As we move past Thanksgiving and “Giving Tuesday” and move into the Christmas and year-end giving
season, it might be an interesting time to consider your institution’s Gift Acceptance Policy and the
procedures surrounding the acceptance of donor gifts.
Many of you have been hearing about the sudden collapse and bankruptcy proceedings of FTX. This
seemingly robust cryptocurrency exchange sought to be very philanthropic – in their terms “altruistic.”
FTX gave heavily to many future-looking projects and to political parties – to the tune of billions of

One question that arises with regard to the FTX collapse is whether the bankruptcy court might seek to
have some or all of the FTX contributions to charities and/or political parties returned. This process –
sometimes referred to as “clawbacks” – could be devastating to recipients. This would be especially
difficult for those who have spent the funds.
So, first question: Does your institution have a “Gift Acceptance Policy” in place? And, right behind that
question: If so, do you follow it?

If your institution does not have a policy of this nature, you should. Please contact us about more
information and policy templates that may assist you and your Team in the process.
Back to FTX and possible “clawbacks.” This post is for information purposes. We are not attorneys and
are not offering legal advice.

Clawbacks generally happen when debtors file claims/complaints with the bankruptcy court. These
complaints most often take the form of 1) preference demands or, 2) fraudulent conveyance claims.
With a preference demand, there would be a request for the return of payments made within 90 days
before the bankruptcy. If actual fraud is involved, there is the potential for a 2-year clawback period.
Back in 1998, Congress enacted the Religious Freedom and Charitable Donation Protection Act that is
designed to protect churches and other charities from having to turn over charitable contributions to a
bankruptcy trustee. A key to this legislation is the following provision, which is an amendment to section
548(a)(2) of the bankruptcy code:

A transfer of a charitable contribution to a qualified religious or charitable entity or organization
shall not be considered to be a transfer [subject to recovery by a bankruptcy trustee] in any case
in which—(A) the amount of that contribution does not exceed 15 percent of the gross annual
income of the debtor for the year in which the transfer of the contribution is made; or (B) the
contribution made by a debtor exceeded the percentage amount of gross annual income specified
in subparagraph (A), if the transfer was consistent with the practices of the debtor in making
charitable contributions.

Historically, clawbacks of donations to charities are pretty rare. However, in a 2014 church case
(McGough, 737 F.3d 1268 (10th Cir. 2014)), required a church to return donations from a bankrupt
couple that gave over 15% of their annual income to the church. The question arose with respect to the
amount of the contributions that the church was required to return to the bankruptcy court. On appeal, the

question arose as to whether the church would be required to return all of the “over 15%” contributions or
only the amount that exceeded 15% in a given year.

In McGough, a federal appeals court concluded that contributions in excess of 15 percent of annual
income are entirely recoverable by the bankruptcy trustee. This includes the first 15% of the
contributions made by the bankrupt donor.


  • Does your school have a “Gift Acceptance Policy” in place that is followed by Management and the Board?
  •  Have you considered the potential ramifications of accepting “digital assets” – including cryptocurrency donations?
  •  Please consider the potential issues that may arise from accepting donations of “unstable” assets or from struggling donors/entities.
  •  Be sure you and your Team are knowledgeable about the “ins-and-outs” of non-cash or “alternative” asset donations.

Written by
David C. Moja, CPA
The information provided herein presents general information and should not be relied on as accounting,
tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions
regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel
about the facts and laws that apply.