Per IRS regulations, gift cards and gift certificates with a face value on them are considered cash equivalents and may therefore be subject to employment taxes and IRS reporting requirements. The procedure outlined on this page will ensure that campus departments are in compliance with IRS regulations and UC policy when it comes to purchasing, safeguarding, and tracking recipients of gift cards and gift certificates.
Types of Gift Cards
UC policy restricts the types, amounts, and recipients of gift cards and gift certificates. Before you purchase gift cards, please review the following policy summaries for employee and non-employee gifts to ensure that your department is in compliance with UC policy and IRS regulations.
Employee Gift Cards
Before you purchase gift cards or gift certificates to distribute to employees, please review the UC policy BFB G-41: Employee Non-Cash Awards and Other Gifts. Generally, gift cards and gift certificates may be presented on behalf of the University to employees for the following work-related reasons:
- Employee Recognition - Spot Awards ($10 - $75)
- Sympathy Gift - Tangible Personal Property (limited to $10 - $75)
- Prizes and Other Gifts - Incentive for employees to participate in an event, survey, or questionnaire ($10 - $75)
- Employee Length of Service ($10 - $400)
- Employee Retirement ($10 - $400)
Gift cards presented to employees as recognition awards must be given as part of an established recognition program. Awards should be presented to employees occasionally on an infrequent basis to avoid being reported as taxable income to the employee. An employee may not receive more than three employee recognition awards in a calendar year.
Gift cards exceeding the values or frequency outlined above require written exception to BFB G-41 due to the tax implications of exceeding policy limits. Please complete the Exception Request Form for Taxable Noncash Awards (Employees), which will need to be approved by the Vice Chancellor for Business & Administrative Services prior to purchasing the gift cards or gift certificates.
Non-Employee Gift Cards
Before you purchase gift cards or gift certificates for non-employees, please review the UC policy BFB G-42: Gifts Presented to Non-Employees on Behalf of the University. Generally, gift cards and gift certificates in the amount of $10 - $599 may be presented on behalf of the University to non-employees for the following business-related purposes:
- Appreciation or Recognition - Student awards for noteworthy academic achievements or for participation in a University-sponsored activity
- Incentive - Student or volunteer awards as an incentive to complete a research study or as an incentive to complete a survey or questionnaire
- Incentive - Door prizes provided to non-employees to encourage participation in a University-sponsored event
In addition, the policy allows for Promotional Items in the amount of $75 or less and Sympathy Gifts in the amount of $200 or less. Gift cards exceeding the values or frequency outlined above require written exception to BFB G-42 due to the tax implications of exceeding policy limits. Please complete the Exception Request Form for Taxable Noncash Awards (Non-Employees). Please complete the Exception Request Form for Taxable Noncash Award for Non-Employees, which will need to be approved by the Chief Financial and Administration Officer prior to purchasing the gift cards or gift certificates.
Purchasing Gift Cards
Gift cards and gift certificates must be reported to Accounting Sevices upon purchase. Please email the following information to treasury@ucmerced.edu at the time you complete the purchase:
- Quantity of gift cards/certificates purchased,
- Denominations of gift card/certificates purchased,
- Reason for purchase,
- Storage location (i.e., campus department, office location),
- Type of locked receptacle or safe used,
- Campus custodian's name, telephone number, and email address.
Please email treasury@ucmerced.edu or contact Christie Harvey at (209) 233-2180 if you have questions or require additional instructions regarding reporting the purchase of gift cards or gift certificates.
Tracking Recipients of Gift Cards
Departments are responsible for record-keeping requirements related to distributing gift cards and gift certificates. Each time a department issues a gift card or gift certificate to an individual, a Gift Card/Certificate Distribution Log must be completed and returned to Tax Services via email at tax@ucmerced.edu. If a recipient receives a gift card or gift certificate of $100 or more, the department is also required to ask the recipient to complete a Form W-9 to collect additional information for potential tax reporting via W-2 or 1099-MISC.
Please email tax@ucmerced.edu or contact Jennifer Di Salvo at (209) 228-4367 if you have questions or require additional instructions regarding tracking recipients of gift cards or gift certificates.
Physical Security Requirements for Gift Cards
Before you purchase gift cards or gift certificates, please review the UC policy BFB BUS-49: Policy for Cash and Cash Equivalents Received. This will ensure that your department is in compliance with physical security requirements for gift cards and gift certificates. Per BFB BUS-49, cash and cash equivalents such as gift cards and gift certificates:
- Must be maintained by individuals that have attended cash handling policy training and separation of duties must be employed to ensure that no single individual is solely responsible for the entire cash equivalent process;
- Must be protected from loss during transit and requires dual custody. This is to protect the University's financial assets and individuals. If cash and cash equivalents exceed $2,500, employees should be escorted by Protective Services while in transit;
- Must be locked in a secure receptacle or safe at all times except when signed out by a cashier for distribution of the gift cards or gift certificates;
- Must be locked in receptacles or burglarproof/fire-resistant safes based upon the following cash limits:
- Up to $1,000 in a lockable receptacle
- From $1,001 to $2,500 in a safe
- From $2,501 to $25,000 in a steel-door safe, with a door thickness of not less than 1/2 inch.
Please email treasury@ucmerced.edu or contact Christie Harvey at (209) 233-2180 if you have questions or require additional instructions regarding safeguarding gift cards or gift certificates.
