Corporate Foundations

Should My Company Establish a Corporate Charitable Giving Foundation?

breiby@growyourgiving.orgCorporate Giving

Your curiosity is a strong indication that it’s time to start thinking seriously about establishing a corporate charitable giving foundation. Obviously, you are thinking along the lines of corporate social responsibility (CSR), giving back to your community and internalizing your employees’ and customers’ desire to be associated with a brand that is making a meaningful impact on causes that matter to them.

There are many ways your company can engage in charitable giving, ranging from matching gift programs, giving cards and disaster relief efforts and donations. Eventually, the time comes when it makes sense to organize and streamline your philanthropic efforts under one corporate giving program.

Does establishing a corporate foundation make the most sense for achieving your company’s charitable goals? Or, is there another option that could help do the most good and result in other advantages and efficiencies?

Corporate foundations are ubiquitous. We all recognize the term, associating it with corporate support of charitable causes. Naturally, foundations are top of mind for corporate leaders serious about CSR. What is not always understood is that a corporate foundation, as defined by the Internal Revenue Service (IRS), is a nonprofit itself that comes with a heavy managerial load.

A corporate foundation’s legal obligations and tax rules include, to name a few:

  • It must be a separate legal entity and have its board members acting in its best interest
  • It must have its financial reports filed annually with the IRS
  • It might be required to register and renew annually to solicit charitable contributions in a majority of states in order to fundraise
  • It must register with and file financial statements at the state level
  • It must abide carefully by the IRS’s self-dealing rules

Rather than taking on the administrative work of a corporate foundation, an alternative is to establish a corporate donor-advised fund that can act in the same way as a foundation. The difference is that your corporate donor-advised fund gives you the ability to maximize tax advantages and create efficiencies in your charitable giving program.

The tax benefits of a corporate donor-advised fund include:

  • Higher AGI tax deduction limitations
  • A fair market value deduction for gifts of real estate and closely held stock
  • Avoiding annual excise tax payments
  • Avoiding excise taxes on the sale of highly appreciated gifts

Other benefits are:

  • Cost savings from not having the expense of corporate foundation registrations, renewals, filings and meticulous compliance oversight
  • Minimal time and effort on your staff’s part for foundation administration duties
  • All your charitable donations coming from one account from which you’ll receive one year-end statement for accounting purposes

Once You Know How, Verify Consensus on Your Why

Your company’s charitable account, whichever type you elect to establish, will be more effective if it is driven by the collective why. In other words, why is your company supporting the causes it supports? Your why should be connected to your employees’ and customers’ interests related to your industry. For example, a shoe company with a corporate donor-advised fund that makes grants to a local nonprofit that helps students whose parents struggle to buy new shoes that fit properly.

To keep your philanthropic efforts going strong, occasionally re-evaluate your why. Does it need to be expanded? Are your employees and customers still feeling passionate about the causes supported? Along with other company news, keep your charitable giving program part of your ongoing communication. Share milestones, success stories, financial impacts and reminders on volunteer opportunities, and donation drives and monetary matches to stoke enthusiasm.

How Can We Help?

Interested in launching a corporate donor-advised fund to help fulfill your company’s charitable mission? Contact the Greater Horizons team to learn more or get started.

Greater Horizons has helped hundreds of U.S.-based companies establish corporate donor-advised funds. Our dedicated team can handle the administrative aspects, as well as guide you through strategic planning, trends in corporate giving, engaging employees, IRS compliance, matching gifts, making grants and whatever else you need to embrace giving back to the community. Fees start at just $21 a month.