05:15:00 Gifts, Prizes and Awards

Purpose

To provide guidance to academic and administrative units regarding the college’s tax reporting obligations associated with gifts, prizes, and awards.

Policy

I. Scope

Gifts, prizes, and awards under this policy are intended to conform to IRS regulations for the proper inclusion or exclusion from an individual’s gross income. Cash and non-cash gifts, prizes, and awards given must be reported by the college to the Internal Revenue Service (IRS) as other income to an individual if the value exceeds the calendar year reporting limit. Consequently, it is incumbent on college departments to have good record-keeping procedures in place to meet possible reporting requirements and document business purposes.

Any single gift, award, or prize is subject to this policy and will require appropriate documentation of the business purpose and recipient tax reporting information. In no event may a single cash or non-cash gift, prize, or award exceed $500. It is the responsibility of college officials to use good judgment in making these expenditures, in both frequency and cost.

II. Definitions

1. Gifts - Non-cash gifts typically are presented as tokens of appreciation to a dignitary, guest, volunteer, or visitor when a valid and documented business purpose exists, such as to honor a distinguished visitor or lecturer. A gift is generally of nominal value given to express appreciation or gratitude and, ideally, bears the college’s logo or theme. Gifts to students (e.g., Christmas, graduation, birthday, etc.) are not authorized by this policy.
    
2. Honorarium - A cash gift, or token payment, given to express appreciation or gratitude is considered an honorarium. Honorariums are not related to job performance or a service performed for the college and may NOT be negotiated in advance. Honorariums cannot be greater than $500. Honorariums must be requested through the college’s requisition process. A completed W-9 form must be provided to the Purchasing Office prior to a requisition being created.
    
3. Prizes - A prize, cash or non-cash, is awarded in conjunction with a judged contest, competition, or drawing where the individual voluntarily initiates participation and is open to any individual who meets the qualification of the event sponsored by a college department or organization. Prizes may be awarded only in situations where benefits are expected to accrue to the college and the event is held for a valid, documented business reason. The amount or value of a prize should be based upon the minimum amount reasonably required to achieve the objective of the promotion and may not exceed $500. (See Nonresident Aliens as Recipients under IRS Reporting Requirements in item V.)
    
4. Awards - An award is generally given in recognition of an accomplishment, achievement, or activity that does not require the performance of a service to the college. Non-cash awards that have little intrinsic value, such as pins, medals, trophies, and plaques are not reportable. (See Nonresident Aliens as Recipients under IRS Reporting Requirements in item V.)

III. Exclusions

This policy does not apply to tuition support, payment for services rendered, or gifts, prizes, and awards to employees. Generally, awards to students that are related to academic performance are considered financial aid, and as such are not subject to the provisions of this policy. This policy also does not apply to gifts, prizes and awards that are awarded through the use of a lottery, raffle, or other game of chance. All such awards are unlawful and will subject the employees participating in the illegal game of chance to college disciplinary action and criminal penalties. Tenn. Code Ann. § 39-17-501(1). Any questions regarding whether a proposed activity constitutes an illegal game of chance should be referred to the vice president for Business & Finance.

IV. Procedures and Documentation of Business Purpose

Gifts, Prizes, or Awards Recipient Information form must be completed to obtain the recipients’ tax reporting information and document the business purpose associated with the event. To avoid an IRS mismatch reporting error, it is extremely important that the name and recipient provides on this form matches the name used on his or her IRS Form 1040 for taxpayer identification purposes. The form must then be forwarded to Budgeting & Business Services which has the responsibility of ensuring college compliance with IRS reporting requirements.

1. Cash gifts, prizes, or awards - Cash gifts must be in the form of a check from the college and cannot be made from a petty cash fund. Requests for payments must be made through the college’s requisition process; therefore, a completed W-9 form must be provided to the Purchasing Office prior to a requisition being created.
    
2. Gift cards and gift certificates - Are considered cash equivalents by the IRS and taxable income to the recipient. Due to their cash equivalency nature, gift cards and certificates cannot be provided as a gift, prize, or award without pre-approval from a division’s vice president, the vice president for Business & Finance, and the Council of Vice Presidents. Petty cash funds may NOT be used to make these purchases per the respective policies. Contact Budgeting & Business Services for instructions in obtaining and issuing cards or certificates.
   
   Gift cards and gift certificates must be handled in the same manner as cash; ensuring adequate controls are in place to safeguard, store, and prevent loss. Until disbursed, gift cards and certificates should be maintained in a secure, locked device appropriate for money storage, subject to audit annually by the Office of Internal Audit.

V. IRS Reporting Requirements

1. U.S. Citizens as Recipients - Gifts, prizes, and awards given are reportable as taxable income if cumulative amounts in a calendar year, from all college sources, equal or exceed the calendar year reporting limit as established by the IRS. The college will file an IRS Form 1099-MISC to report the income when total cash and the fair value of non-cash gifts, prizes, and awards to an individual reach this threshold.
   
   Departments are responsible for communicating to recipients that the award, prize, or gift may be taxable under IRS regulations. Even if the annual reporting limit is not reached and the college is not required to report, recipients are responsible for reporting such amounts on their individual tax returns.
    
2. Nonresident Aliens as Recipients-Gifts, prizes, and awards to persons who are not U.S. citizens or legal permanent residents are subject to additional tax rules. Where applicable, taxable income will be reported on IRS Form 1042-S and may be subject to 30% withholding. Budgeting and Business Services should be consulted prior to distributing a gift, prize, or award to a nonresident alien.

VI. Exception Requests

Exceptions or deviations from this policy may be permitted under certain circumstances, but will require prior written approval by the president or his designee. Each request for an exception must include written justification as to why the higher cost is necessary to carry out the mission of the college. Such requests must identify the type of gift, prize, or award, the purpose, the special circumstances requiring the exception, and identification of the individual(s) on whose behalf the exception is sought. Exceptions approved for gifts, awards, or prizes exceeding the IRS reporting limit will be reported by the college as addressed in item V. The written justification should be submitted with the appropriate form(s).

Any payment exceeding $1,00 requires a personal services contract and would not be allowable as an exception under this policy. 05/15; 05/16; 03/21