Qcd checks

Submitted by Maria Difalco on Sun, 2017-04-30 12:39

Hello Alan: Another wrinkle in qcd distribution. As requested, the insurance company mailed me the checks. The recipients and the amounts are correct. However this year they decided to add to the checks “FBO , my name, and mailing address ” beneath the charity information. My question is does the “FBO” negate the qcd non-taxable benefit? If so, then I will need to return the checks and ask that they be reissued without my information. The checks do total my rmd for 2017.

Your responses are always helpful.
Thanks,
MBD



Submitted by William Tuttle on Sun, 2017-04-30 16:18

  • If they had written “Donor” or even OBO (On Behalf Of), your name and address that would be fine.
  • FBO (For the Benefit Of), clearly contradicts the intention of a charitable donation and implys a benefit or quid pro quo.
  • I don’t see how this qualifes for Section 170, which is required to make a QCD.
  • I would wait for Alan’s response and recommendation, but the insurance company is pretty stupid for putting FBO on a QCD check.

Submitted by Alan - IRA critic on Mon, 2017-05-01 03:50

I think QA 44 of Notice 2007-7 clarifies that the FBO appended to the check does not either void the QCD or constitute a prohibited transaction, so would not be concerned with it:

Q-44.  Will a distribution made directly by the trustee to a § 170(b)(1)(A) organization (as permitted by § 408(d)(8)(B)(i)) be treated as a receipt by the IRA owner under § 4975(d)(9)?  A-44.  Yes.  The Department of Labor, which has interpretive jurisdiction with respect to § 4975(d), has advised Treasury and the IRS that a distribution made by an IRA trustee directly to a § 170(b)(1)(A) organization (as permitted by § 408(d)(8)(B)(i)) will be treated as a receipt by the IRA owner under § 4975(d)(9), and thus would not constitute a prohibited transaction.  This would be true even if the individual for whose benefit the IRA is maintained had an outstanding pledge to the receiving charitable organization.    

 

Submitted by William Tuttle on Mon, 2017-05-01 16:15

You always seen to find the relevent guidance. Do you disagree with me though that of all things, putting FBO on a QCD check is pretty dumb on the Insurance company’s part?

Submitted by Ben Meyer on Mon, 2017-05-01 18:04

  • It does make sense for the charity to receive check with a notice stating the identity of the donor right there on the check.  This will allow the charity to properly credit the donor by listing his or her name in their list of contributors.  An FBO notice will also allow the charity to credit the donation against a prior pledge.  Since the practice seems to be in compliance as described in Q-44 of Notice 2007-07 there should be no detrimental consequence to the donor.  When the IRA custodian uses the phrase “For benefit of” they are saying that the “benefit” is proper crediting of the gift.  The custodian’s computer system probably has an option to print the FBO designation, but possibly no other options are available such as “Donor” or “OBO”.
  • Would a premium or a bonus gift to the donor disqualify a QCD?  Sometimes a charity furnishes a gift or premium back to a donor.  Often the value is nominal, such as a tote bag, but it may also be substantial, such as a large DVD set.

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