Many successful business owners and entrepreneurs take the concept of “giving back” very seriously. Whether they feel a moral obligation to give something back to society and their communities or they want to support causes they’re passionate about, many companies today are actively involved in philanthropy and charitable giving.
An Overall Strategic Plan
To help ensure that your company philanthropy is just as successful as your business and entrepreneurial endeavors, it’s smart to create an overall charitable giving and philanthropy strategic plan. Such a plan will establish guidelines and your charitable giving policy for how company resources will be distributed to specific charitable causes.
These company resources can take many different forms — from time and energy donated by yourself and your employees to cash or other assets given to charitable organizations. Donating cash and/or property to qualified charitable organizations can also yield valuable tax deductions for your business.
Qualified charitable organizations are specifically defined by the IRS in Section 501(c)(3) of the Internal Revenue Code as organizations that are operated exclusively for tax exempt purposes, with none of their earnings inuring to any private shareholder or individual. They generally include most religious, scientific, literary and educational organizations, but not what the IRS calls “action organizations” that attempt to influence legislation or participate in campaign activities for or against political candidates.
Reap Tax Advantages of Gifts
Of course, your reasons for corporate philanthropy probably go beyond just reaping tax advantages for your business. But there’s no reason not to take advantage of tax breaks the government provides for contributions to qualified charitable organizations.
In order to reap the potential tax benefits of your company philanthropy, it’s important to structure your gifts in such a way that they meet the IRS’ strict charitable giving guidelines. You should also plan your giving strategies to allow the level of control that you may wish to retain over your gifts.
One popular giving strategy employed by many businesses and individuals is to donate appreciated property instead of cash. When you donate appreciated stock, for example, you are able to deduct its fair market value at the time of the donation, not at the time when you bought it for less. What’s more, no taxes will be due on your capital gains.
You can also make charitable donations of property (like inventory or equipment) and of goods and merchandise. For example, food manufacturers and processors often donate food to local shelters, and electronics stores often donate computers and printers to schools in low-income areas. Keep in mind that your deduction for these kinds of donations will be based the property or merchandise’s current fair market value. And if you receive any tangible goods or services in exchange for your donation, their value must be subtracted from the fair market value of your donation in figuring your deduction.
Giving Your Time and Expertise
Corporate philanthropy can involve not only giving money and assets, but also the giving of your and your employees’ time and energy. Many businesses today organize company-wide events in which employees are encouraged to come out and spend a day volunteering to help a charitable cause, like a local food bank or homeless shelter.
As a business owner, you can provide your expertise and wealth of knowledge to others. Whatever industry you’re in you can volunteer your time and share your experience by sitting on a nonprofit committee board or providing pro bono services. For example, a marketing agency could provide pro bono work by creating brochures and other marketing materials. By doing so, your charitable contribution will be time and not money.
Your charitable giving and company philanthropy strategic plan will provide a detailed roadmap for how and why your company will donate resources — whether cash, property, goods, merchandise or time and energy — to specific organizations and causes, as well as how your giving will be structured to maximize the tax advantages.