Music for Life Institute encourages the solicitation and acceptance of gifts to Music for Life Institute (herein after referred to as the Charity) for purposes that will help the Charity to further and fulfill its mission. The following policies and guidelines govern the acceptance of gifts made to the Charity or for the benefit of any of its programs.
The exempt purpose of Music for Life Institute is to:
- Develop, fund, administer, facilitate, promote, operate and carry on activities, programs and facilities which will provide compassionate humanitarian and spiritual assistance, education and training to needy persons;
- Equip, train and fund students and other persons to develop, compose and perform music as an expression of life, culture and spirituality; and
- Assist needy and disadvantaged people, especially children, by increasing awareness of their situation and securing funds for direct aid.
1. Purpose of Policies and Guidelines
The Board of Directors of Music for Life Institute and its staff solicit current and deferred gifts from individuals, corporations, foundations and government agencies to secure the future growth and missions of the Charity. These policies and guidelines govern the acceptance of gifts by the Charity and provide guidance to prospective donors and their advisors when making gifts to the Charity. The provisions of these policies shall apply to all gifts received by the Charity for any of its programs or services.
2. Use of Legal Counsel
Music for Life Institute shall seek the advice of legal counsel in matters relating to acceptance of gifts when appropriate. Review by counsel is recommended for:
- Closely held stock transfers that are subject to restrictions or buy-sell agreements
- Documents naming Music for Life Institute as Trustee
- Gifts involving contracts, such as bargain sales or other documents requiring Music for Life Institute to assume an obligation
- Transactions with potential conflict of interest that may invoke IRS or CRA sanctions
- Other instances in which use of counsel is deemed appropriate by the Gift Acceptance Committee
3. Conflict of Interest
Music for Life Institute will urge all prospective donors to seek the assistance of personal legal and financial advisors in matters relating to their gifts and the resulting tax and estate planning consequences.
4. Restrictions of Gifts
The Charity will accept unrestricted gifts, and gifts for specific programs and purposes, provided that such gifts are not inconsistent with its stated mission, purposes and priorities as determined by the Gift Acceptance Committee. The Charity will not accept gifts that are too restrictive in purpose. Gifts that are too restrictive are those that violate the terms of the corporate charter, gifts that are too difficult to administer or gifts that are for purposes outside the mission of the Charity. All final decisions on the restrictive nature of a gift, and its acceptance or refusal, shall be made by the Gift Acceptance Committee.
5. The Gift Acceptance Committee
The Gift Acceptance Committee shall consist of a Board of Directors member and the Operations Manager and Finance Manager of Music for Life Institute.
The Gift Acceptance Committee is charged with the responsibility of reviewing all gifts made to Music for Life Institute, properly screening and accepting those gifts and making recommendations to the Board of Directors on gift acceptance issues when appropriate.
All gifts of one million dollars or above or gifts that fall outside the gift acceptance policies need the review and approval of the Board of Directors.
6. Types of Gifts
- Tangible Personal Property
- Real Property
- Remainder Interests in Property
- Oil, Gas and Mineral Interests
- Bargain Sales
- Life Insurance
- Charitable Gift Annuities
- Charitable Remainder Trusts
- Charitable Lead Trusts
- Retirement Plan Beneficiary Designations
- Life Insurance Beneficiary Designations
The following criteria govern the acceptance of each gift form:
Music for Life Institute accepts cash, credit cards, cheques or money orders made payable to Music for Life Institute or any of its Funds.
b) Tangible Personal Property
Music for Life Institute may accept tangible personal property as a gift. The property must be saleable and the donor must agree that it can be sold, but Music for Life Institute has sole discretion whether or not the item is sold or put to a use related to its exempt purposes. If current law views gifts of tangible personal property for an unrelated use favourably, the donor will be advised if Music for Life Institute is not able to put such gifts to related use.
Other criteria considered before accepting the gift include transportation and storage costs, costs of insurance, selling, maintenance or repair and potential usefulness to Music for Life Institute. If a lengthy selling period is anticipated, Music for Life Institute may refuse the gift or request that the donor cover the expenses as a cash gift.
The donor is responsible for establishing the value of the gift. For US donations: If the perceived value is over $5,000 US, the donor is required to obtain a qualified appraisal and submit IRS Form 8283. Until then, the gift is recorded with a value of $1.00 in Music for Life Institute’s financial statements. If Music for Life Institute sells the property within two years, IRS Form 8282 will be filed by Music for Life Institute, informing the donor and the IRS of the sale price.
Items such as furniture will not be accepted by Music for Life Institute unless it can be readily sold for an amount approximating fair market value. Automobiles can be accepted if in good working order and will be valued at the wholesale Blue Book price, less any necessary repairs or disposal costs.
The Charity can accept both publicly traded securities and closely held securities.
Publicly Traded Securities
Music for Life Institute accepts readily marketable securities and will make all decisions regarding the disposition or retention of these gifts. As a general rule, all marketable securities shall be sold upon receipt unless otherwise directed by the Finance Committee. In some cases marketable securities may be restricted by applicable securities laws; in such instances the final determination on the acceptance of the restricted securities shall be made by the Gift Acceptance Committee of the Charity.
Closely Held Securities
Closely held securities, which include not only debt and equity positions in non-publicly traded companies but also interests in limited partnerships and limited liability companies, or other ownership forms, can be accepted subject to the approval of the Gift Acceptance Committee of the Charity. However, gifts must be reviewed prior to acceptance to determine:
- There are no restrictions on the security that would prevent Music for Life Institute from ultimately converting those assets to cash;
- The security is marketable; and
- The security will not generate any undesirable tax consequences for the Charity.
If potential problems arise on initial review of the security, further review and recommendation by an outside professional may be sought before making a final decision on acceptance of the gift. The Gift Acceptance Committee of Music for Life Institute and legal counsel shall make the final determination on the acceptance of closely held securities when necessary. Every effort will be made to sell non-marketable securities as soon as possible.
Securities from privately held corporations will be recorded at value, if Music for Life Institute receives an appraisal from an independent professional appraiser to substantiate the value, at the cost of the donor. Otherwise gifts of closely held stock will be carried on Music for Life Institute’s books at $1.00. Disposition of those assets will follow the same guideline as regular securities, once they become marketable. The fund will reflect only the principal and income from the restricted stock and not the activity of the endowed pool, until the securities become marketable. Music for Life Institute will not accept securities that cannot be assigned, such as a series, or those that are assessable and could create a net liability for Music for Life Institute.
Stock in subchapter S corporations require qualified appraisal by an independent professional appraiser.
Gifts of bonds that require a holding period will be accepted and cashed when the holding period has expired.
Music for Life Institute does not accept gifts of general partnership interests. Partners in Limited Liability Companies (LLC) are reviewed to determine the underlying assets and liabilities, the activity of the partnership, how allocations are made and the liquidity of Music for Life Institute’s potential interest. Music for Life Institute must be the beneficiary of both the income and liquidation proceeds of the limited partnership interest. Any costs to Music for Life Institute in holding the interest is the responsibility of the donor. Music for Life Institute will not accept limited partnership interests that subject it to cash calls or other liabilities or that have adverse tax consequences. The donor is required to obtain a qualified appraisal and submit IRS Form 8283. Until then, the gift is recorded with a value of $1.00 in Music for Life Institute’s financial statements. If Music for Life Institute sells the property within two years, IRS Form 8282 will be filed by Music for Life Institute, informing the donor and the IRS of the sale price.
d) Real Property
Gifts of real property may include developed property, undeveloped property, or gifts subject to a prior life interest. These gifts may be accepted based on the outcome of a property analysis, including condition, likelihood of an immediate sale, current market analysis of value and environmental issues, among other factors. Music for Life Institute may accept property subject to a mortgage provided the property has sufficient equity and the property is marketable.
Before the gift is accepted, the donor must provide items to assist in preparing the property analysis, including the deed, current property tax bill, title reports, notes or mortgages and Phase I environmental impact report. The donor is required to obtain a qualified appraisal and submit IRS Form 8283. If Music for Life Institute sells the property within two years, IRS Form 8282 will be filed by Music for Life Institute, informing the donor and the IRS of the amount of the sale.
Music for Life Institute will dispose of the property at the earliest possible time. If the property is accepted, Music for Life Institute will pay for the expenses associated with ownership (insurance, taxes) until the property can be sold. However, all costs associated with preparing the property analysis is the responsibility of the donor.
e) Remainder Interests in Property
The Charity will accept a remainder interest in a personal residence, farm or vacation property subject to the provisions of paragraph 4 above. The donor or other occupants may continue to occupy the real property for the duration of the stated life. At the death of the donor, the Charity may use the property or reduce it to cash. Where the Charity receives the gift of a remainder interest, expenses for maintenance, real estate taxes and any property indebtedness are to be paid by the donor or the primary beneficiary.
f) Oil, Gas and Mineral Interests
The Charity may accept oil and gas property interest, when appropriate. Prior to acceptance of an oil and gas interest the gift shall be approved by the Gift Acceptance Committee, and if necessary, by the Charity’s legal counsel. Criteria for acceptance of the property shall include:
- Gifts of surface rights should have a value of $20,000 or greater.
- Gifts of oil, gas and mineral interests should generate at least $3,000 per year in royalties or other income (as determined by the average of the three years prior to the gift).
- The property should not have extended liabilities or other considerations that make receipt of the gift inappropriate.
- A working interest is rarely accepted. A working interest may only be accepted where there is a plan to minimize potential liability and tax consequences.
- The property should undergo an environmental review to ensure that the Charity has no current or potential exposure to environmental liability.
g) Bargain Sales
Music for Life Institute will enter into a bargain sale arrangement in instances in which the bargain sale furthers the mission and purposes of the Charity. All bargain sales must be reviewed and recommended by the Gift Acceptance Committee and approved by the Board of Directors. Factors used in determining the appropriateness of the transaction include:
- The Charity must obtain an independent appraisal substantiating the value of the property.
- If the Charity assumes debt with the property, the debt ratio must be less than 50% of the appraised market value.
- The Charity must assume that it will use the property, or that there is a market for sale of the property, allowing sale within 12 months of receipt.
- The Charity must calculate costs to safeguard, insure and expense the property (including property tax, if applicable) during the holding period.
h) Life Insurance
Music for Life Institute may accept a life insurance policy as a gift if Music for Life Institute is named irrevocable owner and sole beneficiary. The gift is valued at its interpolated terminal reserve value, or cash surrender value, upon receipt. If the donor contributes future premium payments, the Charity will include the entire amount of the additional premium payment as a gift in the year it is made.
If the donor does not elect to continue to make gifts to cover premium payments on the life insurance policy, the Charity may continue to pay the premiums, convert the policy to paid up insurance or surrender the policy for its current cash surrender value.
Music for Life Institute does not participate in charitable split dollar insurance plans.
i) Charitable Gift Annuities
Music for Life Institute may offer charitable gift annuities. The minimum gift for funding is $20,000. Music for Life Institute Board of Directors may make exceptions to this minimum. The minimum age for life income beneficiaries of a gift annuity shall be 65. Where a deferred gift annuity is offered, the minimum age for life income beneficiaries shall be 55. No more than two life income beneficiaries will be permitted for any gift annuity.
Annuity payments may be made on a quarterly, semi-annual schedule. Music for Life Institute Board of Directors may approve exceptions to this payment schedule.
Music for Life Institute will not accept real estate, tangible personal property or any other illiquid asset in exchange for current charitable gift annuities. Music for Life Institute may accept real estate, tangible personal property or any other illiquid asset in exchange for deferred gift annuities so long as there is at least a 5-year period before the commencement of any annuity payment date, the value of the property is reasonably certain and the Board of Directors of Music for Life Institute approves the arrangement.
Funds contributed in exchange for a gift annuity shall be set aside and invested during the term of the annuity payments. Once those payments have terminated, the funds representing the remaining principal contributed in exchange for the gift annuity shall be transferred to Music for Life Institute’s general endowment funds, or to such specific fund as designated by the donor.
j) Charitable Remainder Trusts
The Charity may accept designation as remainder beneficiary of a charitable remainder trust with the approval of the Gift Acceptance Committee of the Charity. The Charity will not accept appointment as Trustee of a charitable remainder trust.
k) Charitable Lead Trusts
The Charity may accept a designation as income beneficiary of a charitable lead trust with the approval of the Gift Acceptance Committee of the Charity. The Board of Directors of Music for Life Institute will not accept appointment as Trustee of a charitable lead trust.
l) Retirement Plan Beneficiary Designations
Donors and supporters of Music for Life Institute will be encouraged to name the Charity as beneficiary of their retirement plans. Such designations will not be recorded as gifts to the Charity
until such time as the gift is irrevocable. When the gift is irrevocable, but is not due until a future date, the present value of that gift may be recorded at the time the gift becomes irrevocable.
Donors and supporters of Music for Life Institute will be encouraged to make bequests to the Charity under their wills and trusts. Such bequests will not be recorded as gifts to the Charity until such time as the gift is irrevocable. When the gift is irrevocable, but is not due until a future date, the present value of that gift may be recorded at the time the gift becomes irrevocable.
n) Life Insurance Beneficiary Designations
Donors and supporters of Music for Life Institute will be encouraged to name the Charity as beneficiary or contingent beneficiary of their retirement plans. Such designations will not be recorded as gifts to the Charity until such time as the gift is irrevocable. When the gift is irrevocable, but is not due until a future date, the present value of that gift may be recorded at the time the gift becomes irrevocable
Securing appraisals and legal fees for gifts to the Charity – It will be the responsibility of the donor to secure an appraisal (where required) and independent legal counsel for all gifts made to the Charity.
Valuation of gifts for development purposes – The Charity will record a gift received by the Charity at its valuation for gift purposes on the date of the gift.
Responsibility for IRS Filings upon sale of gift items – The Gift Acceptance Committee of the Charity is responsible for filing IRS Form8282 upon the sale or disposition of any asset sold within three years of receipt by the Charity when the charitable deduction value of the item is more than $5,000. The Charity must file this form within 125 days of the date of sale or disposition of the asset and provide a copy to the donor.
Acknowledgement of all gifts made to the Charity and compliance with the current IRS requirements in acknowledgement of such gifts shall be the responsibility of the Operations Manager of the Charity.
16. Changes to the Gift Acceptance Policies
These policies and guidelines have been reviewed and accepted by the Gift Acceptance Committee of Music for Life Institute. The Gift Acceptance Committee of Music for Life Institute must approve any changes to, or deviations from, the policies.
Note: Music for Life Institute is used in this document to refer to Music For Life Institute incorporated under the laws of the State of Washington (a US non-profit organization) and to Music For Life Institute incorporated under the Canada Business Corporations Act (a Canadian registered charity).