Philanthropy and the Family Business: Five Channels for Charitable Giving

By Jerad Beltz
Senior Vice President, Deputy General Counsel
Whittier Trust

Philanthropic giving is a hallmark of many successful companies. Once your family business is thriving, there are many reasons why you may want to give back to the community, make a difference, and receive tax benefits—an added bonus. Partnering with a charity can also be an advantageous way to align your brand with a noteworthy cause and build goodwill. 

But where to begin? If you have personal experience as a donor, you’ll have a headstart in understanding tax implications because many of the same rules apply for businesses. But deductibility for companies takes effect at different levels than for individuals, and there are caps based on the type of assets and entities involved. These parameters can make it tricky to select the best way for your company to be philanthropic. And despite your best intentions, charitable giving can result in significant costs and drawbacks if you fail to do the research and due diligence. A trusted advisor can assist in helping you explore the following five most common and effective ways for family businesses to engage in philanthropy.

Direct Corporate Giving

Direct giving is the simplest approach to philanthropy, in which your company donates cash to a qualified 501(c)(3) nonprofit organization. Alternatively, you can make an in-kind donation of products or services to a public charity. A restaurant owner, for example, might donate food for a nonprofit event, or the owners of a hotel might donate a two-night stay for a fundraising auction. The nonprofit accepting your donation needs to provide documentation of your gift (a receipt or letter of acknowledgement), and for in-kind donations, your company will declare a value for the gift, such as: “two nights, ocean-view suite, worth $1,000.”

Whether in-kind or cash, these donations can be deducted as charitable contributions, subject to certain limits. For tax year 2026, a new rule has taken effect: Corporations may face a 1% income “floor” before deductions apply, meaning that gifts of an amount lesser than 1% of the company’s taxable income is nondeductible. So although this form of giving is ideal for smaller businesses, you should be aware that smaller gifts may not qualify for deductions. Additionally, there is a “ceiling” on the amount of deduction companies are able to take, which is 10% of taxable income. Businesses can elect to carry-forward deductions that go above the 10% cap for up to 5 years.

An advisor like Whittier Trust can help you choose a qualified 501(c)(3) charity that best fits your goals. Public charities—which typically run community programs—offer the highest tax-deductible limits for donors. They are primarily funded by the general public or government entities. Private foundations are more opaque, usually funded by a single family or corporation, which means you need to be cognizant of any conflicts of interest or self-dealing. Some companies choose to establish their own private foundation or other charitable vehicles, which will be discussed next.

Corporate Donor-Advised Fund

A donor-advised fund (DAF) offers a slight variation on direct giving, acting as a sort of charitable middleman. The vehicle gives your charitable giving program structure, without being too complicated. Companies often use their DAFs as a way to give to organizations in their community, fund scholarships, or allow employees to collectively recommend gifts. The ease of administration makes it a low-barrier way for companies to engage in philanthropy.

A corporate DAF is easy to set up, often taking only a few days, and is low-cost to manage. As soon as you deposit money into a DAF account, you get an immediate tax write-off for the whole amount. The sponsoring organization that operates the DAF (a public charity) might be a community foundation or part of a financial company like Schwab, Fidelity, or Vanguard. Once assets are deposited, an Advisory Committee gets to recommend which charities it is distributed to, and when those donations are made. This in an ideal option for businesses that want to both maximize the tax deductibility of charitable giving and simplify the management of a charitable offering. Because the sponsoring organization handles compliance and reporting, your tax-related work is done as soon as you make your contribution. 

Once you’ve established your DAF, the funds are legally owned by the supporting organization, so it’s important to research your options and carefully determine the right partner from the beginning. You will want to consider their history and reputation, fees, responsiveness to clients, and relationships in the community. It is important to choose your DAF provider carefully, as not all offer the same features or flexibility. While you can switch from one DAF provider to another, it should be noted that DAF funds can never be distributed back to the donor, or to a private foundation. The only qualified recipients of DAF funds are other DAFs or public charities.

You should also speak with your accountant or client advisor before creating a DAF to be sure you understand minimum and maximum deductions. Although you can contribute appreciated stock or physical assets to your DAF, these assets may yield lower deductions than cash. 

Corporate Private Foundation

A private foundation is more complex to operate than a DAF. It’s a separate legal entity created and funded by your company. Private foundations follow rigorous self-dealing regulations and require board governance and an annual tax filing with the IRS. They also have strict financial rules: First, they must distribute at least 5% of the average fair market value of their assets each year; and second, they must pay a flat 1.39% excise tax on their net investment income and possibly make estimated tax payments throughout the year. Because of this ongoing compliance management, a private foundation can be rather time consuming to run in-house. Outsourced solutions should be explored if this is a concern. 

Amid such strict regulation, why do some companies choose to go this route? Private foundations give your company autonomy and control—over branding, leadership, investments and where to give. It can also help promote your brand and shape your company’s legacy. You’ve probably heard of the Walmart Foundation, Coca-Cola Foundation, or IKEA Foundation. These companies are large enough to manage their charitable entities on their own, and having their names attached to an array of causes, locally and globally, enhances their reputations. 

The most effective foundations tend to align closely with a defined mission. For your own company, you may want to choose a cause that is most important to you or your employees, such as cancer research, literacy, or food security. Having a private foundation allows you to align your company directly with that effort so that your brand is associated, or even synonymous, with the progress being made in that field.

Cause-Related Marketing

Another way to combine branding and philanthropy is cause-related marketing (CRM). If you’ve ever bought Toms Shoes, a Subaru car, Warby Parker glasses, or a RED product, then you may have participated in CRM—in other words, this type of philanthropy is when companies link sales to charitable contributions with a promotion such as “$1 donated per product sold.” 

CRM is one of the most compelling forms of demonstrating charity for consumer-facing enterprises because it demonstrates the positive impact your brand can have on the community. There are, however, many rules to follow and legal considerations. You will want to engage the right representation to establish the correct legal structure and wording of your offer and counsel you through the process. Your company will need to comply with federal and state consumer protection laws and commercial co-venture laws, and the legal counsel setting this structure up for your company can counsel on the deductibility of money spent to operate the campaign.

Further, you will have to meet transparency requirements in all your advertising and printed materials. You’ll want to hire an agency or marketing consultant that manages this specific type of campaign and will respect the guidelines set by your attorneys. The worst thing you could do is launch your new marketing campaign then have the Attorney General take legal action and shut it down. You can’t afford to have customers think your business is misrepresenting its actions. 

However, when managed well, cause-centric marketing can offer a big lift to your bottom line as you gain more attention, new customers, and greater brand loyalty from your existing customer base.

Employee Matching Gift Program

For some businesses, the best solution may be to utilize philanthropy as an employee perk, allowing them to determine where charity dollars go. The easiest way to do this is through an employee giving program with a corporate matching gift. Employees who have a workplace giving program are more likely to say that their company’s values align with their personal values and to have higher overall satisfaction with their employer.

Launching  a workplace giving program is fairly simple: Your company matches donations that employees make to favorite charities, or you facilitate employees giving directly from payroll. Employees would be eligible for their own individual tax deductions and would play an active role in cultivating a culture of philanthropy.  

Although you will have to administer this program internally (or through your payroll company), there is software that can streamline it. Third-party platforms such as Benevity and YourCause can facilitate payroll deductions, automated donation matching, and impact tracking.

Your advisor can provide recommendations for how best to manage and structure the program. One possibility, for example, would be to use a corporate DAF to fulfill your matching responsibility. In this scenario, an employee would give $50 to the local food bank then submit their request to the company. The company would send a confirmation, then direct a $50 matching gift be sent to that same food bank from a pool of funds already pre-funded into a DAF. The company will need to make clear that only certain qualified public charities can receive matching gifts, and may further refine that the cause must be in-line with a corporate mission statement or other guiding principles. 

Keep in mind that employee-directed giving doesn’t mean giving directly to employees. Direct gifts to individuals are prohibited from both Corporate DAFs and Private Foundations unless done through a pre-approved employee emergency or hardship program. For example, you may have a worker who needs help with medical bills or to put a child through college, but you can’t get a tax deduction for making an individual gift to them, because that employee is not a 501(c)(3). Many rules apply to this type of program, however, and expert legal and financial guidance would be essential.

Making The Choice

Using a DAF or direct giving are usually the best options for small to mid-sized companies due to their simplicity and minimal overhead. A larger enterprise might also want the DAF tax advantages but may prefer a private foundation for greater control. Some companies use both together (such as a foundation for flagship giving but a DAF for flexibility). Cause-related marketing and/or an employee matching gift can be added at any time depending on your capacity. 

Your advisor can help you analyze the merits of each option and consider best practices, such as outsourcing management to professional philanthropic advisors, setting up an advisory committee to guide donations and safeguard against any risk of self-dealing. At the same time, you should let your employees know that the company will be getting more involved with the community and communicate your specific approach. No matter which charitable channel you choose, introducing philanthropic goals can signal a new era for the company, promote greater unity among team members, and establish a proud tradition of giving back for your brand and a dynamic legacy for your family.