Counting The “Pros” To Pro Bono Work: Law Firm Gift Giving & Tax Write-Offs

It’s the season for giving. But, instead of wrapping something under the tree, consider giving the gift of time.

Pro Bono. Three words that—in this economic uncertainty—no lawyer wants to hear.

Or maybe they do?

Pro bono is essentially providing legal services to poor, marginalized, or at-risk individuals, groups, and communities without pay in order to serve a higher purpose—the provision of justice.

Some say pro bono work is altruistic and therefore difficult to incentivize among attorneys. Economists at Princeton University, however, may disagree with this statement after a recent study.

“Molly Crockett, a psychologist at the University of Oxford in the United Kingdom, combined the classic psychological and economics tools for probing altruism: pain and money,” writes John Bohannan for Science magazine.

The scientist’s task? To find out who many electric shocks would be dolled out—and to whom—when money was at stake.

The pain given via electrode was deemed “mildly painful, but not intolerable.” And the price tags of each shock varied, from $0.15 to $15.

The randomly chosen “decider” in the trial was given a choice of number of shocks for money, and the shocks were either to the decided, themselves, or to another participant—although the decider always got the money.

Although we as society would like to believe that people would be willing to give up some sort of gain, financial or intrinsic, to avoid the distress of hurting somebody else, this idea has yet to be supported by previous scientific research, points out Bohannon.

In fact, the opposite result has been proven time and time again, as far back as the 1960s with Stanley Milgram, whose psychology experiments are some of the best known and widely discussed.

In 1961, Milgram sought to test our obedience to authority figures. He was motivated, in part, by the behavior of Nazi war criminals, many of whom were facing trial at that time, such as the infamous Adolf Eichmann.

Subjects in Milgram’s experiment were instructed to give a series of escalating electric shocks to an unidentified person in another room. The shocks ranged from 15 volts to 450 volts. Although the subjects were separated, they could communicate between the walls. Participants dolling the shocks could hear the (faked) reactions of their counterparts, which included screaming, banging on the wall, and complaints of heart conditions. After a while, the participant would hear nothing on the other side of the wall. Throughout the experiment, the subjects were not threatened or yelled at, rather, they were given stern and consistent instructions not to stop administering the volts.

So did they?

A (no pun intended) shocking 65 percent of the subjects followed orders and administered the final—and seemingly fatal—450-volt electric shock to the person in the next room.

But today, it finally seems possible that altruism—or at least incentivizing it within people—can exist.

In the more recent study, the results show that while participants did not like the pain of receiving a shock (they were willing to make about $0.30 less money per shock on average to receive fewer of them) people were willing to lose twice that amount, $0.60 per shock, to hurt an anonymous other less. The full results can be found online in the Proceedings of the National Academy of Sciences.

Fifty years later, society can sigh in relief that people are more altruistic than they first seemed in Milgram’s portrayal.

For lawyers, however, Pro Bono work is not actually altruistic. On the contrary, it can provide law firms with many profitable opportunities, among them:

  • Networking opportunities for lawyers
  • A chance to bolster a lawyer or firm’s reputation
  • Enhancing a positive firm culture of team-building
  • Boosting staff morale
  • Fundraising opportunity for a firm working with charities or other endownments
  • Enhancing skills and experience of younger lawyers
  • Providing leadership opportunities for younger lawyers
  • Attracting paying clients through high-profile pro-bono work
  • Attracting young talent who value a Pro Bono, idealistic firm culture

And, in the end, Pro Bono work is at tax write-off for law firms.

The Internal Revenue Service (IRS) writes about tax deductions for pro bono legal services:

“Although you cannot deduct the value of your time or services, you can deduct the expenses you incur while donating your services to a qualified organization.” 

Lahle Wolfe, About.com Guide, answers all your questions about similar tax deductions She writes:

“Before listing the types of expenses you may be able to deduct, they need to meet two IRS qualifications:

  1. The expense be incurred as a requirement in order to perform the service for the organization; and
  2. The services must primarily benefit the charity and not the taxpayer (but both can benefit.)

Examples of expenses you may be able to deduct, or partially deduct, include: cost of supplies needed to provide or perform the service that directly benefited the charity; travel expenses; and other direct expenses.”

Therefore, by serving those in need—including your own self-interests—your firm can get the deductions it needs. With ample online guidance about tax write-offs for pro bono work, there’s no excuse for not offering these services to your community.

It’s the season for giving, so sign-up to give pro bono work this holiday. Do it for both the philanthropy and the profit-seeking it inspires.

-WB

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