• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • Login
  • Subscribe
  • Logout
  • My Profile

  • CORONAVIRUS
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • REGIONS
    • Asia Pacific
    • Canada
    • China
    • Europe
    • Latin America
    • Middle East/Africa
    • North America
  • THINK TANK
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » When Companies Donate Excess Inventory, Everyone Wins

When Companies Donate Excess Inventory, Everyone Wins

August 16, 2016
Gary C. Smith, Pres. & CEO, Nat’l Assoc. for the Exchange of Industrial Resource

The typical ways of dealing with excess inventory—discounting products, liquidating inventory and just holding onto unsold stock in a warehouse—all come with their own sets of problems. Discounting eats into a company’s profits and devalues its brand. Liquidating returns just pennies on the dollar. Holding onto excess inventory wastes valuable warehouse space. By comparison, product philanthropy—donating unwanted stock to charity—requires minimal labor while generating a hefty tax deduction. And for those companies that use a gifts-in-kind organization, a go-between for corporate donors and charities, the donation process requires little more than transporting their donation to the organization’s warehouse.

A gifts-in-kind organization is a nonprofit that collects donated products from corporations and disperses them to pre-screened, qualified nonprofits that want them. Donated items might range from paper goods for a nonprofit’s headquarters to art supplies for a school.

Once a company becomes a recognized donor, they can contact their gifts-in-kind organization whenever they want to dispose of inventory. That might be when a company is consolidating its warehouse or trying to expedite post-holiday returns.

So what’s the bottom line on how much of a tax break a company can earn through a donation to a gifts-in-kind organization? If that company is a C Corp, it can receive a federal tax deduction equal to up to twice the cost of the donated products, according to IRC Section 170(e)(3).

Here’s the formula:

Deductions are equal to the cost of the inventory donated, plus half the difference between the cost and fair market-selling price, not to exceed twice the cost.

For example, if your product cost $10 and you sell it for $30, the difference is $20. Half of $20 is $10. So:

$10 (Product Cost) + $10 (Half the Difference) = $20 Deduction. ($20 does not exceed twice the product cost, so it is does not exceed the maximum allowable deduction.)

Most companies will find that this is a much better return—with less hassle—than liquidating their products or putting them up for auction.

In addition to the tax benefit, product donation saves companies money by reducing the time and labor needed to move excess inventory. It also promotes a company’s brand in two ways. First, by donating products to those in need, it positions the company as one with heart, raising its image with both consumers and its own employees. Second, donating preserves the company’s brand. Donations promote good will, thereby elevating a company’s image. By contrast, putting discounted inventory into the marketplace devalues a company’s brand and can sometimes sour relationships with retailers trying to move those same products.

To make the transition from discounting to donating, companies should research gifts-in-kind organizations to find the one that best fits their needs. There are multiple such organizations operating in the U.S. Companies should look for ones that can tell them exactly what types of charities they serve, will accept the types of merchandise they want to donate, accept both large and small donations, offer a fast, streamlined donation process and provide detailed records of both what the company donated and who received it. Most gifts-in-kind organizations do not charge fees to corporate donors, so this should be a given when choosing an organization to work with.

Once a company selects a gifts-in-kind organization, it will typically complete some basic paperwork. Then, when the company is ready to make a donation, it will contact the organization to let them know what inventory it wants to donate. Once the donation is approved, all the company has to do is ship the donation to the gifts-in-kind organization. The organization will take care of sorting it, cataloging it and making it available to member charities.

Once it has recorded a donation, the gifts-in-kind organization will send the company proper tax documentation. If requested, the organization may also send additional documentation identifying which charities ultimately received the donation.

Toys, school supplies, small electronics and even makeup are among the many items gifts-in-kind organizations may accept. Basically, companies can donate most anything other than food items and some exceptions based on storage requirements.

With a donation to a gifts-in-kind organization, those products taking up space on warehouse shelves can be put to use by people who truly need them. The end result for companies is high marks in both philanthropy and profitability.

Source: National Association for the Exchange of Industrial Resources

RELATED CONTENT

RELATED VIDEOS

Logistics Technology Inventory Planning/ Optimization SC Finance & Revenue Management Global Supply Chain Management Regulation & Compliance Food & Beverage
KEYWORDS Food and Beverage Global Supply Chain Management Inventory Planning/ Optimization Logistics Regulation & Compliance SC Finance & Revenue Management Technology
  • Related Articles

    When Vendors Manage Inventory, It's a Win-Win for Everyone

    The Second Wave of Retail Data-Sharing: Everyone Wins

    Stepping Into Costly, Excess Inventory Problems

  • Related Events

    12 Steps to a Resilient Enterprise

Gary C. Smith, Pres. & CEO, Nat’l Assoc. for the Exchange of Industrial Resource

When Companies Donate Excess Inventory, Everyone Wins

More from this author

Wake up to Coronavirus Updates and the latest Supply Chain News!

Subscribe to our Daily Newsletter

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • Coronavirus-watch-Armada

    Virus Update: Biden Sees Fast Rollout of J&J Vaccine; Astra CEO Defends Delivery Shortfall

    Coronavirus
  • West Coast Port Congestion

    Shippers Need Alternatives to West Coast Port Congestion

    Logistics
  • Mexico

    The Near-Shoring Trend: Will China’s Loss Be Mexico’s Gain?

    Logistics
  • Robotic automation

    Autonomous Supply Chains Are on the Horizon

    Coronavirus
  • Drugmakers

    Research Lays Groundwork for More U.S.-Made Drugs

    Coronavirus

Digital Edition

Scb feb 2021 lg

2021 Supply Chain Management Resource Guide

VIEW THE LATEST ISSUE

Case Studies

  • Remote Implementation: A Dose of the Right Medicine for B2B Pharmacy

  • LSP Saves Customer $1.5 Million a Year With MPO Global Inbound Management

  • Auto Supplier Wows Key Client Using riskmethods Supply Chain Savvy

  • Integrating Shipping and Compliance Saves Conglomerate Millions

  • How a Consumer Goods Giant Upped Its On-Time Delivery Performance

Visit Our Sponsors

6 River Systems ArcBest Armada
aThingz BluJay Burris Logistics
DSC Logistics DCSA (Digital Container Shipping Association) DHL Resilience360
Genpact Geodis GEP
Honeywell Intelligrated Infor Logility
Magnitude Software MPO Old Dominion
Oliver Wight OpenSky Ports America
Purolator QAD Precision Red Classic
Riskmethods Snapfulfil TGW Systems
Transportation Insights Watson Land Company Westfalia Technologies
Workjam Yang Ming  
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2021 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing