In my two previous posts regarding the importance of a Gift Acceptance Policy for an FQHC, we discussed the scope and purpose of the policy as well as the screening of gifts. This week we will dive down into the details and discuss specifics as they relate to gifts of real estate.
Gifts of real estate can include many different types of properties: commercial real estate, primary residences, vacations homes, vacant properties, farms, etc. All these types of properties can be acceptable forms of gifts, but only if proper policies and procedures are in place.
Environmental issues are one of the biggest potential liabilities for an FQHC (or any nonprofit) in accepting real estate gifts. Many people think this is only a concern with commercial or industrial property but, without the proper due diligence, there are risks with all types of donated real estate. Most importantly, issues must be identified before the FQHC takes title to the property.
As an example, a residential home may have an issue with radon gas or a buried oil tank that is leaking. Neither of these issues can necessarily be identified via a visual inspection. It is important for the FQHC’s policies to reflect that a level one environmental assessment will be performed on all properties, and a level two assessment will be performed as deemed necessary by the FQHC.
Other issues regarding gifts of real estate include the real estate market itself. The FQHC must gain expertise within the real estate market in which the property is located. This is done through upfront analysis and working with a licensed real estate professional, as well as obtaining a qualified appraisal. By properly evaluating the marketplace, the FQHC will have a better understanding of the timing of the cash flow from the gift and the donor will have a better understanding of the value of the deduction.
Not only does the FQHC need to have strong policies and processes in place for these types of transactions, they also have to make sure the CEO and the Board of Directors understand the complexities of these gifts. Board education is the key to insuring they are well versed on the risks and rewards related to gifts of real estate.
Finally, and most importantly, don’t go it alone. It is absolutely essential to have an attorney who is well versed in real estate law representing the FQHC. It may look like a straight-forward transaction but, without the proper legal guidance, that dream gift can turn into a nightmare.
If you develop the proper policies, along with the appropriate procedures (it sounds corny but checklists are critical), and educate your CEO and Board, your FQHC could benefit tremendously from these types of gifts.
In my next post, I will wrap up this series on Gift Acceptance with some tips and suggestions related to charitable auctions.
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