Paul L. Caron

Friday, October 29, 2004

Controversy Brewing over Starbucks, the Iraq War, and the Tax Code

Starbucks_1Controversy is brewing in the blogosphere over Starbucks' use of the tax code to justify its refusal to donate coffee to U.S. troops in Iraq. After a U.S. Marine sergeant organized a chain email campaign criticising the company, Starbucks blamed the tax code:

I would like to take this opportunity to clarify Starbucks policy regarding charitable contributions. We are able to donate to nonprofit organizations that are designated as public charities under § 501(c) (3) of the IRS Code, including public libraries and schools. The U.S. military or individual military personnel do not qualify as a public charity.

However, on an individual level, many Starbucks partners have collected and shipped numerous pounds of Starbucks coffee overseas. Starbucks partners receive one pound of free coffee each week as an employee benefit (known as "partner mark-out"). Many of our partners have elected to send their weekly mark-out of coffee to members of the military or military families, and related organizations.

This explanation is a bunch of hooey. Nothing prevents Starbucks from donating coffee to non-§ 501(c)(3) groups; they merely would be denied a charitable deduction for such contributions. In any case, § 170(c)(1) expressly authorizes a charitable deduction for a contribution or gift to "the United States . . . if the contribution or gift is made for exclusively public purposes." Providing the U.S. military with coffee for the troops undoubtedly is "for exclusively public purposes." And of course there are many charitable groups who can receive contributions on behalf of U.S. military personnel. (Starbucks itself is a corporate sponsor of the U.S. Marine Corps' Toys for Tots program.) See IRS Publication 526. For more information, see here, here, and here. (Thanks to reader David Radulski for the tip.)

Nov. 11, 2004 Update: See here.

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» Starbucks and the Marines from No Caliban
UPDATED AND EDITED: Summary: Starbucks is target of chain email from a US Marine sergeant who maligns them for refusing to donate coffee to troops in Iraq. Ultimately, I received an email from Starbucks' customer service (see below) explaining that [Read More]

Tracked on Oct 29, 2004 4:43:44 AM

» hoax-o-weenies from f/k/a
I grow increasingly weary with folk who hit the Forward icon to send me email that spreads (1) fantastic rumors about the supposed sins of others --
[Read More]

Tracked on Oct 30, 2004 5:53:59 PM

» Starbucks and the Marines from No Caliban
Updated and republished from original September post Thanks to Paul Caron of TaxProf Blog for his confirmation of reader Tim Kelly's comment below. [Read More]

Tracked on Nov 11, 2004 8:20:47 AM


I tried to read the Nov. 11, 2004 Update, and the link required a username and password.
I would love to read it, can you let me know how I could?

Posted by: IHS Guy | Feb 27, 2008 4:52:57 AM

Interesting. It would seem to me that donating coffee to schools and teachers and such might just induce a higher state of stress in the classroom than is considered optimum. While schools these days are approaching the status of a combat zone, they hardly qualify in parity with the situation of a US Marine in the combat theater. Having spent quality time with my brother Marines as a Navy Corpsman, I testify that the coffee we received in those twenty pound metal cans was better used as mulch. They make it from these berries that grow on the trees that are next to the coffee trees. They sneak up on the tree with a machine that snatches the tree out of the ground and throws the entire thing into a huge chipper-shredder. There's a bagging machine on the other end. The bags are shipped to a fish cannery where when they're through with their daily run, they run the coffee through the same machines and put it into big square cans that were previously used for veterinary lubricant. Navy and Marine Corps coffee is classified as a Hazardous Material and has to be incinerated after use. There is a rumor, unsubstantiated, that it may have been tested as a chemical warfare agent. Ever since they stopped filtering it through asbestos it just hasn't tasted the same.

Posted by: Rico Suave | Jul 1, 2005 12:19:32 PM

I, too, e-mailed Starbucks asking how they decide who the corporation will donate to.

What prompted my query was Starbucks' sponsorship of Oprah's Favorite Things wherein they donated coffee and music CDs and committed to help pay any taxes due by the teachers.

The gist of my e-mail was to find out from Starbucks why they would donate to one class of public servant, teachers, but not another, our men and and women in harm's way in uniform.

The article by Gerry J. Gilmore (Armed Forces Press Service) never specifically addresses whether member stores would be charged back for the 25 tons of coffee but statements in the article appear to indicate this is to be a donation by the Corporate headquarters.

However, Rep. Dicks' commented during the November 9, 2004 press conference that the corporate headquarters wants to do something of significance. After being shamed into getting a tax break, go figure.

Posted by: Clyde | Jan 31, 2005 4:58:00 PM

This is a hoax that the sergeant did not check into before he started the attack, in fact he has now appologized for it. Follow the link below to get to the truth.

The message is ready to be sent with the following file or link attachments:

Shortcut to:


Note: To protect against computer viruses, e-mail programs may prevent sending or receiving certain types of file attachments. Check your e-mail security settings to determine how attachments are handled.

Posted by: Urban | Nov 4, 2004 2:28:46 PM

So, basically Starbucks is cheap.

Posted by: omar | Oct 30, 2004 11:40:54 AM