IRS TAX CODE: 170e3 

Consideration of IRS Code 170e3

90% of all Gifts In Kind (GIK) which AdTech manages for Nonprofit Organizations have no tax deduction motivations involved.  And it is also true, that when a Corporation has any specific tax deduction motivations, it is critical that the tax intention is known and understood by the receiving Nonprofit Organization and by AdTech so to properly manage the involved inventory donation.

Corporate donors utilize two basic tax features.  The most common is the cost basis, simply writing off against Corporate profit the cost basis remaining, after any depreciation schedule.  Occasionally a Corporation understands and wants to utilize the special tax deduction described in IRS Code 170e3.

IRS Code 170e3 allows a greater or enhanced tax deduction for a Corporation making a donation of an inventory of goods to a qualified Nonprofit Organization, which will utilize the inventory of goods inside of their mission, which must be to meet the needs of the sick, needy or children.  Typical inventory donated into this program includes pharmaceuticals, medical equipment and goods, food, books, computers, clothing, toys, and other similar goods useful to these broad end uses.

When such goods are donated for these specific purposes, the donated goods are restricted from being sold, bartered or traded by the Nonprofit Organization.  The receiving NPOs are allowed, in some cases, to forward these restricted inventory donations to other NPOs which are more qualified to receive and utilize the inventory donation.  In such cases, the receiving NPO is permitted in most cases to receive a “handling fee” to cover transportation, warehousing and costs associated with staff and management services.

The benefits to the Donor Corporation for utilization of the special tax deduction associated with Code 170e3 can besignificant and worth careful consideration.

See the example of a Book Inventory and a Bank Foreclosure on the next page.