Since 2004, the IRS has issued some clarifications about gift cards/gift certificates being taxable as income for
employees.
Employers can give a property or service that is small in value as a (non-taxable) fringe benefit. So this covers a Christmas turkey, a retirement gift, a service award.
However, when employers started giving gift certificates or gift cards, the IRS stepped in and said this was the same as giving cash income, so someone had to pay taxes. There were some lawsuits and it was a mess, so people are wary of those rulings.
I honestly don't know how this applies to 501(c)(3)'s as it's not an employer/employee situation. Several posters on the Forum do give their teachers gift cards as a stipend for classroom supplies. It's not a practice I would endorse because to me it's the same as cash and defeats the purpose of accountability. When our PTO did this, giving each teacher $50 (or whatever), we always reimbursed the teachers when they submitted receipts. Then it's clearly an
expense and not a
personal gift.
Whatever you decide - gift or stipend - giving a teacher a $50 giftcard is exactly the same as giving them a $50 bill (or whatever amount). My question would be - would you still do this if it was currency you were handing out? (The imagery/suitability shifts a bit, doesn't it?)
Again - I haven't seen the issue of PTOs/PTAs doing this for teachers specifically addressed. But I don't see how it would be considered much different.
To research this further, just Google the following:
+IRS +"gift cards"
There's also a little about the topic in this
IRS Newsletter
.
I'd be interested if anyone has spoken to a tax advisor/non profit lawyer about this.
[ 11-27-2006, 11:55 PM: Message edited by: JHB ]
