Does Reddit Have a New Model for Charitable Contributions?

March 12, 2015

Business and charitable giving have had a symbiotic relationship ever since Andrew Carnegie tried to clean up a sooty reputation with public libraries. It’s not all necessarily about shame cure, though. Connected businesses have an interest in working with the communities, actual and virtual, where they really live.

Reddit’s recent variation on this theme takes an experiential marketing approach, inviting community members to choose ten organizations to receive contributions. Could this work for your business, and if so, how? The bigger question is why.

Any campaign that combines marketing and charitable giving needs four things to succeed: a strategy, charitable causes that speak to the market, tax planning and some clarity about what your business actually wants to achieve at the end of the day, which is to say, a strategy.

Charitable Marketing Strategy

Linking charitable giving to marketing is something of a natural. Seventy-five percent of small businesses donate some percentage of profits to nonprofit organizations. The average is around six percent. Eighty-five percent of consumers reportedly have a more positive view of companies that make charitable gifts.

For SMEs, giving can take a variety of forms, including cash contributions, something as simple as shared signage, sponsorship of local charitable events, donations of excess inventory or sustained support through a formal foundation or council.

Early in 2014, the news sharing community, Reddit, declared that it would donate 10 percent of its annual advertising revenues to charity.  On February 18, 2015, it announced that the total to be divided among 10 charities would be $827,659.29, and account holders were invited to vote for recipients, using Charity Navigator’s very large, vetted database of organizations. Voting took place for a week, between February 18 and 25, 2015.

As another example, Subaru has hosted an annual “Share the Love” event for the last seven years. From November 20, 2014 to January 2, 2015, Subaru donated $250 for every new Subaru vehicle sold or leased to the customer’s choice of four or possibly five charities. Total donations were expected to exceed $15 million.

Three models emerge: one in which the corporate mogul, (Andrew Carnegie or, more recently, the charitable contributions committee) makes a decision about where to direct philanthropic efforts, and two in which consumers, themselves, direct giving.  The obvious difference between the latter two, the Subaru and Reddit campaigns, lies in the range of consumer choice.  In all three, the giver may get something different from the deal.

The business donor usually gets to bask in the glow of good works. Reddit and Subaru are also engaged in a form of marketing  in which the consumer is encouraged to build a stronger connection with the brand because of a shared experience or goal. In the Reddit model, limited-time voting created some of the buzz of a contest, and the business also gets some very interesting feedback about the preferences of their market.

Choosing Charities

As a cautionary note, any business contemplating making charitable contributions, whether those contributions are linked to marketing efforts or not, should research the intended donee thoroughly, especially with respect to its status as an IRC 501(c)(3) organization. Your business can use the IRS’s online tool, EO Select Check, to check information about an organization’s tax exempt status. Charity Navigator also provides its own ratings and other information.

The options offered in Subaru’s “Share the Love Campaign” were:

Puppies, sick children, the elderly, trees and something local – these are safe choices. Only a Grinch could complain. Subaru walked away with good vibes, but probably very little new useful information about who buys Subarus.

In the Reddit contest, account holders could vote an unlimited number of times, but only once for any of the 5,000+ charitable organizations listed by Charity Navigator and only during the designated week. The winners in the Reddit vote were:

Not all Reddit contributors participated, certainly, but the takeaway is interesting. The list suggests that redditors favor net neutrality, free speech online, open networks, free software, privacy protection, women’s reproductive rights, cannabis medical research, nontheism and public radio. No one raised the Subaru issue.

Just like Subaru, though, Reddit looks like a good corporate citizen for supporting nonprofits, but it avoided controversy by delegating the choice jointly to account holders and Charity Navigator. It avoided dullness because of what those account holders picked.

It may have built brand loyalty through the mechanism of the vote, especially given the apparently prickly nature of its community. Reddit may have even acquired some information, even if only confirmatory, about who makes up its community. This might be useful in future marketing efforts.

The net marketing return on Reddit’s charitable efforts may be higher than Subaru’s because, beyond the issue of tax-exemption, Reddit let go of the choice. Both Subaru and Reddit make the centralized/Carnegie approach to philanthropy look very stale. Very stale.

Tax Deductions

The third piece of the puzzle is a tax deduction.  Assuming that the recipient is a 501(c)(3)organization, how the contribution is deducted and how much is deductible will depend on what kind of contribution it was and how your business is structured. Your business should seek particularized tax advice, but in general, the following things are true.

If your business is a sole proprietorship or a single member LLC, cash contributions for which you receive no goods or services in return will ultimately end up on Schedule A of your individual tax return, but only if you itemize deductions.

The reporting for an S corporation works as it does for general partnerships in the case of cash contributions. Individual shareholders, like partners, will receive a Schedule K-1, showing their share of charitable contributions made by the business. Those would then be reported on an individual tax return,

If your business does get something in return, like signage, the contribution may be deductible as a business expense for advertising on your Schedule C.  In-kind contributions are subject to special limits. If you donate services or expertise, the gift is not deductible.

Only a C corporation is able to make charitable contributions on its own behalf and to take corporate tax deductions for those contributions.

With small or middle-sized businesses that are not organized as C corporations, the issue of marketing benefit may play a larger role than the benefit of the deduction. The monetary value of the tax deduction itself may be a pot sweetener, though.

Scaled Down Application

Let’s suppose that your relatively new business has not yet reached the proportions of Reddit or Subaru. Fifteen million dollars is a big contribution budget. Why donate to charity, anyway?

Here are a couple of options. Try ranking them in terms of importance. This may clarify your approach:

  • an altruistic expression of business values,
  • the desire to deal with some awkward or embarrassing business history,
  • an interest in tax deductions,
  • a desire to engage customers or clients with the brand in a way that not specifically linked to one product,
  • a desire to explore who your market is or might be, or
  • an interest in distinguishing your business from competitors.

This hardly exhausts the possibilities, but as a small to mid-sized businessperson, you have certainly embraced the discipline of not embarking on adventures without a goal in sight.

Do charitable endeavors play a role in your marketing? Are they central to the reason that you are in business? Do you distrust the world of nonprofit fundraising? These are all reasonable answers.

However, if you choose to guide your business along the path of charitable marketing it may be smart to consider the benefits of openness to consumer direction.

Once your business has defined the size of the contribution and determined that all possible recipients are tax qualified, charitable giving may present an opportunity for valuable feedback from the consumer community.

Your business’s relationship with your market may benefit from a shared vision about larger issues as much as it does from from a good product and good service. What’s new and different in modern commerce is the potential for multidimensional feedback.

By

Anne Wallace is a New York lawyer who writes extensively on legal and business issues. She also teaches law and business writing at the college and professional level. Anne graduated from Fordham Law School and Wellesley College.

Get Business Legal Updates

Please provide your full name.
Please provide a valid email address.
We respect your privacy, and we will never share your information. Unsubscribe at any time.

Related Publications

The US Treasury Department is urging businesses who received a PPP loan to file for loan forgiveness in the wake of a ruling clarifying the tax treatment of expenses paid for with PPP money. Since businesses are not taxed on the proceeds of a forgiven PPP loan, the Treasury Dept ruled that expenses paid from…

December 17, 2020

Nasir and Matt discuss Mark Zuckerberg’s decision to take two months of paternity leave, his pledge to donate99% of his Facebook shares to charity, and the alternative motive of Gravity’s CEO to drastically raise the salary of allemployees.

December 9, 2015

The guys close out the week by talking about the Houston based restaurant that failed to make a donation to a local food bank and latertried to rectify the situation by running an unapproved fundraiser.

August 19, 2015

Nasir and Matt discuss one website’s struggle with regulating user generated content, an issue they’ve discussed with Yelp in the past.  They then answer the question, “I work for a firm doing a temporary assignment on a client’s work site. The firm calls me an “exempt hourly contractor employee” and deducts tax contributions per my…

July 14, 2014
Legally Sound Smart Business cover art

Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
Apple Podcast badge
Google Podcast badge
Spotify Podcast badge

Latest Episodes

November 21, 2023

In this episode, Nasir Pasha and Matt Staub explore the legal implications of Artificial Intelligence in the business world. They delve into the most talked-about issue of 2023: AI and its impact on the legal landscape. Although AI isn’t necessarily a new topic, it has many unanswered questions in the legal world. Nasir and Matt…

July 12, 2023

In this episode, Attorney Nasir Pasha and Attorney Matt Staub delve deep into the complexities of mass layoffs and offer valuable insights, real-life examples, and practical advice to employers grappling with the aftermath of such challenging situations. Nasir and Matt emphasize the critical importance of effective communication when executing mass layoffs. They stress the need…

January 9, 2023

As the COVID-19 pandemic swept across the globe, businesses scrambled to adapt to the new reality it presented. In this blog post, we dive into the case of Goldman Sachs, a financial services giant, to examine their response to the crisis and the lessons other businesses can learn from their return-to-office strategy. From prioritizing employee…

October 28, 2022

Full Podcast Transcript NASIR: Finally, my two favorite worlds have collided – both the law and the chess – right here at Memorial Park in Houston, Texas. Windy day. We have some background noise – ambient noise. What are the two worlds that collided? Well, Hans Neimann has sued Magnus Carlsen for defamation in one…

September 26, 2022

Through a five-round championship bout, Matt travels to Texas from California to determine which state is better for business. Will it be a knockout with a clear winner or will it go to the scorecards?

July 7, 2022

Whether you are buying or selling a business, the transaction goes through the same steps. However, they are viewed from different perspectives. Sellers may not want to fully disclose all the blind spots while Buyers will want otherwise. Nasir and Matt battle it out in this Buyer vs. Seller to determine who has the advantage!…

May 12, 2022

When it comes to Restrictive Covenants, employers are fighting to keep their company safe while employees may use them to their advantage. Keep listening to find out if the Employer or the Employee wins this battle. Round 1: Trade Secrets A company’s trade secrets encompass a whole range of information and are one of the…

February 14, 2022

The Supreme Court rejected the nation’s vaccine mandate. Businesses with 100 or more employees are NOT required to have their employees vaccinated or go through weekly testings. However, this policy remains in effect for health care facilities. In this episode of Legally Sound | Smart Business, the team sat down to discuss their thoughts on this ruling.

December 1, 2021

In this episode of Legally Sound | Smart Business by Pasha Law PC, Nasir and Matt cover the Business of Healthcare. There is more to the healthcare industry than just doctors and nurses. Many Americans have health insurance to cover their yearly needs, but most Americans are not aware of what really goes on behind…

October 12, 2021

In our latest episode, Nasir and Matt are covering the legal issues on Social Media. The average person spends most of their day on social media, whether they are scrolling for hours or publishing their own content. However, just because you publish your own content on Instagram does not equate to you owning that image….

September 28, 2021

What is a Non-Disclosure Agreement, and when do I need one? In this episode, Nasir and Matt shares why you need to use Non-Disclosure Agreements, basic facts about NDA’s, and discuss about the infamous Jenner-Woods story. Having the right Non-Disclosure Agreement in place not only protects you and your business, but it also makes the…

June 16, 2021

Covered in this episode of Legally Sound Smart Business are some typical business mistakes blunders small businesses often make and how to avoid them. Blunder #1: Copying and pasting agreements It may sound like a good idea at the time, but this blunder comes with hidden pitfalls. Having an attorney draft terms that are specific…

February 4, 2021

How you terminate an employee can make the difference between a graceful transition to avoidable negative outcomes like a dramatic exit or even a lawsuit. We gathered a panel of experts and asked them – is there a “right way” to fire an employee? We would like to thank our guests for this episode: Amr…

December 2, 2020

The COVID-19 pandemic has turned nearly every aspect of life on its head, and that certainly holds true for the business world. In this episode, Matt and Nasir explain how the early days of the pandemic felt like the Wild West and how the shifting legal playing field left a lot open to interpretation and…

November 16, 2020

After plenty of ups and downs, our buyer has finally closed on the purchase of their business. While we’re marking this down in the ‘wins’ column, it never hurts to review the game tape. In this final episode, our hosts, Matt Staub and Nasir Pasha, return to the deal almost a year later to reflect…

September 15, 2020

The ink is drying on the signature line and things are looking great for our buyer. After so much hard work, the finish line is in sight and the cheering within ear shot.   Though the landlord is still serving friction, things seem safe to move forward and for now, our buyer will be keeping…

July 31, 2020

Though things are coming along well, the journey would not be interesting if it was purely smooth sailing. After our buyer opens escrow, they are forced to push the closing date back when suddenly a letter from an attorney was received claiming the business, we are buying has a trade mark on the name!  Now…

June 12, 2020

With frustration at an all-time high and professionalism at an all-time low, our friend the Buyer has “had it” with the Seller and quite frankly their lack of knowledge. At present our Buyer is rightfully concerned that the latest misstep from our loose-lipped Seller will threaten not only the entire operation of the businesses but…

May 11, 2020

As we go deeper into the buying process, we start to uncover more challenges from our seller and encounter some of the wrenches they are tossing our way. When we last left off in episode three our team was knee deep in due diligence for our buyer, had already penned and signed the Letter of…

April 4, 2020

One word–interloper! When a new mysterious broker enters the transaction and starts to kick up dust, Nasir and Matt take the reins. The seller signed off on the letter of intent (see episode 2), yet this “business broker” serves only friction and challenges by refusing to send financials, whilst demanding more of a firm commitment…

April 4, 2020

Just as most stories and deals start out, everyone is optimistic, idealistic and full of hope for clear skies. It’s a perfect outlook with a perfect setup for the ups and downs yet to come. Peek further behind the curtain and into the first steps of buying a business: the letter of intent. After the…

April 4, 2020

When a savvy buyer hears opportunity knocking to purchase a prime positioned business, she decides not to go it alone and taps in the professionals to help navigate what could potentially be a fruitful acquisition. “Behind the Buy” is a truly rare and exclusive peak into the actual process, dangers, pitfalls and achievements, that can…

August 7, 2019

GrubHub is subject to two “matters of controversy” that have likely become common knowledge to business owners: “fake” orders and unfriendly microsites.

May 28, 2019

In this podcast episode, Matt and Nasir breakdown the legal issues of the subscription industry’s business on the internet. Resources A good 50-state survey for data breach notifications as of July 2018. California Auto-Renewal Law (July 2018) Privacy Policies Law by State Why Users of Ashley Madison May Not Sue for Data Breach [e210] Ultimate…

March 12, 2019

In recording this episode’s topic on the business buying process, Matt’s metaphor, in comparing the process to getting married probably went too far, but they do resemble one another. Listen to the episode for legal advice on buying a business.

December 3, 2018

Nasir and Matt return to discuss the different options available to companies looking to raise funds through general solicitation and crowdfunding. They discuss the rules associated with the various offerings under SEC regulations and state laws, as well as more informal arrangements. The two also discuss the intriguing story about a couple who raised over…

July 24, 2018

Flight Sim Labs, a software add-on creator for flight simulators, stepped into a PR disaster and possibly some substantial legal issues when it allegedly included a Trojan horse of sorts as malware to combat pirating of its $100 Airbus A320 software. The hidden test.exe file triggered anti-virus software for good reason as it was actually…

April 17, 2018

Attorneys Matt Staub and Nasir Pasha examine Mark Zuckerberg’s congressional hearings about the state of Facebook. The two also discuss Cambridge Analytica and the series of events that led to the congressional hearings, the former and current versions of Facebook’s Terms of Service, and how businesses should be handling data privacy. Full Podcast Transcript NASIR:…

March 10, 2018

The Trump presidency has led to a major increase in ICE immigration enforcement. It’s critical for business owners to both comply with and know their rights when it comes to an ICE audit or raid. Nasir, Matt, and Pasha Law attorney Karen McConville discuss how businesses can prepare for potential ICE action and how to…

February 5, 2018

New years always bring new laws. Effective January 1, 2018, California has made general contractors jointly liable for the unpaid wages, fringe benefits, and other benefit payments of a subcontractor. Nasir and Matt discuss who the new law applies to and how this affects all tiers in the general contractor-subcontractor relationship. Click here to learn…

January 2, 2018

With a seemingly endless amount of new mattress options becoming available, it is unsurprising that the market has become increasingly aggressive. As companies invest in more innovative solutions to get in front of customers, review sites, blogs and YouTube videos have moved to the forefront of how customers are deciding on their mattresses and how…

December 7, 2017

In recent months explosive amounts of high profile allegations of sexual harassment, assault, and varying acts of inappropriate behavior have transcended every sector of our professional world. With a deluge from Hollywood and politics, and the private workforce, accusations have inundated our feeds and mass media. This harassment watershed has not only been felt within…

November 16, 2017

If you are not familiar with the EB-5 program started in 1990 to give green cards to certain qualified investors in the United States, then you may not have been alone a few years ago. Currently, the EB-5 program has since exploded since its inception and now hits its quotas consistently each year. The program…

October 10, 2017

Government requests come in multiple forms. They can come in as requests for client information or even in the form of investigating your company or your employees. Requests for Client Information General Rule to Follow Without understanding the nuances of criminal and constitutional law and having to cite Supreme Court cases, any government requests for…

August 24, 2017

Nasir and Matt suit up to talk about everything pertaining to employee dress codes. They discuss the Federal laws that govern many rules for employers, as well as state specific nuances in California and other states. The two also emphasize the difficulty in identifyingreligious expression in dress and appearance, how gender-related dress codes have evolved…

June 28, 2017

Nasir and Matt discuss the life cycle of a negative online review. They talk about how businesses should properly respond, how to determine if the review is defamatory, the options available to seek removal of the review, how to identify anonymous reviewers, whether businesses can require clients to agree not to write negative reviews, and…

June 7, 2017

On this episode of the Ultimate Legal Breakdown, Nasir and Mattbreak down social media marketing withguests Tyler Sickmeyer and Kyle Weberof Fidelitas Development. They first discuss contests and promotionsand talk about where social media promotions can go wrong,when businesses are actually running an illegal lottery, and the importance of a soundterms and conditions. Next, they…

April 3, 2017

On this episode of the Ultimate Legal Breakdown, Nasir and Matt go in depth with the subscription box business. They discuss where subscription box companies have gone wrong(4:30), the importance of a specifically tailored terms and conditions(6:30), how to structure return policies (11:45), product liability concerns (14:45),the offensive and defensive side of intellectual property (19:00),…

February 1, 2017

Nasir and Matt discuss the suit against Apple that resultedfrom a car crashed caused by the use of FaceTime while driving. They also discuss howforeseeable use of apps can increase liability for companies. Full Podcast Transcript NASIR: Hi and welcome to Legally Sound Smart Business! I’m Nasir Pasha. MATT: And I’m Matt Staub. Two attorneys…

January 5, 2017

The guys kick in the new year by first discussing Cinnabon’s portrayal of Carrie Fisher as Princess Leia soon after her death, as well as other gaffes involving Prince and David Bowie. They alsotalk about right of publicity claims companies could be held liable for based on using someone’s name or likeness for commercial gain.

December 22, 2016

Nasir and Matt discuss the recent incidentat a Victoria’s Secret store where the store manager kicked out all black women after one black woman was caught shoplifting. They then each present dueling steps businesses should take when employees are accused of harassment.

December 8, 2016

Nasir and Matt return to talk about the different types of clients that may have outstanding invoices and how businesses can convert unpaid bills to getting paid.

November 10, 2016

After a long break, Nasir and Matt are back to discuss a Milwaukee frozen custard stand that is now revising it’s English only policy for employees. The guys also discuss how similar policies could be grounds for discrimination and what employers can do to revise their policies.

October 6, 2016

The guys discuss the new California law that allows actors to request the removal of their date of birth and birthdays on their IMDB page and why they think the law won’t last. They also discuss how age discrimination claims arise for business owner.

September 29, 2016

Nasir and Matt discuss the racial discrimination claims surroundingAirbnb and how it’s handled the situation. They also discuss some practical tips for businesses experiencing similar issues.

September 8, 2016

Nasir and Matt discuss whyAmazon seller accounts are getting suspended and banned without notice and how business owners can rectify this situation through a Corrective Action Plan.

August 25, 2016

Nasir and Matt talk about the accusations surroundingfashion giant Zararipping off the designs of independent artists like Tuesday Bassen and howsmaller companies can battle the industry giants.

August 18, 2016

Nasir and Matt discuss Brave Software’s ad replacing technology that has caught the eye of almost every national newspaper and has a potential copyright infringement claim looming. They also welcome digital marketing expert Matt Michaelree to speak on the specifics of what Brave is attempting to do and whether it has the answers moving forward.

July 28, 2016

Nasir and Matt discuss the sexual harassment lawsuit filed by Gretchen Carlson against Fox CEO Roger Ailes. They also talk aboutthe importance of sexual harassment training and properly handling such allegations in the office.

July 15, 2016

Nasir and Matt talk about the changes at Starbucks that have led to many disgruntled employees and customers.

We represent businesses.
That’s all we do.

Oh, and we love it.

We love our work. We love reviewing that lease for your new location. We thrive on closing that acquisition that nearly fell through. We’re fulfilled when we structure a business to grow, raise capital, and be legally protected.

We focus on developing close relationships with our clients by being like business partners. A partner who provides essential, personalized, proactive legal support.

We do all of this without utilizing the traditional billable hour model. You pay for the value we bring, not the time spent on calls, emails, and meetings.

Our team is made up of attorneys and staff that share these values and we are retained by clients who want the same.

Pasha Law PC operates in the states of California, Illinois, New York, and Texas.

Meet Our Team

Fractional General Counsel Services

Pasha Law Select offers the expertise of a high-end general counsel legal team for every aspect of your business at a fixed monthly rate. Pasha Law Select is deliberately designed to allow our legal team to be proactive, to anticipate, and to be comprehensive in serving our clients. To be great lawyers, we need to know our clients. We can’t know our clients unless we represent a select number of clients in the long-term. This is Pasha Law Select.

Learn More