Business Donation Do's and Don'ts

By Maura Gallagher Ardis
Staples Editor

It's better to give than to receive. This familiar phrase is a lesson many of us learned as children — and a way of life we may want to practice as adults, especially during the holiday season.

Today many charitable organizations confront growing challenges. According to the Council of Better Business Bureaus (CBBB), "faced with ever–rising costs, the loss of government funding, and increasing demand for their services, charities are responding by asking for larger contributions from more donors — and they're asking more often than ever before."

Doubtless, your business has been asked for contributions in the past, and you're likely to receive more appeals by mail, phone, or in person during the coming holiday season. However, before you pledge any money or services to a charity, CBBB recommends that you take the following precautions to be sure your donations are helping the needy. In return, your business can enjoy the full benefits of the charitable tax deductions the government allows.

Create a charitable budget

Determine how much money and how many resources (products or services) your company can afford to give to worthy causes each year. This proactive planning will help you keep track of your total contributions, give you the opportunity to alert the local media to your donation, and potentially receive some community–relations coverage.

Legitimate charities are happy to receive your contribution today, tomorrow, next week, or next month.

Never give cash

Always write a check payable to the charity — never give cash to a member of a charity soliciting your business in person. Legitimate charities are happy to receive your contribution today, tomorrow, next week, or next month. Demanding on–spot donations is a tactic some questionable charities may use to make you give without thinking.

Check out the charity

There are no laws in place governing how much of the money collected by a charity must go to programs or activities, in other words, how much actually gets to those in need.

Bennett Weiner, Vice President of CBBB's Philanthropic Advisory Service says, "states cannot dictate how much charities spend on fundraising" and other administrative costs. However, CBBB recommends that at least 50% of all monies raised be spent on programs and services and not more than 35% be earmarked for fundraising. Published reviews of select charities are available on the CBBB Web site. You can also call your local Better Business Bureau for evaluations on regional and local charities.

Verify state registration

Most states require that charities be properly registered, usually with a division of the Attorney General's office. Proper registration within a state, however, is not an official stamp of approval. It only means that the charity has filed the appropriate paperwork.

Clarify tax deductibility

Accounting software

One of the benefits of giving to charity is a tax write–off for your company, as long as the charity qualifies. Unfortunately, many organizations asking for donations are simply "tax–exempted." That's good news for them as they don't have to pay taxes, but not necessarily advantageous for you — your donation may not be tax deductible.

One of the benefits of giving to charity is a tax write–off for your company, as long as the charity qualifies. Unfortunately, many organizations asking for donations are simply "tax–exempted." That's good news for them as they don't have to pay taxes, but not necessarily advantageous for you — your donation may not be tax deductible.

Placing an ad

Charities may ask businesses to run an advertisement in a special publication. Sounds like a good idea since you're making a donation to a good cause, and getting some publicity for your company. Disappointingly, this kind of contribution is typically not tax deductible as a charitable donation. At best, under very specific circumstances, this kind of gift will be deductible as a business expense.

Questionable charities may adopt an impressive sounding name or use one that resembles the name of another well–known charity.

Dance the night away

Fundraising dinners and dances are another tricky situation. Generally, only a portion of the full ticket price is deductible. Charities should provide this information on the ticket or the invitation. If not, ask. A ticket to a fundraiser costing $150 a person may only have a deductibility allowance of $50, or the fair market value of the dinner you enjoy.

Avoid mistaken identity

Questionable charities may adopt an impressive sounding name or use one that resembles the name of another well–known charity. CBBB advises, don't be fooled into contributing to causes based upon name alone. One way to research a charity is to check CBBB's published reviews.

Common scams

The Council of Better Business Bureaus also warns against deceptive practices meant to make you donate money without carefully considering the cause and how much your company can actually afford. Watch out for:

• Appeals disguised as bills or invoices.
• Donation requests that make you cry — not think. This type of appeal often tells a heart–wrenching story, but does not clearly explain the charity or how the group plans to solve a problem.
• Groups that offer to send a runner or messenger to pick up your donation. Legitimate charities are happy to wait for your contribution to arrive in the mail at a time convenient to you.
• Using police or fire in their name to add credibility to the cause. According to CBBB sometimes groups with these words in their names are not officially associated with local, regional, or national organizations.
• Asking you to buy a ticket for a local, needy child to attend an event. Often no arrangements have been made with local children's groups and few, if any children attend. Ask which children's group will receive the tickets and confirm with the group before purchasing any tickets.
• Appeals coming on the heels of a disaster. In these circumstances, give carefully to be sure those affected by the disaster actually receive your donation.
  

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