Y'know those stores that ask you to round up your payment to the nearest dollar to support this or that charity? They keep that money and then make a bulk donation for tax credit. THEY donate billions of dollars.. which you gave them for free.
So, I’m not an international tax expert and can only speak for the United States tax system in this matter.
In the United States, it is not generally legal for a company to “round up at the register” and take the charitable write off. Much the same, if you are asked to “donate $1 to XYZ charity” or such thing, the corporation also generally cannot legally claim it on their taxes.
Generally, the types of donation a store or corporation can claim themselves are ones like “for every $X of qualified purchases we will donate “$X” to charity!” Or “for every 10,000 items sold we will donate $X to charity!” Etc.
The distinction is who is actually giving the money, not who turns the money over to charity. Now the fact that it isn’t strictly legal for the store to claim the donation doesn’t mean it can’t happen or doesn’t, but it would generally be rare if at all due to the liability and consequences of being caught and the relatively low incentive to take the risk.
One way you can better know who gets the credit for the donation on taxes is to look at your receipt. If you “round to the dollar” or give $1 or whatever through the register/check out process vs. a little jar or something, it should be on your receipt. If the donation isn’t a charge on your receipt, the store is either not in compliance with the law or you are not the one who gets the tax benefit, they do. That receipt is proof to the IRS in case of audit of the donation, and likewise it is a tool to help the IRS find corporate tax fraud if a company is claiming donations they aren’t entitled to.
Now, ultimately it maybe doesn’t matter. You almost certainly aren’t going to itemize your taxes. The standard deduction is enough that unless you have very high wealth/earnings or fit certain pocket tax situations that 84-90% of people are generally not going to itemize. A “single” person gets almost $13k as a standard deduction, almost $20k for head of household, and about $26k for married joint filers. That means the average single young person would need basically a minimum of $13k in deductions, charitable donations, qualified medical, school, or work expenses etc. for most people that isn’t practical, and going through the work and keeping all the records long term to protect against audit just to get the same deduction you’d get “free and easy” is a bit silly- so you generally need enough deductions to make it worth it to itemize; and you can’t deduct more than your tax liability anyway so you also need to earn enough taxable income to take the deductions you have stored up.
So you probably won’t be able to get any tax break from your $1 donations at the supermarket unless you’re in a rare group.
So what about the corporations taking the big tax breaks for charity- that’s… gotta rub you wrong a bit at least…? Well…. Maybe? So, most of the time, these donations to charity aren’t going to be all that big a deal tax wise. A smaller company can’t likely gather enough donations to make a big hit to their tax liability, and a very large company will usually have donations that pale in comparison to their scale as far as earnings and theoretically taxable income etc. remember that the most prevalent way for corporations to cash in on such donations is donate a share of profits right? Well… do you think that the tax credit for $100 donated is greater than profit from keeping the $100? A private citizen can lower their tax bracket (tax rate) by earning less. This doesn’t apply to corporations.
So whatever charitable donations they claim are going to hit a statement and possibly change their total tax debt or allow credits, but they can’t really drop their tax bracket. The lower earnings DO show up on investment reports etc. that can impact valuations and stock prices etc, so there is a downside there as well for the corporation. Upsides can be all sorts of things. Charitable donations can be good press,” not only can or get your name in papers etc. or spread by word of mouth, but a charity and it’s key members may be “friendlier” to your corporation if you are a regular major source of income to them. Charities tend to be expensive. Big charities are themselves essentially massive corporations that generate and distribute wealth. The founders and top agents of these charities tend to be wealthy and often connected to powerful people or powerful themselves. They can be CEO’s if for profits or ex CEO’s, board members, politicians, and have connections. Charities also often…
.. have strong media connections and even may have control or influence in various media. A large charity can be powerful behind this. A reasonably “mission oriented” charitable organization may average something like 60-70% of donations going to the actual cause, but many, especially some big name charities, will have different numbers. In perspective, over $5.8 billion dollars was spent on advertising by charities in the USA in 2020, a slight increase over 2019. A “straight charity” may average about 30% income to fundraisers alone. Events, parties and such to attract and appease donors. Pledge drives and prizes etc. large charities due to their prominent members, sympathy and support, and the sheer amount of money they spend contracting media and other companies can exert a fair deal of pressure and influence. For a company to have such an organization rely on them or consider them a major asset can be very helpful.
But there’s another aspect afoot here.
When a large company donates to charity and can serve to incentivize consumers.
Some percentage of people will make purchases during the donation period they may not have made otherwise. If you were going to buy a TV or a dress or whatever anyway, why not “give back” while doing it right? A 15% off sale doesn’t excite most people on most small consumer goods, but a 10% charitable donation might have more effect on consumer attitudes than a slaw costing more money and not having any “halo” benefits. From a perspective of brand identity, sales can be seen as cheapening a brand. Some brands rely on constant sales and mark downs to entice customers- these are usually “bargain brands.” Your pricing strategy etc. will not only impact the type of customers you attract but the attitudes of who you comfort your core customers.
For example, Apple electronics isn’t big on “sales.” The Apple store is not known as a place for “BOGO” deals and attention grabbing signs shouting out price cuts and limited time deals. Cartier is not going to try and sell you a watch or necklace through claims they will beat all competitors best prices. It doesn’t have to be so extreme- The core grocery shopper who primarily shops Whole Foods, Trader Joe’s, Safeway/Vons/Kroger, Walmart… they tend to be slightly nuanced in their demographics. A person may do some shopping at different stores, but plenty of Core Whole Foods customers will literally avoid Walmart and vice versa. Different personalities and perceptions of value etc. can be observed in certain groups as a whole. So Apple’s core customer is more likely to respond well to an incentive to donate $X to charity to help Trans rights for each purchase than perhaps the core Walmart customer.
A person buying a $1200 personal electronic from Apple might be more the demographic to be incentivized by a percentage of their purchase to go to charity than $50 off, whereas the core Walmart customer may be better incentivized by giving $50 off a $1200 TV or personal electronic etc. to be clear I’m not saying one customer is “better” than the other or anything like that trashing Walmart of its customers etc. I’m saying that there are differences in who generally is shopping at these very different stores on any regular basis. That’s the point- companies often use charitable donations as part of a campaign around overall brand image. Not just the “good will” of donating to charity, but in ways like mentioned above. A company that only takes will often be seen poorly, but “giving” in the form of savings isn’t always the smartest move for a brand or segment of industry. Charitable donations are one tool in the arsenal of businesses to help promote their brand, establish identity, and..
Maintain customer relationships or drive sales. Now, there can be a lot of backend potential in charities- especially “in house” charities which are tied directly to a specific company. Ronald McDonald house is one such example. While separate legal entities, this offers cross branding potential and other possibilities and generally strengthens the relationship benefits of the company from the charity. An “in house” charity quite obviously is incentivized to at least passively support the company it is tied to through its efforts and connections.
There are all sorts of little legal and political hooks that we can get into when we talk about charities and what they can be used for. I’ll leave that alone for now. I will say that the largest corporate donors can see some material benefit from shilling for donations, but the backend is usually where the money is. What does that mean? Well… donating $100k to charity can only do so much for a companies taxes and only IF their taxes allow..
.. them to take advantage of the deductions etc. if you invest that same $100k into something like directly funding the planting of trees, you can accumulate things like “carbon credits.” These credits can be used to offset taxes and other charges related to environmental law, or to comply with existing laws where you would fail if you didn’t plant some trees or run some solar panels etc. even if a company itself doesn’t need the credits, such credits can conditionally be bought, traded, or sold. This means company A which is already very “clean” on paper can sell unused carbon credits to company B which is very dirty and can’t accumulate enough credits to legally run or avoid massive expenses unless or buys uo carbon credits. Such credits also allow businesses that are environmentally dirty and or perceived as such to claim “carbon neutral” status- another way they can shift buyer thinking and influence voters and law makers when regulations are proposed. People aren’t necessarily…
Going to go looking to impose strict environmental regulations on a company or industry which is perceived as “eco friendly” or “carbon neutral.” They’ll go look to regulate an industry seen as dirty. So a relative small cost of a few million or hundred million in carbon credits can save hundreds of billions over years or decades by avoiding being seen as a “dirty” company or industry, and “eco conscious” buyers and such will tend to choose a company that advertises how “clean” it is versus “dirtier” competitors- even if in reality their businesses operate the same and it is all largely on paper. This is an aspect of what is called “greenwashing,” a perception of environmentally friendly actions that in reality are as bad or worse. Eco charities can help companies “green wash.” In our system separate companies can exist as conglomerates, each company is legally separate but they are all tied together in ownership. In practice this allows them to take advantage of each other in ways…
Truly independent companies cannot. A simple example, you own a sandwich shop. You need trucks to deliver goods to you from company A and bread from company B. You are a customer to those companies and are each an independent business trying to maximize profits. Now, if the sandwich shop owner also owns a small truck delivery company and a bread company, those companies are technically independent. The truck company can deliver packages to other customers and collect money for those deliveries. The bread company can sell bread to other customers and make profits. But by having the sandwich shop contract with the bread company you also own and use the trucking company that you also own, you keep more money which you can reinvest into your businesses. You can also pass around things a bit, decreases prices at one company and increase prices at another to offset the losses and allow competitive pricing or taking advantage of industry trends or to weather poor performance in one area etc.
So if we then add in the strategic use of charities, we can do all sorts of things. A “green” sandwich shop could be used as an incubator for carbon credits to the shipping company. We could run a charitable campaign for a company in position to take tax advantage while another of our companies is in a record profit position so our total profits aren’t impacted negatively but our end of year/quarter net is higher than otherwise. But let’s add ANOTHER aspect. On the backend, our hypothetical company can get tax breaks for hiring certain types of workers like disabled workers, military veterans, ex convicts etc. we can get tax breaks for upgrading certain equipment and infrastructure like moving to lower grid power consumption or using more Efficient machines.
Now, if you were needing to upgrade equipment or expand/change capabilities anyway, you were looking at the costs of new equipment. Any extra cost will be the cost of qualifying equipment over cheaper alternatives that don’t…
.. qualify for tax or other incentives. Where the incentives exist we can deduct the credits and if there are any reduced operating costs, extended operational life or range, or increased productivity etc- we can factor that in and see if the choice is cost favorable. We can of course also look long term, if this equipment is slated to last 20 years, what do the savings add up to vs. less efficient or alternate equipment? Now add in conglomerates- huge potential there. We can sell or lease our old equipment to a conglomerate affiliate or even create a new company around that equipment. We can take additional tax breaks for things like depreciation in operation or on sale. There actually a lot of shenanigans we can do here to move markets or exploit financial laws or otherwise capture money or poop on competitors. Moving on though- there are sooo many ways a corporation can game things using all sorts of back end money and charity type incentives.
Going back to brand image, if your company serves a community where military heritage and support are big, you can make a point to hire veterans (and potentially get money back to do this…) then you can find raise for veterans and military family related charities, and this creates a brand image that can be very favorable to military service people and their loved ones. Not only can you take money on the back end and taxes for it though, you can potentially save on benefits as laws vary, but where veterans receive benefits like medical care from the VA etc, this can reduce your liability to provide care for employees. The disabled can often be hired for below minimum wage, this was a trick Walmart for alot of attention for. Laws vary again, but if a person has substantially impaired ability and their job functions for certain criteria for what they do, you can get away with paying less than minimum wage. This can be a substantial savings in payroll and benefits as well as provide…
.. good press and tax benefits. Lots of stuff. The rabbit hole is deep.
But getting away from the complex stuff that starts to need lots of context- in simple terms- regardless of who gets a tax write off, the company can take the credit. What I mean is that in their press releases and internal announcements etc. a company can say: “helped raise $10000000000 for…” even if they don’t get the tax breaks. I mean- they did help. If your idea of donating to charity is rounding a pack of skittles to an even dollar you probably weren’t going to go out of your way to find “Turtles for tots” or whatever store charity they are pushing and write a check for $.026 cents. You don’t need them to donate, but how many people asides maybe giving money to pan handlers or buying chocolate from some kids or pledging to PBS or whatever etc will donate charity this year that doesn’t involve being asked at the register of having a store donate based on sales? A good number of us just wouldn’t at all.
Of course, if it is wrong to give because you get something from it, most giving is wrong. And what’s the moral stance here? What if your donation gives Target $.002 off their taxes? Does that change anything if they raise enough money to save a child’s life or feed a hungry family? What dollar value would YOU put on it if their charity helped just ONE person in a profound way? Here is a better question for us- what are WE doing to selflessly help others? If you found this site you have internet and can use it somewhat. So how often do you go find a charitable organization online and donate money? Would you save your $.022 cents or whatever a week and write a check at the end of the year to a charity for that amount? Maybe you would, but would all or even most of the millions of others who donate at stores also do it? Or would these charities suddenly find themselves with less money?
Here is another perspective- it costs these corporations money to participate in charity. Wether it is the small efforts across possibly thousands of locations in training and setting up the donation systems etc. counting and separating the money, handling the money, and the truly expensive and potentially nightmarish accounting and financial record keeping and legal efforts that running such charitable drives cost. We are talking about meticulous records for potentially hundreds of millions of tiny transactions that generate $0 profit but from the employee at contact to the accountants and lawyers and data workers etc. there is time being put in to account and maintain legal compliance. Records must be kept for periods or often years or decades should audits etc. occur. There are Huge and potentially even larger expenses attached. At that point why would a store bother to collect for charity at all if they got absolutely nothing except a fuzzy feeling and a bill?
Let me put it another way- are teachers a scam because they collect money to teach? People like to say nurses and teachers and maybe police or such are “noble” workers who are often underpaid etc etc- but… they are getting paid aren’t they? Like- most teachers aren’t educating the youth out of the goodness of their hearts alone. And that’s ok. Teachers need to eat right? They may want a family of their own? A place to live? A car to get to work with etc? So no, they aren’t just teaching your kids to serve a noble goal, if they stop being paid they generally quit. That’s logical. Reasonable. You can’t help someone tomorrow if you are the one who needs help can you? So can we say a store Is wrong to get a tax break for helping charity? It’s a complex question. I think that as discussed in this string, there are flaws in the way we do these things. The regulations often don’t serve the people or purposes they are meant to. Lots of “gaming the system” and complex rules somewhat designed..
.. with that concept in mind, to allow those with the resources and special knowledge to take advantage of the complex rules system to do so, while obscuring potential advantages form those who aren’t appropriately on the “inside” to know they exist or navigate them or leverage them.
One might wonder if perhaps it would t be better to not give such tax breaks for charitable donation at all and instead collect money from everyone as part of their taxes and use that money through government programs to eliminate the need for these charities. A government with free comprehensive skilled medical care doesn’t need charities for medical causes. A government that prioritizes the research of medical treatments through its efforts and regulations doesn’t need charities to find cures. A government that ensures a basic standard of living for all people doesn’t need charities for helping those without food or homes or clothes etc.
In the United States, it is not generally legal for a company to “round up at the register” and take the charitable write off. Much the same, if you are asked to “donate $1 to XYZ charity” or such thing, the corporation also generally cannot legally claim it on their taxes.
Generally, the types of donation a store or corporation can claim themselves are ones like “for every $X of qualified purchases we will donate “$X” to charity!” Or “for every 10,000 items sold we will donate $X to charity!” Etc.
The distinction is who is actually giving the money, not who turns the money over to charity. Now the fact that it isn’t strictly legal for the store to claim the donation doesn’t mean it can’t happen or doesn’t, but it would generally be rare if at all due to the liability and consequences of being caught and the relatively low incentive to take the risk.
So what about the corporations taking the big tax breaks for charity- that’s… gotta rub you wrong a bit at least…? Well…. Maybe? So, most of the time, these donations to charity aren’t going to be all that big a deal tax wise. A smaller company can’t likely gather enough donations to make a big hit to their tax liability, and a very large company will usually have donations that pale in comparison to their scale as far as earnings and theoretically taxable income etc. remember that the most prevalent way for corporations to cash in on such donations is donate a share of profits right? Well… do you think that the tax credit for $100 donated is greater than profit from keeping the $100? A private citizen can lower their tax bracket (tax rate) by earning less. This doesn’t apply to corporations.
When a large company donates to charity and can serve to incentivize consumers.
Some percentage of people will make purchases during the donation period they may not have made otherwise. If you were going to buy a TV or a dress or whatever anyway, why not “give back” while doing it right? A 15% off sale doesn’t excite most people on most small consumer goods, but a 10% charitable donation might have more effect on consumer attitudes than a slaw costing more money and not having any “halo” benefits. From a perspective of brand identity, sales can be seen as cheapening a brand. Some brands rely on constant sales and mark downs to entice customers- these are usually “bargain brands.” Your pricing strategy etc. will not only impact the type of customers you attract but the attitudes of who you comfort your core customers.
There are all sorts of little legal and political hooks that we can get into when we talk about charities and what they can be used for. I’ll leave that alone for now. I will say that the largest corporate donors can see some material benefit from shilling for donations, but the backend is usually where the money is. What does that mean? Well… donating $100k to charity can only do so much for a companies taxes and only IF their taxes allow..
Now, if you were needing to upgrade equipment or expand/change capabilities anyway, you were looking at the costs of new equipment. Any extra cost will be the cost of qualifying equipment over cheaper alternatives that don’t…
But getting away from the complex stuff that starts to need lots of context- in simple terms- regardless of who gets a tax write off, the company can take the credit. What I mean is that in their press releases and internal announcements etc. a company can say: “helped raise $10000000000 for…” even if they don’t get the tax breaks. I mean- they did help. If your idea of donating to charity is rounding a pack of skittles to an even dollar you probably weren’t going to go out of your way to find “Turtles for tots” or whatever store charity they are pushing and write a check for $.026 cents. You don’t need them to donate, but how many people asides maybe giving money to pan handlers or buying chocolate from some kids or pledging to PBS or whatever etc will donate charity this year that doesn’t involve being asked at the register of having a store donate based on sales? A good number of us just wouldn’t at all.
One might wonder if perhaps it would t be better to not give such tax breaks for charitable donation at all and instead collect money from everyone as part of their taxes and use that money through government programs to eliminate the need for these charities. A government with free comprehensive skilled medical care doesn’t need charities for medical causes. A government that prioritizes the research of medical treatments through its efforts and regulations doesn’t need charities to find cures. A government that ensures a basic standard of living for all people doesn’t need charities for helping those without food or homes or clothes etc.