Where do your donations at the checkout register go?
This is just one of the stories from our “I’ve Always Wondered” series, where we tackle all of your questions about the world of business, no matter how big or small. Ever wondered if recycling is worth it? Or how store brands stack up against name brands? Check out more from the series here.
Listener Garrett Lynch from Ridgefield, Connecticut, asks:
How does checkout charity work at retail/grocery stores? Recently, I was asked to donate $2 during checkout at Stop & Shop. I was told the donation would help Memorial Sloan Kettering Cancer Center in NYC. Of course I said yes, but I got to wondering: aside from MSKCC, who gets the benefit of this donation? If I shopped every day and made donations enough to warrant an itemized deduction, would I be allowed to? Would Stop & Shop be considered an exempt organization for this purpose? Or am I just handing over $2 to Stop & Shop, who will in turn make the donation and claim the corporate charity deduction? And furthermore, how much of that $2 actually makes its way to MSKCC?
If you’re making a donation at the cash register, you could theoretically get a deduction if you wanted, according to tax experts. But to make it worth your while, it’d have to be more than the standard deduction, which stands at almost $13,000 for single filers and almost $26,000 for married couples.
“Usually, they’re quite small donations, and keeping a record of them is kind of a pain in the neck,” said Henry Ordower, a law professor at Saint Louis University.
There aren’t many people who itemize their deductions anymore, a downward shift caused by the Tax Cuts and Jobs Act of 2017, explained Turney Berry, a partner at law firm Wyatt, Tarrant & Combs LLP. The act, signed by then-President Donald Trump, nearly doubled the standard deduction for individual and joint filers. The Tax Policy Center estimated that 90% of households would take the standard deduction in 2018, a jump from 70% in previous years.
Ordower pointed out that Congress did temporarily allow tax filers to deduct charitable donations made in cash, without itemizing, for the 2020 tax year as part of the Coronavirus Aid, Relief and Economic Security Act, better known as the CARES Act. This provision allowed single and joint filers to deduct up to $300. The deduction, which was extended for the next year, was bumped up to $600 for joint filers on their 2021 returns. It’s now expired.
While you can itemize these deductions if you want, the companies that ask for them can’t if the money came from you, the customer, Berry said.
In an emailed statement, a spokesperson for the Stop & Shop supermarket chain said it runs register campaigns during “select weeks of the year” and said “100% of proceeds” goes to the company’s nonprofit partners.
Specifically, the supermarket company raises funds for pediatric cancer care in an annual four-week campaign, encouraging customers to donate $1, $3, $5 — or round up their purchase to the nearest dollar. These funds go to Dana-Farber Cancer Institute in Boston and MSK Kids, a pediatrics program at Memorial Sloan Kettering Cancer Center. “This program is not a corporate charitable deduction for us,” the spokesperson said.
Since the campaign started more than two decades ago, Stop & Shop said, it has donated about $100 million to pediatric cancer care and research.
Ordower noted that this doesn’t make these companies charitable organizations. “They’re just collecting the money for somebody else,” he said.
While these types of campaigns can’t be used as tax write-offs, a corporation could deduct its own donations, Berry explained. If it earmarked a certain percentage of sales, say 5%, for charity, the company could then deduct that 5%. “That’s the business doing it, so they can certainly deduct that,” he said.
In comparison, when it comes to those donations at the cash register, Berry noted that they weren’t counted as income going to the business. So it can’t get the deduction.
But there are intangible benefits that come with having these programs.
“The store is basically telling you that they’re collecting money for this good cause. And presumably, that makes you feel better about the store and it makes you feel better about shopping there,” Ordower said.
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