Because they use your donations to pay for their parties
I wasn’t going to comment initially but, thinking again, I will.
According to what I was once explained, the scheme runs like this.
a) organization X starts a fund raising campaign
This alone can be deducted as an expense, as any amount of hours can be attributed to planning, preparing, etc, the entire thing.
As this time as no profitable end, it can be deducted.
b) You donate. But now it’s their money.
Your money is siphoned to a separate bank account or just tallied and earmarked as for charitable purpouses but this does not mean the entity needs to hand it over immediatly.
That money is held within the company’s vaults, figure of expression, and, as such, counts towards the overall financial assets of the company.
It still needs to be handed to the end recipient but until it does it can be used to leverage loans and be invested into short term investment products, like overnight deposits (with hundreds of thousands or even millions it does gain interest overnight).
c) the money gets donated eventually but not by you
Eventually, all that money gets handed over but it is now their money, not yours. And as such, they get the tax deduction. And, again, with hundreds of thousands to millions in donations, the deduction gets very high.
This deduction, on your expense, goes towards clearing more of their profits.
Want to do something good?
Volunteer. Help your neighbour. With your own efforts, actions and work. Don’t hand over money.
As mentioned in other comments - the tax deduction thing is not true. It is true, however, that they can '‘donate’ the funds to a charitable foundation that is run by the same people as the company (i.e. they are on the board of the charity as well as being C-suite execs of the company) thereby creating a slush fund disguised as charity that may only need to actually use 5% for charitable activities.
And as such, they get the tax deduction.
This part, at least, is not correct. (explanation at apnews.com, alternate snopes link)
THIS IS PURELY A METHOD OF AVOIDING TAXES.Never donate to charities through one of these big companies. If you want to donate, then do so directly.
Anything else just helps the corporation wash their image by gathering money and then donating to whichever cause.
They do so and also take all of that money off of their taxable requirement.Edit: was wrong.
Why do they never offer to match donations? I’d probably consider it if they did.
Someone correct me, but I understood that donations serve as a tax write-off.
So they don’t care about the donations as much as their own savings.Since you asked, the tax write off stuff is basically a myth. If you donate, let’s say $20, then they have to mark down $20 of additional income, raising their tax burden by $20 x 21% (federal, plus whatever state tax there is). Then, when they hand over the money to the charity, they get to take a $20 deduction (not a credit) which means their tax burden is lowered by $20 x 21% (again plus any state tax). So comes out even in the end. The deduction basically says, hey, remember the $20 I put down as income? Don’t tax me on that because I used it for a tax-exempt purpose. They report it as income, then report the donation. Nothing fishy there.
However, depending on how long they hold onto that money, it’s possible to use the money to make other money, like investing it or even just sticking it in a savings account where it would get a little interest. And with enough donations, that might add up.
Why do they never offer to match donations?
Why would they bother? It costs them next to nothing to stick an ad on the screen. But matching donations would be far more expensive.
Besides “matching donations” has always been a scam. These agreements inevitably amount to “Person/Org X agrees to donate up to $X in matching funds”. But $X is so small that its trivial to hit. And I’ve never heard of someone failing to get the whole amount regardless of the donation rate. It’s just an excuse for the folks running the donation drive to scream “PLEASE! PLEASE! PLEASE! Your refusal to donate an extra $1 is costing us $10!!! Why are you being so stingy!!!”
Because you’re giving them money that they then donate and claim as their own. It’s a way to get around actually donating money from their profits, while making it look like they’re donating a ton for the tax write off.
That’s not how it works, at all. Businesses can’t claim donations they collect on behalf of a charity as a deduction.
They can lie and misreport. And if nobody in the state/federal bureaucracy follow up, they get away with it.
A friend in the field had told me that they preemptively make donations to offset their taxes. Let say it’s 1million dollars. they put up 1 million dollars of their own money, then they gather donations at the till towards this charity to pay themselves back for the money they spent.
Again just what I’ve heard.
I had a friend who once told me his brother discovered Alaska while riding in a hot air balloon. I wonder if we have the same friend.
“Had a friend at a business report that the business was casually doing fraud to lower their tax liability.”
“Oh yeah? Well I had a friend who reported he is a talking monkey who lives in Mars.”
“Damn, both of these stories sound equally far-fetched and unbelievable.”
Your friend is wrong, or the company he works for is committing fraud.
company committing fraud
Well yes, it’s a corporation.
Congrats, you understand that the government taxing them and using the money to fix social problems will work infinitely better than charity ever has.
They likely do donate and this is a way for them to make that money back.
It’s not. Literally the only benefit the business gets is bragging rights.
The purpose of these is that the company gets to deduct charitable donations from its revenue before taxation. Even if you are in a position to give you probably shouldn’t use this method.
If they’ll actually open their own wallet in e.g. a fund matching program, there might be net benefit, but don’t do it just to help companies avoid their fair share of taxes.You’re wrong. Companies that collect donations on behalf of a charity can’t deduct a single penny of it.
This isn’t correct.
If they get an extra million in these donations, they can deduct that extra million. It’s a net zero improvement. It does not help them at all financially.
But it’s free good will and they can advertise that THEY donated a bunch. It’s just to make them look good.
They can’t actually deduct a penny from it.
They can claim it’s not income and they’re simply passing the money through. They don’t pay taxes on it.
Because it’s not income and they’re just passing the money through. Why would they pay taxes on it?
They wouldn’t.
My original point is that there’s no additional financial benefit to the company by doing this. They don’t win or lose financially.
People make these donations out to be some kind of financial scam. They’re not. They’re a perception scam, because the company can say “we donated X, aren’t we great”.
The reason they ask for donations is because they can pool the donations together, say they’re donating, and then get a tax write off. They are just trying to make free money.
You should delete your misinformation.
No, they should leave it up as it is immediately debunked in the next comment, which is good.
Yeah they won’t. Lemmy is very lax when dealing with published falsehoods which are in support of an ideologically needed narrative.
This is a commonly repeated myth but it isn’t true. Nobody gets a tax write off in point-of-sale fundraising. Charities ask stores to do it because it’s one of the most efficient and effective ways for a charity to raise money. Chairty events are costly, and asking people on the street gets a lot of rejection. Stores agree to do it because they get to run ads saying they helped raise millions for charity and the charity will usually shout them out as well.
I’ve always been curious how the money gets to the charity. Does the corporation put the donations into an account and collect interest on it before they give it to the charity?
And who pays the cc fees? And do they have an agreement with the cc provider for a kickback? There are so many hands involved with simple monetary transactions most people wouldn’t believe it.
Charity is profitable.
I work for a retailer and have been loosely involved in a project like that a few years ago.
Basically, it felt like it was mostly a very inexpensive way for the company to get everyone involved feel good about themselves. The free advertising was definitely an argument to get the higher-ups on board, but my impression was that it was kinda secondary compared to the kinda fake good conscience it gave everyone.
There was definitely no tax breaks for that initiative though, so at least in my country that is indeed a myth
Damn, I didn’t know I was duped. I do wonder how this holds up in countries other than the US.
They still take credit for it like you said.
Don’t forget the press release they can also make saying how nice they are for donating, too…
Remember that none of the people working there have any say in the matter either, and are most likely struggling themselves. The system was made broken.
It’s not the people , it’s the corporations
I never take out my frustration on the employees, but one time I did mutter, I’m still waiting for someone… any one …to give me something for free.
Oh man I feel ya.
Because they don’t want, they just ask if you want.
I don’t know. I don’t know how high finance works, but a company who has the oportunity to take 1 dollar from every person is a big no for me. I do not care if they do donate the money or not, I don’t do it because we let them carry that ridiculy amount of money, to the people that does know how high finance work. Maybe the money it is donate it, yea, but, what’s next? I do not want to be rewarded, I wanna know if
my moneythe money of everyone was delivered as it should, that’s all, and I don’t think that a company uses the same time that spent to ask you for a dollar for letting you know that everything is fine.
