Uncovering hidden benefits
by Greg Chaillé, president, Oregon Community Foundation
Whether your business has an established plan for charitable
giving or is just getting started, it is important to know how
much of the philanthropic contributions your business makes can
be deducted for tax purposes.
It can be daunting to navigate the complex tax structure for
charitable giving. For instance, because the IRS treats
business expenses differently from charitable contributions, it
is essential that you are precise about the deductions you
claim.
The following information applicable to Oregon businesses is
based on contributions made to 501(c)(3) corporations and does
not cover all types of charitable giving.
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Business Structure
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Who Receives Deduction
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Allowable Deduction
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C corporation
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Corporation
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Up to 10% of a business’s pre-tax profit in the year
of the donations. Contributions over 10% can be carried
over for five years.
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S corporation
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Individual owner(s)
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Up to 50% an of individual’s adjusted gross income in
the year of the donations. There is usually a five-year
carryover.
|
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Partnership
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Individual owners
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Up to 50% of an individual’s adjusted gross income in
the year of the donations. There is usually a five-year
carryover.
|
|
Sole proprietorship
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Individual owner
|
Up to 50% of an individual’s adjusted gross income in
the year of the donations. There is usually a five-year
carryover.
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The next chart summarizes IRS regulations for deductions. For
greater detail on the regulations that are specifically
applicable to Oregon and your organization or business, you
must consult your tax adviser.
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Type of contribution
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Charitable deductions
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Business expenses
|
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Direct cash donation
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Yes. However, if you receive any benefit in return, you
must subtract the value of that benefit from the amount of
your deduction.
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No.
|
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Cash given to employees to donate to charities of their
choice
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Yes.
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No.
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Sponsorship
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Yes, if not directly related to business.
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Yes, if directly related to business.
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Purchase of ad in nonprofit publication
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Yes, if you don’t expect to earn at least the cost of
the ad as a result of its publication.
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Yes, if you expect to earn at least the cost of the ad as a
result of its publication.
|
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In-kind gifts of products
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Yes, for the value of your costs, not market value.
However, inventory donations by C corporations to benefit
the ill, the needy or infants, and gifts of scientific
equipment used for research may be eligible for
higher-value deductions.
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No. Be sure not to deduct your costs as both a business
expense and a charitable contribution.
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Depreciable property
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Yes. Fair market value less prior depreciation.
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No.
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Stock
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Yes, of both C and S corporations. Deductions can be made
for fair market value if held by the donor for more than
one year.
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No.
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— Greg Chaillé,
president, Oregon Community Foundation, www.ocfl.org.
The Oregon Community
Foundation offers advice on the tax benefits of setting up
a business or family foundation
and provides guidance for charitable giving.
