Kyle Penney

I sound like a broken record when I observe that fall is a very busy fundraising season in East Texas.

You can imagine that the mail here at East Texas Communities Foundation is filled with a steady stream of invitations to charity luncheons, receptions, dinners and galas. Though it is impossible to attend them all, the few events I have been able to attend recently have common themes.

At each event there is an opportunity to learn more about how the organization is achieving its mission, a sincere expression of appreciation for the generous support provided by donors, and a program listing the generous local businesses and individuals that sponsored the event. Though it is nice for a business to be recognized in a printed program, have their logo displayed on a screen, or receive a mention during the event, businesses provide sponsorship support because they believe in the work of the charity. In fact, sponsorships are just one small way businesses can support local charities.

Businesses are inanimate legal entities, but they are owned and operated by people who have opinions and values. Business owners are often in a position to express their opinions and values in the culture they create at work, and in the way their business interacts with customers and their community. Sponsoring events is often just the most visible way businesses support the community. Many business owners encourage their employees to volunteer for local charities. Some businesses encourage volunteerism in employee job descriptions, personnel policies and compensate employees for time spent volunteering.

Business owners also use many methods to set an example and encourage employees to financially support local charities. In our community, some business owners will use company funds to match employee contributions to charities. This practice of matching funds helps businesses align their values with those of their employees, and builds employee loyalty and morale. Other businesses in our community allow employees to guide the distribution of company funds to local charities through an employee-guided selection process. Using this method, employees consider applications for charitable grants and work together to make wise investments in local nonprofit organizations. Business support of charities is also the key ingredient for United Way employee campaigns here in Smith County and around the country. United Way campaigns are proven methods to engage employees across all levels of an organization to support the work of local charities.

Beyond sponsoring events and encouraging employee giving, business owners also have choices with regard to sharing profits and managing ownership interests. Profit sharing and distributions of ownership interests, such as stock dividends, can create opportunities for employees and business owners to make tax-smart charitable contributions. Employees and business owners can contribute ownership interests to charity and potentially avoid taxes that would otherwise be paid by the shareholder when redeemed for cash. Some local companies offer periodic buyback programs where ownership shares may be redeemed from shareholders for cash. Contributing shares to a charity and allowing the company to buy those shares back for cash can maximize the fair market value of a contribution and potentially eliminate capital gains taxes for the donor. Publicly traded stocks or closely-held C-corporation and S-corporation interests can receive different tax treatment, and such gifts should be carefully analyzed to determine the best strategy for your specific tax situation. East Texas Communities Foundation enjoys working with donors and their financial advisors to maximize potential charitable gifts of business interests and minimize taxes.

At the end of a business life cycle, when an owner is considering selling a business, there are additional opportunities for significant charitable giving and tax savings. Reaching a point to sell a business, which for some owners represents their life’s work, is not a decision that is taken lightly. Proper planning can allow this event to provide retirement income and retirement philanthropy. Contributing a portion of a business to a donor-advised fund, prior to sale of the business, can minimize taxes and create a resource for charitable giving that will last through your retirement, or even into succeeding generations. Proper planning for charitable giving when a business sale is on the horizon is the ultimate career move.

Businesses produce annual income and serve as a store of wealth for investors and business owners. Business owners can, and do, use profits to support local charities and encourage employee giving. As much as event sponsorships are important to local charities, considering gifts of business interests could be the ultimate charitable giving opportunity. Perhaps planning for charitable giving as part of your business exit strategy is your next best opportunity to give well.