Re: IRS - AERC Bylaw Change

[Truman Prevatt <truman.prevatt@netsrq.com>]

In every company I have worked - and with merger mania in the defense
sector there have been a quite a few years without ever leaving my
office - views advertising as an investment as Mike states.  They expect
a return on that investment.  Advertising budgets are established at the
begining of the year and tracked by the bean counters with great care. 
If there is no return on the investment then those funds are spent
differently the next year.

When the profit goals are made then the "play money" is used for
contributions.  This is usually not a hard and fast budgeted item and
comes from a different pot than the advertising money.  There is not the
same hard fast cold return on investment critera applied to
contributions as applied to contributions.  

One way to think of this is the Cosequin Challange which most likely
came out of NutraMax's advertising budget.  I would assume some bean
counter at NutraMax is going to be trying to find a return for the
investment.  If the money invested doesn't add up to increased revenue,
then they will probably go elsewhere with that portion of the
advertising budget next year.

On the other hand I would be surprised if the donations for the national
championship rides weren't mostly contributions to help a 501C3.

I believe Mike is absolutely correct about being able to attract more
discretionary funds by retaining the 501C3 status.

Mike Sofen wrote:
> 
> I can tell you from direct experience, having been inside the books of 100+
> companies (as a software developer, not as an accountant), that there is a
> distinction between how companies view contributory funds and advertising
> dollars.
> 
> Advertising comes from budgeted expense accounts and is spent SOLELY to
> generate revenue for the company.  Thus the company that sponsors an event
> by purchasing advertising (directly or indirectly) is intending that the
> advertising bring new customers and revenue to their doorstep.
> 
> Contributions, on the other hand, can come only from the pool of profit
> dollars in the company's coffers.  Put another way, a company that is
> breaking even or losing money will not tend to be donating cash or goods to
> another entity.  A company that is doing extremely well has many incentives
> to donate to non-profits - the implied goodwill, the assistance to local
> infrastructures, and yes, the reduction of corporate taxes.
> 
> I know for a fact that Microsoft donates millions of dollars in software and
> cash every year.  This is not advertising expense, these are donations to
> qualified entities, SOME of which are not 501C3 organizations, like public
> schools.  You can rest assured that all of these contributions are deducted
> at tax time, so unless the AERC is classifying itself as a public school, it
> will attract far more discretionary funds by retaining 501C3 status, in my
> opinion.
> 
> Mike Sofen
> Seattle, WA
> 
> -----Original Message-----
> From: K S Swigart <katswig@deltanet.com>
> Date: Sunday, October 11, 1998 8:54 PM
> Subject: Re: IRS - AERC Bylaw Change
> 
> It would be an error to assume that "major corporations" and other
> sponsors are willing to buy advertising only from 501(c)(3) corporations.
> I can name a host of them that regulary buy advertising from NBC.
> 
> And any reputabe controllerr for a "major corporation" or any competent
> acountant for just about any other company would have no difficulty in
> justifying to the IRS that "sponsoring" awards for the AERC and all the
> attendant publicity associated with doing do could reasonably deducted as
> a legitimate advertising expense.
> 
> So, though the AERC may no longer be able to solicit tax-deductible
> donations...it can still sell advertising.
> 
> And don't tell me that no major corporation does such a thing.  I have
> been to countless local endurance rides who have garnered sponsorships for
> their awards from a wide variety of companies...from the local tack shop
> to Coors Beer. And I know for fact that at least SOME of these rides are
> not 501(c)(3) organizations...can't speak for all of them, but I would be
> surprised if any of them were.
> 
> The statement from the "guest" about no major coporation making
> contributions to anything other than 501(c)(3) organizations is just so
> much horse shit.
> 
> And I am not so jaded that I don't think that even individuals (who can't
> expense their "promotional" expenses) would be unwilling to make donations
> to the Convention Raffle/s, or buy raffle tickets if they couldn't write
> it off their taxes.  I have made donations to this myself, AND bought
> raffle tickets, but have never had my bookkeeping together enough to
> actually get the expense down on the right tax form (and, yes, _I_ can
> write it off as a business expense).  This doesn't keep me from making
> contributions.
> 
> Let's hear it, how many people actually DO deduct their contributions to
> the AERC????
> 
> kat
> Orange County, Calif.

-- 
Truman Prevatt
Mystic “The Horse from Hell” Storm
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