Charitable Contributions Key Terms

Learn these important accounting terms regarding charitable contributions

More and more businesses are discovering the tax benefits of making charitable contributions. If you are considering giving to charity, or your business already makes charitable contributions, you will want to ensure that anyone handling your business accounting understands the impact of that giving on your company's tax situation. Learning basic charitable contribution terms will give your accounting staff the background knowledge they need to deal with charitable contribution regulations; it will also give them the vocabulary they need in order to ask meaningful questions.

 

Quid pro quo contributions

This type of donation involves a business contribution that is part charitable donation and part purchase of a goods or service. An example would be when your business purchases a ticket to a charitable event, but the donation to the organization is more than the cost of the ticket.
Try: The Internal Revenue Service has an easy to read explanation of quid pro quo contributions on its website.

Qualified charitable organizations

Businesses must ensure that the charitable donations they make are to qualified organizations. Not all organizations qualify and donations made to unqualified organizations cannot be considered as a tax deduction. Only specific types of organizations are qualified, such as governments, fraternal groups, non-profits, and corporations or foundations meeting certain requirements.
Try: WorldWideWeb Tax has a great explanation of qualified charitable organizations, including a list of what types of organizations qualify and those that don't.

Planned giving

Planned giving means exactly what it says, and, as a business professional, it makes sense to plan your charitable donations. You can do this by putting charitable contributions in your annual budget, or you can make a commitment to a specific charity and make planned donations monthly, quarterly, etc.
Try: Those handling your business accounting will want to use the Partnership for Philanthropic Planning website for the most up-to-date resources and tax information for your planned giving.

Valuation

Valuation involves the process of determining the value of items that you donate. Accountants need to understand the process of determining the correct value in order to stay in compliance with current tax laws.
Try: The Internal Revenue Service is the best source for current regulations pertaining to all areas of valuation.

Substantiation and disclosure

Think of substantiation and disclosure as your proof of donation or your receipt.
Try: The Planned Giving Design Center lists the rules and requirements that anyone dealing with accounting should know in terms of substantiation and disclosure.

Tax preparation software

Anyone working with business finances will want to consider purchasing tax preparation software. This software is especially programmed to help your business prepare their taxes including charitable giving.
Try: CPA Online has a search feature to help your business select tax preparation software that will work well with specific types of business. You can research which one will work the best for you and will fit with the amount of charitable contributions you make.

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