We investigate the drivers of firms’ donation spending, focusing on whether tax incentives influence their decisions. We develop a local, empirical measure to capture the extent to which firms use donations to reduce taxable income. Using a German setting, where donations are tax-deductible under specific conditions, we examine whether firms take advantage of the tax- deductible threshold. Contrary to expectations, we find no evidence of bunching effects around the threshold. Expanding the analysis, we examine cross-sectional determinants influencing firms’ decisions to donate. We find that experience, the economic sector, the legal form, hidden profit distributions, and the tax obligation play a significant role. We propose an information friction effect: To optimize tax benefits, firms need to know the legal requirements, often provided by tax advisors or assistants. To explore this, we plan to develop a local measure of the density of tax assistants at the municipality level. We hypothesize that denser distributions increase firms’ access to relevant knowledge, raising their likelihood of tax-optimal donation behavior. Our study contributes to tax planning research by showing whether and how firms manage donation spending as a tax strategy. We are the first to investigate donations in this context, adding insights into firms’ information environments, provision, and processing.