Carnival’s Government-Subsidized Corporate Donation to the University of Alaska

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October 3, 2013; Alaska Dispatch


Two subsidiaries of cruise ship operator Carnival Corp. have given $1 million to the University of Alaska. The important element of this story is that a corporate donation is not always a pure donation because of the mix of tax deductions and tax credits that might be involved. The gift got lots of attention, including the participation of Governor Sean Parnell at a ceremonial acceptance of the donation. He might as well have joined Carnival in accepting the University’s thanks.

Part of the state’s role in Carnival’s donation is the state’s Educational Tax Credit: Corporations that support education get a tax credit. For the first $100,000 worth of donation, corporations get a 50 percent tax credit. For the next $200,000 of educational donations, they get a full 100 percent tax credit. As the Dispatch notes, the cost of a $100,000 donation for a corporation is the same as the cost of a $300,000 donation; that is, only $50,000.

If the corporations structured the $1 million gift to be distributed over multiple years— say, $300,000 a year for the first three years—the cost to the corporation would be only $50,000 a year, with the State of Alaska paying for the other $250,000 of the corporation’s “gift.” A multi-year gift would cost as follows:

Year 1

First $100,000 –cost $50,000

Next $200,000 –cost zero

Year 2

First $100,000 –cost $50,000

Next $200,000 –cost zero

Year 3

First $100,000 –cost $50,000

Next $200,000 –cost zero

Year 4

$100,000 donation –cost $50,000


If the corporations were to make the donation all in one year, for the portion of the sum between $300,000 and $1 million, they would get a 50 percent tax credit. The total cost would be as follows:

  • First $100,000 – cost $50,000
  • Next $200,000 – cost $0
  • Next $700,000 – cost $350,000

Add in the federal tax deduction, and the corporate donor saves even more money on the donation.

The Dispatch offers the following interpretation of the Alaska program: “One way to look at this program is that the Legislature has delegated to private companies the ability to appropriate a portion of their taxes in the interests of education and good publicity.” In other words, the corporate taxpayer is determining how its taxes will be deployed—and in the process receives the public gratitude of the recipient of the tax-subsidized corporate largesse.

Is this corporate philanthropy, or something significantly different?—Rick Cohen

  • Kevin Cahill

    Seriously, you must be the most ungrateful person on the planet. You think Bill Gates doesn’t take advantage of tax opportunities. In Canada the government introduced a “Super Credit” as a means of encouraging first time donors. I am sure University of Alaska is very grateful for the gift, after all no one held a gun at Carnival’s head to make them do it. Also you should have gotten a more accurate picture. The Miracle was the ship to sail into Alaska this year. The Dream has never been there.

  • Rick Cohen

    Dear Kevin: Thanks for your note. Yes, Bill Gates I’m sure takes advantage of tax incentives, though his personal wealth makes the possible tax deductions he could get for his donations to his foundation sort of outside the pale of charitable deductions. All the article points out is that Carnival–the corporation–is taking advantage of a generous state government subsidy of its charitable “gift.” The source article discusses this in the context of the tax rate that Carnival pays on its corporate income, which might be interesting regarding Carnival’s generosity. Remember that Alaska is offering Carnival a tax “credit”, which is a dollar for dollar reduction on taxes owed, compared to what you and I get as a charitable tax “deduction”, which is a reduction of the amount of our taxable income. Regarding the picture, you are correct, and the picture of the Dream is being taken down.

  • Peter Hudson

    This picture is wrong on so many levels. First Carnival’s donation even if all the tax credits are not factored in, is the cheapest PR and advertising corporations can get. The cruise lines world wide are some of the most environmentally destructive enterprises on the planet. And their economic benefits are questionable when one considers such practices as buying up most or all dockside stores to peddle their own mechandise sqeezing out local retailers. Carnival’s lines (including Princess and Holland America) fly flags of convenience enabling them to subvert environmental and labor regulations. “Donations” such as the one reported here clean up their image. Second, as the article says, because of the tax credit features, the unelected board of plutocrats of Carnival is effectively setting public budget priorities. .Finally, there is the possibility that such donations enable the corporate sector to influence, if not set, the priorities of the University. In Canada, the chemical and pharmaceutical industries have leveraged donatjions to cash strapped Universities into setting the entire research agenda. Drug research is not looking for the cause anymore, only the development of lifetime blockbusters.