Awards, Gifts, and Prizes
Revised: 08/18/2016; 01/20/2017; 11/05/2018
Division of Finance
Awards, gifts, and prizes are allowed to the extent the expense is reasonable and necessary to carry out the mission of the University. They may not be lavish or extravagant, and must comply with any funding source restrictions. Proper classification of payments is necessary to differentiate between those considered scholarships, which may be tax-free, and those that are awards, gifts, or prizes, which may be taxable.
Awards to employees are an acceptable practice. However, they must be part of a formally established program and approved by the chancellor, chancellor’s staff or their direct reports.
Further guidance for awards, gifts and prizes detailed at UM Policy 22307.
See UM Policy 22307.
The following procedures assist with ensuring compliance with the above policy:
In order to determine the appropriate classification of the payment, departments should document the nature of the transaction including, but not limited to: program name, criteria to be qualified, recipient selection method, relationship of the recipient to the University, description and value of item received by recipient, timing, frequency, and tax reporting.
Written acknowledgement must be obtained from the recipient regarding the receipt of the award, gift or prize and retained in the department.
For payments qualifying as taxable compensation, departments are responsible for gathering the necessary information: social security number, name, and permanent mailing address, description and value of item received, amount spent for a chance or ticket (if applicable). Once the recipient receives the item, departments must forward the information for tax reporting to either Payroll for employee awards or Division of Finance-Accounting for non-employees.
Awards to Employees
IRS guidelines dictate that if an employee is given the choice of taking an award as cash or having the award amount put into a university account to support their work (travel, research, etc.), the amount is taxable to the employee in either case. Awards that an employee opts to have put into a university account will be taxed as taxable perquisite and can only be used for University expenditures in accordance with University polices.
If the employee is not given the choice of taking the award as cash (the award can only be a contribution to a university account to support their work), then it will not be considered taxable to the employee.
Information regarding gifts to employees and nonemployees, prizes, and nonresident alien gifts/awards/prizes, including taxes and IRS reports, visit the UM Policy 22307.
- UM Policy 22307 – Awards, Gifts, and Prizes
- UM Policy 22308 – Gift Cards
- BPPM-2:080 Financial Aid: Processing Payments to Undergraduates
- BPPM-2:081 Financial Aid: Processing Payments to Graduate and Professional Students