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Janice France-Pettit: The advantages of charitable giving

Union Bank of Santa Clarita

Posted: September 21, 2010 2:19 p.m.
Updated: September 21, 2010 2:00 p.m.
 

For many Santa Clarita business owners, donating to a charity is probably something we do regularly. Philanthropy on a local or global scale benefits our society and promotes good will. It may also improve how people perceive your business and help you maximize your tax return.

Taking the time to educate yourself on the advantages of charitable giving may result in a larger tax return for you in 2011, as well as lead to intangible benefits such as increased community visibility, networking opportunities and more.     

Although altruism is the primary reason small business owners make charitable contributions, giving can also have other important benefits.

Donating assets and/or services
Typically, business owners are able to make contributions of merchandise, property, and other assets that can benefit a charitable organization. Tangible property can usually be deducted in the amount of the property’s fair market value — the amount a buyer would be willing to pay if the property or product was sold on the open market. However, certain limitations do exist on these types of gifts and Internal Revenue Service rules on these contributions can be complex, so it is wise to consult your tax advisor to determine the deductibility of these types of contributions.

Whether your business is sponsoring a charity event, donating inventory or services or making a cash donation, these acts are all considered forms of charitable giving and may be beneficial to your business when they qualify as tax deductions. 

Defining deductions
In most cases, gifts made by your business to a qualified nonprofit organization may be deducted on the company’s income tax return, but be aware that not all contributions are considered legitimate deductions.  In order to qualify as a deduction, contributions must be made to a qualified charity. These include organizations such as educational institutions, religious organizations, publicly supported non-profits and private foundations. 

Most charitable organizations operate under a federally approved designation known as a 501(c)(3). This designation ensures that the charity is genuine and accountable to rules that regulate nonprofit activity. Before you write a check or donate merchandise, it may be wise to ask whether the organization you are considering supporting has a 501(c)(3) designation.

Intangible benefits
In addition to the tax advantages, many marketing-savvy entrepreneurs have learned that aligning their business with a nonprofit organization can help create awareness and goodwill for their businesses. People like to associate themselves with businesses that support worthy causes, so getting involved with a charity can be a powerful way to develop exposure for your product or service while also helping your community. And while this “cause-related marketing” does not necessarily qualify as a charitable deduction for tax purposes, it may qualify as a marketing expense deduction.

Supporting nonprofit organizations may extend your sphere of influence and result in networking opportunities that can benefit your business. Whether you are making material contributions or volunteering time on a committee, event or a board, chances are you will be in contact with other like-minded individuals who could possibly become customers. 

The foregoing article is intended to provide general information about the advantages of charitable giving and is not considered financial or tax advice from Union Bank.  Please consult your financial or tax advisor.

Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, Santa Clarita Valley, San Fernando Valley and Antelope Valley region. The foregoing article is intended to provide general information about and is not considered financial or tax advice from Union Bank. Ms. France-Pettit’s column represents her own views, and not necessarily those of The Signal.

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