Why Donating to a For-Profit Company is Smart. And Now, Also Easy.

According to Oxford Languages (Google’s dictionary), Philanthropy is defined as “the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes.” 

The word philanthropy actually comes from Ancient Greek φιλανθρωπία (philanthrōpía) 'love of humanity', from phil- 'love, fond of' and anthrōpos 'humankind'.

I’ve Googled and ChatGPT-d a lot of ways to define “philanthropy”, and none mention the IRS tax code…but let’s be honest, most philanthropists (donors) intrinsically connect philanthropy with tax breaks - and as they should! There is nothing wrong with a tax deduction when you’re committing your hard earned dollars to the wellbeing of society.

However, it is this tax code (IRC Section 170 to be exact, allowing for a deduction of up to 60% of your adjusted gross income) that discourages donations to “good causes” that aren’t connected to a tax-exempt status. And increasingly, it is these types of companies that are doing the heavy lifting on crafting solutions that make the world a better place.  Take Sunrun, a startup-turned-multi billion dollar public corporation - and now the leading home solar panel and battery storage company - that has generated 25.6 billion kilowatt-hours of clean energy since 2007, helping enable the avoidance of an estimated 14.6 million metric tons of CO2e from entering the atmosphere (the equivalent of taking 3.2 million cars off the road for a year). It would be hard to dispute the impact they’ve had to date, and their potential to catalyze innovation in solar energy access to underserved communities around the world. But no one donates to Sunrun (that I’m aware of at least). 

This is not to say that for-profits don’t already receive donations (i.e. grants).  Many large foundations, like the Gates Foundation, give a ton of money to for-profits (see their Strategic Investment Fund strategy). The US government also grants out billions of dollars to for-profits each year. Tesla, for example, has been on the receiving end of several billion dollars worth of grants to hasten the transition to EV-powered vehicles.

Having these nonprofit and government intermediaries can be helpful from a compliance standpoint, but they are inefficient and expensive.  Why not make it easier for individuals to donate directly to certain for-profits that can do - or are already doing - “charitable” work? 

We at Rise Together are obviously big proponents of this, and it turns out it’s not as difficult as we had originally thought. The answer is something called fiscal sponsorship, which allows a for-profit to essentially “borrow” an existing nonprofit’s 501(c)(3) exempt status and accept non-dilutive funding to support its charitable initiatives. It takes a mere two days to set up, and then anyone can donate to this instance, in service of supporting some of the good and charitable work that many for-profits are doing to make the world a better place. It’s a no-brainer for both companies and donors. 

Imagine a clothing company with excess materials at the end of a season that would typically go into a landfill (cheapest option)…what if the company started an initiative where this excess material is instead shipped to a local handcrafter’s warehouse to be repurposed and resold or donated, in service of the upcycling movement? I’d be excited to support that (this exists by the way).

As the baby boomers move into their prime giving years over the next two decades, they are expected to bequeath or donate trillions of dollars - now is the time to normalize putting philanthropic capital to work in both the nonprofit and for-profit sectors. 

I’ll dive deeper into this topic of fiscal sponsorship in a follow-up blog post in the coming weeks.

Lastly, kudos to you if you noticed my hidden Taylor Swift innuendo….