Guidelines for Business Giving

9/6/2001

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  • Shows That Benefit Charities
    Professional fund raisers are sometimes hired by charities to produce traveling circuses or variety shows as special fund-raising events. Typically, after an agreement is reached, a fund-raising firm sells tickets for the show. In many instances, a solicitor will state that if you are not interested in attending the show, you can purchase tickets that will be distributed to handicapped, or underprivileged, children in your area.

If such statements are made, do not hesitate to ask the solicitor: How many children are there? How were they chosen? How many tickets for the children have been sold? How will the tickets be distributed to the children? Will transportation to the event be provided?

In many communities, the number of children "eligible" to receive free tickets is limited and transportation to the event is not arranged. So, in effect, free tickets given to the few needy children who attend the event might have been paid for many times over by the businesses and individuals who have bought the tickets.

In addition, depending on the details of the written agreement between the charity and the promoter, the nonprofit organization might receive only a small portion (in some cases less than 20 percent) of the total money raised through ticket sales. The charity, or the promoter, should identify at the point of solicitation the actual, or anticipated, portion of the ticket price that will benefit the cause. If the solicitor does not offer this information outright, ask for it.

  • Canisters on the Counter
    Businesses that are open to the public are often asked to place coin canisters, or display cards, in an accessible area so that customers can donate their change to a charitable cause. If your business is asked to participate in this type of fund-raising effort, do not hesitate to ask the nonprofit organization for more information about its location and the nature of its programs.

    Ask if the charity receives all the collected funds. If not, find out what portion goes to the cause. In some cases, the charity may only receive an agreed monthly flat fee, regardless of the amount collected.

    Examine the container and make sure it includes a clear description of the programs for which funds are being raised and an address that donors, or potential donors, can use to request more information.

    Find out if the organization will regularly send a representative to collect filled canisters, or if your business will be responsible for either contacting the charity, or mailing the collected funds. Also, remember that closed containers help ensure greater control over the loss or theft of these types of contributions.

  • Advertising in Charity Publications
    Your business might be solicited to place an ad in a charity's newspaper, journal, or magazine. If so, verify the type of organization selling the ad. Even though it might have a name that sounds like a charitable organization, the publication in fact could be published by a for-profit company.

    Do not hesitate to ask for the same information you would consider before placing any ad. How many copies of the publication will be printed? Who will receive it? Does the publication cost anything? How often is it printed? What is the estimated publication date? Will this publication be distributed to the number and the kinds of people your business wants to reach?

    You might also want to ask the organization if it hired a promoter to produce the publication and/or sell ad space. If so, only a portion of the proceeds from the ad sales will benefit the charity. If you decide to place an ad, ask for a copy of both the draft and final published version of the ad. You might receive an invoice for an ad without having placed an order. If this happens, remember there are laws and regulations against this type of deception.

    Remember, also, that the cost of placing a business ad in a charity's publication is not deductible as a charitable donation, but may be deductible as a business expense, if it can be shown that the expense is "ordinary" and "necessary" in carrying out your trade or business. If this ad is in the form of a personal message or greeting, it might not be deductible.

  • Telephone and Door to Door Appeals
    When someone calls or appears at your place of business to ask for a donation, ask for the charity's full name and address, and whether your contribution would be tax deductible. The caller should also identify his or her relationship with the organization (volunteer or paid solicitor). If the solicitation is made in person, ask to see some form of identification. Ask if the charity is licensed by the appropriate registration does not mean that the state or local government endorses, or recommends, the charity.

    If you are asked to buy magazines, tickets, or candy in conjunction with the appeal, ask what portion of the funds the charity will receive.

    Do not be pressured into making an immediate giving decision. If a fund raiser uses high pressure tactics such as threats of economic retaliation, or repeated harassing calls or visits, contact the BBB.

  • Mail Appeals
    Mail appeals should clearly identify the charity and describe its programs. Beware of appeals that bring tears to your eyes, but tell you nothing about the charity or how its work addressed the problems depicted in the literature.

    Appeals should not be disguised as invoices. It is illegal to mail a bill, or statement of account due, that is in fact an appeal for funds, unless it bears a clear and noticeable disclaimer.

    Mail appeals that include sweepstakes promotions should disclose that you do not have to contribute to be eligible for the prizes offered. Requiring a contribution would make the sweepstakes a lottery, and it is illegal to operate a lottery by mail. It is against the law to demand payment for unordered merchandise. If unordered items such as key rings, stamps, greeting cards, or pens are enclosed with an appeal letter, you are under no obligation to pay for, or return the merchandise.

  • Offers of Merchandise
    When asked to buy merchandise, services, or tickets to a fund-raising event in support of a worthy cause, consider whether you would make the purchase if there were no charitable pitch. If not, consider whether the purchase will provide the maximum benefit to those you want to help.

    Be wary of approaches that ask you to commit your company to buying "four tickets again this year." Was there a "last year"? What is the nature of the event? Whom will the purchase help?

    If you are not really interested in the offered item, service, or event, but would like to help the organization, consider a direct contribution, the full amount of which would benefit the charity.

    If you decide to make the purchase, remember that only part of the purchase is tax deductible. Generally, only the amount of money that exceeds what the Internal Revenue Service calls the "fair market value" of the item, or service, is considered a charitable donation for federal income tax purposes.

  • Charity-Business Marketing
    Charities participating in charity-business marketing arrangements with for-profit corporations may be featured in everything from television commercials to newspaper supplement coupons. The basic solicitation message: "Buy the product of corporation ABC and a contribution will be made to charity XYZ."

    Voluntary CBBB standards call for charities to establish and exercise control over fund-raising activities conducted for their benefit, and to include certain information in solicitations made in conjunction with the sale of goods or services.

    Participants in charity-business marketing should have a written agreement between the company and the charity giving the corporation formal permission to use the charity's name and logo, and the charity's prior review and approval of all joint-venture solicitations that use the charity's name. Also, charity-business advertisements should specify:

    • The actual or anticipated portion of the product, or service price, or the fixed amount per sale/transaction to benefit the charity and if applicable, the maximum amount the charity will receive.
    • The full name of the charity.
    • An address, or phone number, to contact for additional information about the charity or the campaign.
    • The term of the campaign.

  • Is the Contribution Tax Deductible?
    If an organization declares it is "tax exempt," it means that the organization does not have to pay taxes. However, not all contributions to tax exempt organizations are "deductible" for federal income tax purposes.

    The Internal Revenue Service defines more than 20 different categories of tax exempt organizations. Contributions to only a few of these are tax deductible.

    Organizations that are tax exempt under section 501(c)(3) of the Internal Revenue Code are broadly termed "charitable" organizations. Organizations in this category include the following types of nonprofit groups: charitable, religious, educational, scientific, literary, those that work to prevent the cruelty to children and animals, and those that foster national or international amateur sports competition. Contributions to these organizations are deductible as charitable donations for federal income tax purposes.

    Other tax exempt groups include civic leagues and social welfare organizations that are tax exempt under section 501(c)(4) of the Internal Revenue Code, and business membership organizations that are exempt under 501(c)(6). Contributions to such organizations are not deductible as charitable donations for federal income tax purposes, but might be deductible as a business expense.

    A special tax exempt category for veterans' organizations in the 501(c)(19) section. (Some older war veterans' organizations are tax exempt under section 501(c)(4), the previous designation for veterans' organizations.) Contributions to veterans' organizations are deductible as charitable donations.

    Police and firefighter organizations can be tax exempt under a number of different sections of the Internal Revenue Code, depending on the organization's purpose and structure. For example, contributions to volunteer fire departments that are tax exempt under section 501(c)(3), or 501(c)(4), of the Internal Revenue Code are deductible as charitable donations. However, contributions to police fraternal organizations that are tax exempt under sections 501(c)(8), or 501(c)(10), are only deductible as charitable donations if the contribution is to be used exclusively for charitable purposes.

    If you are unsure about an organization's tax exempt status, ask the organization for a copy of its IRS "determination letter." Every group receives such letter from the IRS when exempt status is granted. If you would like more information about tax exemption and deductions, contact your local IRS office.

  • Your Good Name
    Contributing money is only one of the ways in which you and your business may be asked to assist charitable groups. Other common approaches include, requests that you serve as sponsor, or nominal head of a fund-raising drive; give your time as a volunteer or neighborhood solicitor; or serve the board of a charitable organization.

    When you allow your name, or your company's name, to be used by an organization, it is assumed that you also are lending your active support to its activities and fund-raising procedures. Your reputation is on the line. Therefore, it is doubly important that you secure detailed information on the program, its resources, and its fund-raising methods before agreeing to provide such support.

    Even if you are only a minor contributor, you may want to think twice before allowing a charitable group to use your company's name. Some organizations have been known to use the names of contributors to pressure others to contribute.

    If you decide to agree to the use of your company's name, ask for a signed agreement clearly specifying how, when, and where it may be used. The agreement should also confirm your right to review, and approve, advance copies of all print and audio visual materials that contain references to your company.

    Soliciting organizations should honor requests for confidentiality, and should not publicize the identity of donors without prior written permission. Organizations that violate this trust should be brought to the attention of local Better Business Bureaus, and the Council of Better Business Bureaus' Philanthropic Advisory Service.

  • Basic Guidelines to Remember
    In considering charitable contributions, keep the following basic guidelines in mind:

    • If your business is inundated with an ever-increasing number of appeals, consider developing a more carefully defined giving program. For example, you might decide how much you want to contribute during the year, identify a short list of "must" contributions, and then select one or two focal points for the firm's giving.
    • Your company's focus on giving should reflect its size, location, structure, the nature on its business objectives, and the needs of the community. You might also want to involve employees in the contributions decision process, or give to programs in which employees themselves are involved.
    • Ask questions, and do not contribute until you are satisfied with the answers. Charities with nothing to hide will encourage your interest. Be wary of those reluctant to answer reasonable questions.
    • Do not succumb to pressure to give money on the spot. The charity that needs your money today will welcome it tomorrow.
    • Before buying candy, magazine subscriptions, cards, or tickets to a dinner or show to benefit a charity, ask what the charity's share will be. Keep in mind that only a portion of the amount paid for any such item may be tax deductible.
    • Be wary of statements such as "all proceeds go to charity." That can mean that only the money left after expenses -- which may be considerable -- will go to the charitable cause.
    • Do not be mislead by a name that looks impressive or resembles the name of a well-known organization.
    • Bear in mind that, although most states and many communities require charitable organizations to be registered with, or licensed by, state and local authorities, registration does not mean that the government endorses the charity.
    • Always make your contribution by check, and make the check out to the charity, not to the individual collecting the donation.
    • Assign one staff person to handle all requests for charitable donations. This will save time and eliminate the possibility of duplicate donations.
    • Keep records of your donations, such as receipts and canceled checks, so you can document your charitable giving at tax time. Receipts and other written records should show the name of the organization, and the date and amount of the contribution. Although the value of your time as a volunteer is not deductible, out-of-pocket expenses that directly relate to your volunteer services, such as transportation costs, may be deductible.
    • Check out local soliciting organizations with your local Better Business Bureau, and with the local charity registration office (usually a division of the state attorney general's office).
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