Gifts of Mineral Interests: FAQs
Will Mercy Foundation North accept donations of non-producing mineral interests (including oil and gas)?
Yes. Mercy Foundation North will accept donations of mineral interests. If these interests are currently not leased and not producing, under current IRS rules, they do not have a value for tax purposes, and you will not be able to claim a charitable income tax deduction for your contribution of those assets.
How will my mineral interest be valued?
The valuation of a producing mineral interest is a sophisticated process that will analyze the interest's expected future cash flow.
For purposes of claiming a charitable income tax deduction for your mineral interest's fair market value, you will need to obtain a qualified appraisal for a claimed deduction of more than $5,000. The requirements for a qualified appraisal are set forth in the Internal Revenue Code and accompanying Treasury regulations, and the appraisal must be performed by a "qualified appraiser" as similarly defined. The sole purpose of the qualified appraisal requirement is to allow you to take your income tax charitable deduction, and the IRS will disallow the deduction if the requirements are not met. Without a qualified appraisal, the donor subjects themselves to IRS scrutiny.
If the mineral interest is non-producing and is not currently under lease, the interest is deemed to lack current value and you will not be able to claim a charitable income tax deduction for a donation of a non-producing mineral interest.
Will Mercy Foundation North provide me with the value of my gift?
No. Although Mercy Foundation North may be able to provide helpful information about the value of the interest and point you to the qualified appraisal rules described above, you are responsible for having the interest valued according to the applicable rules. Mercy Foundation North may be able to provide a list of qualified mineral appraisers.
How does I transfer my mineral interest?
Depending on the nature of your interest, you will transfer ownership by a written assignment or mineral deed. In some instances, Mercy Foundation North may be required to record a deed in the land records of the jurisdiction where the interest is located, even if the interest is non-producing.
Can I create a life income gift with mineral interests?
Yes. You can use mineral interests to create a Charitable Remainder Unitrust or, in some cases, a Charitable Gift Annuity. Because mineral interests are depleting assets, however, Mercy Foundation North recommends that you also contribute stock or cash to stabilize the unitrust value and payments over time.
Can I create a Retained Life Estate gift which includes mineral interests?
Yes. You can donate the remainder interest which includes the mineral estate and continue to use and enjoy the property during the life estate term.
Will Mercy Foundation North sell my mineral interests?
The answer to this question can vary depending on whether the interest is generating a large cash stream, whether we need to hire a third party to manage the interest, and whether you used the interest to fund a life income gift. We will evaluate the interest and make the decision that best serves our charitable purposes and your gift plan.