Tax

Giving the Goods Rather than the Cash

Many large U.S. corporations are becoming more generous with their charitable contributions overall, a survey finds, ''but products are far outpaci...
Stephen TaubDecember 12, 2005

Last year, 189 large U.S. companies surveyed by the Conference Board donated a total of $7.87 billion worldwide — 56 percent of it with merchandise rather than money.

In 2002, merchandise reportedly accounted for just 35 percent of total corporate contributions, reported The Wall Street Journal. “Everything’s going up” about giving by these large corporations, survey author Sophia A. Muirhead told the paper, “but products are far outpacing everything else.”

Under current tax law, a company’s product donations can’t exceed 10 percent of taxable income in any one year. The Journal observed, however, that “product philanthropy” and the related tax regulations are not tracked very closely. “The tax rules might have gotten to be a bit too broad,” Bruce R. Hopkins, an expert in nonprofit tax law, told the paper.

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The practice dates to 1976, according to the Journal, when Congress included a tax provision that allowed companies to take up to twice the tax deduction they would normally receive if they donated rather than disposed of goods. In addition, stressed the newspaper, companies could deduct up to twice their “cost basis” — deemed to mean their manufacturing cost — as long as the products were given to a nonprofit organization “solely for the care of the ill, the needy” or minor children.

The Journalstressed that the products can’t be resold or bartered. The rules were subsequently expanded to include scientific property used for research and computer equipment donated to schools, according to the paper.

The 189 survey respondents told the Conference Board that the “tax value” of their product donations last year totaled $3.5 billion, according to the paper, which noted that the Internal Revenue Service acknowledges that it doesn’t know what the true figure is. The paper added that in 2002, U.S. companies claimed a total of $10.3 billion in charitable deductions, including both goods and cash, according to the IRS.

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