. The gift is valued at its interpolated terminal reserve value, or cash surrender value, upon receipt. If the donor contributes future premium payments, the Foundation will include the entire amount of the additional premium payment as a gift in the year that it is made.
If the donor does not elect to continue to make gifts to cover premium payments on the life insurance policy, the Foundation may:
- continue to pay the premiums,
- convert the policy to paid up insurance, or
- surrender the policy for its current cash value.
Remainder Interests in Property. The Foundation may accept a remainder interest in a personal residence, farm or vacation home subject to the provisions of Section 3 above. The donor or other occupants may continue to occupy the real property for the duration of the stated life. At the death of the donor or beforehand upon agreement of all parties, the Foundation may use the property or reduce it to cash. Where the Foundation receives a gift of a remainder interest, the Foundation will require a written agreement with the donor regarding the donor's responsibility for payment of expenses for maintenance, insurance, Phase 1 environmental assessment, real estate taxes, and any property indebtedness, etc.
Retirement Plan Assets. Donors may name the Foundation as the designated beneficiary of retirement plan assets as a way to add to an existing component fund or establish a component fund within the Foundation.
Gifts for Donor Advised Funds. Notwithstanding any other provision hereof, the Foundation shall not accept any gift of an interest in a business enterprise (as such term is defined in the Pension Protection Act of 2006) for a donor advised fund (DAF) that would subject the Foundation to tax under section 4943 of the Internal Revenue Code, concerning "excess business holdings." Any proposed gift that may result in the DAF holding:
- a 20% or greater of voting stock of an incorporated business, interest in a business or entity, or profit interest in a partnership or a joint venture or the beneficial interest of a trust or similar entity.
- any interest in an entity in which any interest is owned by a donor or advisor to the DAF, by a family member of any such person, any person disqualified with respect to that fund, or by an entity in which any of the foregoing has an interest;
shall be referred to the Foundation's counsel for an opinion on the possible application of Code section 4943.
Ownership of unincorporated businesses that are not substantially related to the fund's purposes is also prohibited.
Minimum Fund Balances: The minimum gift for a fund or supporting organization shall be determined by the Foundation and may be revised from time to time. If the total assets received for a fund from lifetime and testamentary contributions do not meet the minimum fund balance required by the Foundation, the Foundation reserves the right, in its sole discretion, to (1) make no distribution from the fund until the balance reaches the fund minimum requirement; or, (2) without establishing a permanent endowment fund, to make one or more lump sum distributions to individual charitable organization(s) which in the discretion of the Foundation most closely fulfill the donor's original intent. See section IV for more details about minimum fund balances.
Grant Distributions. Except as otherwise provided in the agreement governing the fund, distributions from endowed funds will be made in accordance with the Foundation's distribution policy as it may be revised from time to time. Grants from principal are allowed only where this provision is included in the fund agreement. Contributions to a non-endowed fund must stay on deposit for a minimum of 60 days before distributions may be requested, unless the donor pays a withdrawal fee as determined by the Foundation from time to time. Where a non-endowed fund balance has become so low that the administrative costs exceed the earnings on the fund, the Foundation may use its discretion to allocate such funds either to the undesignated funds of the Foundation or to other nonprofit organizations. Where possible, the donor will be contacted prior to such allocation.
Fees. All funds created by a donor are subject to the Foundation's administrative fees as adjusted from time to time. The Foundation reserves the right to negotiate fees for larger or unusual gifts on a case by case basis.
Disputes Over Charitable Purpose(s). Only the Foundation's Board of Directors has the right to vary the stated fund name and purpose(s) of a fund created by a donor. When a fund is created by a testamentary gift, and the Foundation receives no instructions during the donor's lifetime as to the recommended charitable purposes of the fund, and the will, trust or beneficiary designation is silent on the donor's intent for the use of the assets, the assets will be added to the Foundation's unrestricted fund.
Unrestricted Gifts to the Foundation. Although specific language to create an unrestricted gift is not necessary, any donor wishing to leave an unrestricted gift to the Foundation may use language similar to the following: I give and bequeath [describe gift] to The Community Foundation of Louisville, Inc., of Louisville, Kentucky, to be held as a component unrestricted endowment fund to be known as the "__________________Fund."
Form 8282. In the case of the sale of certain donated assets, if required, the Foundation will report to the IRS on Form 8282 the actual sale proceeds of the asset if sold within three years of the date of gift. There may be delays before the asset can be sold. The value of the asset as of the date of gift plus or minus any gains or losses that are incurred during the time between gift transfer and subsequent sale by the Foundation will be reflected in the value of the donor's fund. In negotiating the sale of an asset, a fair market value will be established at the time of sale. No warranty is given by the Foundation that the valuation will be acceptable to the IRS.
IV. TYPES OF FUNDS
Component Endowment Fund. Donors may establish the following types of funds:
Unrestricted funds are available to the Foundation for any of the charitable purposes encompassed by the Foundation's mission. The Board of Directors determines how unrestricted funds are used. Minimum amount to set up a named unrestricted fund is $5,000.
Field of Interest Funds
Field of lnterest funds are restricted in their use by the donor's preference for a limited charitable purpose, without designation of specific recipient organizations or programs through which such charitable purposes may be served. The Board of Directors determines which organizations and programs receive grants from field of interest funds and the amount and timing of such grants. Alternatively, the donor may request the appointment of an advisory committee to make such decisions. Minimum amount to set up a field of interest fund is $25,000.
- Donor Advised FundsDonors generally establish advised funds for unrestricted charitable purposes. The donor may make recommendations to the Foundation regarding the recipients and amounts of grants from the fund. The Foundation retains final authority to determine distributions. Donors may appoint their children and grandchildren or others to succeed them as advisors of the fund or allow the advisory period to run for a term not to exceed 99 years. Minimum amount to set up a donor advised fund is $25,000.
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. All scholarship funds shall be administered in accordance with the Pension Protection Act and the resolution adopted by the Board of Directors on June 20, 2007, as it may be amended from time to time. The minimum amount to set up a scholarship fund is $5,000.
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 organization or program. If the recipient organization ceases to exist or changes its status or mission as a charitable organization, the Foundation will execute the donor's directive as to an alternate beneficiary. If there is no such directive, the Foundation's Board of Directors may exercise its variance authority, selecting an alternate use for the fund compatible with its original charitable purpose. The minimum amount to set up a designated fund is $25,000.
A non-profit organization may request that the Foundation manage an endowment fund for its benefit. The organization's assets are invested with the Foundation's other assets. A portion of the fund balance is available for distribution to the organization on a regular schedule, allowing for a steady stream of income year after year. The fund agreement may provide that the organization may request a return of principal, subject to the approval of the Foundation's board of directors. The minimum amount to set up an agency endowment fund is $25,000.
Non-endowed Funds. Individuals, organizations, groups or businesses may establish a non-endowed fund for current giving. There is no fee and no minimum for this fund, but contributions must remain on deposit for 60 days from the date of the gift, unless an early withdrawal fee is paid. The Foundation retains all interest earned on the fund while assets are on deposit. Funds over $100,000 may share in investment performance if requested by the donor.
Supporting Organization. With the prior approval of the Foundation's Board of Directors, a donor may establish a supporting organization to the Foundation as a separate tax-exempt organization with independent governance. The Foundation will only accept a Type 1 Supporting Organization. The Supporting Organization may adopt its own policies regarding grants, spending, investments and communications.
V. PLANNED GIVING ARRANGEMENTS
Forms of Planned Gifts. The Foundation's planned giving program encompasses gifts whose benefits do not fully accrue to the Foundation until some future time. Donors using planned and testamentary gift techniques may establish any of the component fund types listed above, subject to limitations on minimum value. Will, trust, or other documents should specify the Foundation as the charitable recipient and name the new or existing fund to which the donor's gift will be added. The type and purpose of a new fund may be described in detail in a separate fund agreement. Planned giving opportunities offered by the Foundation include the following:
- Charitable Remainder Unitrust. Under a charitable remainder unitrust, the donor irrevocably transfers money, securities, or other property to a trustee selected by the donor. The trustee pays the donor (or one or more income beneficiaries designated by the donor) a fixed percentage of the net fair market value of the trust's assets, as determined each year. The payments are made for the life or lives of the income beneficiaries or for a fixed period of years not to exceed 20 years. Upon termination of the income beneficiary's interest, the assets of the unitrust are transferred to the Foundation. The Foundation may serve as trustee of a charitable remainder unitrust when it is irrevocably named as the sole beneficiary.
- Charitable Remainder Annuity Trust. A charitable remainder annuity trust is identical to a unitrust, except that the income beneficiary receives a fixed dollar amount annually from the trust. The Foundation may serve as trustee of a charitable remainder annuity trust when it is irrevocably named as the sole beneficiary.
- Pooled Income Fund. The Foundation has established a pooled income fund. A donor irrevocably transfers property to the pooled income fund and retains an income interest for the life or lives of up to two income beneficiaries designated by the donor. Each income beneficiary receives a proportionate share of the net income earned by the fund. Upon termination of the income beneficiary's interest, the remaining assets must be used to establish a component fund at the Foundation, subject to any fund minimum set by the Foundation.
- Charitable Gift Annuities. The Foundation offers charitable gift annuities. The Foundation 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 gift of cash or marketable securities to the Foundation. The amount of payment is dependent upon the age of the donor and the size of the gift. Minimum age requirements and fund minimums shall be as determined by the Foundation from time to time. The date that income payments to the beneficiary begin may be deferred. The annuity contract is a general obligation of the unrestricted assets of the Foundation. Payment rates reflect the recommendations of the American Council on Gift Annuities or such other rate as may be determined by the Foundation from time to time. Upon termination of the income interest, the remaining assets must be used to establish a permanent endowment fund at the Foundation, subject to any component fund minimum set by the Foundation.
- Remainder Interest in Property. A donor may contribute real estate and retain the right to occupy the property until death in accordance with the policy set forth in Section III.B.8 above. Upon the donor's death, the Foundation will own the entire interest in the property.
- Charitable Lead Trust. Under a charitable lead trust, the donor irrevocably transfers money, securities, or other property to a trustee selected by the donor. The Foundation is given an income interest in the trust assets for a period of years or the lives of one or more individuals, at the end of which time the assets of the trust are distributed to noncharitable beneficiaries designated by the donor. The trustee pays the Foundation each year: 1) a fixed amount from the trust; or 2) a fixed percentage of the net fair market value of the trust's assets, as determined each year. The Foundation will not serve as trustee of a Charitable Lead Trust.
- Gifts by Will or Trust. The Foundation may be designated as the beneficiary of a bequest or gift by the terms of the donor's will or by a revocable or irrevocable trust. Sample bequest language for restricted and unrestricted gifts should be made available to donors and their attorneys to ensure that the bequest is properly designated.
- Retirement Plan Assets. Retirement plans owned by the donor may be gifted to the Foundation at death by beneficiary designation. These include Individual Retirement Accounts (IRA), 401(k), 403(b), and defined contribution plans.
VI. FUNDRAISING BY DONORS
The Foundation does not directly accept contributions or participate in fundraising campaigns where the donor receives goods or services in exchange for their donation. Additionally, the Foundation does not participate in or sanction special events on behalf of a fund at the Foundation, and the benefits of the Foundation's nonprofit status may not be used for such special events. The Foundation will not promote the special event or be directly involved in its planning or execution in any way. If an event host desires, they may plan and execute a fundraising event asking that checks be made payable to the event host. The event host would cash the checks and make one lump sum donation to the fund. Unless the event is sponsored by a qualified non-profit organization (not the Foundation), individual contributions are not tax-deductible to the donor. Fund holders may conduct a gift solicitation with no donor benefit that will be deposited into their fund. The Foundation will not promote such a solicitation or be directly involved in its planning or execution in any way, although the Foundation reserves the right to review any promotional materials that mention the Foundation.
The foregoing policies were considered and approved with a majority vote of the directors present at its quarterly meeting on September 14, 2011, by
Henry M. Altman, Jr., Board Chair
The Community Foundation of Louisville, Inc.