Credit Card Fee portion Paid by Donor - is it still part of the donor's gift?

Elaine Tucker

We recently added the "I'm happy to pay the credit card fee" to our pages in NetCommunity.  I wanted to see if anyone had GAAP language regarding this allocation - I think it's still a "donation" from the donor. Our CFO checked with our auditors and they say "no it's not part of the donation".  What say you hive mind? John Heizer‍ do you have any documentation?

Ryan Hyde

I can't speak with certainty as I don't know IRS rules related to this, but I think it's part of their donation. In a 'normal' situation where we don't ask the donor to cover costs, we still receipt them for the entire gift. We don't change their receipt amount to the donation amount less transaction fees, and we don't add anything in the tax language at the bottom of a TY letter indicating that their donation is only valued at the net amount. Therefore, if a donor is generous enough to cover the transaction fees, that is an additional donation. 


Or put another way, if two donors give $20 and only one of them covers the transaction fees, it wouldn't make any sense to receipt them both for $20. One would be receipt for $20 and the other for $21.12 or whatever the fee coverage is.

Joanne Felci 2

But on the other side of that, if we receipt the donor for $20 when we really only receive $18.50 why would they get additional gift credit for covering the fee?


I can see both sides of the issue and we just starting having this as an option for online donation pages


Very quick web search - this short blurb agrees with Ryan Hyde‍ (and honestly I usually agree with Ryan and am not totally disagreeing, I'm just on the fence about this)


The Turbo Tax person from this link also agrees with Ryan


And that is all I'm finding with the way I'm searching


Very interested to hear other opinions on this issue - find out what others do and if there is any documentation/industry standard out there

 

Ryan Hyde

I think the answer here is pretty simple and logically consistent: We credit the donor for the amount they gave, not the amount we received. There's always cost associated with accepting gifts, whether it's a direct credit card fee, staff time, lockbox processing fees, etc, but none of that is the donor's responsibility.


I feel like I just sounded like I was getting short with you, and I'm totally not. Such are the limitations of the written word. You know I respect you, Joanne

John Heizer

I can't give you chapter and verse of the regulations, but I can show you this page:  https://www.givemn.org/about/fee


Think about it this way, the donor gave $100 + $7 additional for the fees.  Their credit card statement shows $107 to your org. That's how much your org received. Your org chooses to allocate that additional $7 to cover the fees, but could just as easily allocate it toward program expenses and absorb the expense (there's an argument to be made that donor intent restricts the $7 to fees, but it's still covering your org's legitimate business expenses). I'd question the auditors about why they think money coming to you from a donor wouldn't qualify as "part of the donation."  Would they also advise you that if the donor didn't add the $7 then you should only receipt them for $93???

Joanne Felci 2

We are totally cool Ryan - you will always be my Excel Golden god 


And this has just been an internal debate for a few months, we have been receipting for the full amount including CC fees which does sound like the way to go

Ryan Hyde

Let it be forever known, Joanne Felci‍'s 1000th post here was spent calling me a Golden God.

Aparna Chidambaram 2

We just started offering this option to "cover fees" to our donors and my conundrum is how to enter this gift in Raisers Edge such that I match with our Finance team numbers and can still receipt the donor for their full amount. So in the scenario where a donor donated $51.66 to cover $1.66 transaction fees, our Finance dept will place $1.66 in the expenses field and use net amount of $50. But in the receipt, we need to thank the donor for the full amount of $51.66. Can others please share with me how you enter a gift where the donor covers fees? 

Thank you very much!

Aparna

Elaine Tucker

Update:  The auditors changed their mind - we are receipting the full amount to the donor and splitting the gift so the fees are allocated as needed when we post to FE.