How does your organization handle IRA gifts and Qualified Charitable Distributions?

Andy Flory

Hi All!

Hoping to get some outside perspective on how organizations handle their gifts originating from IRAs, and more specifically if/how they are differentiating Qualified Charitable Distributions (QCDs). From what I understand, gifts can be made from an IRA that are not QCDs, but those cases are probably pretty rare. However, this creates a kind of sticky situation because best practice calls for certain legal language to be included on acknowledgements for QCDs which would not be necessary for a “normal” gift from an IRA (such as cases where a donor under 70 ½ gives a gift using an IRA checkbook). So my questions are:

1. Does your organization differentiate between IRA gifts and QCDs, and if so how?
2. How does your data entry team identify IRA Gifts/QCDs?
3. Do all acknowledgements for gifts from IRAs, regardless of verified QCD status, include QCD language?

Thanks so much in advance for your insight!

Andrew

Sherry Aldrich

@Andy Flory We don't differentiate the various third party gifts. We enter the gift under who ever has written the check and then soft credit to the constituent. We use gift subtype field and our drop down for this type of gift is “Third Party”. We can see that it's a third party but it makes it easier for reporting since not all soft credits are thirds party or donor advised or something like that. We write the acknowledgement letter similar to "We received a gift of $XX.XX from ORG or BANK Name on your behalf. We do not put tax information on the bottom of the letter like other gifts. If the constituent needs more / different letter we can adjust as appropriate, however I don't think in the 8 years I've been here that we have ever been asked to do so.

JoAnn Strommen

@Andy Flory There are almost as many ways of dealing with this as there are orgs using RE.

We found while the type is very clear on some distribution checks, others have no indication at all. Our solution has been to use the statement below on their letter of receipt. It has worked for us.

If this represents a qualifying charitable distribution from an IRA under Internal Revenue Code Section 408(d)(8), this gift is not tax deductible for federal income tax purposes. If this distribution does not represent a qualifying distribution from an IRA under Internal Revenue Code Section 408(d)(8), it may be tax deductible. No goods or services were provided by South Dakota Mines CARA in return for this gift. All or part of your gift may be tax deductible as a charitable contribution. Please consult your tax advisor.

Andy Flory

@JoAnn Strommen Wonderful, thank you so much for your response-- this is extremely helpful! Am I understanding correctly that you aren't doing anything on the RE side to differentiate between QCDs and other IRA gifts?

JoAnn Strommen

@Andy Flory Just a note in gift reference field about check source. We keep a scan of the check and any documentation.
I suppose it could come back to bite us at some point but done this for several years as it was getting to hard to differentiate between the two types for so many gifts and ensuring they got the correct language on their receipt.

Spring Velazquez

@Andy Flory The first thing you'll notice is that QCD is always mailed directly to you. It may or may not have the donor's name on mailing label or address, but it always going to come directly to you. There are other requirements for it to be classified as a QCD and our acknowledgment states those requirements have been met. I use the letter code to identify a QCD, and if it's a regular IRA check, it's from the donors account so the donor gets credit. This is a language that merges into our QCD acknowledgment

"Thank you for the gift from your Individual Retirement Account. We are writing to acknowledge that we received your gift directly from your plan trustee/administrator and that it is your intention for all of your gift to qualify as a qualified charitable distribution from your IRA under section 408(d)(8) of the Internal Revenue Code.

In that connection, we warrant to you that our organization is qualified under section 170(b)(1)(A) of the Internal Revenue Code and that your gift was not transferred to either a donor advised fund or a supporting organization as described in section 509(a)(3). We further warrant that no goods or services of any value were or will be transferred to you in connection with this gift."