How to account for differences between merchant donations, customer donations and the ChangeUp license fee.
1) Who We Are
ChangeUp is donate-at-checkout software for e-commerce sites that allow merchants to invite customers to make donations to any charity in America. The software also allows merchants to make donations, either unilaterally or by matching their customers’ donations. ChangeUp tabulates and processes thousands of micro-donations per month for its merchant partners. ChangeUp sends merchants: 1) Donation Report (green border, monthly); 2) Invoice (blue border, annually), and; 3) Tax Planning Statement (grey border, end of year).
2) Accounting for Donations
Your Donation Report (“DR”) will segregate donations made by your customers and you, the merchant. Donations are not to be recorded by your company as revenue and should never land on your income sheet. Instead, they are a balance statement item and should be recorded as “Payable to the American Online Giving Fund (“AOGF”) via ChangeUp.” The AOGF is a Donor Advised Fund that distributes over $100M per month in donations and is utilized by ChangeUp to ensure that all donations are remitted promptly to the chosen charities. On the merchant side, the process of collecting micro-donations throughout the month is similar to collecting sales tax and sending it to the state at month’s end.
3) Invoice for License Fee
The ChangeUp License Fee, like any other software fee your company pays, is an expense-paid annually to ChangeUp, Inc. We will provide you with ACH information to wire payment to us, and we use a bank account that is separate and segregated from the one that receives and processes the donation monies discussed above.
4) Tax Deductions for Your Company’s Donations
Every year, US-based C Corps are permitted to deduct up to 10% of their taxable income (revenue less expenses). For that reason, donations made by the company via the ChangeUp donation software can help offset our software’s license fee. For example, $100,000 in merchant donations would reduce taxable income by the same amount and provide a cash flow benefit of $30,000 (assuming the standard rates of 21% federal and 9% state = 30% combined rate). As part of our service, at end of year we provide a formal giving statement for your tax planning purposes.