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Barter�s Use Grows Among Corporate America With �Product Philanthropy�

According to a survey by the Conference Board, a New York business research think tank, for the first time ever, more than half of all charitable contributions by U.S. companies�54.2%�were in the form of merchandise not cash. That�s up from 35% in 2002, at which time total corporate charitable deductions reached $10.3 billion.

The recipients, nonprofit organizations, charities and churches, especially those offering assistance to the poor, say they welcome the trend and that their clients are grateful for receiving free products.

Trading Products In Exchange For Tax Advantages

The growing trend stems in part from the 1976 tax provision by Congress that allows major companies to take up to twice the tax deduction normally received if they donate goods to charity, instead of discarding them. (Generally, companies that discard unsold items can only expense their cost.)

In short, companies can deduct up to double their manufacturing cost (their cost basis) when the products go to a nonprofit organization, �solely for the care of the ill, the needy, or minor children.� By law, the products received by the nonprofits can�t be resold or bartered.

Providing products in exchange for added tax deductions is only half the benefit. Another important consideration comes into play...the chance to reduce excess inventories brought about by obsolete or improved products and packaging, or returned by customers and no longer salable at retail.

It should be noted that many companies make in-kind donations of their goods and yet don�t spend the time necessary to pursue the added deduction.

Of course, as more excess inventories are moved in this manner, they won�t be available to the corporate barter marketplace, heretofore one of the outlets for Corporate America�s excess inventories. Factor in the growing proliferation of outlet stores across the country and the burgeoning use of the Internet as a liquidating mechanism, and one can envision changes occurring in the corporate barter world.

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