Donations: A Play in Three Acts

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Carrie Connelly

At the end of 2022, our office received some good questions regarding donations. This article is a toe-dip into the vastness of this topic. As such, please consider this general information and not legal advice. Please call our office if you have your own donation scenario you’d like to discuss. Okay, let’s dig in!

ACT 1

The scene: A quiet office. Attorney Connelly calmly reads statutes. Outlook chimes. A new email. She opens it….

To support a community’s unhoused population, a city sponsors a shoe and sock drive. The city requests only new shoes and socks for donations. A community member donates 2 pairs of new men’s shoes and a 10 pack of new men’s socks. Is the city required to provide a receipt to the donor?

This scenario involves what the IRS would call a “noncash donation, value most likely less than $250.” There is no requirement to provide a receipt in this scenario unless the city is providing goods and services in exchange for the donation (a quid pro quo contribution). If you have a quid pro quo situation, call our office and we can walk you through what is required.

Even without a receipt, a donor may satisfy the IRS’s substantiation requirements for a noncash donation, value less than $250 if the donor keeps their own written records for each donated item. So, if the city chooses not to provide a receipt, donors who want to claim a tax deduction can do so using their own records.

If the city wants to provide a receipt, our recommendation is to keep it simple. Donated household goods or clothing are only acceptable to the IRS as a tax deduction if they are in “good used condition” or better. The city should avoid assessing the condition of donated items for purposes of receipts. That would put the city in an awkward position. As explained above, for this category of donation, a blank receipt is probably just as good to a donor as a receipt that lists the items donated but does not include the condition of those items. So, to keep it as simple as possible, the city may choose to provide a receipt that acknowledges that a donation was received by the city and leaves the rest (value and condition) up to the donor.

ACT 2

The scene: Lunch time, finally. Attorney Connelly returns to her office with her snack size bag of baby carrots and portioned out nonfat ranch dressing. Spring break is
coming up after all. Outlook chimes. A new email. She opens it….

A city’s public works department is offered equipment with a donor-provided value of $10,000. The donor asks the city to provide them with documentation that the donor can then use for tax purposes. What are the city’s obligations?

Under IRS rules, units of local government are considered to be qualified organizations that are eligible to receive charitable contributions that are tax deductible. Your
organization may have a policy regarding accepting donations. If so, review and follow that policy.

In the absence of a policy, here are some steps to take: Determine whether the city wants/needs the donation. If not, there is no obligation to accept it. If the city does
want the donation, then start by finding out as much as you can about it before accepting it. Is the equipment titled in the donor’s name (individual name vs. a company name, for instance)? Is the equipment collateral for an outstanding debt? Is the useful life remaining on the equipment less than one year? If any of these issues are present, then I would caution against accepting the donation unless there is a clear path to remedying the issue before you accept the donation. Before accepting a high-value donation, also consider who has the authority to accept the donation on behalf of your organization.

In the scenario above, what does the city have to provide to the donor for tax purposes?

Bottom line: The donor needs to follow the direction provided by their own tax consultant/accountant. That’s because what is really at stake is the success of the donor’s claimed tax deduction. There really is no penalty for the city (in this scenario) if it provides the wrong type of acknowledgement (or none at all) unless goods and services are exchanged for the donation. What the city should watch out for is the usefulness of the equipment to the city’s operations; the title to the equipment; and the way in which the donor plans to transfer title of the equipment to the city.

Our office is available to help if this situation arises in your jurisdiction. Your organization’s accountant or bookkeeper would also be a good resource in this type of situation.

ACT 3

The scene: An LGLG attorney meeting. Discussion of upcoming newsletter articles ensues. Attorneys Williamson and Stone add a tangentially related topic to Attorney Connelly’s donation article. Attorney Connelly’s ears perk up, admittedly she was only halfway listening to the discussion up to that point. Act 3 is born.…

A city councilor is becoming a first-time homebuyer. A community member sets up a Go Fund Me account to help the city councilor with furnishing the new home. Can the city councilor accept donations from the Go Fund Me account?

In case you haven’t heard, Go Fund Me is an online crowdfunding platform wherein an individual may set up an account for a beneficiary in need of money. The Oregon Government Ethics Commission has issued an opinion in a similar situation to the one described above. (Albeit the scenario presented to OGEC was a more worthy cause.)

That opinion provides the following guidelines:

  • ORS 244.025 limits how much a public official may accept each calendar year
    from a source with a legislative or administrative interest in the matters subject to
    the public official’s decisions. The limit is $50 per calendar year.
  • The funds collected in the Go Fund Me account would be subject to the $50 per
    calendar year limitation if the source has a legislative or administrative interest in
    the public official’s work. ORS 244.020(10) defines “legislative or administrative
    interest” as an economic interest distinct from that of the general public in any
    matter subject to the decision or vote of the public official acting in their official
    capacity.
  • To comply with ORS 244.025, the public official would need to see the list of
    donors’ names and the amount donated to decide whether or not the public
    official may accept the donation. If the public official sees that a $500 donation
    has been made by a business owner with a matter pending before the city
    council, then the city councilor should not accept that donation. The amount
    exceeds $50 and the donor has an economic interest distinct from that of the
    general public in a matter subject to the decision or vote of the city councilor.
  • Online crowdfunding platforms, such as Go Fund Me, allow anonymous
    donations. In that case, a public official would not be able to tell who the
    donation came from and should not accept an anonymous donation. If a donor
    has no distinct economic interest in the public official’s decisions, then there
    would be no limits on the donation amount that the public official could accept
    from that source.
  • There are nuances to the use and acceptance of donations through online
    crowdfunding platforms. If you would like to develop a policy around the use of
    online crowdfunding platforms for your city councilors, city employees, etc.,
    please give one of us a call to discuss.

FINAL ACT

The scene: Attorney Connelly packs up after another productive day in the office. She rides the elevator down to the first floor and walks to her car on the top level of the
parking structure. She forgot her car keys….

Paid Leave Oregon

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Diana Moffat

“WE RECEIVED A DEMAND TO BARGAIN FROM THE UNION. WHAT DO WE DO?”

As most of you know, the Oregon legislature enacted what has come to be known as Paid Leave Oregon (PLO).

PLO is a new program/legislative scheme that allows employees in Oregon to take paid time off for some situations that impact their need to be away from work. It covers family-related leaves, medical leaves and safety leaves. These leaves are not in exact alignment with other leaves available under OFLA and FMLA, and they are PAID leaves.

Benefits under this program will begin in September of 2023, but the payments toward PLO began in January of 2023. (*This article will not cover which employers are required to participate, the process for withholdings, the availability of equivalent plans, what qualifies for leave under PLO, how you determine concurrent leaves under OFLA and FMLA, job protection upon a return from leave, etc. There is a lot of information available about those topics on https://paidleave.oregon.gov/).

So, let’s get to your question! What are you required to bargain/negotiate with your union about in regard to this new program?

The first and most common demand to bargain coming from unions is in regard to the EMPLOYEE required contribution toward the program, which sets a maximum rate of 1% of employee wages, up to $132,900 – with 60% of the 1% paid by the employee and the other 40% of the 1% being paid by the employer. (*Employers with less than 25 employees are NOT required to make their 40% contribution, but the employees are still required, through withholdings, to make their 60% contribution.)

If the union files a demand to bargain over the employee’s portion, do you have to bargain with the union? Yes and no. If you are mid-contract of your current Collective Bargaining Agreement (CBA), arguably you do not have to enter into mid-term bargaining. Why? Because under ORS 243.698 the union only had 14 days to file their demand to bargain once they became aware of the anticipated change. Obviously, more than 14 days has elapsed since the payment withholdings began in January of this year.

Now, on the other hand, once you are bargaining for a successor CBA, then you probably need to bargain over the employee portion of the payment, if raised by the union. But, remember, bargaining and agreeing are two different things. There are many “taxes,” contributions that employees are required to pay, such as their portion of social security, their contributions towards workers compensation, etc. The employer does not traditionally pay the employee’s portion toward those programs. However, on the other hand, it is not unusual for an employer to “pick-up” the employee’s 6% contribution toward PERS. In addition, during the legislative session which resulted in the Oregon Paid Leave program, unions openly agreed that their members would be responsible for their 60% of the 1%.

The second, frequently seen demand to bargain has to do with union requests to be able to “top off” their PLO benefit payments with their otherwise accrued leave so that they still receive a full paycheck. That is because PLO payments to an employee, who is out on a qualified leave, does not result in a “full paycheck.”

Most small to medium-sized public employers are willing to consider various top off proposals from the union. But you do need to consider the impact of allowing an employee to use accumulated sick leave prior to using banked vacation, holiday and compensatory time. It is also important to remember that PLO supplements, in a sense, your current paid leave program. So, if the PLO leave time also qualifies for your current sick leave paid leave time, both must be honored. In addition, BOLI is preparing to issue a letter opinion detailing use of employer paid leave time when that leave would also qualify for coverage under OFLA or FMLA.

If you receive a demand to bargain, your best course of action is to contact your labor attorney for additional advice.

Tipping Public Employees

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Emily Guimont

Though perhaps not a common occurrence, there are situations in which public employees may be offered a tip for services performed in connection with their jobs. While there is no Oregon law that expressly forbids public employees from accepting tips, the acceptance of tips could violate Oregon’s government ethics laws. It is important for government employers to understand how these government ethics laws apply to tips so they can make informed policy decisions to regulate tip-accepting and avoid violations of government ethics laws:

Tips as “Gifts” and “But For” Financial Gains

Under Oregon government ethics laws, a “gift” is anything that has economic value and that a public employee receives without giving consideration in exchange for it. ORS 244.020(7)(a). Public employees cannot solicit or receive gifts that, in total, exceed $50.00 per calendar year from each donor that has or could be reasonably expected to have a legislative or administrative interest in the public employees’ decisions. ORS 244.025.

ORS 244.040(1) forbids public employees from using their position to obtain a financial gain that they would not have obtained if they were not public employees: “But for” the public employee’s job, would the public employee have obtained the financial gain? If the answer is no, the public employee would not have obtained the financial gain if they were not a public employee, then the public employee has violated ORS 244.040(1). However, gifts received in compliance with ORS 244.025 are not considered “but for” financial gains and do not violate ORS 244.040(1).

Under these Oregon government ethics laws, tips are likely “gifts” and subject to the “but for” test: They are financial gains that have economic value and are received as a gratuity, not as consideration in exchange for a service. As gifts, a public employee’s tips cannot exceed $50.00 per calendar year from each tipper unless the tipper does not have a legislative or administrative interest in the public employee’s decisions. While that rule may seem simple, government employers may find its practical application complicated: How will a government employer verify the amount of tips each public employee receives from each tipper? How will it determine whether a tipper has a legislative or administrative interest in its employees’ decisions? A possible solution is for a government employer to assume that every tipper has a legislative or administrative interest in public employees’ decisions and so apply the $50.00 limit across the board, without having to make case-by-case determinations. A government employer could also develop system for tracking and verifying tips, but that may prove to be administratively burdensome. A government employer could choose to be hands off and rely on its employees to accept or reject tips as required by ORS 244.025, but this runs the risk that employees will not comply with ORS 244.025 and, in turn, ORS 244.040(1), without oversight.

Consequences of Violations

The Oregon Government Ethics Commission (“OGEC”) investigates ethics complaints against public employees and can impose civil penalties on public employees who violate Oregon government ethics laws. The OGEC accepts complaints from the general public, so anyone could report a public employee for violating ORS 244.025 or ORS 244.040(1). Government employers do not have any duty to protect or defend a public employee in an investigation. Furthermore, government employers are not responsible for any penalties issued against a public employee. However, employees’ morale and the public’s perception of the government employer’s role in such a situation would not be good and it is best to avoid such situations through proactive policy decisions.

The Budget Process in Four Simple Steps

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Mark Wolf

It’s hard to believe that it’s already the end of March and budget season is upon us. For many of you, you’re off and running. This letter explains the budget process in four simple steps. It also serves as a reminder that ORS 192.670 requires governing bodies (to the extent reasonably possible) to make public meetings accessible by telephone, video, or other electronic means and to allow written testimony by email or other electronic means.

Budget Process in Four Simple Steps:

If you haven’t already done so, the first step in the budget process is to appoint a budget officer. Typically, the budget officer is the chief executive officer (i.e., the fire chief or the city administrator), but your finance officer or even your attorney may function as the budget officer.

Step two is to review the composition of your Budget Committee. Your Budget Committee consists of the members of your governing body and an equal number of appointed electors. The appointed members of the Budget Committee may not be officers, agents, volunteers or employees of your entity. If for some reason you cannot find enough electors for the Budget Committee, you may still move forward with the budget process. Just make sure that your minutes reflect the efforts you made to recruit citizen members.

Your third step is to make a copy of your proposed budget available for public review immediately after the budget officer releases it to the Budget Committee. Your budget officer must publish notice of the Budget Committee meeting, as well as a notice of the budget hearing held by your governing body.

Both the notice of your first Budget Committee meeting and the notice of your budget hearing can be published in one of four ways. The most common method of publication is to publish the notice in a newspaper of general circulation, at least 5 and not more than 30 days prior to the budget meeting or hearing. If you chose to publish in the paper, the notice of the Budget Committee meeting must be published twice. Notice of the budget hearing only needs to be published once. If your entity is located in Washington County, you must also send budget information to the County.

The notice of your budget hearing must include a summary of the budget approved by the Budget Committee. The Oregon Department of Revenue provides forms you can use to develop and publish your budget. You can find these forms by clicking on the following link and scrolling down to “Local budget”:

http://www.oregon.gov/DOR/forms/Pages/default.aspx

The fourth step is to adopt the budget. Remember, your governing body has the ability to make changes to the Budget Committee’s recommended budget. New information introduced at the budget hearing should be carefully considered by the governing body prior to budget adoption. If a proposed change to the budget includes an increase in taxes, or more than a 10% increase in a fund, additional notice is required. Changes to the budget after adoption also generally require action by the governing body and sometimes require additional publications and public hearings. For this reason, all available information should be collected and considered during the budget process.

Your budget must be adopted on or before June 30.

Two Final Thoughts

First, it’s very important that the Budget Committee approve any proposed taxes as part of its approval of the budget. If a tax election is scheduled for March or May (especially May), the Budget Committee should include the revenue from any anticipated additional tax authority in its approved budget. Act like the proposed tax election will pass and budget for it. If it fails, the governing body may reduce the budget. But if a Budget Committee fails to plan on the tax passing, you can run into timing issues as the governing body must publish a revised budget summary and hold a second hearing on the budget, which might prevent the tax from being certified prior to June 30.

Second, in thinking about your budget, consider which projects and purchases are planned for this upcoming year. Not only will this process assist you in projecting your entity’s expenditures and revenues, this level of planning will also allow you to provide the required notice to the Bureau of Labor and Industries (BOLI). State law requires that at least 30 days prior to budget adoption, your entity must submit to BOLI a “WH-118 form,” listing each public improvement your entity plans to fund in the upcoming budget period. For example, if you are planning to budget and use public funds to build a new fire station in the next year, you must file a form WH-118 with BOLI at least 30 days before your budget is adopted. Form WH-118 is available on BOLI’s website at http://www.oregon.gov/boli/WHD/PWR/docs/wh118.pdf.

As always, if you encounter any legal issues during your budget adoption cycle (or if you learn of information or receive additional revenue requiring a change in your adopted budget) please contact your legal counsel as early as possible. An ounce of prevention is worth a pound of cure. It is much more cost effective and efficient to consult with your legal counsel before a problem develops.