Employee Awards, Gifts and Prizes

A. Overview

In this guideline, the term “awards” includes awards, gifts and prizes provided by UTSA to employees (including student employees), unless otherwise noted.

UTSA supports the recognition of employee service and performance through the use of awards when appropriate. These may be provided to UTSA employees in the form of cash, cash equivalents or tangible items.

Awards should be appropriate for the circumstances for which they are awarded.

Internal Revenue Service (IRS) regulations are intended to ensure that employers do not avoid taxation of employee compensation by referring to a payment as an award. Consequently, all cash and cash equivalent payments to employees are considered compensation and subject to taxation unless a specific exemption applies.

The information in this guideline is provided as a guide for understanding UTSA procedures for processing employee awards. It is not intended to be tax advice, nor does it guarantee the tax consequences of any award to an employee.

Note: The University Excellence Awards and the President's Distinguished Achievement Awards are handled separately. Once the winners are finalized, the Provost Office and Human Resources work directly with Payroll Services on the taxability and issuance of checks.

B. Responsibilities

All employees are responsible for the appropriate use of UTSA funds and compliance with this guideline. Oversight for compliance with this guideline is required at the supervisor, Department Manager and senior administration level.

• Ensuring that awards are issued in conformance with established guidelines, including ensuring that expenses incurred are appropriate for the funding source;
• Maintenance of appropriate records; and
• Determines if recipient should receive the full award or net of applicable taxes.
• Completion and submission of the Business Expense Form (BEF).

• Determines and notifies the awarding department of the taxability of awards;
• For taxable cash awards, notifies the awarding department of the required withholding amount, or the “grossed–up amount” to be charged to the department if the department chooses to present a check for the entire award amount (see Taxability of Awards);
• For taxable awards, records the amount to be included in the recipient's Form W–2
• Ensures payment requests contain appropriate approval; and
• Processes awards in accordance with IRS regulations.

• Ensures appropriate approval for purchases of awards;
• Processes reimbursements and purchases in compliance with this guideline; and
• Coordinates as required with Payroll Services.

C. Appropriate Use of UTSA Funds

1. Recognition:
   • Selected for an official employee recognition award program for which there are clearly defined nomination and selection procedures;
   • Marking the achievement of a major departmental goal or other extraordinary work-related accomplishments; or
   • Honoring a retiree or an employee who is leaving UTSA with at least five years of service (see section on Employee achievement awards below).
2. Length-of-service awards (see section on Employee achievement awards below) presented after the employee has been employed by UTSA for at least five years, or presented in five-year increments.
3. Safety achievement awards (see section on Employee achievement awards below).
4. Prizes (if de minimis), such as drawings for door prizes at UTSA functions.

D. Inappropriate Use of UTSA Funds

UTSA funds may not be used to purchase gifts for occasions such as birthdays, bridal/baby showers, farewells (except as specified in section C.1.), holidays or anniversaries. Departments can only provide gifts for those occasions if the gifts are paid for by other employees without use of University funds.

E. Allowed Funding Sources

1. Official-Occasions Cost Centers are sourced from interest earnings, and are authorized for the payment or reimbursement of employee award expenses. For more information on Official-Occasions Cost Centers see fmog.0701.utsa.
2. Official University Employee Awards Cost Centers that are managed by the relevant departments.
3. Auxiliary Enterprise funds.
4. Designated fee-funded Cost Centers are only appropriate if the expense is included or inferred in the fee justification.
5. Gift funds that contain restrictions may be used for awards only if the purpose is in compliance with the terms of the restricted gift. Care must be taken to ensure that the use of gift funds does not violate the donor's intent.
6. Grant funds are only allowed if the terms of the grant specifically authorize the expense as approved by the applicable RSC.utsa.

F. Disallowed Funding Sources

1. Educational and General funds.
2. Cost Centers funded by designated or differential tuition.
3. Federal grant funds unless specifically authorized by the award terms and approved by the RSC.

G. Determining the Monetary Value of a Tangible Non-cash Award

The monetary value of a tangible (non-cash) item is based on its fair market value (FMV) at the time of transfer to the employee. The FMV is the amount an employee would have to pay a third party in an arm's-length transaction to obtain the award. An item's FMV must be substantiated for compensation and taxation reporting purposes, and relevant documentation must be attached to the Business Expense Form (BEF):

• If the department purchases the award, the original receipt of the item purchased serves as proof of its FMV. NOTE: Do not use One Cards (University credit cards) to purchase employee awards.
• If the department does not purchase the item – for example, the item is given to UTSA, which in turn awards the item to an employee – a reasonable assessment of value must be made using one of the following methods:
  • Providing proof of value or price of an item of the same model matching the description of the award. An internet search of the item depicting the description is sufficient.
  • For a unique award, the value or price of a closely similar item based on an internet search is sufficient.

H. Taxability of Awards

Unless a specific exemption applies, the value of an award given by an employer is taxable to an employee as wages, included on the employee's Form W–2, and subject to payroll taxes and income tax withholding.

1. Taxable Awards Included in Income

Regardless of the cost of an award or its FMV, the following awards are always taxable as wages to an employee:

• Cash and cash equivalents;
• Recognition awards for job performance (e.g., employee of the month, outstanding customer service) unless the awards qualify as de minimis fringe benefits;
• Awards for length-of-service or safety achievement that do not meet the requirements for excludable treatment (see section on Employee achievement awards below); and
• Prizes purchased with university funds (unless de minimis) won by employees from random drawings at UTSA-sponsored events.

Cash awards and “grossed-up” wages to pay for the employee's share of taxes are subject to a flat rate withholding (currently 22%, depending on the particular circumstances) as supplemental wages.

A cash award can be issued to the employee net of applicable taxes, or UTSA can pay the employee's share of taxes and issue a check for the full award amount. Taxes paid on behalf of the employee generate additional income to the employee.