Giving tactics vary widely and, because of the abrupt and devastating nature of the Sept. 11 events, many new charities have appeared and still await their IRS designations, according to Bob Hill, tax executive at Crowe, Chizek and Company LLP.
Corporate donors need to carefully secure the correct documentation, Hill
"If they're giving to a charity, they need to ask for a copy of the IRS determination letter that states the donee is a 501(c)(3) organization," he
said."That includes public charities, schools and churches.If they plan to deduct, they must make sure they give to an organization that qualifies." Hill
said another important factor to keep in mind is that many current charities -- such as the Liberty Disaster Fund
-- are legitimate divisions of existing organizations, Hill
Examples of this are America's Fund for Afghan Children
and the Armed Forces Emergency Services, whose "parent" organization is the American Red Cross.
Considerations for corporations
One other factor for businesses to consider when preparing for tax-filing time is the business' structure.
The method for deducting charitable donations depends on the type of corporation, according to Hill
When it comes to the structure of corporations, all corporations are the same in the manner that cars are all the same -- cars all have one engine and four wheels, Hill
But beyond that, most large companies are C corporations
and elect to pay taxes on their income.
Whereas, an S corporation
elects to be taxed similarly to partnerships, in which the individual partners, instead of the company itself, pay taxes, Hill
If a business partner of an S corporation
owns 15 percent of the business, "then (he would) get 15 percent of (the company's) income," he
And that income is what the individual pays taxes on, Hill
When it comes to charitable donations, contributions from an S corporation
are limited to 50 percent of the shareholders' adjusted gross income.
However, donations can be deducted over a period of time.For example, "if a corporation wants to contribute $10,000, but they're only allowed a maximum of $5,000 that particular year, the extra amount can be carried forward for up to 5 years," Hill
said."Afterward, any money not used is `lost' to the donor in terms of deductibility."