- What are the administrative/legal requirements for matching gift programs?
- Is there a minimum or maximum to the corporation's or foundation's match?
- Are there any gifts that should not be matched?
- What kind of gifts can the corporation or foundation match?
- What about matching gifts to foreign charities?
There are two basic parts to a matching gift program: verifying that the employee or other donor has made a gift to a qualifying charity and documenting the matching gift program’s add-on to that gift.
Many programs require the employee to complete a form and send it along with his or her gift to the charity. An appropriate officer of the charity attests to the charity’s receipt of the employee’s contribution and sends the form back to the corporation. The corporation then makes a determination regarding whether the gift qualifies for a match and, if so, sends out its contribution – singly or bundled with other gifts to the same institution. A recent development is for employees to request matching gifts through a touch-tone telephone system.
Many grantmakers routinely request a receipt for a grant payment. Whether a matching gift program is required to secure a receipt for a contribution over $250 depends on whether it is run through a corporate giving program or by a foundation. Such a receipt is necessary for a corporation to take an income tax charitable deduction; foundations do not pay income tax (the 2% tax is an excise tax) and therefore, do not take deductions. Thus, they do not need to get a receipt. The bottom line: A receipt is required for matching gifts of over $250 from a corporate giving program; it is not necessary for gifts of $250 or more from foundation-run matching gift programs.
An appropriate receipt will state the amount of the contribution (or a description of property other than cash). It should also state that no goods and services were provided in exchange for the gift. Note that the new Treasury Regulations on charitable gift receipts provide specifically that any goods and services received in exchange for a matching gift are to be attributed to the employee’s portion of the gift. Thus it will be the employee’s responsibility to deduct the value of goods and services from his or her contribution. Some matching gift programs may choose to match only the portion of an employee’s gift that exceeds the value of goods and services received. There is no legal requirement that a program so limit its grantmaking.
The receipt for a gift of $250 or more must be secured by the earlier of the due date of the corporation’s income tax return or the date on which the return is actually filed. If the corporation cannot produce a receipt on audit, the deduction may be retroactively denied.
No, the matching gift program may match either a portion or a multiple of a gift. Some programs provide that they will double or triple the employee or board member’s gift; others may only match a percentage. Some programs set a floor on the size of the gift that will be matched; almost all set a ceiling on the maximum that will be paid. It is possible, though not necessary, to provide that a match will be available for only the tax-deductible portion of the employee or board member’s gift to a particular charity.
A foundation-run matching gift program that fulfills the pledge of a disqualified person (a substantial foundation contributor or foundation manager and relatives of the same; employees of a related corporation and the corporation itself are all disqualified persons) may run afoul of the self-dealing rules. This is because foundation assets are being used to relieve the disqualified person of a financial obligation he or she would otherwise have to pay.
In other words, if a disqualified person promises a sum of money to a charity and then seeks to have the matching gift program of the foundation pay part of his or her pledge, the foundation will have likely committed an act of self-dealing. A recent private letter ruling regarding a corporate charitable gift makes clear that the IRS frowns on such transactions (see PLR 9703020, January 17, 1997). Where the matching gift program is not run through a foundation, its payment of its donor corporation’s pledge will not be an act of self-dealing but it is arguably the use of charitable assets for a private purpose (relieving the corporation of its legal obligation) rather than a public (charitable) one and should also be avoided. Where a corporation’s matching gift program is switched mid-year to a corporate foundation, the foundation may conceivably be seen as fulfilling the corporation’s pledge to its employees to match gifts.
Note that there is no bar on an individual promising a sum to charity and adding that he or she is a participant in a matching gift program so that this sum will be increased. The only problem arises when the program’s incremental increase is part of the pledge. The wise administrator will make this point clear to program participants from the start.
In general, corporations and foundations can match gifts to any public charity. While many programs provide only for matches to gifts made to educational institutions, there is no legal requirement that programs be so limited. Some programs exclude gifts to religious organizations. Again, this is a policy, not legal, choice.
For multinational corporations and families, this question arises often. The answer depends on whether the program is run through a private foundation or not. If the program is run through a private foundation, the same rules apply as with any foreign grant. If the foreign organization does not have a 501(c)(3) determination letter from the IRS or a "friends of" organization that is organized and operated in the U.S., the private foundation must perform expenditure responsibility or otherwise verify that the gift is used for exclusively charitable purposes. In general, a corporation may not take an income tax charitable deduction for a contribution, including matching gift contributions, to a charity that is not organized and operated in the U.S. However, a U.S. treaty with Canada provides that a deduction may be available if the corporation has Canadian-source income and the charity has qualified with the IRS.
The U.S.-Mexico Tax Treaty ratified in 1993 provides similar benefits in connection with gifts by multinational corporations. In addition, the treaty provides that Mexican charities may qualify for gifts from U.S. companies by applying to the Mexican tax authorities, whose determinations are to be recognized by the IRS.
- Clark & Dewey. Organizing Corporate Contributions Options & Strategies. Council on Foundations: 1996.
- J. Edie. Beyond Our Borders, Third Ed.. Council on Foundations: 2002.
- The Clearinghouse for Corporate Matching Gift Information, operated by the Center for Advancement and Support of Education (CASE). The clearinghouse maintains a database of over 6,000 profiles of companies that offer matching gift programs. The database is available in book, disc and CD-ROM formats. 202/328-5978.
- M. Dickey. 'Free Money': How Charities Can Make the Most of Matching Gifts, Chronicle of Philanthropy. March 6, 1997, p. 40.