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With the holidays fast approaching, now is a good time to make sure your company has an office gift policy -- and to stick a copy of it in everyone's stocking.
While it's the season of giving, companies still need to set and enforce gift-giving guidelines, as overenthusiastic gift exchange has the possibility of resulting in compliance and tax violations.
When Is a Gift Not a Gift?
We're sorry to be a Grinch, but holiday gift giving can raise significant legal issues. A recent white paper from Thomson Reuters notes that "there is an increasingly blurry line between gift giving and bribery," for example. While typical bribery might include government benefits, sweetened deals, and illicit kickbacks, sometimes a gift is enough -- especially when that gift is made to an official. As the white paper explains:
When it comes to gift, giving, businesses cannot offer, promise or give anything of value, directly or indirectly, to a foreign official for the purpose of obtaining or retaining business. Corporate gifts need to be carefully evaluated to ensure they do not appear to violate these prohibitions.
The paper recommends instituting a cost threshold, say $100 to $250 depending on the market. Any gift above that amount would need to be approved by a designated executive beforehand, in accordance to the company's gift policy. Companies should also track gifts given and accepted, consider capping gifts to single individuals, and require prior approval for presents for government officials, compliance officers, and senior executives.
Of course, you'll want to forbid cash gifts as well. No briefcases of Benjamins for the next White Elephant exchange with those government officers.
Don't Forget to Think of the Tax Man This Christmas
Limiting gifts isn't just about protecting the company from liability. It's also about protecting employees.
Generally, gifts given to employees are considered income and their value is taxed. There are, of course, exceptions for "de minimis" gifts. There's no concrete definition of a de minimis gift, but the IRS has ruled in one particular case that gifts exceeding $100 don't meet that definition, so it's a good rule to keep any gifts to employees under $100, or to treat that gift as part of their total income.
There's also an exception to the de minimis exception. Cash gifts and gift cards or certificates of any amount are never excluded from income -- so they should probably be excluded from your company's list of allowable employee gifts.
Nine-dollar scented candles, though? You can't go wrong with those.