The Board of Directors of the American Council on Gift Annuities has issued a statement in which it joins with the National Committee on Planned Giving in reiterating both organizations' long standing opposition to the practice of charitable organizations paying sales commissions to for-profit planners in connection with the sale of charitable gift annuities.

PGDC SUMMARY:

The Board of Directors of the American Council on Gift Annuities has issued a statement in which it joins with the National Committee on Planned Giving in reiterating both organizations' long standing opposition to the practice of charitable organizations paying sales commissions to for-profit planners in connection with the sale of charitable gift annuities.

FULL TEXT:

November 2, 2001

To: Sponsors of the American Council on Gift Annuities
From: Board of Directors, American Council on Gift Annuities
Re: Commission Sales of Gift Annuities

In response to concerns expressed by many gift planners about commission sales of charitable gift annuities, the National Committee on Planned Giving (NCPG) and the American Council on Gift Annuities (ACGA) wish to reiterate their long standing opposition to this practice. NCPG and ACGA jointly reaffirm the purpose of charitable gift annuities as a method of making a gift to charity, and they continue to oppose the commission sales of charitable gift annuities for the following reasons:

• The payment of commissions on the sale of a charitable gift annuity may subject a gift annuity reserve fund to regulation by the Securities and Exchange Commission (SEC). The Philanthropy Protection Act of 1995 exempted charitable gift annuity funds from regulation as securities provided that no commissions are paid to solicitors of these gifts.
  
  
• Charitable gift annuities are different from commercial annuities because they are a means of making a charitable gift. If gift annuities are sold by commissioned agents they may appear to be much like commercial annuities.
  
  
• The payment of commissions on the sale of charitable gift annuities creates 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 IRC Sec. 170(f)(8).
  
  
• The commission sale of charitable gift annuities may violate state solicitation laws and cause a loss of tax exempt status.
  
  
• The payment of a commission on the sale of a charitable gift annuity may significantly reduce the residuum that will be available for charitable purposes.
  
  
• These practices violate the 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, NCPG and ACGA jointly urge all organizations engaged in this practice to cease immediately and further urge all charities to refuse to participate in these practices.

Finally, the National Committee on Planned Giving and the American Council on Gift Annuities urge all charities that issue charitable gift annuities to (1) comply fully with applicable federal and state regulations, and (2) maintain adequate financial reserves, responsibly managed, to assure payments to all annuitants for the duration of their contracts.