University System of New Hampshire
Financial and Administrative Procedures

AWARDS, GIFTS, AND PRIZES
Procedure 8-008
Issued By: Controller
Issued Date: 03/20/01
Revised Date: 04/01/04

  1. Summary. Awards, gifts, and prizes are allowed to the extent the expense is reasonable and necessary to carry out the mission of USNH. They may not be lavish or extravagant. Restrictions regarding funding source must be complied with. Proper classification of payments is necessary to differentiate between those considered scholarships (i.e., charged to an object code in the 7000 series), which may be tax-free and not reportable to the Internal Revenue Service (IRS), and those that are awards, gifts, or prizes, which may be taxable.

  2. Detailed Procedures

    1. Awards to employees. With certain exceptions, awards provided to employees in the form of cash, gift certificates, or noncash merchandise for meritorious performance, productivity, or other reasons connected with their employment are considered taxable compensation. This includes the VIP Award, "Employee of the Month" Award, awards to boost employee morale, as well as awards originating with a gift to USNH from a third party. The award must be reported as employee compensation on the employee's Form W-2 and is subject to federal withholding and FICA taxes. Since the award must be recorded in the USNH Payroll system (see USY.V.F.11.4), the department presenting the award must notify USNH Payroll of the employee's name, Social Security number, date and value of the award unless the award qualifies for one of the exceptions below:

      1. Certain achievement awards of tangible property (not cash or gift certificates redeemable for cash) may be given tax-free to an employee if they are awarded in a meaningful presentation that emphasizes the purpose of the award. The value of the award funded by USNH may not exceed $400 per year per employee. These awards and additional criteria are as follows:

        1. A "length of service" award is not taxable if it is not granted to an employee more frequently than every 5 years. A retirement gift generally qualifies as nontaxable if all above criteria are met. Retirement gifts must be charged to a discretionary account (as defined and designated by the USNH Controller) unless the gift is part of a campus-wide recognition program sponsored by the President or Chancellor for all retirees meeting certain criteria.

        2. A "safety award" is not taxable so long as both of the following conditions are met:

          • It is provided to no more than 10% of eligible employees; and,

          • Managers, administrators, clerical, and professional staff are ineligible for the award.

      1. Noncash, de minimis awards are not taxable to an employee unless readily convertible into cash. IRS regulations use the example of a Christmas turkey to define "de minimis". For USNH purposes, de minimis is defined as having a value less than or equal to $75. Unless there is a notation to the contrary, gift certificates are not redeemable for cash. Therefore, awards of gift certificates of $75 or less are generally nontaxable.

    2. Awards to nonemployees. Awards may be given in recognition of time spent by volunteers as well as for other valid business reasons. Awards to students that are classified as scholarships (i.e., charged to an object code in the 7000 series) are not reportable to the IRS. Awards not classified as scholarships that are paid to nonemployees are considered taxable income, regardless of value. There is no de minimis exception to taxation for awards to nonemployees. The department presenting the award must notify USNH Accounts Payable of the recipient's name, address, Social Security number, date and value of the award if the value of the award is $200 or more. USNH Accounts Payable will file Form 1099-MISC to report these payments when payments to an individual total $600 or more in a calendar year.
      3.

    3. Gifts to employees. Gifts - including those for birthdays, weddings, showers, and other personal events - are never allowable expenditures of USNH funds. At their discretion, co-workers may contribute personal funds for this purpose. In limited circumstances, gifts of flowers or other expressions of sympathy are allowed if approved by the employee's Dean, Director, Department Head or Vice President and paid from a discretionary account, as defined by the USNH Controller.

      Gifts presented to employees in recognition of service to USNH (including retirement gifts) are awards and fall under the rules discussed in Section B.1 above. Since the gift must be recorded in the USNH Payroll system (see USY.V.F.11.4), the department presenting the gift must notify USNH Payroll of the recipient's name, Social Security number, date and value of the gift as it is subject to federal withholding and FICA taxes.

    4. Gifts to nonemployees. Noncash gifts may be presented as a token of appreciation to a donor, dignitary, guest, volunteer, visitor (or in certain circumstances, customer or client) when a valid and documented business purpose exists such as to recognize contributions to USNH or to honor a distinguished visitor. Items purchased for use in a department's business operations should be accounted for as supplies rather than awards, gifts or prizes. Examples are token items given to donors by the Alumni Association or mugs given to conference attendees by the New England Center.

      5. To qualify as a gift, there should be no negotiation in advance for the gift. Cash, gift certificates redeemable for cash, and alcohol are not allowed as gifts. Gifts should be of minimal value and, ideally, bear the University's licensed logo.  Gifts are not taxable income to the recipient and therefore are not reportable to the IRS.

    5. Cash and noncash prizes in connection with games of chance and door prizes in connection with a USNH-sponsored event. No prize may be awarded to a USNH employee except in situations where the individual's employment is incidental to the basis on which the prize is awarded. For example, an employee would be eligible to win a door prize awarded at random to those in attendance at an athletic event.

      USNH is required by Internal Revenue Code section 6041(a) to report to the IRS and the recipient winnings of $600 or more paid to an individual during a calendar year. If the winnings are $600 or more and the winner either fails to provide USNH with a Social Security number or provides a number that USNH has been notified is incorrect, USNH must withhold federal income tax at the rate of 28% of the winnings. Withholding at 25% is required if the fair market value of the prize exceeds $5,000 and a wager has been made. The department sponsoring an event where it is anticipated the prize will be at least $600 must notify the USNH Disbursement Services Manager prior to the event. USNH Disbursement Services will work with the department to satisfy the withholding and reporting requirements of the Internal Revenue Code.

      SUMMARY
      Cash and
      Gift Certificates
      Redeemable for
      Cash      		 Other Than
      Cash and Gift Certificates
      Redeemable for Cash < $75                   > $75
      Employee:
          Award (W-2)      		 Taxable Nontaxable Taxable *
          Prize (W-2G) Taxable ** Taxable ** Taxable **
      Nonemployee:
          Award (1099-MISC)      		 Taxable Taxable ** Taxable **
          Gift (Noncash) Not Allowable Nontaxable Nontaxable
          Prize (W-2G) Taxable** Taxable ** Taxable **

        *Unless a length-of-service or safety award
      **Reportable to IRS if  > $600

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