A. SUMMARY
For quick reference, see table in Procedure 8-008T.
1. Awards, gifts and prizes are allowed to the extent the expense is reasonable and necessary to carry out the mission of USNH. Awards, gifts, and prizes 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, which may be tax-free and not reportable to the Internal Revenue Service and those that are awards, gifts or prizes, which may be taxable.
2. Individual campuses or departmental policies may be more restrictive than USNH policy, but not less restrictive.
3. If a third party provides USNH with funds or property for administration and distribution, these will be administered according to USNH policies and procedures (e.g., Employee of the Month award or prizes awarded to employees at USNH outings which are provided by local vendors).
4. In all circumstances, cash, gift cards and gift certificates of any amount are taxable when provided to a recipient, regardless of classification as an award, gift or prize.
5. Per the Administrative Board action approved March 13, 2009:
"USNH shall not compensate any employee for the federal income tax consequences of accepting from USNH any award, [gift], prize, incentive or compensation in any form whatsoever, regardless of whether the tax consequences cause or may cause the employee to decline the award, [gift], prize, incentive, benefit, or compensation."
B. DEFINITIONS AND REQUIRED APPROVALS
1. An award is tangible property, cash, gift card or gift certificate given to an individual in recognition of meritorious performance or productivity. Awards are generally taxable to the recipient. All awards must be approved by a Dean, Vice President or President.
2. A gift is tangible property bestowed voluntarily on an individual, often as a gesture of gratitude or expression of sympathy. To qualify as a gift, there should be no negotiation in advance for the gift. Cash, gift cards, gift certificates and alcohol are not allowed as gifts. Gifts should be of minimal value (generally ≤ $25) and ideally bear one of the USNH institution’s licensed logos. Gifts so defined are not taxable income to the recipient and not reportable to the IRS. All gifts must be approved by a Dean, Vice President or President.
3. A prize is tangible property, cash, a gift card or gift certificate won by an individual in a game of chance or in connection with a USNH-sponsored event. The prize may result from a wager (e.g., UNH Hockey 50/50 raffle) or no wager (e.g., the 100th person to walk through the door). All prizes are taxable income to the recipient. All prizes must be approved by a Dean, Vice President or President.
4. A scholarship or fellowship is value (i.e., cash, tuition waiver, etc.) provided to an individual for the educational benefit of the recipient, with no requirement for present or future services. The scholarship/fellowship may be taxable and/or reportable, depending on the use of the funds and citizenship of the recipient. Note: Scholarships/fellowships are not addressed in this policy.
C. DETAILED PROCEDURES - EMPLOYEES
1. Awards to employees. With two exceptions (see Sections a. and b. below), awards provided to employees, including student employees, in the form of tangible property, cash, gift cards or gift certificates for meritorious performance, productivity or other reasons connected with their employment are considered taxable compensation. Please contact USNH Disbursement Services for any questions regarding reportability of the awards in your award programs.
The value of an award is reported as compensation on the employee's Form W-2 and is subject to federal and FICA tax withholding. Cash awards given to employees must be paid through the Human Resources System in accordance with USNH policy USY V.F.7.5.7. Unless qualifying for one of the exceptions below, departments making non-cash awards must notify their Campus Payroll Office of the employee's name, the last 4 digits of the employee's USNH identification number, the value of the award and the date it will be presented to the employee. This information will be used to record the non-cash compensation in the Payroll system and facilitate tax withholding.
Under certain circumstances, some types of awards may qualify as nontaxable as noted below:
a. Certain achievement awards of tangible property (other than cash, gift cards or gift certificates in any amount) 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 may not exceed $400 per year per employee. These awards and additional criteria are as follows:
i. A length of service award is not taxable if it is not granted to an employee more frequently than every 5 years.
An award presented at retirement may be considered a length of service award and is subject to the rules of this section. Retirement gifts are generally funded by employees taking up a collection of personal funds; in these cases, there are no tax consequences to the recipient and no USNH reporting requirements. Retirement gifts funded with USNH funds must be charged to a discretionary fund (a list of these funds is maintained by USNH Accounting Services) unless the gift is part of a campus-wide recognition program sponsored by the Campus President or Chancellor for all retirees meeting certain criteria.
ii. A safety award is not taxable as 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.??
b. Non-cash, de minimis awards are not taxable to an employee. IRS regulations use the example of a holiday turkey to define "de minimis.” For USNH policy, de minimis is defined as a value less than or equal to $75. Since the IRS considers gift cards and gift certificates to be the equivalent of cash, gift cards and gift certificates in any amount awarded to employees for any reason are considered taxable compensation and are subject to reporting and withholding.
2. Gifts to employees. Gifts - including those for birthdays, weddings, showers and other personal events - are never allowable expenditures of USNH funds, regardless of the source of funds. Holiday gifts and gifts for occasions such as Boss’ Day and Secretary’s Day are also examples of unallowable expenditures. At their discretion, co-workers may contribute personal funds to commemorate a personal event, but these funds should never be deposited to any USNH bank account. In limited circumstances, gifts of flowers or other expressions of sympathy are allowed if paid from a discretionary fund (a list of these funds is maintained by USNH Accounting Services).
Gifts presented to employees in recognition of service to USNH (including retirement gifts) are awards and fall under the rules discussed in Section C.1. above.
3. Cash and non-cash prizes to employees. In general, 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. In this instance, the door prize is taxable and reportable on Form 1099 if the prize is $600 or more. If an employee won a game of chance that involves a wager, the prize is reportable on Form W-2G if the prize is $600 or more.
Prizes provided by an outside vendor and presented directly to the employee by the vendor would be considered to be administered by the vendor (e.g., prizes provided by vendors at the Benefits Fair with no involvement by USNH as to administration, processing, etc.).
D. DETAILED PROCEDURES - STUDENTS
1. Awards classified as scholarships or fellowships to U.S. students must be processed through the Campus Student Information System. Scholarships/fellowships are generally not reportable as taxable income; however, they should be disclosed on Form 1098-T.
If the recipient is not a USNH student, scholarship/fellowship payments should be processed through USNH Accounts Payable and will be reported on Form 1099-MISC for U.S. citizens. If the recipient is a nonresident alien, USNH Disbursement Services should be notified prior to processing to insure proper tax withholding and reporting on the award.
2. Academic achievement awards given to students in recognition of meritorious accomplishment (e.g., UNH Holloway Award) that are unrelated to employment are taxable income to the student. Cash awards of this nature are paid through USNH Accounts Payable and reported on Form 1099-MISC for U.S. citizens and Form 1042-S for nonresident aliens. If the award is $200 or more, the department presenting the award must:
a. ?Notify USNH Accounts Payable of the recipient’s name, address, Social Security number, date and value of the award; and,
b. Obtain a completed Form W-9 from the recipient prior to payment.
c. If the recipient is a nonresident alien, USNH Disbursement Services will work with the department to insure proper tax withholding and reporting on the award.
3. Awards related to a student’s employment (See Section C.1.)
4. Gifts to students (See Section E.2.)
5. Prizes given to students that are associated with academic achievement or competition are awards. (See Section D.2.) For other cash and non-cash prizes to students, see Section E.3.
E. DETAILED PROCEDURES - NON-EMPLOYEES
1. Awards to non-employees. Awards may occasionally be given to non-employees in recognition of meritorious achievement as well as for other valid business reasons.
Awards paid through Accounts Payable that are paid to non-employees are considered taxable income, regardless of value. There is no de minimus exception to taxation for awards to non-employees. USNH will report these awards on Form 1099-MISC when the cumulative total of all payments to an individual in a calendar year is $600 or more.
If such an award is $200 or more, the department presenting the award must:
a. Notify USNH Accounts Payable of the recipient’s name, address, Social Security number, date and value of the award; and,
b. Obtain a completed Form W-9 from the recipient prior to payment.
2. Gifts to non-employees. Non-cash gifts may be presented as a token of appreciation to a dignitary, guest or visitor when a valid and documented business purpose exists such as to recognize contributions to USNH or to honor a distinguished visitor. In limited circumstances, gifts of flowers or other expressions of sympathy are allowed if paid from a discretionary fund. A list of these funds is maintained by USNH Accounting Services. Items purchased for use in a department's business operations should be accounted for as supplies expense rather than awards, gifts or prizes. Examples are insignia mugs given to visiting speakers or T-shirts given to conference attendees. Gifts to volunteers, donors and prospective donors are not covered by this policy and will be addressed in a future policy. Until such policy is issued, please contact the USNH Controller with questions on these types of gifts.
3. Cash and non-cash prizes to non-employees. Prizes may be awarded to a non-employee in connection with games of chance and door prizes in connection with a USNH-sponsored event.
a. For recipients who are U. S. citizens and residents, prizes of $600 or more are reportable by USNH. If the prize is won in connection with an event that involves a wager, the value is reportable on Form W-2G. If the prize is won in connection with an event that does not involve a wager, the prize is reportable on Form 1099-MISC.
i. If the prize is the result of a wager and the winnings are $600 or more, the department sponsoring the event is responsible for completing Form W-2G. Copies A, D, 1, and Instructions for Payers of Form W-2G should be forwarded to USNH Disbursement Services who is responsible for filing with the IRS. Copies B, C, 2 and Instructions to Winner should be provided to the winner after the event.
If the value of winnings is $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 24% of the winnings. If the fair market value of any prize exceeds $5,000 and a wager has been made, withholding of 24% is required even if USNH has accurate filing information. The department sponsoring an event where it is anticipated that a prize will be valued at $600 or more, must notify USNH Disbursement Services prior to the event. USNH Disbursement Services will work with the department to satisfy the withholding and reporting requirements of the Internal Revenue Code.
ii. If the prize is not the result of a wager and the winnings are $200 or more, the department presenting the prize must:
- Notify USNH Disbursement Services of the recipient’s name, address, Social Security number, date and value of the prize; and
- Obtain a completed Form W-9 from the recipient prior to payment.
b. For recipients who are nonresident aliens, the prize value is reportable by USNH on Form 1042-S, regardless of amount. In addition, federal income tax withholding in the amount of 30% of the value of the prize is generally required unless 1) the recipient is a resident of a country with a treaty that exempts prize income from taxation, and 2) the recipient files Form W-8BEN with USNH to claim the exemption. The department sponsoring the event is responsible for contacting USNH Disbursement Services prior to presenting the prize to the recipient. USNH Disbursement Services will work with the department to satisfy the withholding and reporting requirements of the Internal Revenue Code.
The official version of this information will only be maintained in an on-line web format. Any and all printed copies of this material are dated as of the print date. Please make certain to review the material on-line prior to placing reliance on a dated printed version.
