ACGA Position Paper: Selling Charitable Gift Annuities On Commission
Presented by the American Council on Gift Annuities and the National Committee on Planned Giving
It has come to the attention of the American Council on Gift Annuities (ACGA) that one or more charitable community foundations have been recruiting life insurance agents, securities brokers, financial planners and others to sell charitable gift annuities on commission.
Be it resolved that the American Council on Gift Annuities (ACGA) reaffirms the purpose of charitable gift annuities as a method of making a gift to charity; that ACGA strongly opposes the selling of charitable gift annuities as a commercial product; and that ACGA strongly opposes the payment of commissions on the sales of charitable gift annuities for the following reasons:
- It may subject a gift annuity reserve fund to regulation by the Securities and Exchange Commission (SEC). The Philanthropy Protection Act of 1995 exempted gift annuity and charitable remainder trust funds from securities laws provided that no commissions were paid to solicitors of these gifts.
- It may cause state insurance departments to impose the same licensing requirements on charities that issue annuities as they impose on insurance companies that sell commercial annuities. This could make it prohibitively expensive for charities to operate a gift annuity program.
- It subverts current efforts by the charitable community to exempt gift annuities from the state regulations applicable to domestic insurers. Gift annuities are different from commercial annuities because they are a means of making a charitable gift and are solicited by staff and volunteers of a charity. However, when gift annuities are sold by commissioned agents, they will appear to insurance commissioners to be very much like commercial annuities.
- It may affect donors' tax benefits if the contribution is construed to be reduced by the amount of the commission.
- It would create confusion and uncertainty as to proper crediting of gift amounts on gift receipts issued by charities for charitable gift annuities, under the substantiation requirements of Code Sec. 170(f)(8).
- It may violate state solicitation laws and cause a loss of tax exempt status.
- It will significantly reduce the residuum that will be available for charitable purposes.
- It violates the National Committee on Planned Giving's (NCPG's) Model Standards of Practice for the Charitable Gift Planner which state that payment of "finders fees, commissions and other fees by a donee organization... as a condition for the delivery of a gift are never appropriate."
Accordingly, ACGA urges all organizations engaged in this practice to cease immediately. ACGA urges all charities to refuse to participate in this practice. ACGA encourages its supporters to explain the inherent problems to any charity or donor advisor considering commissioned sales of gift annuities. (Note: The National Committee on Planned Giving (NCPG) has passed a similarly-worded resolution).