Payments to exempt organizations are deductible as business expenses
In a recent Chief Council Advice, the IRS ruled that a business that advertised it would donate a certain percentage of its sales proceeds to organizations promoting certain social missions could deduct the payments it made under this program as an ordinary and necessary business expense under IRC Sec. 162 because it had a reasonable expectation that its program would enhance and increase its business. It did not matter that some of the payments were made to tax-exempt charities that were not qualified charitable and educational organizations (as defined by IRC Sec. 170 ) and for profit entities that had a social mission included in its corporate bylaws.