Curt Weeden is president of the consulting firm Business & Nonprofit Strategies, Inc. He is author of Smart Giving Is Good Business (Jossey-Bass/Wiley) and the novel Book of Nathan recently nominated for best mystery of 2010. His website: www.curtweeden.com
The syndicated radio host Ron Insana asked me this question a couple of weeks ago just after the release of my new book Smart Giving Is Good Business…
“Do you really think businesses are going to pony up another $8 billion in cash each year for charity?”
Yes, I do. For a couple of good reasons.
First, too many corporations have lost sight of how strategically managed contribution programs can address critical business needs and objectives. Getting past 13 roadblocks outlined in Smart Giving hopefully will fix that problem and turn around what’s been a two-decade-long decline in corporate philanthropy.
Second, at least some of the recommended $8 billion increase (which will move cash donations from roughly $15 billion to $23 billion a year) will come from reconfiguring line items in budgets already in place. Example? Some companies code cause related marketing payouts made to 501c3 organizations as ordinary business expenses and not as charitable deductions. The payments don’t get added to what businesses publicly declare as their total commitment to the nonprofit sector.
Publicly Disclosing Cause Marketing as a Charitable ContributionSmart Giving covers a lot of territory including a new algorithm companies can use to budget next year’s contribution investments. But the book is also important for another reason — it calls on companies to sign off on the same page when it comes to publicly disclosing a more comprehensive look at how they are financially helping nonprofits.
The Rule for Cause Marketing
For cause marketing, the rule is simple. If a nonprofit organization receives support via a cause marketing deal and if that payment is not subject to an unrelated business income tax (UBIT) then the nonprofit is counting the cash the same way it logs in other charitable gifts. For the sake of apples-to-apples reporting, the company making the cause marketing payment should add that same amount (not including any commercial or promotional costs) to its publicly reported giving total for the year.
Predictably this proposed change will drive more than a few accountants and tax lawyers nuts. The company books will still show the cause marketing cost as an ordinary business expense (probably carried as a marketing department charge). But the company then ramps up its corporate philanthropy numbers for public reporting purposes. Precedent trumps this concern. Companies already have double vision when it comes to accounting and reporting. Most corporations publicly point to the fair market value of products they donate which usually is a much higher number (sometimes more than eight times higher) than the product donation tax deduction shown on line 19 (“charitable contributions”) of a company’s federal tax return.
An Easy Start Toward an $8 Billion Hike in Corporate PhilanthropySmart Giving goes beyond nudging some businesses to increase their corporate social investments. It also campaigns for more factual tracking of what companies are already doing for nonprofit organizations. How much would adding non-UBIT-type cause marketing payments to the nation’s corporate giving total? Of the $1.5 billion IEG estimates businesses invest in cause marketing initiatives each year, we might see half that amount ($750,000) shifted to publicly reported giving totals. That still leaves corporations several billion dollars short of Smart Giving’s push to hike corporate philanthropy by $8 billion a year. But it’s an easy way to start.
Does your company consider cause marketing to be a charitable contribution? If not, how challenging would it be for your company to make this shift?
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