Comment by jasode | Hacker News Reader

Comment by jasode | Hacker News Reader

This essence of the CVS misbehavior:

>According to the complaint, prior to the completion of a customer’s transaction, the checkout screen would prompt the customer with several boxes of pre-selected amounts (and an opt out option) to donate to the American Diabetes Association (ADA). The plaintiff alleges that CVS did not merely collect the customer’s donations and forward them to the ADA, but instead, counted the donations toward a legally binding obligation of $10 million that CVS had made to the ADA.

If the complaint is ultimately proven true, it contradicts a Lifehacker March 2021 story[1] saying that doesn't happen :

>Case in point: A tweet with erroneous information went viral last week, claiming that participating grocery stores have already handed out donations to nonprofit partners for a tax write off, and are merely collecting customer money as a reimbursement. The donation, according to the tweet, is merely a ruse for the sake of profiteering under the guise of charity.

(The LifeHacker article was before ChatGPT so we can't blame A.I. generated nonsense in this case.)

EDIT to replies about the sequence of donate-then-collect vs collect-then-donate:

I don't believe this is actually a big difference in terms of the spirit of the donation from the perspective of the consumer. If one reads the splashy PR releases from CVS about the $10 million donation :

- https://www.cvshealth.com/news-and-insights/press-releases/c...

- https://diabetes.org/newsroom/press-releases/2021/10-million...

... CVS wants the positive associations with that $10 million donation. The unstated implication is that CVS will pay $10 million out of their profits. Normal readers would not expect that self-congratulatory press release to mean they will actually add donation prompts at the checkout so it will be the customers paying that $10 million donation. The public would think it feels like the deception in the LifeHacker article even if the sequence actions of collect-then-donate is reversed.

[1] https://lifehacker.com/check-out-donations-arent-a-scam-actu...

There's a good difference between the two things, actually.

What I believe this Lawsuit is alleging is that CVS promised ADA that they would give them $10m, and CVS is saying that customer donations are part of that $10m.

The other aspect is the tax aspect. What people are concerned about is that a company is profiting off their "donation" which cannot happen, even if they are merely reimbursing themselves.

* Company donates $10 and so does not have to pay the income tax * Customer donates $10 through company. This is $10 of income to the company, which requires the income tax.

In such a scenario, the company gets no financial benefit - though they may get a social benefit in what they're claiming to donate

Those two paragraphs don't contradict each other. You can have CVS collecting money, disbursing money to the ADA, and counting the money it disburses toward its legal obligation to give money to the ADA, all in that order. The Lifehacker story says it's not disbursing the money first and collecting it second.

The Lifehacker article definitely implies that stores are not counting your donation as their own donation.

> it will not include your donation as part of its business receipts, or income, nor will it claim the charitable gift as an expense.

(And the order of operations is not so relevant. From a tax perspective, there's no difference if it forwards your donations and calls it their own, or makes its own donation and reimbursing itself with your donation. In both cases it doesn't lose any money and gets to illegally claim a tax deduction.)

This particular case is about a legal obligation, not a tax credit, but in either case it's unethical and illegal to call customer's donations your own.

> but in either case it's unethical and illegal to call customer's donations your own.

What? That makes no sense. You put in the effort and delivered the money. Without your effort, the money would never arrive. In every possible sense, the customer's donations are donations from you.

Politicians are always evaluated by how much fundraising they can do for their party. They are never evaluated by how much of their fundraising came out of their own pocket, because... that metric just isn't relevant to anyone or anything.

Same goes for salesmen. If you're responsible for $10,000,000 / year of revenue, does it matter to anyone that you didn't personally purchase $10,000,000 / year of products? Of course not.

The grocery stores are getting the reflected credit for being involved in collecting the donations, of course, which is why the do it, but they absolutely do not get to have the legal credit for actually donating the money.

This is absolutely cut-and-dry, and echoed in the Lifehacker article, and here [1] and here [2].

1. https://apnews.com/article/fact-checking-000329849244

2. https://www.taxpolicycenter.org/taxvox/who-gets-tax-benefit-...

There are no tax implications either way. The benefit you're worrying about is imaginary.

From your link #2:

> What happens to the money you donate at the cash register?

> This is where you round up your bill to give to a charity designated by the retailer, and the donation amount appears on your receipt. The store serves only as a collection agent for your gift. Assuming the business is following the law, it will not include your donation as part of its business receipts, or income, nor will it claim the charitable gift as an expense.

In the alternative scenario, the store claims the charitable gift as an expense, and it also recognizes it as part of its business receipts. This is the difference between being taxed on [(I+G) - G] and being taxed on [(I)].

The fact that you get to subtract a G in the first formula means nothing. The store gets equivalent legal credit for donating the money in the other scenario when it is allowed to exclude that money from its business receipts. Or, from another perspective, the ability to claim a deduction in the one case is of zero benefit to the store, because they also get to claim the same deduction in the other case.

I feel like you didn't read that well, or missed the original issue in OP's article.

The Tax Policy article is describing two legal ways that a store can be involved in charities:

1. The business engages in a co-venture with a nonprofit charity. It dedicates a certain percentage of its sales to a charity. The company can deduct this gift in it's taxes. This cannot come out of a voluntary addition made by the customer at the POS.

2. A voluntary donation made by the customer at the POS. The business cannot count this for a deduction. The customer can deduct it (though generally won't). It makes no difference that, as you said earlier, the company "put in the effort and delivered the money." The donation is not their donation.

These are two mutually-exclusive charity drives. You cannot move money from one pot to the other.

The original article says that the petitioners are claiming that CVS had a legal obligation to do (1) i.e, they had engaged in a co-venture with the ADA and had pledged a certain amount of their own money, but that instead they were using money from (2), customer's voluntary contributions at the POS.

You'll have to make up your mind about what you think the problem is.

If you're worried about -- in your own words:

> From a tax perspective, there's no difference if it forwards your donations and calls it their own, or makes its own donation and reimbursing itself with your donation. In both cases it doesn't lose any money and gets to illegally claim a tax deduction.

Then your comments are gibberish. Write out a cash flow chart.

A customer makes a $30 purchase at CVS and donates $5 to the ADA. There are two options:

1. CVS recognizes $35 of revenue, gives $5 to the ADA, and claims a $5 deduction.

2. CVS recognizes $30 of revenue, gives $5 to the ADA, and doesn't claim a deduction.

These are equivalent in every way. In both cases, CVS takes $35 from the customer, gives $5 to the ADA, and recognizes an adjusted $30 of revenue.

You could accuse CVS of taking $35 from the customer, giving $5 to the ADA, and recognizing $25 of revenue by taking the deduction twice - first recognizing $30 of revenue, and then claiming a double-counted $5 deduction on top of that. That would be tax fraud. It would cause no harm to the ADA; they get the same amount of money either way. I'm pretty sure that's not what you're saying. But it is the only interpretation that would make your discussion of "illegal deductions" make any sense.

But there is another theory of what the problem might be. You could be saying that CVS promised to give the ADA a certain amount of money, and then did. Again, I'm not sure why that is supposed to be bad. This is what I've been talking about up above - in every other circumstance, if you go out and drum up money for a cause, you get credit for the production of that money. This is due to the obvious fact that you produced the money.

I'm confused that you find this confusing. Read the Tax Policy article again, and make sure you understand that is talking about two separate options:

> there are two ways charities can benefit from point-of-sale donations. The first is where the store donates a share of its sales. That type of donation is deductible by the business but not by its customers. The second way is where customers add something to their bill at the register with the extra amount going to charity. Customers can claim those amounts donated as deductions on their individual income tax return,

In your head these options count as the same thing. If they did, there wouldn't be an article on how the two separate options work.

Here's one way that can be really clear: if a customer donates at a POS, and itemized their deductions, as they are legally allowed to do, and the company also claimed the tax benefit then that same $10 credit is being claimed by two different people. This is clearly not legal.

That alone should convince you that a store cannot claim a POS donation as their own donation. You can't just say "These are equivalent in every way" and just make it so.

The point of the lawsuit is that CVS had a legal obligation to donate their own money. Money donated at a POS is legally the customer's donation. They can't both claim it.

And, to be clear, no one but you is confused that that would be illegal. The question that the lawsuit will settle is whether CVS was using POS donation in this way, not whether that would have been legal.

> in every other circumstance, if you go out and drum up money for a cause, you get credit for the production of that money.

What are you talking about? Moral credit or legal credit? Because legally, no, that's 100% wrong. If I host a charity dinner, I do all the work, I get my rich friends to come, I get them to open their wallets and donate thousands to my cause, no, I very much do not get to claim legal credit for their donations.

If you're trying to ignore legal facts and just make moral arguments about who deserves "recognition," I'm not talking about that.

What do you think you're talking about? Give me the cash flow chart. According to you, what is CVS accused of?

> Read the Tax Policy article again, and make sure you understand

You do realize the purpose of that article is to point out to people like you that you don't understand what's happening in point of sale donations? Here, the article introduces itself:

> These small, easy donation opportunities are hugely important to participating non-profits and can help boost the reputations of retailers. And they can make a shopper feel good, too. But like so much else these days, these giving opportunities have become controversial, in part because some critics insist retailers are taking a tax benefit for their customers’ donations.

> Watch this TikTok video of a dramatized exchange at the counter. The video’s creator plays the roles of both cashier and customer. The cashier asks the customer to “round up” his bill by 25 cents and donate the extra change to a charity. The customer refuses, believing the corporate store owner will “dodge taxes” by taking a deduction for the customer’s contribution. The video’s creator appears righteous, but he is wrong, or at least confused.

> According to you, what is CVS accused of?

If you can't be bothered to read my comments, or the original article, what are you arguing for?

I've answered that question twice, in sentences starting with:

"The original article says that the petitioners are claiming that ..."

"The point of the lawsuit is that ..."

Are you actually claiming that the lawsuit is frivolous? Because I think you've been arguing about something inside your head this whole time, while I try to keep coming back to the facts in the lawsuit, and the legal definitions of donations, neither of which you seem to care to understand. You just keep making vague moral arguments about who should get "credit" for a donation.

If you believe that the point of the lawsuit is that CVS had an obligation to donate money that didn't come from their customers... then all your comments about illegal tax deductions are nonsense. You have no idea what you're talking about.

I keep asking you to describe what you think is wrong, because you have no idea what you're talking about. And you keep refusing, presumably because you're not able to give such a description.

But I'll try a completely different line of attack: an illegal tax deduction would be fraud, and the victim would be the IRS. It isn't possible, under the American legal system, for civilians to sue over an offense of that kind.

But this is a lawsuit by a civilian seeking to become a class representative. He alleges that CVS has committed fraud against its customers. As he must, since it isn't possible for him to sue CVS for tax fraud.

No one on any side has alleged any problem with CVS's taxes. Why do you believe there's a problem with them?

The claim is that:

1. CVS made a legally binding that CVS would donate $10 million to the ADA during the three year period of 2021 through 2023

2. CVS instead took the customer's own donations and used them to fulfill its own obligations.

The purpose of discussing tax law is that you seem incapable of understanding that a company's own donation and a pass-through donation are two different things. They legally come from two different entities, and for good reason. If the company pledged to donate its own money, and instead it "donated" its customer's own donations, this is not the same thing.

The claimed harm to the customer is that CVS had already pledged $10 million of its own money to ADA, so this money was already going to them, and the "donation" is therefore equivalent to a reimbursement to CVS itself, not additional money that helps the ADA. Clearly the customer desired to give money to the ADA, not to CVS. The ADA gets not a single penny more money from each donation if CVS only hands over the $10 million it had already pledged of its own money.

> an illegal tax deduction

Again, this is showing that you are unwilling to read my comments. I have not once described the issue as being a tax issue. I said "From a tax perspective" in a parenthetical in my very first comment, to show an example of how, legally, direction donations and pass-through donations are different, but said right away that "this particular case is about a legal obligation, not a tax credit." I've also referenced Tax Policy Center to, again, highlight how direct donations and pass-through donations are legally different.

You are the one who has gone on and on about taxes even though this case is not about that.

> I said "From a tax perspective" in a parenthetical in my very first comment, to show an example of how, legally, direction donations and pass-through donations are different

You don't seem to understand how they're different.

The difference is that in one case, the customer is entitled to a tax deduction, and in the other case, they aren't. That is a choice the store makes. But it doesn't affect the store, or the charity. There is a difference, from a tax perspective, and that difference applies only to the customer.

Going back to my earlier example, we see that the store must pay taxes on $30 of revenue in every scenario, while the customer always has to pay income tax on $30 of income, but may or may not have to pay income tax on the additional $5.

That is the only legal difference. How do you think it applies to this lawsuit?

After that, you're arguing about whether CVS has "really" donated any money to the ADA. As I have repeatedly pointed out, in every parallel scenario, the answer is unambiguously yes. Salesmen "really" bring in revenue when they haven't personally purchased anything. Politicians "really" bring in revenue when they haven't personally donated anything. Fundraisers "really" bring in revenue when they haven't personally donated anything. Logistical improvements "really" bring in profit even though that comes in the form of lowered costs and revenues don't increase at all.

> The ADA gets not a single penny more money from each donation if CVS only hands over the $10 million it had already pledged of its own money.

This is clearly untrue; see my sidethread example of a structured donation in which a pledge of $15 million in matched donations raises $25 million in match-seeking donations. You really believe CVS customers were tracking the total amount of donations and stopped when it hit $10 million?

Lifehacker was bought out long ago and is no longer a source for real information. It's owned by G/O media that owns other respectable gems like the onion, jezebel, kotaku.

G/O is most famous for destroying other honest journalism sites after they publish unfavorable investigative reporting.

Customers want the charity to have the dollar they gave. The donation doesn't make it to the charity. You end up donating to the store.

Why do they keep saying "legally binding obligation"? Like a court settlement? What were the terms?

I'd assume just a sponsorship contract where CVS agreed to pay and in exchange got to feature the ADA partnership in advertisements and such.

Sounds like the lawsuit will be great news for ADA when they go to negotiate next year's contract.

Why? The ADA isn't suing and there is no allegation they've been harmed. We can safely assume they understood how the CVS pledge drive would operate.

Nonprofits routinely ask large donors who come to them to make a donation to hold off on the donation and instead announce a pledge match. ("For every $1 donated to this charity over the next three months, I will donate $1 of my own, up to $15,000,000.") They do that because they prefer to try to turn the $15,000,000 they were getting anyway into $40,000,000 when $25,000,000 worth of small donors see the match announcement and think "this doubles the value of my pledge!". No charity is going to be shocked at the idea of a large donor committing to donate a certain amount of money that they raise from other people.

The ADA is unlikely to support this lawsuit, because if it wins, it hurts the ADA's fundraising prospects.

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