In-kind donation organizations are non-profit organizations that collect corporate product donations and then donate them to qualified non-profit organizations.
Uncertainty is the fourth quarter theme for retailers and manufacturers.
Many gift retailers stocked up early before the holiday season to beat inflation and not be short-changed like they were last year. Holiday sales are expected to increase again this year, but not at the blistering pace of last year as households grapple with rising prices. This will likely lead to deep discounts – in fact, we’re now seeing holiday deals starting well before Black Friday. And the discount will weigh heavily on profitability.
For manufacturers, the reverse is true. Struggling to manage their inventory as delays and shortages continue in the supply chain, they worry that by the time they have inventory, the window has closed to get it to market.
What is your plan for manage a warehouse overflowing with products? The discount? Sell it to a dollar store chain? Put it in a landfill? None of these options are particularly attractive.
Now that the end of the year is approaching, it’s time to think about increasing the bottom line through another solution: product philanthropy.
These excess inventory pallets are not going to move on their own. They will take up valuable warehouse space and potentially reduce profitability.
The good news is that there’s a smart and easy way to turn that slow-moving inventory into a massive asset, while doing something positive for the community. This is called product philanthropy. And for C corporations, it’s one of the IRS tax code’s best-kept secrets.
Current economic conditions are straining family budgets and nonprofits are being called upon to do more with less. For example, many schools have started giving students school supplies. Homeless shelters always need clothes and cleaning supplies. The needs are endless.
When companies donate their stock to an in-kind donation organization, they don’t have to spend valuable time identifying deserving charities and logistics. In-kind donation organizations are non-profit organizations that collect corporate product donations and then donate them to qualified non-profit organizations. Basically, they do the work for you. They accept 100% overstock items, whether it’s a truckload or a few boxes, and make sure those items are routed to qualified 501(3)c nonprofits.
For example, the National Association for the Exchange of Industrial Resources (NAEIR) gives $100 million a year to schools, churches and other nonprofits, allowing them to stretch their budgets in a time of runaway inflation. Since its inception, NAEIR has received donations from more than 8,000 U.S. corporations and distributed more than $3 billion in products.
A reputable in-kind donation operation will not only give you a full account of how your donation was used; this will ensure that your merchandise does not end up in the open market where its branding can be damaged. Or in a landfill.
In these difficult times, an in-kind donation can also benefit the bottom line. Section 170(e)(3) of the Internal Revenue Code states that when regular C corporations donate inventory to qualifying nonprofit organizations, they may receive a tax deduction of up to two times the cost of the donated products.
Under the tax code, deductions are equal to the cost of the donated inventory, plus half the difference between the cost and the 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. So $10 – cost of the product – plus $10 – half the difference – equals a $20 deduction. Since $20 is not more than twice the cost of the product, it is an allowable deduction. It’s so simple.
It really is a win-win. Even better, a business has the satisfaction of knowing that it has helped a school or nonprofit organization better serve its students and customers. Additionally, the positive public relations generated by such generosity enhances a company’s reputation.
There is no single solution to the global supply chain crisis. An in-kind donation, however, can help clear inventory while doing good for the community.
Gary C. Smith is President and CEO of NAEIR, an in-kind donation organization based in Galesburg, Illinois. Smith can be reached at 800-562-0955.
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Gifts and Decorative Accessories presents multiple viewpoints through the use of contributing guest authors.