By Eric Kinaitis

A 2020 report from Giving USA determined that corporations & businesses donated over $21 billion to charity in 2019. Like many individual donors, business owners may also be persuaded by emotional/sentimental reasons to give to a specific cause or just give general support to their community. A study conducted by Ernst & Young determined that 89% of entrepreneurs donate money to charitable causes, and that 61% of study respondents felt that being an entrepreneur made them more inclined to give to charity.

However, what is often overlooked is the potential for “Philanthropic ROI” beyond just the community support and the charitable deduction.  The creation of “Philanthropic ROI” can happen when a business’s charitable giving also creates the following:

The Giving USA study also indicated that opportunities for employee engagement in corporate philanthropy were a driving factor in the recruitment, loyalty, and retention of a company’s workforce.

No differently than a donor advised fund (DAF) that an individual or family may choose to open, a business can also open a DAF with which to engage in corporate giving. The company can contribute funds or other assets into the DAF and take a public charity deduction up to a maximum of 10% of taxable income in the year that the contribution was made.

By opening a DAF, the business also benefits from flexible timing. They can make their charitable investment over a longer time period instead of having to spend it all in the same year as their original donation.  Furthermore, while many companies may consider or already have a private foundation for their company giving, they may not have to dedicate as many of their staff or other corporate resources to running the donor advised fund.

Corporate giving as a growth opportunity

How to find opportunities in corporate giving:

  • Your current client base: As a financial advisor, you already know which clients of yours are business owners or hold an executive position in a corporation. Have you ever discussed with them the types of charitable causes or partnerships that their businesses support? A few questions can indicate why those specific causes are chosen and how they are supported – cash donations, in-kind contributions, and so forth.
  • Existing charities/events: Have you ever attended a fundraising or charity event and noticed some of the businesses mentioned or logos featured as “underwriters”, “patrons”, “partners” or “sponsors”? Getting answers to questions such as:

    – How did those businesses get involved in that event or with that charity?
    – Are they involved with other charitable organizations that are devoted to a similar cause?
    – How does that event or cause support a business goal of that company or corporation?
    – What was the nature of their support (cash, product, etc.)
    – Who at the company played a role in making that decision?

Charitable giving by businesses is an area that is ripe for the involvement of a financial advisor. Educating a business on the flexibility in timing and assets that a donor advised fund can offer them for their corporate philanthropy can prove to be an ideal way to bring more assets under management.

At American Endowment Foundation, we look forward to discussing how DAFs created by businesses and corporations can play an important role in your financial practice. Contact us or call at 1-888-660-4508 to learn more.