From Dock to Dish: A Deep Dive Into Seafood Sustainability
4 Tax Planning Strategies To Maximize Corporate Donations
The positive impact of corporate giving on employees and nonprofit organizations is by no means the only advantage. The considerable tax benefits of giving through a donor-advised fund (DAF) can support business health too. When an organization can minimize its tax burden through tax deductible donations, there’s a smoother path to long-term growth. Follow these four popular tax planning strategies for achieving that goal.
1. Time Your Donations
No business operates in a bubble. External economic factors affect performance as much as internal decisions. One consequence is that annual revenue (and tax liability) is often inconsistent. There may be windfall years following rapid expansion or sale of assets, or fallow periods when investment outpaces revenue.
One of the big advantages of donor-advised funds is that they allow a business to make several years of contributions in a windfall year, and take the tax deduction up front for that tax year. Focusing contributions on the years with greater revenue can reduce the tax liability. Although contributions cannot exceed 25% of taxable income, the excess is carried forward for a maximum of five years. Crucially, there is no minimum contribution and donations do not have to be disbursed immediately. In other words, the corporation can make the donation now to lock in the tax deductible, without having to decide on where those funds will be allocated.
2. Avoid Capital Gains Tax
Although capital gains tax in the U.S. is relatively modest at 15% or 20%, it could be as low as 0%. Giving through donor-advised funds is one way to achieve that target — again with the possibility of taking the tax deduction upfront.
Selling any appreciating business assets will incur capital gains tax, whether it’s the sale of a business subsidiary, real estate or stocks. Rather than losing 15% of the profits to capital gains tax, corporations can donate the assets to a DAF and still claim a tax deduction (up to 30% of adjusted gross income) at the current market value rather than the purchase price.
That kind of prudent financial management not only builds investor confidence in a board of directors. It also leaves the business with more to invest back into the organization when assets are sold, emerging stronger, not weaker.
3. Avoid Estate Tax
Estate planning is another area in which businesses have the potential to reduce their overall tax burden. As of 2022, any estate valued at over $12.06 million will incur estate tax, and the top rate is as high as 40%. Losing almost half the value of an estate to taxes is hardly an attractive proposition. Fortunately, assets within a donor-advised fund are not included in an inherited estate, therefore are not subject to estate tax. Corporations can remove high-growth assets from their estate by parking them in a DAF, and take the current market value deduction for the tax year in question.
4. Bunch Your Donations
Following changes to tax law in 2017, there’s a significantly less financial incentive for donors to itemize deductions. By contrast, the standard deduction has risen from $6,350 in 2017 to $12,950 in 2022. With that shift in focus comes a clear invitation to bunch donations in a single installment, instead of making them over a number of years. Particularly where a business is close to the threshold, it now makes sense to consolidate funds into a bigger donation in one year to maximize the tax benefits, then take the standard deduction in subsequent years.
Example: A single filer (whether business or individual) whose charitable contributions were “on the margin,” that is, nudging the $12,950 threshold annually, can now consolidate two or more years’ contributions in year one to take a larger deductible, then receive the standard $12,950 deduction in the following year.
Effective Corporate Giving Programs With Groundswell
Groundswell offers a seamless way to make corporate donations simple. With a donor-advised fund, your business can invest the funds in the most advantageous tax circumstances without having to decide when those donations will be granted out. That is for the sponsoring organization to manage. At the same time, the business can take the immediate tax deduction to minimize the tax burden in a given year. Contact us today to see how your business can give better.
How Do Tax Deductible Donations Work for Corporations?
The right for corporations to deduct charitable donations from their taxes was established in 1935. Today, corporate philanthropy is a consistent feature for most of the world’s biggest brands, to the point where corporations donated over $21 billion to nonprofit organizations in 2019. Yet no matter how straightforward the motivation for businesses, the rules surrounding tax deductible donations are complex. Here’s how donations work and which vehicles offer the most compelling benefits.
What Are Tax Deductible Donations?
The fundamental provision of tax deductible donations, as set out under section 170 of the Internal Revenue Code, is that donations to nonprofit organizations with tax-exempt status (see IRC 501(c)(3)) reduce the overall tax burden for the donor corporation within that particular tax year (the IRS provides a useful search tool for looking up the tax-exempt status of an organization). With some exceptions, only funds or foundations within the United States qualify.
Corporations can donate the following:
Cash: still the most common form of tax deductible donation. Often, corporations will sponsor a charitable event and then match whatever funds are raised by employees.
Inventory: in the form of supplies and equipment. Tax is deductible on half the difference between the cost of inventory and its fair market value (which cannot be more than twice the cost of the inventory).
Real estate: rather than selling property and giving the proceeds to a nonprofit (which would incur capital gains in the long term), corporations can donate it to a donor-advised fund (DAF) and receive the current market value tax deduction with no capital gains.
How Do Tax Deductible Donations Work?
The regulations vary for different types of corporation, but some rules apply across the board. Tax deductible donations cannot be for personal or shareholder benefit, for example, so the purpose must be philanthropic. Similarly, contributions must be made before the end of the tax year. Arguably the most important rule, however, is that nonprofit contributions cannot exceed 25% of taxable income (excluding disaster relief). Until recently this figure was 10%, but the IRS extended the limit (temporarily) in 2021 in response to the COVID-19 pandemic. Any excess donations over the threshold are carried forward for five years, after which tax deductions no longer apply.
Deductible donations by corporation:
C corporations, in which the corporation is taxed separately to the shareholders and owners, are the only business structure that can write off a nonprofit donation directly.
Sole proprietors have to report nonprofit donations as an itemized deduction on their personal tax return (Schedule A). Donations cannot be deducted on Schedule C, where business income is declared.
S corporations and partnerships also have to report donations on the individual tax return of each shareholder. In this case, the value of the corporate donation is divided up amongst each shareholder.
No matter what kind of structure a business has, it is required to maintain full records (receipts, registered charity number, bank statements, etc.) of any nonprofit donations to qualify for tax deductions. If the cash donation is over $250, there must be written acknowledgement from the tax-exempt fund or foundation, while for non-cash donations over $5,000 there must be a written property valuation from a qualified appraiser.
What Are the Benefits for Corporations?
While the prospect of a tax write-off, depending on how the business is structured for tax purposes, is a clear incentive, it’s not the only motivation. Donations to nonprofit organizations also foster community goodwill, fortify the corporate mission and improve culture and employee engagement. Increasingly, consumers want to see greater evidence of their favorite brands driving change within their communities, either on a local or national level.
Finding the Right Vehicle for Tax Deductible Donations
Changes to the tax law in 2017 nearly doubled the standard deduction for most individual taxpayers, meaning that there’s now less incentive to itemize deductions as opposed to “bunching” them. As a result, there are even more advantages to donating through DAFs, since these allow corporations to make several years of contributions in a single (typically windfall) tax year.
DAFs also offer some attractive advantages compared to donations through corporate foundations. For a start, there is no minimum annual giving requirement for a DAF and contributions are not publicly reported. That allows corporations to make a larger donation within a single tax year, without having to decide immediately where those donations should be allocated. Because a DAF is managed by the sponsoring organization, the responsibility for disseminating funds does not fall on the corporation, so fewer personnel and resources are required. The corporation just has to establish how much it wants to contribute within the current tax threshold.
For any corporation looking to unlock the financial and brand value of nonprofit donations, Groundswell can provide professional expertise in contributing through a DAF or private foundation. Learn more about boosting employee engagement, supporting the wider community and trimming your next tax bill with Groundswell.
How To Improve Morale at Work: Groundswell Feature in Lifehack
When workplace morale is high, it affects employee engagement and productivity in positive ways. Yet as companies pursue increasingly remote and decentralized operating models, the happiness quotient can be difficult to maintain. That may leave many leaders wondering how to improve morale at work.
According to the article “11 Ways To Boost Workplace Morale,” published on Lifehack, there are many ways to boost morale and help employees feel more connected to the organization and its core principles and values. For many employees, particularly millennials and Gen Z, it’s not just a matter of phoning it in and collecting a paycheck. They want to feel that what they do matters and that the companies they work for care about making the world a better place.
That’s why corporate giving programs are so important. In fact, Groundswell was mentioned in the Lifehack article as a platform that allows companies to turn donor-advised funds (DAFs) into an employee benefit.
Following, we’ve provided a brief rundown of some of the highlights from the article:
It’s important to gather feedback so that you understand what’s working and what’s not. Provide open-ended questions and allow anonymous responses to invite candid responses. Exit interviews are a good way to get constructive criticism.Communication
With more people working from remote locations, it can be difficult to ensure that everyone is on the same page or that they feel connected. Take extra steps to ensure that employees are not isolated and lonely.
Trust employees to do things on their own to meet the deadlines and objectives established. Empowerment goes a step further, as well. Lift employee morale by inviting them to the table. Asking for input in brainstorming sessions helps employees feel included.
Use praise generously and ensure that it is, at least most of the time, unconditional. This means that it comes without counterpoints or corrections. Everyone has something you can praise. Praise does not always have to be verbal; it can come through other forms of recognition like a promotion.
Although leaders must be prudent about sensitive information, it never hurts to give employees the information they need to know. In fact, this will help them feel like valuable members of the team.
Bond through team building activities that allow employees to get to know each other beyond water cooler chitchat. These activities needn’t be elaborate or expensive. Meeting icebreakers and trivia questions can work as well as an escape room outing. There are also virtual team building activities for teams that are not co-located.
Bring teams together outside of work to help the community. Platforms such as Groundswell, which can turn corporate giving into an employee benefit, can be used to facilitate employees working together toward charitable goals.
Trust teams to get the work done. Leaders who can do this without excessive input or monitoring will find that morale increases.
Motivate employees using small incentives. Praise works well, as does a premium parking space or small spot bonus.
Oftentimes, workers feel that they can never stop working. As a leader, encourage employees to take sufficient breaks. Even short periods of time, like 30 seconds, can boost productivity by 13%.
The competitive environment, particularly technology, is changing rapidly. Offer ongoing training to let employees know that you are willing to invest in them for the long haul.
Clearly, there are many ways to bolster morale. Start by measuring, then determine the steps needed to keep your employees engaged and productive. To read the full article, visit Lifehack. Need help with boosting morale and increasing employee engagement? Groundswell can help you reimagine your approach to employee benefits. It’s easy to add Groundswell to your existing benefits package and create a program that employees can be passionate about. Contact us for more information.
How To Improve Company Culture (and Why It Matters So Much): 5 of Our Expert Tips
Culture may not appear on the balance sheet alongside goodwill and brand recognition, but maybe it should. Many people talk about culture, yet few really understand what it is and how to shape it to the company’s advantage. Culture goes far beyond your reputation as a great place to work and free popcorn in the employee lounge.
Rather, company culture is about the values, beliefs and practices that define how leadership and employees:
Support one another
Interact with the company managers and their colleagues
Relate to the business objectives and identity
Above all, get the work done
To understand how to improve company culture, you’ll need more than a list of activities. Begin by understanding the benefits of a strong culture and how important it is to your company’s long-term prosperity.
Why Culture Is So Important
There are some very compelling reasons for leadership to make an effort to improve the company culture. Culture is, after all, one of the main reasons companies like Netflix, Google and Zappos are desirable targets for those looking for a job. Yet, Netflix proudly proclaims in its culture manifesto that their version of the great workplace has nothing to do with sushi lunches and great gyms. They write, “ Our version of the great workplace is a dream team in pursuit of ambitious common goals.”
In fact, there are many benefits to having a strong and positive culture. They include:
Enhanced productivity: A strong culture means that employees align to fulfill a common purpose. The goals and the direction are clear. When employees know what is expected, conflict is minimized and collaboration is facilitated.
Higher level of employee engagement: Culture provides a sense of identity that generates excitement. Employees are more interested in the work because they understand how it contributes to the company’s overall vision. According to Gallup, a highly engaged workforce can increase profitability by 21%.
Improved brand reputation: When it comes to consumer preferences, culture can help one company outperform another. Word of a toxic company culture travels fast via social media. This not only affects the company internally, but many customers will also turn away.
Better talent: Companies that have a positive culture also have a reputation for being great places to work. According to a recent Glassdoor survey, 77% of job seekers consider culture before applying for a job. In fact, culture is considered the number one driver of happiness — even more than money.
The Key Elements of Company Culture
Few people agree on the essential elements of company culture. It’s helpful, however, to examine culture using some sort of framework. Elements, even if they differ from model to model, at least give us something to hold on to. When we understand the elements of culture, it’s easier to see the types of effort needed to bring about lasting change.
While there is no agreed-upon framework for the discussion of culture, here are five elements that we feel are essential.
These deeply embedded standards help determine what’s important and right. Although values tell us how we should behave, they don’t always reflect what happens in reality. To make them an essential part of the culture, values must be reinforced by the company’s systems and its leaders.
Leaders are important in the establishment of policies, the setting of goals and the pursuit of new opportunities. Further, they develop the next generation of employees who will propel the company into the future. Their words and actions, good and bad, are often mimicked by others and reflected in how employees interact with colleagues and managers.
A simple and compelling vision is the foundation of a great corporate culture. It’s so much more than a placard adorning the hallways. Companies that have great vision are aligned behind a common purpose and moving with intent toward True North.
Beliefs are things employees hold to be true. They influence how people make decisions, interact with one another and what they conclude about how things work. Beliefs manifest in behaviors and dictate where leaders and employees invest their time and energy.
Artifacts can be physical objects and events that demonstrate what the company values, such as an open concept layout, an annual family picnic or even meaningful art on the walls. But artifacts also show up in other ways. Some nonphysical artifacts might include, for example, the benefits structure, an often-repeated company legend, loaner bikes on the corporate campus or a “no shoes” policy.
The five elements above help explain why we have included the tips that follow. They will also help you create a personalized and comprehensive strategy to develop your own unique approach to improving company culture.
How To Improve Company Culture: 5 Tips
Many culture initiatives start with a kick-off meeting followed by the appearance of company slogans, some wallet cards and a few wall posters. But that’s not how real change happens. To improve company culture, begin with action. Embedded in these tips are a few ideas to get started. Of course, the caveat is that one size does not fit all. That’s where creativity comes in.
1. Focus on Communication
Leaders communicate as much through their actions as through what they say. They set the tone for how employees speak to one another, resolve conflicts, collaborate in teams and respond to requests from other employees. Their words and actions are mimicked and become ingrained in the culture. Many companies use 360-degree evaluations from bosses, colleagues and employees to create an action plan to ensure that leaders exemplify company values.
2. Provide Transparency
Transparency generates trust, increases engagement and reduces job-related stress. When leadership communicates strategy, it motivates employees and helps them understand how they are contributing to the company’s success. Remember, however, that transparency invites feedback. In some cases, employees may weigh in on decisions without having sufficient information to give an informed opinion. Still, feedback deserves a transparent response.
3. Make It Fun With Gamification
Gamification is a fun way to use something that already exists, like key performance indicators (KPIs), and apply game elements to it. Ensure that your game strategy aligns with and supports the company vision. Include goals, metrics and rewards in the games that invite employees to take responsibility for their own success. Games also encourage fun in the workplace by setting up friendly competitions and providing a great excuse to visibly recognize and celebrate achievements.
4. Enhance the Employee Experience
The employee experience is the sum total of your employees’ interaction and experience with the company. It’s your internal brand. A positive employee experience is the result of beliefs that create a supportive work environment. One of the best ways to support employees is by spending meaningful time with them. Schedule frequent check-ins and one-on-one meetings and ask how you can help them be more successful.
5. Connect to a Purpose
Many employees want to work for companies that value what they value. If you already have a corporate giving program, ratchet it up. If you don’t, now is a great time to start. People, even those who will not show up at company parties, love to come together in support of a good cause. Your employees can select a favorite nonprofit to choose where corporate donations go and work toward charitable goals as a company. The company can sponsor community events and supply employees to help.
Corporate giving programs offer a great opportunity to create artifacts, as well as connect to the broader community. In addition to facilitating employee giving through paycheck deductions, here are few other ideas to engage your workforce:
Offer a launch gift to employees who participate in the new corporate giving program
Celebrate employee birthdays by making a donation to a nonprofit in their name
Incorporate giving into your annual bonus by allowing employees to designate a portion that is matched
Create a holiday match program
Pair spontaneous spot rewards with a charitable gift to employees
Reward performance and achievements at all-hands meetings by awarding charitable dollars
Keep It Going
Once you understand the elements of culture, it really isn’t very difficult to influence it in a positive way. If you run out of ideas, generate enthusiasm by challenging your employees to help. However, no matter what actions you take, change is unlikely to stick without a concerted and consistent effort to keep your culture moving in a positive direction.A corporate giving program is one of the best ways to engage and inspire your employees. At Groundswell, we make it easy for you to turn your corporate giving program into an employee benefit. Contact us for more information.