Gary C. Smith, President/National Association for the Exchange of Industrial Resources01.20.20
It’s no secret that corporate social responsibility (CSR) programs are good for business as well as communities. They improve employee engagement, increase customer loyalty and elevate corporate brands. But while most companies build their CSR programs around monetary donations and employee volunteerism, there is another form of giving that many overlook—namely, making in-kind product donations.
In-kind giving is ideal for offloading overstocks, obsolete merchandise, discontinued products—even returns. Just because some inventory no longer benefits your business, it can still be very useful to those in need, and there are ways to optimize the donations you make.
The Business Benefits of In-Kind Giving
In addition to adding another facet to your CSR program, donating excess inventory offers a number of tangible benefits, including:
It’s an Easy Way to Move Unwanted Stock
Whether you currently discount, liquidate or auction your non-selling merchandise, it undoubtedly takes a certain amount of time and labor, while yielding a poor ROI. Done right, making in-kind donations can be fast and easy (no negotiating with liquidators, no creating online auctions) and it makes better financial sense, too.
It’s Tax Deductible, Times Two!
Product donations are tax deductible. Better yet, if your company is a C Corp, you’re eligible for a tax deduction up to twice the cost of the merchandise you donate. According to a little-known section of tax code, IRC Section 170(e) (3), C Corp tax deductions equal the cost of donated inventory, plus half the difference between the cost and fair market-selling price, not to exceed twice the cost. For example, if your product costs $10 and you sell it for $30, the difference is $20. Half of $20 is $10. $10 (product cost) + $10 (half the difference) = a $20 tax deduction. $20 does not exceed twice the product cost, so it’s allowed.
It Keeps Your Warehouse Up-to-Date
Every square foot of wasted warehouse space costs you money, every day. According to studies, the real cost of holding onto stale inventory exceeds its cost value. Each time you donate outdated stock, you free-up valuable warehouse space for more profitable products.
It Protects Your Brand Value
Discounting and liquidating your products lessen their value and detracts from your brand. But a smart gift-in-kind organizations will use a careful allocation system to ensure products are distributed thinly across a tightly-closed market. Your products retain their value, while your brand receives CSR recognition. It’s a win/win.
How to Find a Nonprofit Partner
Businesses can always seek out local nonprofits to partner with, but finding the right fit—a group or groups that can use all you have to offer—can be a full-time job in itself. An easier approach is to join a gifts-in-kind organization. These groups are licensed 501c3 nonprofits that collect all types of unwanted merchandise from member corporations, then redistribute it to member nonprofits—i.e., charities, churches and schools—that request it. Some of the most in-demand products are office and school supplies, cleaning products, personal care items, electronics, clothing and toys.
How do you choose a quality gifts-in-kind organization? Look for one that:
• Does not charge corporations membership or donation fees.
• Accepts donations of nearly any kind at nearly any time.
• Provides proper tax documentation of every donation for your records.
• Shares annual results publicly, so you know how much merchandise was accepted and redistributed.
How Gifts-in-Kind Programs Work
After you choose a gifts-in-kind organization a work with, you need to become a corporate member. Ideally, that should be as easy as making a phone call or sending an email to the organization. Once you’re accepted, you should be able to make donations at any time. You may decide to donate quarterly, between seasons or whenever your warehouse demands it. Each time you wish to donate, you first provide the organization with an inventory list. Once it’s approved, you simply ship it to a designated location, where it will be sorted, cataloged and made available to member nonprofits.You’ll receive tax documentation for your records. Eventually, you’ll also learn what charities received your goods—a gratifying experience for the whole company. This makes terrific content for your company newsletter and adds another dimension to your CSR program.
Giving Is the Right Thing to Do
Beyond benefiting your CSR program, in-kind giving allows you to put your merchandise into the hands of needy people who can genuinely use it, while helping worthy nonprofits deliver on their mission. You care enough to develop a CSR program…why not do even more good with your unwanted goods?
Gary C. Smith
About the Author
Gary C. Smith is President and CEO of NAEIR, National Association for the Exchange of Industrial Resources, the largest gifts-in-kind organization in the US. Galesburg, Illinois-based NAEIR has received donations of excess inventory from more than 8,000 US corporations and redistributed more than $3 billion in products to more than 110,000 nonprofits. During fiscal year 2018, NAEIR collected more than $99.5 million in inventory and distributed more than $105 million. Smith may be reached at 800-562-0955.
In-kind giving is ideal for offloading overstocks, obsolete merchandise, discontinued products—even returns. Just because some inventory no longer benefits your business, it can still be very useful to those in need, and there are ways to optimize the donations you make.
The Business Benefits of In-Kind Giving
In addition to adding another facet to your CSR program, donating excess inventory offers a number of tangible benefits, including:
It’s an Easy Way to Move Unwanted Stock
Whether you currently discount, liquidate or auction your non-selling merchandise, it undoubtedly takes a certain amount of time and labor, while yielding a poor ROI. Done right, making in-kind donations can be fast and easy (no negotiating with liquidators, no creating online auctions) and it makes better financial sense, too.
It’s Tax Deductible, Times Two!
Product donations are tax deductible. Better yet, if your company is a C Corp, you’re eligible for a tax deduction up to twice the cost of the merchandise you donate. According to a little-known section of tax code, IRC Section 170(e) (3), C Corp tax deductions equal the cost of donated inventory, plus half the difference between the cost and fair market-selling price, not to exceed twice the cost. For example, if your product costs $10 and you sell it for $30, the difference is $20. Half of $20 is $10. $10 (product cost) + $10 (half the difference) = a $20 tax deduction. $20 does not exceed twice the product cost, so it’s allowed.
It Keeps Your Warehouse Up-to-Date
Every square foot of wasted warehouse space costs you money, every day. According to studies, the real cost of holding onto stale inventory exceeds its cost value. Each time you donate outdated stock, you free-up valuable warehouse space for more profitable products.
It Protects Your Brand Value
Discounting and liquidating your products lessen their value and detracts from your brand. But a smart gift-in-kind organizations will use a careful allocation system to ensure products are distributed thinly across a tightly-closed market. Your products retain their value, while your brand receives CSR recognition. It’s a win/win.
How to Find a Nonprofit Partner
Businesses can always seek out local nonprofits to partner with, but finding the right fit—a group or groups that can use all you have to offer—can be a full-time job in itself. An easier approach is to join a gifts-in-kind organization. These groups are licensed 501c3 nonprofits that collect all types of unwanted merchandise from member corporations, then redistribute it to member nonprofits—i.e., charities, churches and schools—that request it. Some of the most in-demand products are office and school supplies, cleaning products, personal care items, electronics, clothing and toys.
How do you choose a quality gifts-in-kind organization? Look for one that:
• Does not charge corporations membership or donation fees.
• Accepts donations of nearly any kind at nearly any time.
• Provides proper tax documentation of every donation for your records.
• Shares annual results publicly, so you know how much merchandise was accepted and redistributed.
How Gifts-in-Kind Programs Work
After you choose a gifts-in-kind organization a work with, you need to become a corporate member. Ideally, that should be as easy as making a phone call or sending an email to the organization. Once you’re accepted, you should be able to make donations at any time. You may decide to donate quarterly, between seasons or whenever your warehouse demands it. Each time you wish to donate, you first provide the organization with an inventory list. Once it’s approved, you simply ship it to a designated location, where it will be sorted, cataloged and made available to member nonprofits.You’ll receive tax documentation for your records. Eventually, you’ll also learn what charities received your goods—a gratifying experience for the whole company. This makes terrific content for your company newsletter and adds another dimension to your CSR program.
Giving Is the Right Thing to Do
Beyond benefiting your CSR program, in-kind giving allows you to put your merchandise into the hands of needy people who can genuinely use it, while helping worthy nonprofits deliver on their mission. You care enough to develop a CSR program…why not do even more good with your unwanted goods?
Gary C. Smith
Gary C. Smith is President and CEO of NAEIR, National Association for the Exchange of Industrial Resources, the largest gifts-in-kind organization in the US. Galesburg, Illinois-based NAEIR has received donations of excess inventory from more than 8,000 US corporations and redistributed more than $3 billion in products to more than 110,000 nonprofits. During fiscal year 2018, NAEIR collected more than $99.5 million in inventory and distributed more than $105 million. Smith may be reached at 800-562-0955.
