By partnering with tax-exempt organizations, for-profit corporations may gain access to a valuable marketing opportunity, allowing them to reach target audiences while supporting the important efforts of tax-exempt entities. Depending on the particular facts, a corporate sponsorship payment may be deductible under Sec. 162 as an ordinary and necessary business expense or under Sec. 170 as a charitable contribution. According to Regs. Sec. 1.513-4(e)(3), the fact that a payment is a qualified sponsorship payment treated as a contribution to the payee organization does not determine whether the payment is deductible by the payer under Sec. 162 or Sec. 170.
Deduction as a charitable contribution requires an intent to make a gift. A corporation's expectation of a return benefit may suggest a lack of gratuitous intent and could disqualify the deduction under Sec. 170. Deduction as a business expense requires that the payment must be an ordinary and necessary expense of carrying on the taxpayer's trade or business. Regs. Sec. 1.162-20(a)(2) provides that expenditures for institutional or goodwill advertising, which keep the taxpayer's name before the public, generally are deductible as ordinary and necessary business expenses if the expenditures are related to the patronage the taxpayer might reasonably expect in the future.
If a payment appears potentially eligible for deduction under either provision, the corporation may be able to evaluate which provision affords it the greatest tax savings. When making this determination, corporations should take into consideration the limits on charitable contributions. Corporate charitable contribution deductions are limited to 10% of taxable income (as computed under Sec. 170(b) (2)(C)).
Not sure if I understand the question fully. But here, event funds are pooled into operating accounts from which event staff pay event bills. After all the chips settle, they submit a request to journal the net remaining to the gift designations being supported by that event.
Aaron Forrest CPA
Senior Director Gift and Donor Services
University of Rochester Office of Advancement
585.275.2799 | firstname.lastname@example.org