The year 2022 is coming to an end. This is usually a time of financial reports, a time of employee bonuses based on company earnings, buying equipment for tax deductions, and making sure all parts of the yearly budget are utilized by company departments. But what if, after all of this, there is still money left over in the company budget?
Usually, companies donate money to charities, creating a positive social impact. Donations range from hundreds of thousands to millions of shekels. If a non-profit organization has a section 46 status, companies can offset their contributions to these organizations on their tax returns.
The business sector in Israel, including large corporations, may have made significant progress in corporate responsibility and relationships with the third sector, but what works well throughout the year with strategic, well-planned donations, is often neglected at the end of the year in exchange for “checking off another task on the list” through an impulsive and quick donation, with a decision made arbitrarily – just in order to spend the money before the end of the tax year.
This situation happens for two reasons:
Lack of time. Even the most organized of corporations find themselves sometimes at the end of the year with sums intended for social causes that have not been used. The need to write the spending on the current tax year forces them to act and donate the money quickly, without putting thought into where they are donating the money.
Lack of knowledge. Even if a corporation wants to dedicate the donation money to organizations that are aligned with its business agenda (for example, projects to integrate women in hi-tech), the company doesn’t always know where to turn. In most cases, the companies just transfer large sums of money to one or two charities that they know.
There is no doubt that any donation for any reason is a blessing, but impulsive donations can hurt your company. Here are a few reasons why:
First, you are missing the opportunity to create a long-term investment – many companies around the world have already realized that corporate responsibility, and ESG (environmental, social and corporate) investments, have great value for both the grantee (society) as well as for the grantor (the company and its reputation).
Choosing a quick donation in a crunch misses the company’s opportunity to link its name to social organizations that are active in the company’s content worlds. It also misses out on the opportunity to promote important goals that align with its agenda.
Worker involvement
Second, worker involvement. Quick distribution of large sums of money at the end of the tax year means that employees can’t get involved. They cannot be part of the company’s giving mission statement and the due diligence checks, and they are not involved with the choice-making processes that come along with responsible philanthropy.
Additionally, the question arises as to what happens to the money. With quick donations, the company doesn’t have time to dig deeper into the goals, financial administration and reports of the nonprofits receiving the donations. A considered donation allows the business to have better knowledge of the charities that it donates to. They can distribute the money between a number of charities and demand a higher level of involvement, such as impact reports or an invitation to discuss different collaborations.
Many businesses in the US have already realized the great power that lies in organizational donations and their great ability to promote important social causes, while improving a company’s reputation and employee satisfaction.
Many solutions have been found for the issue of time pressure, such as a donor-advised fund (DAF), a charitable vehicle that allows the company to receive tax benefits in the current year and donate the money over time.
Early planning and removal of the urgency factor that comes with end-of-the-year pressure by adopting advanced models for donation management can be a meaningful game changer in the Israeli donation ecosystem. A company that chooses to do this and chooses to do it digitally will receive a double benefit.
With online philanthropy, your company can designate funds for donation and receive the tax benefit immediately; however, the actual donation and de facto transfer to the charity can be made in a rational and responsible way during the following year.
The writer is the CEO and founder of JGive – a nonprofit organization working to change the culture of giving in Israel.