Turns out, it's probably a moot point.

Line 1 of the Federal Form 990 calls for "Contributions, gifts, grants, and similar amounts received." Without going into the minutia of the IRS Regulations (and I'm an Enrolled Agent prone to doing just that), nearly all public support, including gifts and nearly all federal or state grants would be lumped together and reported on Line 1B of the Form 990. Income from Clinical Trials and other "fee for service" agreements would be reported as "program income" on Line 2 of the return.

NOTE: Don't confuse the IRS definition of "program income" with the NIH definition -- I haven't researched it yet, but you'd be well-served to assume that two different federal agencies have (at least) two different definitions for the same term.

There's no mention of a $5,000 limit for reporting contributions, nor is there any mention of a requirement to list grants received individually. Gift or Grant, it all gets reported together. However, and this might be where the confusion arises, it does appear that any 501(c)(3) organization that MAKES grants to external recipients must report all of these individually (still no $5,000 minimum).

Now all that being said, this is federal guidance for non-profit charitable organizations. I have no idea how state-sponsored institutions handle this. What's more, you all may have individual state regulations that require you to report in this manner. God help you.

But to your previous point, Joanne, you're correct that the waters are murky at best as to what is considered a gift and what's considered a grant. Aside from institutional bookkeeping and organizational turf issues, one has to exercise caution to protect both the organization's tax exempt status and donors, who might receive a nasty surprise when their "charitable contribution" turns out to be nondeductible after all. Unfortunately, there is no "bright and shining line" between one and the other.

Jeffrey Ritchie
Grants Management Analyst
Aurora Health Care
3033 S. 27th Street; Ste 100
Milwaukee, WI 53215
(414) 385-2883

"Altieri, Joanne [VPRED]" <xxxxxx@IASTATE.EDU>
Sent by: Research Administration List <xxxxxx@hrinet.org>

08/13/2008 04:03 PM

Please respond to
Research Administration Discussion List <xxxxxx@hrinet.org>

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Subject	Re: [RESADM-L] IRS determination that grants over $5,000 are donations

Actually, I have done some pretty in-depth research on this, and I think the line is not as clear between gift and grant as you say. It can still be a charitable donation (gift) even if the donor specifies the intent of the money. So a donor can give a gift of $20,000 to be used by Prof. X in his/her research related specifically to ABC. They can even request a report that summarizes how the funds were spent and gives a general summary of the work that was accomplished as a result of the gift. They can’t require something in return (no quid pro quo) and they can’t have unspent funds returned or enter into anything that resembles a cost-reimbursable agreement. But the IRS is much more fuzzy about what can be considered a gift than you might think. For tax purposes, a charitable donation gets the same tax breaks for gift as they do “grant.” In other words, a “grant” can be a gift or a sponsored project depending on the terms of the grant. If there is anything that goes beyond the general “gee, we’d like to know how your research progresses and how you used the funds” then it probably can’t be considered a gift.

But you’re dreaming if you think that gifts don’t have ANY strings at all and that there are never any limits on how the gift funds can be spent. Since the Sarbanes-Oxley Act of 2002 everyone is including some parameters on “gifts.” The accepted definition of a gift is now is when you receive something that has value (including cash) and you are not required to deliver anything in return of economic value. But a gift can include specifications that the funds must be dispersed according to the donor’s wishes.

When I asked one of the larger foundations how we should handle their grants, (as gifts or sponsored projects) they said it didn’t matter at all to them, since it was a tax deduction either way. It only depended on our policy.

So I don’t think I could answer Lori’s original question so easily.

Joanne K. Altieri, Director
Office of Sponsored Programs Administration
1138 Pearson Hall
Iowa State University
Ames, IA 50011-2207
Phone: (515) 294-7723
Fax: (515) 294-8000
Email: xxxxxx@iastate.edu

From: Research Administration List [mailto:xxxxxx@hrinet.org] On Behalf Of Jeffrey Ritchie
Sent: Wednesday, August 13, 2008 2:25 PM
To: xxxxxx@hrinet.org
Subject: Re: [RESADM-L] IRS determination that grants over $5,000 are donations

This is not correct. To be deemed a donation (or gift), the eventual use of the funds would have to be at the complete discretion of the recipient. As we all know, grant funds may only be spent for the purposes specified in the grant application and any deviation from that purposes must be approved in advance by the sponsor.

Jeffrey Ritchie
Grants Management Analyst
Aurora Health Care
3033 S. 27th Street; Ste 100
Milwaukee, WI 53215
(414) 385-2883

Lori Hulak <xxxxxx@JCHS.EDU>
Sent by: Research Administration List <xxxxxx@hrinet.org>
08/13/2008 02:17 PM

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Subject
[RESADM-L] IRS detemination that grants over $5,000 are donations

Research Administrators -

Does your institution report all grants and contracts over $5,000 as donations on their IRS reports?

"In the IRS's eyes, grants are donations and must be reported." - is this a true statement?

Thanks,

Lori

Lori B. Hulak, BA, CRA
Specialist, Grant Writer
Jefferson College of Health Sciences
920 S. Jefferson Street
Roanoke, VA 24031-3186
Phone (540) 985-8206
xxxxxx@jchs.edu

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