Vox Reader Ben Kutcher Ask: What happens to money when I put it into a register? Are these real charities? Who will earn credit for your donations? Are there any taxable profits for companies that offer this? Should they provide transparency reports?
If I had been to a grocery store checkout counter and the cashier asked me to round up my purchases for the charity, I would probably have asked the same question. The Roundup Charity Campaign was first introduced about 15 years ago and has been ubiquitous since. In 2022, the 77 most successful of these initiatives raised more than $749 million, more than twice the amount raised in 2012.
These types of charity campaigns are very easy. The charity partners with a local grocery store, gas station or business, a favorite restaurant, to ask customers to round up the total to the nearest dollar. These few cents are heading towards fundraising. Retailers usually collect these small donations over a period of time and collect the amounts to charities.
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The Roundup campaign has proven to be quite successful. More than half of Americans are willing to round up and fork over a few cents. A 2018 survey showed that even if customers were asked to donate roughly the same amount as rounding up the total purchase, the roundup approach was more successful than other more traditional types of fundraising. I knew there was.
But at the same time, the rise in charities, restaurants and supermarkets has begun to irritate some customers by asking them to round up their purchases for the charity. These requests usually don't contain much information about who is benefiting or how much of your contribution actually reaches the charity. (Needless to say, there are concerns about whether the donation roundup is a farce to help businesses get tax cuts.)
Here's everything you need to know about these campaigns: This will allow you to make an informed decision the next time you are asked to put together a charity.
Who will receive tax benefits?
One of the biggest controversies surrounding the Roundup campaign is those who enjoy tax benefits. I'll close.
There's a lot of misinformation swirling on social media, but tax experts have set records straight. Customers who donate money will benefit from tax purposes.
If you complete your purchase and choose to donate to a charity, the business that makes the transaction is simply mediated. They pooled client funds before handing over to charities, Renu Zaretsky, author of the Urban Blue Kings Tax Policy Center, told The Associated Press. The business is merely a holding agent and cannot report any donated funds as charitable contributions.
Walmart launched its Roundup campaign in 2022, allowing customers to choose validated charities for customers to donate. Customer donations go directly to third-party platforms where nonprofits can track campaigns and receive funds. Nonprofits such as Operation Homefront, which raise funds to support military families, have raised millions through the campaign. Sometimes, Walmart matches the donation. So, if a customer donates 20 cents, the store does too. (Now when stores match such a donation, they will receive tax benefits from donations.)
Customers will enjoy all the tax benefits of donations as long as you include it in your tax form, but most people will not. Learn more about how to do that here.
While stores cannot amortize donations received from customers who round up purchases, there are similar types of fundraising activities to help businesses obtain tax benefits. If a company chooses to donate a portion of its sales to a charity, it means that the business will acquire a portion of the income it earns regularly and give it to the charity. However, this is not the same as the Roundup campaign.
How transparent is the company about how much they nurture?
Generally, for-profit companies are not legally required to disclose how much money they raise for charities during roundup campaigns and other fundraisers. Less than half of US states have laws that address charitable promotions, and these laws differ dramatically in terms of transparency, record-keeping and advertising. Some states, such as California, Massachusetts, and New York, have stricter laws.
With the exception of legally binding requirements, many reputable companies publish annual donation reports or corporate social responsibility reports. But again, the quality of these reports varies from company to company, as my colleague Sam Delgado wrote previously.
One of the biggest questions surrounding Roundup Campaigns and other charitable contributions is that the actual cause of donations is actually the culprits and overhead. There are no universal legal restrictions on how much a deadline donation can cover, but some states either regulate this or disclose to charities exactly where the donation goes. I'm requesting that. Charity Watchdog recommends that at least 65% to 70% of the funds raised are heading towards program costs. (Most charities need to use several donations to cover minimum costs such as staff, advertising, office space, and more.)
Rather than worrying about how Petco will interface with local animal shelters, perhaps a better move is to get familiar with the charities you believe in advance. It's hard to assess whether to give money when you're about to go home before the ice cream melts. Evaluating a specific cause through donation reports and charity watchdogs (such as charity watches and charity navigators) may help to escape the pain in advance. Below are Future Perfect's recommended charities for climate, animal and health.
And yes, even a few cents can help a lot!
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