Gifts, Awards, and Prizes

University Policy 101.18, Gifts, Awards, and Prizes

I. Policy Statement and Purpose

A. Overview

This document establishes the policy and procedures related to awards and other gifts presented on behalf of the University.  The award and gift recipients covered by this policy include faculty and staff employees, individuals who are not employees of the University (“non-employees”), and organizations.  This policy specifies the University funds that may be used for awards and other gifts and addresses the tax implications and reporting requirements of the awards. A summary of key points identified in the information below can be found in Non-Reportable Limits for Allowable Gifts, Awards, and Prizes (Appendix A).   

B. Reporting

Awards and gifts (cash and non-cash) are subject to federal and state taxes and reportable on Form W-2 (employees), Form 1099-MISC (non-employees), or Form 1042-S (nonresident aliens) unless an exception applies as described in this policy.  The UNC Charlotte Tax Office (“Tax Office”) will evaluate any reporting or withholding requirements to external taxing authorities, such as the Internal Revenue Service.

C. General Requirements

All awards, regardless of dollar amount, must have a valid, documented business purpose and must comply with all University purchasing and expense procedures.  The presentation of an award or gift must demonstrate that the gift benefits the University, is in furtherance of the University’s business purpose, or is clearly necessary to the University’s fulfillment of its role as a good community citizen.  All gifts made or received by the University are subject to applicable North Carolina ethics and lobbying laws; any questions regarding such laws should be directed to the Office of Legal Affairs.

II. Roles and Responsibilities

The Vice Chancellor for Business Affairs is responsible for ensuring compliance with the requirements of this policy.  The Vice Chancellor for Business Affairs will ensure that this policy is updated; will provide interpretative guidance; and will report to the Chancellor, Provost, and the vice chancellors on the use of university funds as necessary.  Exceptions to this policy must be approved by the Controller’s Office.  

III. Procedures

Units making awards and gifts are responsible for tracking such awards and gifts, maintaining the appropriate documentation as indicated below, and communicating with the Tax Office when an award or gift is reportable.  The purchase of, or the reimbursement for, a gift or award must be handled through an approved payment processing method with a valid business purpose and supporting documentation.

The Reportable Gifts, Awards, and Prizes Documentation Form (Appendix B) is required for reportable gifts.  See Appendix A for a summary of the non-reportable amounts of awards and gifts described in this policy.  No formal tracking is required beyond the substantiation required for any business expense for awards and gifts that do not exceed the listed amounts.  However, documentation for such awards and gifts must be maintained within the unit to support distribution of the awards and gifts in the event of an audit or review.  The Gifts, Awards, and Prizes Log Sheet (Appendix C) is recommended for the unit’s use to document the distribution of non-reportable awards and gifts.

A. Employee Awards and Gifts

All awards and gifts (cash and non-cash) to employees are allowable as long as the criteria in Section I are met (e.g., valid business purpose).  As a rule, these awards and gifts are taxable to the employee and must be reported to the Tax Office for tax reporting purposes[1].  However, certain awards and gifts of tangible personal property to employees are not reportable to the Tax Office if they meet certain additional criteria, described below.[2]  These criteria, as promulgated by the IRS, are dependent on the type of gift or award and are listed below.  Any cash gifts to employees, regardless of the amount, are taxable and must be reported to the Tax Office.

1. Employee Recognition

An item of tangible personal property may be presented to an employee in recognition of his or her noteworthy work-related accomplishments.  Examples include, but are not limited to, flowers, fruit, UNC Charlotte logo items, a book, a pen, a plaque, a sporting or cultural event ticket (excluding a season ticket) or similar item.  Non-cash awards that meet all of the following requirements need not be reported to the Tax Office:

  • The award must be of minimal value and occasional;
  • The recipient should not receive more than one such award in a calendar year;
  • The award must be provided within an established recognition program and based on objective criteria;
  • The award must be presented to employees on a basis that does not discriminate in favor of highly compensated employees; and
  • The cost or value of the award (not including shipping and delivery costs) is limited to $100 per employee.

If the above requirements are not met, the entire amount is taxable to the employee and must be reported to the Tax Office.[3] 

2. Length of Service or Retirement

An item of tangible personal property may be presented to an employee for meritorious length of service to the University or retirement from the University.  Awards that meet all of the following requirements need not be reported to the Tax Office:

  • The award must be given for a length of service achievement;
  • The recipient must have completed at least five years of service;
  • The recipient must not have received a similar gift in any of the prior four years;
  • The award must be presented as part of a meaningful presentation;
  • The award may not be based on an employee’s personnel classification; and
  • The award is made under conditions and circumstances that do not create a significant likelihood of disguised pay.

If the above requirements are not met, the entire amount is taxable to the employee and must be reported to the Tax Office.  If the above requirements are met, only the amount in excess of $400 is taxable and reportable to the Tax Office.  [4]

3. Safety Achievement

An item of tangible personal property may be presented to an employee for safety achievement.  Awards that meet all of the following requirements need not be reported to the Tax Office:

  • The award cannot be given to an employee who is in a professional occupational group (e.g., manager, administrator) or who is an administrative support personnel;
  • The award cannot be given to more than 10% of total employees of the University, excluding those referenced in the first bullet, per calendar year;
  • The award must be presented as part of a meaningful presentation; and
  • The award is made under conditions and circumstances that do not create a significant likelihood of disguised pay.

If the above requirements are not met, the entire amount is taxable to the employee and must be reported to the Tax Office.  If the above requirements are met, only the amount in excess of $400 is taxable and reportable to the Tax Office.  [5]

4. Prizes, Incentives, and Other Gifts

Occasionally, units will provide tangible personal property as prizes and other gifts to encourage employee participation in an event or as an incentive to complete a survey or a questionnaire.  If the cost or value (not including shipping and delivery costs) exceeds $100, the entire amount is taxable and must be reported to the Tax Office[6]

5. Sympathy and Congratulatory Gifts

Gifts of tangible personal property, such as flowers, candy, a pen, or a book, may be presented as an expression of sympathy, for example, in the event of the death or major illness of an employee or a member of the employee’s family or household or as an expression of congratulations, for example, in the event of a wedding or birth of a child of an employee.    If the cost or value (not including shipping and delivery costs) exceeds $100, the entire amount is taxable to the employee and must be reported to the Tax Office[7]

Cash contributions for sympathy and congratulatory gifts are allowable if made to a charity in the name of the University. 

B.  Non-employee Awards and Gifts

1.  Non-employee awards and gifts: Non-employee awards and gifts are gifts given to recipients such as donors, potential donors, visiting dignitaries and scholars, volunteers, community members, elected and appointed officials, students, and research participants, and may include the following:  an award for promotional and goodwill gifts, gifts presented as a token of appreciation for, or in recognition of, service to the University, gifts presented for meritorious academic achievement, incentive gifts for completion of a survey, or for participation in an event or research project, and gifts offered as an expression of sympathy or congratulations. 

2. Dual Status as Employee and Other Status: If the gift recipient has a status as both a non-employee (such as a student or volunteer) and an employee, a determination must be made as to whether the presentation of the gift is dependent on the individual’s employment relationship with the University.  If the gift is not dependent in any fashion on the fact that the recipient is also employed by the University, the gift will be treated as a non-employee transaction.  If the gift relates to the employee’s employment with the University, the gift will be subject to the guidance set forth in Section III.A.

3. Cumulative Gifts:  Awards and gifts (cash and non-cash), combined with other payments made to non-employees, that equal or exceed $600 per calendar year, are reportable to the Internal Revenue Service by the Tax Office.  [8]

4. Non-employee Awards and Gifts Reporting Guidelines:  All awards and gifts (cash and non-cash) to non-employees are allowable as long as the criteria in Section I.C. are met (i.e., valid business purpose, etc.).  As a rule, these awards and gifts are taxable to the recipient and must be reported to the Tax Office for tax reporting purposes.  However, certain awards and gifts of tangible personal property to non-employees are not reportable to the Tax Office if they meet certain additional criteria.  These criteria, as promulgated by the IRS, are dependent on the type of gift or award and are listed below. Any cash gifts to non-employees, regardless of the amount, are taxable and must be reported to the Tax Office. 

a. Promotional Items

A promotional item of tangible personal property may be gifted to a non-employee.  Examples include, but are not limited to, flowers, UNC Charlotte logo items, a pen, a t-shirt, a cap, a pennant, a mug, or similar item.  If the cost or value of the promotional item gift is $600 or more, the gift must be reported to the Tax Office. 

b. Appreciation, Recognition, or Incentive

A gift of tangible personal property for appreciation, recognition, or incentive may be given to a non-employee.  Examples include, but are not limited to, tickets to a sporting, theatrical, or musical event, UNC Charlotte logo items, a meal, a memento item, a pen, a plaque, a watch, a book, or similar item.  Such gifts include student awards for a noteworthy academic achievement or an incentive gift to complete a survey or questionnaire.  This category also includes gifts to volunteers for participation in a clinical study or other university activity.  Door prizes and other gifts provided to non-employees to encourage participation in a university-sponsored event are also included in this category.  If the cost or value of such gift is $600 or more, the gift must be reported to the Tax Office. 

c. Sympathy and Congratulatory Gifts

Gifts of tangible personal property, such as flowers, candy, a pen, or a book, may be presented as an expression of sympathy, for example, in the event of the death or major illness of an individual or a member of the individual’s family or household, or as an expression of congratulations, for example, in the event of a wedding or birth of a child.  The cost or value of all such gifts given to an individual is limited to less than $600 per calendar year.  If the cost or value is $600 or more, the gift must be reported to the Tax Office. 

Cash contributions for sympathy and congratulatory gifts are allowable and non-reportable if made to a charity in the name of the University. 

C. Human Subject Payments

Cash and non-cash payments are allowable for human subjects (e.g., participation in research studies) and for completion of surveys.  If the cost or value of such payment exceeds $25, the payment must be reported to the Tax Office.[9]  For allowable methods of payment, see separate Human Subject Payments procedures, which accompany this policy.

D. Nonresident Alien Recipients

All awards and gifts (cash and non-cash) to a nonresident alien recipient, regardless of the dollar amount, are subject to specific tax reporting requirements and must be reported to the Tax Office[10] on the Reportable Gifts, Awards, and Prizes Documentation Form (Appendix B).

E. Gift Certificates and Gift Cards

Non-negotiable gift certificates and gift cards for tangible personal property are the only types of gift certificates and gift cards that qualify as non-cash awards for purposes of allowable awards set forth in this section.  Such gift certificates and cards must confer only the right to receive tangible personal property, not cash or cash for the difference between the purchase price and the value of the gift certificate or card.  The tangible personal property criterion is not met if a gift certificate or card entitles an individual to choose to select an item of merchandise, receive cash, or reduce the balance due on his or her account.  Also, the tangible personal property criterion is not met if the gift certificate or card is for services (e.g., spa treatments, golf lessons) because such services do not constitute tangible personal property.  A gift certificate or card will qualify as a non-cash award if it meets all the following requirements[11]:

  • The gift certificate or gift card is inscribed with the recipient’s name;
  • The gift certificate or gift card is not transferable;
  • The gift certificate or gift card is for tangible personal property; and
  • The gift certificate or gift card cannot be redeemed for cash or be used to reduce the balance due on the recipient’s account with the merchant.

If a gift certificate or card cannot be inscribed with the recipient’s name, the donating unit must inform the recipient that the card may not be transferred to another individual.

Gift certificates and cards from merchandise retailers whose primary business is to sell goods (tangible personal property) would be allowable as non-cash awards.  Examples of such retailers include, but are not limited to, Walmart, Target, Lowe’s, Home Depot, Barnes & Noble, Belk, Starbucks, Applebee’s, and McDonald’s.

Gift certificates and gift cards from service provider retailers whose primary business is to sell services would NOT be allowable as non-cash awards.  Examples of such retailers include, but are not limited to, Modern Salon and Spa, Carowinds, and Autobell Car Wash.  Other examples of gift certificates and gift cards that would NOT be allowable as non-cash awards include those for golf lessons and Visa gift cards.

If a gift certificate or card does not meet the requirements as outlined above, the award is considered cash, which is taxable and must be reported to the Tax Office. 

Units may purchase advance quantities of gift certificates and cards as long as the following controls are established with respect to the quantity of gift certificates and cards purchased:

  • There are appropriate controls to ensure that all pre-purchased gift certificates and cards are kept in a secure place.
  • Records documenting the use of the gift certificates and cards that include the recipients’ information and the gift certificate or card number or other similar identification number are maintained.
  • Units purchase only the number of gift certificates and cards expected to be awarded during a fiscal year.
  • Gift certificates and cards with a value greater than the limits specified in this Policy may not be purchased without advanced written approval from the Tax Office.  Advanced approval must be requested via e-mail or hard copy memo submitted to the Tax Manager.

​F. Gifts and favors from university contractor, subcontractor or supplier

North Carolina General Statute §133-32 prohibits contractors, subcontractors and suppliers from making gifts or giving favors to any officer or employee of a governmental agency who has specified duties as stated in the statute.  It is also unlawful for any officer or employee of a governmental agency with those specified duties to receive or accept any such gift or favor from any contractor, subcontractor or supplier. Under the statute, these specified duties are as follows; (1) Preparing plans, specifications, or estimates for public contracts, or (2) Awarding or administering public contracts or (3) Inspecting or supervising construction.  Contractors, subcontractors, and suppliers may donate gifts and favors to the University (not to employees) which the University will then distribute to the most appropriate individuals.  The University must have complete discretion in choosing appropriate recipients for the gifts and favors received from contractors, subcontractor, and suppliers.  Once the University selects employees to receive the gifts, the tax and reporting implications of these gifts and favors would be the same as in Section III.A for employees.  Note that this statute is not intended to prevent a gift a public servant would be permitted to accept under NC General Statute §138A‑32, or the gift and receipt of honorariums for participating in meetings, advertising items or souvenirs of nominal value, or meals furnished at banquets. Any questions about the interpretation of GS 133-32, GS 138A-32 or other laws relating to gifts to state employees should be sent to the Office of Legal Affairs.

G.  Funding Sources

Discretionary Funds and Other Institutional Trust Funds (as defined in Policy 601.8) may be used to purchase awards and gifts as long as the spending restrictions of the fund are met.  General Funds (as defined in Policy 601.8) may be used for this purpose as long as the awards and gifts are through a Chancellor-approved program, UNC Charlotte-sanctioned program, or under the North Carolina Employee Suggestion System that is described in the North Carolina Office of State Human Resources employee handbook.  The Teaching Excellence Award, state service awards, and staff appreciation celebration awards are examples of UNC Charlotte-sanctioned awards.  Chancellor-approved award programs will identify an appropriate fund source. 

H.  Raffles

North Carolina law (NC General Statute §14‑309.15) provides the following guidance related to raffles:

  • A non-profit organization or State government entity may hold only two raffles per calendar year.
  • A “raffle" means a game in which the prize is won by random drawing of the name or number of one or more persons purchasing chances.
  • The maximum cash prize (or fair market value for goods) that may be offered in any one raffle is $125,000.
  • The total cash prize (or fair market value for goods) offered in one calendar year may not exceed $125,000.
  • Raffles shall not be conducted in conjunction with bingo.
  • No less than ninety percent (90%) of the net proceeds of a raffle shall be used by the nonprofit organization or State government entity for charitable, educational, civic, or other nonprofit purposes.
  • "Net proceeds of a raffle" means the receipts less the cost of prizes awarded. 
  • None of the net proceeds of the raffle may be used to pay any person to conduct the raffle, or to rent a building where the tickets are received or sold or the drawing is conducted.
  • Real property may be offered as a prize in a raffle.
  • The maximum appraised value of real property that may be offered for any one raffle is five hundred thousand dollars ($500,000).
  • The total appraised value of all real estate prizes offered by any nonprofit organization or State government entity may not exceed five hundred thousand dollars ($500,000) in any calendar year.  

At UNC Charlotte, a raffle held by any unit counts against the two raffle limit for the University. Prior to conducting a raffle, a university unit must consult with the Associate Vice Chancellor for Finance to ensure that the raffle is within the two raffle per year limit and otherwise meets the criteria set forth above. Student organizations and associated entities are not considered a university unit or department for purposes of this section.

Raffle winnings are taxable, subject to federal and state taxes, and reportable on IRS Form W-2G.  Amounts greater than $5,000 are subject to withholding of 25% at the time winnings are disbursed.  The unit conducting the raffle must collect the winner’s name, address, and taxpayer identification number to ensure proper reporting.

 

[1] IRC §61(a)

[2] IRC §132

[3] IRS Publication 15-B; IRC §132(a)(4)

[4] IRS Publication 535

[5] IRS Publication 535

[6] IRS Publication 15-B; IRC §132(a)(4)

[7] IRS Publication 15-B; IRC §132(a)(4)

[8] IRS Instructions for Form 1099-MISC

[9] IRC §274(b)

[10] IRC §1441

[11] Proposed Treasury Reg. §1.274-8(c)(2)