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AFAIK, it's all about tax deductions. If a company gives to a charity, they can write it off, but they'd rather someone else foot the bill for the giving. So

by jpk 4y ago

AFAIK, it's all about tax deductions. If a company gives to a charity, they can write it off, but they'd rather someone else foot the bill for the giving. So by presenting the option to round up your purchases or whatever, they give you the opportunity to essentially pay part of their taxes for them. So in general, if I want to give to a charity, I give directly and claim the deduction myself unless the company is matching or something.

UncleMeat 4y ago
This is not how it works. Businesses pay taxes on profits, not revenue. If a business donates money to charity or makes a big pile of cash and lights in on fire, both reduce profit and therefore tax burden. If a business collects $10 from people and then donates that $10 to charity the net effect on their taxes is exactly zero.
- jpk 4y ago
  Hm, IANAA but my understanding is if you sell a widget for $10, which costs $8 to produce, you have to pay taxes on the $2 profit. But if you present the option to your customer to pay $10 + $1, knowing the extra dollar will go to a charity, it's still a $2 profit, but the extra dollar can be used as a deduction to reduce the business's total tax liability. I guess what you're saying is the extra dollar is actually considered profit, and using it for a tax deduction it's a wash compared to just not collecting the extra dollar in the first place?
  - UncleMeat 4y ago
    Your understanding is absolutely wrong. Businesses do not "use charitable giving as a deduction" in the way that individuals do. Profit is unchanged and there isn't some new "deduction" that saves a business from its tax burden.
    - jpk 4y ago
      If that's the case, then I'm confused about what line 19 on Form 1120 is for. The instructions read an awful lot like the deduction individuals can take. The limits are different (corps can typically only deduct up to 10% of taxable income), but the instructions specifically mention cash contributions to charities. https://www.irs.gov/forms-pubs/about-form-1120 https://www.irs.gov/forms-pubs/about-form-1120 Again, I'm not an accountant so I might be missing something, but it seems plain to me?
deleted 4y ago
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neodymiumphish 4y ago
But that's not what they do, if they're doing it legally. Let's say I'm making and selling coffee, and I ask each customer to donate an additional dollar toward a local orphanage. At the end of the month, I've collected $10k in revenue and $500 in donations, the $500 isn't mine to donate, it's my customers', which I'm donating on their behalf. If I go to the orphanage and donate $500 and pocket the $500 from customers as revenue, that's illegal. This is exactly what this lawsuit is alleging.
- thaumasiotes 4y ago
  > At the end of the month, I've collected $10k in revenue and $500 in donations, the $500 isn't mine to donate, it's my customers', which I'm donating on their behalf. If I go to the orphanage and donate $500 and pocket the $500 from customers as revenue, that's illegal. No, that's what you're supposed to do. > This is exactly what this lawsuit is alleging. No, it isn't; that has nothing to do with the allegations in the lawsuit.

by jpk 4y ago

UncleMeat 4y ago

This is not how it works. Businesses pay taxes on profits, not revenue. If a business donates money to charity or makes a big pile of cash and lights in on fire, both reduce profit and therefore tax burden. If a business collects $10 from people and then donates that $10 to charity the net effect on their taxes is exactly zero.

jpk 4y ago
Hm, IANAA but my understanding is if you sell a widget for $10, which costs $8 to produce, you have to pay taxes on the $2 profit. But if you present the option to your customer to pay $10 + $1, knowing the extra dollar will go to a charity, it's still a $2 profit, but the extra dollar can be used as a deduction to reduce the business's total tax liability. I guess what you're saying is the extra dollar is actually considered profit, and using it for a tax deduction it's a wash compared to just not collecting the extra dollar in the first place?
- UncleMeat 4y ago
  Your understanding is absolutely wrong. Businesses do not "use charitable giving as a deduction" in the way that individuals do. Profit is unchanged and there isn't some new "deduction" that saves a business from its tax burden.
  - jpk 4y ago
    If that's the case, then I'm confused about what line 19 on Form 1120 is for. The instructions read an awful lot like the deduction individuals can take. The limits are different (corps can typically only deduct up to 10% of taxable income), but the instructions specifically mention cash contributions to charities. https://www.irs.gov/forms-pubs/about-form-1120 https://www.irs.gov/forms-pubs/about-form-1120 Again, I'm not an accountant so I might be missing something, but it seems plain to me?

deleted 4y ago

[deleted]

neodymiumphish 4y ago

But that's not what they do, if they're doing it legally. Let's say I'm making and selling coffee, and I ask each customer to donate an additional dollar toward a local orphanage. At the end of the month, I've collected $10k in revenue and $500 in donations, the $500 isn't mine to donate, it's my customers', which I'm donating on their behalf. If I go to the orphanage and donate $500 and pocket the $500 from customers as revenue, that's illegal. This is exactly what this lawsuit is alleging.

thaumasiotes 4y ago
> At the end of the month, I've collected $10k in revenue and $500 in donations, the $500 isn't mine to donate, it's my customers', which I'm donating on their behalf. If I go to the orphanage and donate $500 and pocket the $500 from customers as revenue, that's illegal. No, that's what you're supposed to do. > This is exactly what this lawsuit is alleging. No, it isn't; that has nothing to do with the allegations in the lawsuit.