G14: Purchase and distribution of gift cards

I.  Policy Statement

This policy is to set forth guidelines and procedures for the purchase and distribution of gift cards.

II. Reason for Policy

Gift cards are considered cash equivalents by the IRS and are not de minimis fringe benefits.

For employees, the value of gift cards is always taxable compensation regardless of amount and must be reported through payroll and included on the employee’s Form W-2.

For non-employees, gift cards may be reportable on Form 1099-NEC when the aggregate amount paid during the calendar year meets or exceeds IRS reporting threshold of $2,000.

III. Applicability of the Policy

This policy applies to all College departments, employees, faculty, staff, students, and administrators involved in the purchase, approval, distribution, receipt, or accounting of gift cards purchased with College funds.

IV. Related Documents

De minimis fringe benefits: 

https://www.irs.gov/government-entities/federal-state-local-governments/de-minimis-fringe-benefits                

About Form 1099-NEC, Nonemployee Compensation:

https://www.irs.gov/forms-pubs/about-form-1099-nec   

V. Contacts

VI. Definitions

Gift Cards 

Stored-value cards, digital gift cards, prepaid debit cards, or similar instruments that function as cash equivalents and can be exchanged for goods or services from a merchant.

This includes:

• Electronic gift cards
• Reloadable cards
• Prepaid Visa/Mastercard cards

VII. Procedures

Allowable Uses

• Student prizes for contests, raffles, or competitions
• Student participation incentives for approved programs or research
• Employee recognition awards (subject to tax reporting requirements)
• Approved institutional events or engagement activities

Prohibited Uses

• Employee bonuses
• Substitute compensation
• Honoraria or payment for services
• Circumventing payroll processes
• Payments to independent contractors for services
• Personal purchases

Internal Control Requirements

Departments must:

• Secure gift cards in a locked location with restricted access
• Assign a department custodian responsible for tracking inventory
• Reconcile purchased gift cards to the Gift Card Log
• Report lost or stolen cards immediately to Financial Services

Gift Card Approval Form

This form is the official approval method for the purchase of any gift cards. The form must include the purpose of the purchase, funding source, quantity, and dollar value of gift cards requested. Financial Services must approve the request prior to purchase. Purchasing will process the order only after approval documentation has been received.

Gift Card Log

For IRS tax reporting purposes, the department is required to complete the Gift Card Log, which lists the parties receiving the gift cards and information required for IRS tax reporting purposes. The Requesting Department will give the Gift Card Log to the Financial Services office by the earliest of the following dates: a) ten (10) business days after all gift cards have been distributed, b) sixty days (60) after gift cards have been purchased, or c) November 15 of the current calendar year.

The Gift Card Log will be a standardized spreadsheet that will need to be completed with the following information:

• Department Name
• Event/program name
• Distribution Date
• Type of gift card (Amazon, Target, etc.)
• Serial Number of gift card
• Gift card amount
• Recipient full name (first and last)
• Recipient Colleague ID number (if applicable)
• Recipient mailing address
• Initials of recipient upon receipt of gift card
• Initials of department custodian

Gift Card Tax Reporting

For any non-employee who receives $2,000 or more in gift cards under one entity, the individual will receive an IRS Form 1099-NEC for the total value at the end of the calendar year. An IRS Form W-9 will be required from each non-employee (including students) who receive a gift card.

Gift cards issued to employees must be reported to Human Resources or Payrollso that the value can be included in taxable wages and reported on the employee’s Form W-2.

Compliance 

Failure to comply with this policy may result in corrective action, including reimbursement of unallowable expenditures or disciplinary action in accordance with College policies.

Approved by the OCC Board of Trustees June 23, 2026