Corporate philanthropy is at a crossroads, facing a decline in contributions as executives grapple with the delicate balance between societal responsibility and shareholder demands. Charitable contributions by U.S. companies fell 14.5% in last year, and over the last 15 years, corporate giving as a percentage of profits has dropped by 50%, according to an article published by Harvard Business Review and FSG Social Impact. In contrast, small businesses find unique advantages in charitable giving, fostering community ties, and enhancing their brand image.
Charity As Relationship-Building
"What distinguishes small business from large-scale corporations is the connection with the community," says Kristen Fusaro-Pizzo, a Peer Collaborative Teacher at Staten Island Technical High School. Small businesses thrive by demonstrating care for individuals and community causes, creating a unique selling point that resonates with conscientious consumers.
Charitable giving helps businesses form alliances, fostering long-term relationships and broader professional networks. It not only improves company culture and morale but also showcases a thoughtful and global worldview. This positive image attracts a more loyal customer base, creating a win-win situation for businesses and the communities they serve.
And it's not just about the money. Businesses can support charities by volunteering, sponsoring sports teams, launching charity drives, and donating online. Encouraging employees to participate in charitable endeavors aligns with their values and talents, creating a holistic approach to philanthropy within the company.
Understanding Charitable Tax Deductions
For small businesses, navigating charitable tax deductions requires careful consideration—and likely the help of an advisor. According to Schwab Charitable, 85% of advisors offer charitable planning for clients, highlighting the dual benefits of maximizing philanthropic impact and minimizing taxes.
A few basics to consider:
- Eligibility typically requires donations to bona fide 501(c)(3) organizations. Sole proprietorships can opt for a business tax deduction or an itemized deduction, with the latter being affected by the Tax Cuts and Jobs Act of 2017.
- Small businesses also need to consider the basics of tracking, limits, and types of deductible gifts. Tracking donations meticulously is crucial, and receipt-tracking software can simplify this process.
- Businesses must be mindful of political donations, gifts to individuals, and gifts to for-profit schools, as these are non-deductible.
Perhaps the most important takeaway is to give wisely. The importance of balancing personal and business cash flow when making charitable donations cannot be overstated. Aligning with charities that support business values, researching their efficiency to avoid scams, and ensuring responsible use of donations contribute to a meaningful and mutually beneficial partnership. Kris Putnam-Walkerly, a strategic advisor to philanthropists, advises businesses to "develop an ongoing relationship with the charities you support," emphasizing year-round support through volunteering, event sponsorship, and collaboration with local business associations.
In navigating the landscape of corporate and small business philanthropy, the key lies in finding a harmonious balance between social responsibility and financial imperatives. Small businesses can leverage their community ties, building a positive image while contributing meaningfully to causes that align with their values. The decline in corporate philanthropy underscores the need for a recalibration, urging businesses of all sizes to reconsider their approaches and contribute meaningfully to foster a cycle of prosperity. As we move forward, it's not just about giving; it's about giving wisely and building relationships that stand the test of time.
This article was originally published on Certainty News: Article Link