3 ms·

Well, I hope so. They have to record the income, which is taxable. So if they're donating it to a charity, they should take the write off. It's an interesting

Well, I hope so. They have to record the income, which is taxable. So if they're donating it to a charity, they should take the write off. It's an interesting situation, since the stores are not charities themselves. I don't know if you, the consumer, can write it off. I don't know if there's a some kind of "pass through" loop hole that lets the consumer write off the donation, while the store funnels it to the charity, but themselves do not get dinged for the taxes on the income.

hackernewds 4y ago
Does it lower their effective tax? Where they claim the donation, so that I've effectively donated to them?
- neodymiumphish 4y ago
  No, because if they bring in $10k in revenue from these donations, but then still donate $10k to the charity, their effective income isn't changed by the donation. Maybe they can stake a claim publicly to donating that much income, but that's all publicity (and shouldn't they stake some claim, since their efforts led to such an increase in funds donated to the chosen charity?). The issue in this case is that CVS committed to a donation to the charity, then had customers pay that money on their behalf, effectively.
neodymiumphish 4y ago
There are two ways this could happen, either of them have the same effect for the company handling the donation. First, McDonald's takes the money and sets it aside, using their POS systems to segregate these funds from their traditional revenue. At the end of whatever time frame, they send the accumulated funds to the non-profit. The consumer can use these donations as a write-off by simply keeping their itemized receipt and showing the round-up. Second, McDonald's could collect the funds as revenue, then make the donation as themselves. This is most likely not legal, since the consumer can also count the revenue as charitable donations, so it wouldn't make sense to have the same funds sent for the same purpose but tallied as a donation from two entities. However, this money would be revenue, then a donation, so it would have an impact against their legitimate taxable revenue/profits. For example, let's say McDonald's earns $1b in revenue, including the consumers' donations of $10m and amount to a total profit of $100m. Their profits without the donations is $90m. By donating the $10m from their $100m in profits, their lowering their taxable profits to $90m, making for the same tax obligation as if they didn't take the money in as income. The only place for nefarious activity in all this would be the potential for earning interest from the donations in the time between receiving the funds and forwarding them to the charity. Curious how they would be able to justify those earnings, if they did something like that.
jxramos 4y ago
I wonder how these things even appear on the receipt; come to think of it I've never given to charity using these mechanisms I always give direct so I've never witnessed how such a transaction gets rendered on the receipt.
butlerm 4y ago
What you call a pass through "loop hole" is exactly what happens by default with ordinary business accounting. As a business you have other expenses that increase by the same amount as your other income. Net income is unaffected. Before special tax treatment comes into play, businesses in the United States are taxed on revenue minus expenses, i.e. their net income. Nothing about passing through charitable contributions for others affects their net income at all.

hackernewds 4y ago

Does it lower their effective tax? Where they claim the donation, so that I've effectively donated to them?

neodymiumphish 4y ago
No, because if they bring in $10k in revenue from these donations, but then still donate $10k to the charity, their effective income isn't changed by the donation. Maybe they can stake a claim publicly to donating that much income, but that's all publicity (and shouldn't they stake some claim, since their efforts led to such an increase in funds donated to the chosen charity?). The issue in this case is that CVS committed to a donation to the charity, then had customers pay that money on their behalf, effectively.

neodymiumphish 4y ago

There are two ways this could happen, either of them have the same effect for the company handling the donation. First, McDonald's takes the money and sets it aside, using their POS systems to segregate these funds from their traditional revenue. At the end of whatever time frame, they send the accumulated funds to the non-profit. The consumer can use these donations as a write-off by simply keeping their itemized receipt and showing the round-up. Second, McDonald's could collect the funds as revenue, then make the donation as themselves. This is most likely not legal, since the consumer can also count the revenue as charitable donations, so it wouldn't make sense to have the same funds sent for the same purpose but tallied as a donation from two entities. However, this money would be revenue, then a donation, so it would have an impact against their legitimate taxable revenue/profits. For example, let's say McDonald's earns $1b in revenue, including the consumers' donations of $10m and amount to a total profit of $100m. Their profits without the donations is $90m. By donating the $10m from their $100m in profits, their lowering their taxable profits to $90m, making for the same tax obligation as if they didn't take the money in as income. The only place for nefarious activity in all this would be the potential for earning interest from the donations in the time between receiving the funds and forwarding them to the charity. Curious how they would be able to justify those earnings, if they did something like that.

jxramos 4y ago

I wonder how these things even appear on the receipt; come to think of it I've never given to charity using these mechanisms I always give direct so I've never witnessed how such a transaction gets rendered on the receipt.

butlerm 4y ago

What you call a pass through "loop hole" is exactly what happens by default with ordinary business accounting. As a business you have other expenses that increase by the same amount as your other income. Net income is unaffected. Before special tax treatment comes into play, businesses in the United States are taxed on revenue minus expenses, i.e. their net income. Nothing about passing through charitable contributions for others affects their net income at all.