Gift acceptance policy
Revised June 2019
This policy summarizes the documentation, signatories, and processes required for Lyric Opera of Chicago (hereinafter referred to a "Lyric") to accept a gift or bequest. All gifts are to be accepted in accordance with the policy statements set forth herein.
Lyric is a non-profit corporation, exempt from federal income taxation pursuant to Internal Revenue Code Section 501(c)(3), and gifts to Lyric may be tax-deductible to the extent allowed by law. As such, the acceptance of a gift or bequest may have financial or legal consequences. To mitigate these consequences, this document outlines Lyric's gift acceptance policy.
The Gift Acceptance Policy is subject to change by action of the Executive Committee of the Board of Directors, and this policy is intended to complement and integrate with existing policies established by the Executive Committee of the Board of Directors.
The Gift Acceptance Policy shall be interpreted within the context of the following overarching principles:
A gift shall not be accepted by Lyric unless there is a reasonable expectation that acceptance of the gift will support Lyric in its mission of cultural service and advancement of the development of the art form of opera. In addition, Lyric will not knowingly accept a gift that would be adverse to the interests of the donor.
Lyric may decline a gift due to particular restrictions imposed by the donor. By definition, a gift cannot be associated with a private benefit that would jeopardize the charitable contribution deduction under IRC Section 170 if the donor and beneficiary of the restricted gift have less than an arms-length relationship.
1. Cash or check
All gifts by cash or check shall be accepted by Lyric regardless of amount. Checks shall be made payable to Lyric. In no event shall a check be made payable to an individual who represents Lyric.
In general, pledges may be payable in single or multiple installments and must have a value of at least $100. A pledge may not exceed five years in duration. Pledge amount, purpose, and payment schedule must be confirmed by the donor in writing. Pledges less than $1,000 and payable on or before the end of the then-current fiscal year do not require written confirmation. All pledges of $10,000 or more will require written confirmation from the donor that includes the gift amount and gift designation (if applicable).
Exceptions to this rule are discussed with the Chief Advancement Officer and Chief Financial Officer.
3. Publicly traded securities
Readily marketable securities, such as those traded on a stock exchange, can be accepted by Lyric.
- Gifts of securities may be made by electronic transfer to Lyric's DTC account or may be made by stock certificate, in which case the stock certificate should be either duly endorsed or accompanied by a stock power and in each cirumstance accompanied by an appropriate signature guarantee.
- All readily marketable securities are to be sold immediately upon receipt.
- For internal gift crediting and accounting purposes, the value of the securities is calculated at the average of the high and low on the effective date of the completed transfer to Lyric.
- Gift acknowledgement documents must include the number of shares received, the date received, and the fair market value. The value of the gift is calculated using the average trading price on the date received. The high, low, and mean trading prices of the security may be provided to the donor upon request.
4. Closely held securities
Non-publicly traded securities, including membership interests in limited liability companies or partnership interests, may be accepted after consultation with the corporate treasurer and general counsel.
- Prior to acceptance, Lyric shall explore methods of liquidation for the securities through redemption or sale. A representative of Lyric shall try to contact the closely held corporation to determine:
- An estimate of fair market value, and
- Any restrictions on transfer.
- Gift acknowledgment documents must include the number of shares received, the date received, and the fair market value.
5. Real estate
a. Gifts of real estate
- Gifts of the real estate may include developed property, personal or secondary residences, condominium units, residential co-ops, vacation property, farms, commercial property, undeveloped property, or gifts subject to a prior life interest. It is the policy of Lyrcic not to keep gifted real estate for any length of time, but to sell it as quickly as possible and realize the sale to proceeds from the gift. Therefore, prior to acceptance of real estate, Lyric shall make a determination that the property is marketable at a reasonable price, and that upon acceptance, it can be sold in a reasonable amount of time in order to avoid excessive carrying costs. In order to make such a determination, Lyric may retain qualified experts in real estate evaluation, management, or sales to assist Lyric in this process.
- Prior to acceptance of any real estate, Lyric shall require an initial environmental review of the property to ensure that the property has no environmental damage. In the event that the initial inspection reveals a potential problem, Lyric may reject the gift at that time or elect to retain a qualified inspection firm to conduct an environmental audit. The cost of the environmental audit shall be an expense of the donor.
- When appropriate, a title binder shall be obtained by Lyric prior to the acceptance of the real estate gift. Such title binder shall show that the donor has clear and full ownership to the property. Any mortagages or other liens on the property shall be fully paid and statisfied by the donor before conveying real estate to Lyric. The cost of this title binder shall be an expense of the donor.
- Prior to acceptance of real estate property, the gift shall be approved by the General Director, President, and CEO of Lyric. Criteria for acceptance of any gift of real estate property shall include, but not be limited to, the following factors:
- Does acceptance of the real property contribute to the mission of Lyric?
- Is the property marketable? This will entail a consideration of the estimate of the property's value at the time of gift, and upon resale, the condition of the property, the time it would take to sell the property, and the plan for the property's use or sale.
- Will the property, in the condition when accepted, require excessive expenses in order to upgrade the property to a marketable condition? If so, the donor may be required to upgrade the property to a marketable condition prior to conveying ownership to Lyric.
- Are there any restrictions, reservations, easements, or other limitations associated with the property?
- Are there any carrying costs, which may include insurance, property taxes, assessments, maintenance expenses, etc., associated with the property?
- Does the environmental audit confirm that the property is not damaged and will not require any expenses to conform to existing environment, federal, and state laws and regulations?
- The estimated value of the property at the time of the gift – net of expenses – shall be recorded by Lyric as a pledged donation. The donor shall receive a Gift Receipt at the time of the gift showing the description of the property received, but will not contain a valuation of the property. (Under IRS rules and regulations, the donor is responsible for valuing the gifted property with a supporting appraisal, not the donee.) After the sale of the property, the financial entry shall be made by Lyric recording the net sales proceeds of the sale.
b. Remainder Interests in real property
- A Remainder Interest in real property is one in which one or two donors live in the property for their life or lives, and upon their deaths, the property passes to Lyric. Lyric will accept a remainder interest in any of the types of real estate property referred to in the provisions of section 5, above.
- In all such cases, all expenses incurred on the real estate during the lives of the donors shall be paid by the donors. These include, but are not limited to, expenses for maintenance, property taxes, assessments, insurance, and any indebtedness to the property. Upon request by Lyric, the donors shall supply documentation to Lyric that these expenses are being paid by the donors. The donors shall also maintain the property and keep it it reasonably neat condition for the benefit of Lyric as the residual owner, which shall be permitted, upon reasonable notice to the donors, to inspect the property from time to time to ensure the property is properly maintained.
- Prior to acceptance of a gift of a remainder interest in real property, the donors shall sign a Gift Agreement with Lyric containing the above and any other related provisions.
c. Non-Standard gifts of personal property – for use by Lyric
- Non-Standard gifts include gifts of personal property other than cash or publicly-traded securities (for example, furniture, airline miles, music scores, books, etc.). Prior to acceptance of such property, the gift shall be approved by the General Director, President, & CEO of Lyric or designee such as the Chief Advancement Officer. Criteria for acceptance of any gift of personal property shall include, but is not be limited to, the following factors:
- Does acceptance of the property contribute to the mission of Lyric?
- Can the gift be used by Lyric? If not, the gift shall be declined.
- Are there any undue restrictions on the use, display, or resale of the property?
- Are there any carrying costs for the property?
- A description and the donor's estimated value of the property at the time of the gift shall be recorded as an in-kind donation by Lyric. The donor shall receive a Gift Receipt at the time of the gift showing the description of the property received. The receipt does not contain a valuation of the property.
- Under IRS rules and regulations, if the value of a donated gift is $5,000 or more, the donor is advised to complete an IRS Form 8283 and provide supporting appraisal. Lyric acknowledges on the IRS Form 8283 that is has received the gift, without representing agreement with the donor's claimed fair market value. A copy of the 8283 form will be maintained in the donor's file for future reference.
d. Non-Standard gifts for use or resale by Lyric at auctions, raffles, and other Lyric events
- For specific events at Lyric, such as the Wine Auction and other fundraising activities, Lyric solicits non-standard gifts of personal property for use or resale from individuals and companies. The same procedures as specified in Section 5, Part C, above, shall be followed.
- Lyric records these gifts on its financial records using the donor's estimated value. Acknowledgment receipts are sent to the donor where no estimated values are included.
- As mentioned above, if the value of a donated gift is $5,000 or more, the donor is advised to file an IRS Form 8283 and provide supporting appraisal. Lyric acknowledges on IRS Form 8283 that it has received the gift without representing agreement with the donor's claimed fair market value. A copy of the filed and signed Form 8283 must be forwarded to the Finance Department with the date the organization received the donated property; date the property was sold, exchanged or otherwise disposed of; and amount received upon disposition.
- If Lyric sells a donated item (valued at $5,000 or more) within three years of the date of receipt (as we normally do at our events), Lyric is required to file IRS Form 8282 withint 125 days of the date of sale. A copy of the Form 8282 is also sent to the donor.
Qualified appraisals are required of donors to support the allowance of specific income tax charitable deductions under certain circumstances. Individuals and corporations who donate property, other than money or publicly traded securities, with a claimed value exceeding $5,000 must obtain at their own expense a qualified appraisal prepared by an independent appraiser.
7. Planned gifts
a. Life insurance
- There are two kinds of life insurance planned gifts: those in which the donor only names Lyric as a beneficiary (which can be changed), and those in which the donor gifts the life insurance policy to Lyric to own (which beneficiary designation cannot be changed).
- Any person may name Lyric as a beneficiary of a life insurance policy in any percentage amoung without transferring ownership of the policy to Lyric.
- Lyric will accept the ownership of life insurance policies as gifts only when Lyric is named as the owner and beneficiary of 100% of the policy.
- If the policy owned by Lyric is a paid-up policy, the value of the gift for Lyric gift-crediting and accounting purposes is the policy's replacement cost.
- If the policy owned by Lyric is partially paid-up, the value of the gift for Lyric gift-crediting and accounting purposes is the policy's cash surrender value. (Note: For interpolated terminal reserve.)
- Any person naming Lyric as a beneficiary of any life insurance policy must agree to pay all life insurance premiums when due unless there is enough value built up in the policy to automatically pay the premiums when due. In the event payment of premiums cease, Lyric shall surrender the policy and take the cash surrender value available.
- Assets transferred through bequests or distributions by will or trust ("bequests") that have immediate value to Lyric or can be readily liquidated shall be encouraged by the Development Office of Gift Planning. Bequests that appear to require more cost than benefit shall be discouraged or rejected.
- Donor restrictions and designations on the use of bequests will be followed under all reasonable cirumstances.
- Where no restrictions or designations exist, the proceeds of bequests will be utilized as stated in the bequest resolution of the Executive Committee of the Board of Directors.
- A bequest gift can be booked after the creditor period has passed for the estate and when/if Lyric receives written confirmation, either electronically or hardcopy, from the executor or attorney which includes the value of the bequest to Lyric.
8. Perpetual Endowment Funds
- Lyric accepts gifts and bequests perpetually restricted to endowment.
- Lyric's Endowment Spending Policy allows for an annual draw as outlined in the Investment Spending Policy.
- The minimum gift to establish a separately identified named perpetual endowment fund is $1,000,000; exceptions must be approved by the Development Committee.
- To establish a perpetual endowment fund, the donor shall sign documentation making the perpetual restriction explicit. The document shall be reviewed by a member of the Finance Team and a member of the Development Team prior to being signed by the donor.
- Perpetual endowment funds may also be established by an estate document that specifically states the gift is to be used for permanent or perpetual endowment support.
- All perpetually restricted endowment funds will be governed by Lyric's Endowment Spending Policy.
Lyric shall not act as an executor for a donor's estate nor shall it act as a trustee for any donor's trust. Lyric shall not appraise the value of in-kind contributions; appraisals must be prepared by an independent appraiser.
Gifts of significant risk
- Lyric shall closely review all gifts of significant risk prior to acceptance of the gift.
- All such gifts shall be acknowledged when received, with writeen notice to the donor that due to the nature of the gift and its inherent risks, review is necessary prior to final acceptance.
- Such gifts include, but are not necessarily limited to, the following:
- Non-publicly traded securities;
- All gifts of real property;
- Gifts of personal property if not to be used by Lyric;
- Gift of real or personal property with donor restrictions pertaining to disposal;
- All bargain sales of property;
- Cash gifts with significant donor restrictions; and
- All gifts of unusual items or gifts of questionable value.
Lyric has developed the following policies with respect to atypical gifts and situations outside of the normal course of donor/donee relations.
- Conditional gifts: Conditional gifts are those gifts that, because of some qualifier or restriction, are considered non-routine. Conditional gifts may commit Lyric to act within a specified time or use a gift for a specific purpose. If, in any instance, a gift offered by a donor would put Lyric in an embarrassing or unteable position with the general public, Lyric will decline acceptance. Gift acceptance agreeements should specify a time period for meeting any condition for the gift and should also indicate what will happen to the gift if the conditions are not met.
- Refunding of gifts: Under rare circumstances, Lyric may deem it necessary to return or refund a gift. For example, when it is in the best interest of Lyric or because conditions agreed to in aceepting a gift cannot or will not be met. Requests for refunds may come either from the donor or from the Board of Directors of Lyric.