Can a PR Campaign be tax deductible?

With the April 15th deadline looming, it’s not a bad time to think about tax strategy. Can a public relations campaign be tax deductible?

An important caveat first…I’m not a CPA or an attorney, so take these recommendations with a grain of salt…that said, we know that partnering your for-profit client with a non-profit, whether it’s an environmental or health cause, is often a great way to get media exposure, generate goodwill and improve your client’s image in the community and/or the world.

If you have been transfixed as I have been over the past few nights with PBS’ excellent documentary series “Cancer: The Emperor of All Maladies” you may have also noticed that it was underwritten by Genentech, Cancer Treatment Centers of America, Bristol-Myers Squibb, AACR, American Cancer Society and others. You can’t help but admire all of these sponsors for bringing such highly educational, inspirational quality programming to the general public. In the case of the for-profits involved, since the funds were no doubt provided as unrestricted educational grants, they could have potentially beneficial tax implications as charitable deductions. (I don’t know this for a fact, but I have certainly had other clients in the past who have done something similar).

Another common public relations tactic that could have tax implications is the public service announcement. Steve Edelman, CPA of Connect360 Multimedia recently wrote a White Paper that says: “At a time when not-for-profit organizations are under continual pressure to be financially efficient, Public Service Announcements are the single most cost-effective way for them to communicate their mission-related messages to the public. PSAs make it possible for 501 (C)(3) organizations, to have television and radio stations air their messages for free and receive over $100 of free advertising time for every $1 they spend getting their messages to the stations. For example, a nonprofit that spends $50,000 on a PSA campaign can reasonably expect to receive over $5 million of free advertising time, giving it an extraordinary 100:1 return on every dollar it spends.”

Another interesting fact is that as non-profits want to look better on rating services such as Charity Navigator or Charity Watch can leverage the performance of a broadcast public service announcement to show how efficiently they are using donor contributions.

Edelman writes “When a PSA is properly reported, three things happen on an organization’s financial statements. First, all resources the organization receives, whether in the form of cash donations or Gifts-in-Kind (GIK), are included in total revenue. Next, all resources used by the organization, no matter what form they came in are included in total expense. And third, because GIK donations are almost always associated with cause-related activities, the percentage of revenue spent on cause-related activities goes up, often dramatically. This increase changes a key financial benchmark that the rating organizations use to evaluate the financial ‘efficiency’ of a charity. Organizations that spend a high percentage of donor resources on cause-related activities are considered by the rating agencies to be more ‘efficient’ stewards of donor money than organizations that spend a high percentage of donor money on fundraising and overhead. And because PSAs always create cause-related expenses, they always result in the percentage revenue spent on cause-related activities to go up (often dramatically). This makes organizations that use PSAs look more attractive to prospective donors and rating agencies using this benchmark.”

The same logic might apply to programming like the PBS cancer series, or any similar endeavor that involves PR tactics, be it a multimedia news release, satellite, ground or radio media tour,  radio news release or any other outreach that involves earned or “free media.”

To get a copy of Edelman’s whitepaper go to Questions, comments, I’d love to hear from you