Cause Marketing - Tips for Tax Deductions for Your Business

Participating in a cause related marketing campaign can be a win-win for your business, the people making donations, and the cause. Here's what I mean: Let's say you have a small business that serves a local market, and you want to donate money to a local charity. You could simply make a donation to that charity or cause, and receive a deduction, if the charity was an IRS-qualified charity. Or, you could get some publicity out of your donation, through what's called "cause marketing" or "cause related marketing." For example, you could create an ad in which you promise to donate $1 to the cause for every one of your products purchased during a certain time frame.

Why Participate in Cause Marketing?
Steven Van Yoder, About.com Guide to Small Business, says you can "show your business heart" and be perceived as altruistic and philanthropic by people in the community. The Philanthropy Journal recently reported on a study showing that cause-related marketing can boost business sales. And, yes, you can can take tax deductions for these donations.

How is Cause Marketing Deductible to My Business?
Cause marketing expenses are not deductible as charitable contributions, but they are deductible as advertising expenses for your business.

What Are Some Tips for Cause Marketing Campaigns?
If you are considering a cause related marketing campaign and you want to make certain you receive a tax deduction:

• Partner with a qualified non-profit. You can only get the deduction if you donate to IRS-qualified non-profit organizations. If you are not sure, IRS Publication 78 lists qualified charities, and you can search their database. Be aware that some charities may be in process of obtaining IRS qualification, so they may not be on the list.
  
  
• Check with the charity first. Some businesses say they are donating to a charity, but the charity has no knowledge of the donation. You don't want people calling the charity and asking what's going on. So please contact them. They can give you promotional materials and logos to help you with your campaign.
  
  
• Document everything.
  
  • Keep excellent records on the amounts you spend on the advertising campaign, to prove your marketing costs.
    
  • Document your sales and the amount of discount you lost on each sale. You should be able to count this total as a reduction in sales.
  • Document the amount you send to the charity after the campaign ends.
    
  • Check with your tax adviser. Before you embark on the campaign, review it with your tax adviser to be certain that you will be able to get the deduction. If you wait until the end, you might find you missed something that will cause the deduction to be disallowed.

  Cause marketing can be a winning proposition for your customers, who feel good that they are giving; to the cause, which receives additional funds; and for you, for increased customer goodwill and greater tax deductions.