11.5 Gifts-in-Kind

Policy Statement

Units must ensure that gifts-in-kind (also known as “in-kind contributions”) are properly accounted for within Banner.

Reason for the Policy

To ensure accurate reporting for the University of Illinois System’s audited financial statements and compliance with applicable IRS guidelines.

Applicability of the Policy

Any unit that receives non-monetary, in-kind donations from external donors.

Procedure

To ensure that gifts-in-kind are properly accounted for in Banner, refer to the guidelines and procedural steps below.

1. Understand the definition of a gift-in-kind.
   1. Gifts-in-kind are non-monetary donations of goods and/or services to the University of Illinois System or one of its universities that support and further the system’s mission.
   2. Common examples of in-kind donations include, but are not limited to, professional services, labor, real property (such as real estate), personal property, equipment, artwork, supplies, livestock, rare books, vehicles, food, or event tickets.
   3. Gifts-in-kind can also include the provision of goods and/or services from an external party at a significantly reduced price from the usual charge when the intent of the price reduction is to provide charitable support (e.g., as opposed to a liquidation sale). Usually, if the price of the good or service purchased is discounted by 50% or more for charitable reasons, then the price reduction may be considered an in-kind donation.
2. Identify any potential gifts-in-kind that a unit may receive from an external donor and decide whether the gifts-in-kind will be accepted, and if so, how they will be utilized.
   1. All gifts-in-kind must support and further the mission of the system. Before a gift-in-kind is accepted from an external donor, this requirement must be considered.
   2. Before a gift-in-kind is accepted, the unit must consider any ongoing maintenance costs of the donated item and if the donated item is worth accepting and retaining, given any potential maintenance costs that may come with the donation.
   3. Units should consider whether the donated good or service will be utilized for system operations or if it will be liquidated. For example, instead of utilizing the donated good or using the donated service for operational needs, a unit may decide that it would be better to liquidate the donated good or service via a fundraising sale at a silent auction to generate actual gift and non-gift proceeds.
      1. The Illinois Department of Central Management Services (CMS) exempts applicable property control rules for these scenarios, allowing the system to sell donated gifts-in-kind and retain the funds from the sale to support the system’s mission in accordance with the donor’s intent.
      2. If the gift-in-kind is tangible personal property that is subsequently sold at a live, silent, or online auction, then that sale is typically exempt from sales tax. Do not collect and report sales tax in those scenarios.
   4. Any gifts-in-kind for which UIF becomes the owner of record (e.g. real estate, farmland, residential property, etc.) UIF should be contacted to assist with the gift acceptance decision and review process (e.g. property inspection, title search, environmental review, property management, etc.)
3. If a decision is made to accept a gift-in-kind, ensure that the fair market value (FMV) of the gift-in-kind is determined prior to acceptance.
   1. Determining the FMV of the gift-in-kind is essential to track the donor’s giving history, as well as to ensure proper value for financial reporting and tax purposes.
   2. Determining the value of an in-kind contribution is the sole responsibility of the donor, not the system (the system is not allowed to assess a value to the gift-in-kind for the donor’s tax purposes).
   3. If the individual donor’s estimated FMV of the gift-in-kind is greater than $5,000, an independent qualified appraisal is typically required if the donor wants to claim a tax deduction. See IRS Form 8283. A copy of the qualified appraisal must be submitted with the eventual gift-in-kind transmittal form to UIF as well.
   4. If the donor is an external party who directly manufactures the donated good or service (such as a corporation who makes the product being donated), then no independent qualified appraisal is required, as the manufacturer sets the FMV of their own products and thus has the expertise to properly value the items being donated. Typically, the manufacturer will be asked to provide an invoice or estimated FMV to accompany the gift-in-kind, to ensure proper documentation. In these scenarios, the discounted FMV for educational institutions is used (as opposed to the retain market value), since the system is an educational institution that would be purchasing the item at the discounted educational rate if it was purchasing the item (as opposed to receiving it as a donation).
   5. Finally, if the donor is not able to accurately determine the FMV of the gift-in-kind, then the recipient unit can employ other methodologies to reasonably provide the FMV of the gift-in-kind for financial reporting purposes. For example, asking the opinion of an industry expert within the system (such as a professor familiar with the industry) is an option to provide the FMV for internal record-keeping purposes only. An internal valuation cannot be provided to the donor to be used for substantiation for tax purposes. Another option is to request that the donor provide receipts or other documentation supporting the FMV of the donation. Comparing the donated good or service to other comparable assets or services in the open market or obtaining an independent qualified appraisal are other options as well.
   6. Units should inform donors to consult with their tax advisors on donor tax requirements, or direct them to the University of Illinois Foundation.
4. Once a gift-in-kind is received, ensure all reporting requirements are completed, and all necessary documentation is submitted to the appropriate parties.
   1. Gifts-in-kind should be reported to UIF on a timely basis (e.g., within the same accounting period and fiscal year in which the donated goods and/or services were received, if possible).
   2. However, if the gifts-in-kind are pledged (and not yet received), the pledges should not need to be reported to UIF. The reporting should only take place once the gift-in-kind is received/consumed.
   3. Once the gift-in-kind has been received, complete the Gift-in-kind Transmittal Form and submit the completed form (along with any relevant supporting documentation, such as a qualified appraisal, if applicable) to the UIF’s Gift Administration Office via email at giftadmin@uif.uillinois.edu.
   4. If the gift-in-kind is subsequently sold (e.g., at a silent auction), it is also important to report those sale proceeds to UIF via the applicable cash, check, credit card, or wire Gift Transmittal Form. In these scenarios, it is essential for the unit to report both the gift and non-gift values of the donated good or service that was sold. For example, if the donated item had a FMV of $100 but was sold at a charitable auction for $500, then the unit would need to report a non-gift value of $100 and a gift value of $400 (for a total of $500) on the applicable transmittal form. The gift and non-gift proceeds need to be deposited and credited to the unit’s applicable gift fund supporting the cause of the donor’s gift-in-kind. If the sold item was valued over $5,000 upon receipt (original market value, not sales proceeds) an IRS Form 8282 may be required to be reported to the donor and IRS; units should contact UIF for more instructions.
5. If the gift-in-kind is a donation of equipment, movable property, or items for a library collection, the unit must follow the system’s applicable property accounting policies. This includes adding a new record into FABweb for the donated asset, if applicable. See 12.1.9 Add Donated, Found, and Other Non-Cash Addition Equipment to FABweb for further guidance.
6. Once UIF receives and processes the gift-in-kind, UIF completes the applicable reporting to the IRS and if requested by the donor. See IRS Form 8283 and IRS Form 8282. Units should inform donors to speak with a tax attorney or certified public accountant to discuss the donor’s tax requirements, or direct donors to the University of Illinois Foundation.
7. Finally, once the gift-in-kind has been received and all reporting has been completed, the unit should either begin utilizing the gift-in-kind within their operations, or they should begin efforts to sell the item as referenced above.
   1. For gifts-in-kind that are retained and used in system operations, there will be no entry in Banner to reflect the gift revenue generated from the in-kind donation. Instead, these gifts-in-kind are reported to University Accounting and Financial Reporting (UAFR) by UIF. Then, as a part of the year-end closing process, UAFR includes the value of these in-kind donations in the total gift revenue reported in the system’s financial statements.
   2. However, if a gift-in-kind is sold as a part of a charitable fundraiser (such as a silent auction), then the proceeds from that sale will be processed by UIF and will be distributed to the related gift fund within Banner. The non-gift revenue portion of the sale (the FMV of the in-kind donation that was sold) will be credited to the 303242 revenue account code of the related gift fund, while the gift revenue portion of the sale (the charitable portion of the payment that exceeds the FMV of the in-kind donation) will be credited to the 303241 revenue account code of the related gift fund.