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Do you get approached every year by non-profit organizations, asking you to donate money for one event or another? Even if the representative at the organization tells you the donation is a charitable deduction, you should be careful how you classify this expense.


Just because the organization is a charitable organization does not mean you have a charitable expense on the company's books. You need to look at the intent of the expense. For example, was the intent to "advertise" your company name at the golf outing, in the program, on a T-shirt, etc.? If so, you should treat and record your expense as advertising. If the intent was truly charitable, then you have a charitable donation.


This area is especially important when you have a net operating loss carryover on the company tax return. Net operating losses are carried over 20 years while a charitable donation is only over five years. Remember to analyze your giving and use the proper classification to get the most out of your expenses.


Please contact your Rea & Associates advisor if you have questions.


-By Kathleen E. Davis, CPA (Principal, Medina Office)


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