However, the excess inventory can potentially have a significant impact on the community. Fortunately, there is a solution available that offers an advantage to both the company needing to unload the excess inventory, and non-profit organizations that would love to accept it: a charitable intermediary.
In kind giving is the simplest form of corporate philanthropy and an excellent way to clear warehouse space while receiving a beneficial tax deduction for responsible corporate citizenship. The Internal Revenue Service (IRS) allows a company to qualify for a tax deduction for donations that go to nonprofits listed as 501(c)(3) and are a public charity. According to IRS code Section 170 (e)(3), a business can earn a federal income tax deduction. In addition to the cost of inventory donated, C corporations may deduct half the difference between cost and fair market value, therefore deductions may be up to double the cost. Donation under these circumstances often generates more benefit than scrapping or liquidation.
A business can donate virtually any property that it owns, including inventory and equipment, to a charity. For product donations, there are elements to consider that complicate the issue: tax exemptions, inventory execution and administration costs. Therefore, it is a good practice to consult with a charitable intermediary organization that specializes in handling every aspect of product donations, including providing a set of professional services to make the entire process as easy as possible for the corporate donor.
A charitable intermediary is a nonprofit organization that collects donated products from corporate donors and disperses them to qualified charitable organizations in need. These donated items can range from cleaning and office supplies to equipment to clothing. The list of products is virtually endless and can be made available to charitable organizations from donated excess inventory. Corporations can contact the charitable intermediary when they need to clear warehouse space for new models, move excess inventory or have an influx of one particular product.
In today’s hyper-connected world, charitable intermediaries can distribute donations of excess inventory across the United States and internationally. The access to an online catalog is a great resource for any nonprofit, big or small. A nonprofit organization such as a school district may not have the budget to purchase brand new maintenance equipment nor the access to a local organization that can donate the needed equipment. However, having access to an online catalog of donated maintenance equipment available at the click of a mouse is extremely beneficial to both parties.
When a corporate donor is ready to donate excess inventory, the charitable intermediary will be contacted to approve receipt of the product. Once the product arrives it is sorted and processed to be uploaded to the online catalog. Qualified nonprofit organizations then have access to order the items for a small handling fee and shipping charge. The small handling fee is based on the value of the product and is significantly less than retail price.
Typically, a membership program or registration form is available for organizations to apply using a Federal Employment Identification Number (FEIN). Qualified nonprofit organizations include schools, churches, charities, support service agencies, first responders, veteran organizations and municipalities. For example, a 501(c)(3) nonprofit organization that offers job training services would qualify to order suits to supply to clients participating in a job interview.
The online platform enables companies to donate excess inventory and gives nonprofits access to goods they need to fulfill their local community missions. The impact of this technology is beneficial to expand a charitable intermediary’s reach and make the business of giving easier, more efficient and more effective.
Collaborations between corporations, charitable intermediaries and nonprofit organizations can be valuable to all. Moreover, making appropriate use of excess inventory can reap benefits for the corporation, the charitable organization, and for society as a whole.