A common phrase in many of today's professional circles is "work smarter, not harder." However, when it comes to giving to the causes people care about, we see them either missing out on tax-minimization opportunities or overcomplicating the process of trying to take advantage of various tax deductions and strategies. Utilizing Shell's HERO (Helping Employees Reach Out) Program gives employees a simple platform and company match for their charitable donations. In addition, strategically giving through appreciated Shell stock or Donor Advised Funds (DAF) can provide additional leverage and take those charitable donations one step further.
Charitable Giving through Shell's HERO Program
As a Shell employee or retiree, you likely know Shell regularly gives back to the local communities and supports many non-profit organizations. However, Shell's philanthropic efforts expand beyond just its corporate efforts. Shell also provides a company match to their charitably-inclined employees and retirees through the Shell HERO program. The Shell HERO (Helping Employees Reach Out) program is Shell's corporate giving program that matches employees' and retirees' charitable contributions.
How Much Does Shell Match for Charitable Donations?
Shell's HERO Program matches charitable donations from Shell employees each calendar year, up to $7,500 in 2022. For Shell retirees eligible to receive company benefits, Shell will match up to $5,500 in 2022.
Suppose you give $7,500 to the charity of your choice. Then, through the HERO program, Shell will match your $7,500, which means that your chosen charity will receive $15,000. That is leverage, but wait, it gets even better!
Shell Doubles the Company Match for Charitable Donations in September
In addition to the regular company match, the Shell HERO giving program allows for a double company match for two weeks of the year. In 2022, these double days are September 1-15.
Consider this: if you make a $7,500 charitable gift, Shell, through their double match contributions, will give $15,000. By timing your charitable contributions effectively, the charity of your choice can receive a total of $22,500!
How to Give Through Shell HERO Program
Participating in Shell's charitable match program is simple. If you're an employee or retiree with full benefit eligibility, you can follow the steps outlined in this guide to request your match from Shell to the charity of your choice. The organization you select to receive donations must be a 501(c)(3) organization to be eligible for Shell's corporate match.
Charitable Giving Through Donor-Advised Funds
While many people like to write a check or give cash online, we often discuss another option with our clients. By using a Donor Advised Fund (DAF), you can often increase what available funds you can give to your preferred charity in a tax-efficient manner. However, while the Shell HERO Program and Donor Advised Funds (DAF) are great ways to leverage giving to charity, Shell will only match contributions to the HERO program, not those made through a DAF.
What's Best for Charitable Giving: Using Donor-Advised Funds or Shell's HERO Program
To qualify for Shell's matching gift, you must make the gift through the HERO Program. Unfortunately, giving to your Donor Advised Fund is not eligible for a Shell match. Because of this caveat, Shell professionals face a unique trade-off when making their charitable gifts. If individuals contribute through Shell's HERO Program, their chosen charity receives additional funds because of Shell's match. However, if an individual donates to charity through a DAF, Shell won't match contributions, but the individual could receive a better tax advantage.
Benefits of Using a Donor-Advised Fund for Charitable Giving
When contributing to a donor-advised fund, you can receive an immediate tax deduction the year of your contribution. In the DAF, you can invest these funds and make distributions at a later time. Investing within the fund enables your gifts to grow and can potentially increase the money going to the cause you care about.
Let's consider an example. Suppose you make a $10,000 contribution to your DAF in 2022. For the 2022 tax year, you will get a charitable deduction for your donation amount. Instead of immediately distributing the funds, you could leave them inside the DAF and invest aggressively. Those funds could grow to $15,000 or $20,000 over time, depending on the market and your investment choices. After they’ve grown, you can utilize a strategy called “charitable clumping” to contribute several years of gifted funds to your preferred charity. Donor-advised funds, in this case, enable you to give more while remaining tax-efficient and getting deductions each year you contribute!
Benefits of Using Shell's HERO Program for Charitable Giving
A donor-advised fund strategy sounds great, right? Let's consider the alternative if you leveraged Shell's HERO program over time.
With Shell's company match, a gift made through the Shell HERO Program of $5,000 yearly turns into a $10,000 annual contribution. If you contribute the same amount each year for five years, your charity of choice receives $50,000, of which you only gifted $25,000. Even in a stellar market, receiving growth on contributions at the same rate as Shell's match is unlikely. Evaluating your cash flow and tax deductions is crucial to deciding which strategies are best for your charitable efforts.
Evaluating Charitable Tax Deductions And Maximum Charitable Contributions
Many people are still below the standard deduction threshold with a $7,500 or $5,000 charitable gift. However, you can make substantial donations in a given year to receive a larger deduction using a donor-advised fund. For example, if you put $25,000 into your DAF, you'll receive a larger itemized deduction the same year you contribute and can plan to take the standard deduction in future years. While this strategy can potentially lower your taxes in a given year, a lower sum of funds will go to charity than if you'd leveraged the HERO program and Shell's charitable matching.
Gifting Cash vs. Gifting Shell Stock
When making contributions to a Donor-Advised Fund or the HERO program, you can make gifts in either cash or stock. Often, we believe that gifting appreciated stock is better than giving cash to either the HERO program or a DAF.
Benefits of Gifting Shell Stock
When meeting with our Shell clients to discuss philanthropic strategies, most don't realize gifting stock is an option. However, donating appreciated stock is often better than cash because of the tax arbitrage. When you donate your appreciated stock to a charity or DAF, you avoid paying the long-term capital gains on the stock's appreciation. Additionally, as a 501(C)(3) organization, the charity doesn't pay taxes on the gift either!
Let's consider a final example. Suppose you want to give $50,000 to charity. If you paid $30,000 for your stock and it's appreciated up to $50,000, you'd have a few options.
- Option 1: You can sell the stock and pay a 20% long-term capital gains tax of $4,000. You can donate the rest of the cash to charity, which would be a gift of $46,000.
- Option 2: Instead, you could directly transfer your $50,000 of stock to the charity. The charity receives the entire $50,000 tax-free, and you pay no capital gains. However, despite avoiding long-term capital gains, you can still receive a significant tax deduction in the amount of the stock you donated. Over time, gifting appreciated stock while claiming a deduction over the standard deduction threshold can have substantial tax benefits.
When evaluating charitable giving options there are many factors to consider, and your priorities can change from year to year. While using a donor-advised fund can help you make a larger charitable contribution one year for a sizable tax deduction, you may face a trade-off in what you can give to your preferred charity. If you decide to leverage the HERO program, the charity you choose can receive more funds than you could give on your own, but you may not cross the standard tax deduction threshold. These are only a few of the factors to consider when deciding how to incorporate charitable giving into your financial plan.
At Willis Johnson & Associates, we help our Shell clients with their philanthropy through our all-encompassing approach to financial planning and our in-depth understanding of Shell's benefits. For those who are charitably inclined, now is an excellent time to consider utilizing the HERO program to capitalize on Shell's double match for your preferred charitable organizations. For a better understanding of how your philanthropic endeavors, Shell benefits, and tax strategies interconnect, start the conversation with one of our advisors today.
