Gift Acceptance Policy
The United Methodist Church Foundation Policy and Procedure for Potential Gifts of Partnership Interests
I. AUTHORITY TO NEGOTIATE
The Executive Director and the President of the UMC Foundation will have the overall authority to handle inquiries, negotiate with donors, assemble documentation, and execute agreements on behalf of The UMC Foundation. Assuming such activities follow approved procedures and assuming such agreements are approved by the Foundation’s legal counsel, this authority to act will not require review or further approval by the Board of Directors.
II. GENERAL GUIDELINES
Contributions of partnership interests to the UMC Foundation raise several issues which bear on the advisability of accepting the contribution. These issues include (i) exposure to creditors, claims and contingent liabilities; (ii) GCF.s obligations to obtain a reasonable rate of return and to invest prudently; (iii) possible exposure to the unrelated business income tax (UBIT); (iv) possible adverse effects to GCF.s tax-exempt status; and (v) the nature of the partnership.s activities. The purpose of this Policy and Procedure is to assure that these issues are addressed prior to the acceptance of a contribution of a partnership interest.
A. Type of Interest: The UMC Foundation will only accept contributions of limited partnership interests. The UMC Foundation cannot accept general partnership interests, due to the exposure to claims of creditors and other liabilities.
B. Nature of Activity: The UMC Foundation will only accept interests in passive, investment-type partnerships, such as those holding rental real estate, stocks, bonds, and other investments. GCF cannot accept interests in partnerships that carry on an active, for-profit business.
In addition, the UMC Foundation will not accept contributions of limited partnership interests where the nature of the partnership’s activities is not consistent with the mission and objectives of the Foundation.
C. Sale or Liquidation: It should appear reasonably certain that the partnership will be sold or liquidated and its assets distributed within a specific time frame, not to exceed three to five years.
III. RESPONSIBILITIES OF THE DONOR
A. Documentation. The following documentation must be submitted to the Foundation before a proposed gift of a partnership interest can be accepted:
Partnership Agreement. A copy of the partnership agreement. The Foundation.s legal counsel will review the limited partnership agreement to determine the nature of the interest being contributed and the activities of the partnership and whether there are any potential liabilities associated with holding the limited partnership interest, such as capital calls or contingent liabilities.
Income Tax Return. A copy of the most recent federal income tax for the partnership (Form 1065) and the most recent Schedule K-1 that the donor has received from the partnership. The Schedule K-1 will be reviewed to determine the nature of the income generated by the partnership (active versus passive).
Appraisal. If requested, a qualified appraisal complying with IRS regulations for the purposes of establishing the value of the gift for federal income tax purposes, including the preparation of Form 8283 (Noncash Charitable Contributions.) See Treas. Reg 1.170A-13(a).
Description of Activities. A description of the activities in which the partnership engages. If the partnership owns real property, this description should include a description of the property, its location and the current use(s) of such property.
Transfer Instrument. A copy of the proposed instrument that will be used to transfer the partnership interest to the Foundation. The transfer instrument should include a warranty that the interest is free and clear of all claims and liens. The proposed transfer instrument will be reviewed by the Foundation.s legal counsel prior to acceptance by the Foundation.
Confirmation of Sale or Liquidation. A written statement from the general partner of the partnership, confirming the likelihood that the partnership will be sold or liquidated and its assets distributed within three to five years following the date of the transfer.
Administrative Expenses. Prior to acceptance of the partnership interest, the Foundation and the donor must agree in writing on arrangements for paying expenses associated with the partnership interest. In general, it is expected that the donor will agree that UBIT and the Foundation.s associated administrative costs (accounting expenses and tax return preparation) will be charged against the fund holding the partnership interest. In addition, there should be adequate assurance that the affected fund will have adequate cash to pay the tax and associated costs, either from the investment itself or from further contributions from the donor. In some cases, partnerships will not distribute sufficient cash to pay the tax, and in these cases, the donor should agree to contribute additional cash to the fund to pay the tax and associated costs.
B. Advance Approval.The required documentation should be submitted to the Foundation sufficiently in advance of the anticipated date of the gift as to allow the Foundation adequate time to evaluate the proposed gift. For gifts that are to be made at or before the end of the calendar year, the required documentation should be submitted prior to December 15.
C. Bequests. Donors are encouraged to discuss contemplated bequests before finalizing their wills. Partnership interests that are bequeathed to the Foundation will be evaluated in accordance with this Policy and Procedure like all other gifts of partnership interests.
IV. PROCEDURE FOR ACCEPTING PARTNERSHIP INTERESTS
A. Acceptance. After the requirements of this Policy and Procedure have been satisfied, the Executive Director will have the authority to accept or decline a gift of a partnership interest.
B. Declination. The Executive Director may decline to accept any offered gift of a partnership interest that is judged not to be in the best interests of the Foundation.
C. Acceptance Agreement. Prior to or upon transfer of the interest to the Foundation, the donor and the Foundation will sign an agreement (approved by legal counsel) stating the terms of the gift, which shall specify that there are not restrictions on the Foundation.s right to use or convey the property.
D. IRS Form 8282. In addition, the donor will be advised that if the property listed in IRS Form 8283 is sold, liquidated, or otherwise disposed of within two years of receipt, the UMC Foundation is required to file a separate report within 125 days with the IRS on IRS Form 8282 (Donee Information Return.) and disclose facts about the disposition. See Treas. Reg. 1.6050L-1.
V. WHAT THE FOUNDATION WILL NOT DO
A. Donor Expenses. Except in extraordinary circumstances, the Foundation will not pay for legal assistance, appraisals or other services on behalf of the donor.
B. Corroboration of Value. The Foundation will not establish or corroborate the value of any property for the purpose of substantiating the donor’s income tax charitable deduction.