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How Community Giving Can Benefit Your Small Business

If your small business hasn’t supported a local community or charitable cause lately, you may find the business and personal benefits you earn from philanthropy make the effort well worthwhile – rewards that may include:

• A tax deduction for money, products or employee time donated to a qualified charity
• A favorable image of your company throughout the community at large
• Soft promotion or advertising for your products or services to a specific group
• A way to network with community leaders, other business owners and potential customers

Many Ways to Give

Consider these ideas and how you can tailor them to your own operation:

Donate goods or services – Giving products or services lets you transfer considerable value to the community without drawing down needed operating cash; identifying your business as the source while providing you with image enhancement and advertising opportunities.

Your company’s out-of-pocket expenses for products or materials given may be deductible, but not if you originally purchased them for your operation and have already deducted them as a business cost. For services donated, you may deduct the salaries of employees doing charitable work, but as a business owner you generally cannot deduct the time you donate. Check with your tax advisor regarding deductibility before you give.

Offer employees paid time off to volunteer –You can help your employees give to the community by offering a specific amount of paid time off to volunteer.

Provide use of your facilities – Hosting a community group meeting or charitable event on your premises may offer image and promotional value, since the event is directly tied to your business.

Match employee cash contributions – This idea requires a cash outlay, but – like encouraging employee volunteerism – it can generate a tremendous amount of goodwill for your company from employees and the charities they choose.

Give company cash directly – Before you give cash, make sure 1) you determine an amount you can afford, 2) the recipient is a legitimate operation that provides a service you want to support, and 3) the group is listed by the Internal Revenue Service as a qualified charity (if not, your deduction may not be income tax deductible). To find out, check IRS Publication 78, Cumulative List of Organizations.

Create a Community Relations Plan

Whether you give products, time or cash, your charitable efforts will be more effective (for you and recipients) if they are part of a thorough community relations plan. Meet with your financial and tax advisors to make sure your business receives plenty of benefits from your plan as well.

October 25, 2001

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