Currently, more than 20 states have some form of tax credit for charitable contributions, but under devolution, the list is likely to grow. The states are:
Of particular interest, Michigan allows a 50% tax credit for contributions to community foundations, homeless shelters and food kitchens. Colorado allows a 50% tax credit for contributions to charities within enterprise zones. Idaho allows credits for contributions to its children's homes. Indiana and Missouri have neighborhood assistance programs, and Kansas allows credits for those who support AFDC recipients.
Current State Tax Credit Legislation (selected)
| State | Program | Summary |
| Colorado | Enterprise Zone Contribution Credit (EZCC) | Enacted in January of 1989, the original program allowed for any taxpayer who makes monetary or in-kind contributions to an enterprise zone administrator for the purpose of implementing the economic development plan of the enterprise zone to claim an income tax credit. A credit of 50% of the value of the monetary contribution was allowed up to a maximum credit of $100,000. The amount of credit allowed for in-kind contributions alone was limited to 25% of the value of the contribution, up to a maximum credit of $50,000. New legislation, signed into law in 1996, begins the process of reducing the EZCC from 50% to 25%. Contributions to the enterprise zone must be intended for at least one of the following activities: business assistance, blight redevelopment, child care, facilities, homeless shelters, infrastructure and marketing. |
| Idaho | Credit for Contributions to Youth and Rehabilitation Facilities (CCYRF) | This program, enacted in 1982, applies to taxpayers who make charitable contributions to the Anchor House, the North Idaho (Northwest) Children's Home, the Idaho Youth Ranch, or to a nonprofit facility that is located in Idaho and is accredited by the Commission on Accreditation of Rehabilitation Facilities. The credit is calculated as 50% of the contribution (contributions may be in the form of merchandise). For individual taxpayers, the credit is limited to the lesser of $100 ($200 on a joint return) or 20% of the taxpayer's income tax liability. For corporations, the credit is limited to the lesser of $500 or 10% of the corporation's tax liability. |
| Indiana | Neighborhood Assistance Credits (NAC) | This program, enacted in 1984, allows for a credit against the adjusted gross income tax equal to 50% of the amounts invested in an approved program for neighborhood assistance. The approved programs include: education, crime prevention, community service, and those programs that provide jobs and job training. The amount of credits allowed cannot exceed $1.5 million in any state fiscal year. |
| Kansas | AFDC Family Contribution Credit (FCC) | This program, enacted in 1994, is a credit for any individuals providing financial support to a person who would otherwise be eligible to receive AFDC. This credit is equal to 70% of the amount of financial assistance paid by the contributor, and may not exceed the amount of financial assistance that would have been paid under the AFDC program from state matching contributions. The credit is not available if a credit for child care and dependent care expenses was claimed on either a state or federal tax return, or if the contributor receives payment for the care of the person to whom financial assistance was provided. |
| Community Service Contribution Credit (CSCC) | This credit can only be claimed against business income. Individual taxpayers only qualify if they report business income on their returns. The amount of the credit allowed to individuals is limited to the percentage of business income on their return. Projects eligible for inclusion in the CSCC program must address one of three categories: community service, crime prevention, and health-care services. The State of Kansas authorizes a total of $5 million in tax credits per fiscal year. |
Current State Tax Credit Legislation (selected)
| State | Program | Summary |
| Michigan | Community Foundations Credit (CFC) | For tax years 1989 through 1997, this program allows for a credit equal to 50% of the amount the taxpayer contributes during the tax year to the endowment fund of a certified community foundation. For an individual taxpayer, the credit for a community foundation contribution cannot exceed $100 ($200 for joint filers). For a resident estate or trust, the credit cannot exceed the lesser of 10% of the tax liability for the tax year before claiming any personal income tax credits or $5,000. |
| Homeless Shelter / Food Bank Credits (HFC) | For tax years 1992 through 1997, a credit is allowed equal to 50% of the cash amount the taxpayer contributes during the tax year to an entity whose primary purpose is to provide food and shelter to indigent or homeless persons if such contribution is tax deductible as a charitable contribution under the Internal Revenue Code. For an individual taxpayer, the HFC cannot exceed $100 ($200 for joint filers). For a resident estate or trust, the credit cannot exceed the lesser of 10% of the tax liability for the tax year before claiming any personal income tax credits or $5,000. The maximum credit that can be claimed by corporations is the lesser of 5% of their tax liability before claiming any credits or $5,000. | |
| Missouri | Neighborhood Assistance Program (NAP) | Businesses or individuals in business in Missouri who contribute funds or other resources to certain community improvement projects in the state are eligible to receive tax credits through the NAP. The credit equals 50% of the contribution (70% for rural community projects) and may be claimed against various state taxes. Generally, the credit may not exceed $250,000 per year. All projects must first be approved by the state. |
| Pennsylvania | Neighborhood Assistance Credit (NAC) | The original NAC program started in 1967. Credits are available to businesses for the following programs: neighborhood assistance, job training, education, community services, crime prevention and economic development. The amount of the credit is up to 50% of the contributions to approved programs during the taxable year, but may not exceed $250,000. An expanded credit of 70% may be available for investments in certain priority programs. This expanded credit carries with it a maximum of $175,000 per taxpayer. |
| STATE | SPONSOR | LEGISLATION |
| Massachusetts | Representative Kay Khan
(617) 722-2140 |
H5278 is sponsored by Representative Kay Khan (D). The legislation provides a tax credit not to exceed $2,000 per year for individuals and $4,000 for joint returns against the tax liability imposed, in an amount equal to 5% of all contributions the taxpayer makes to organizations within Massachusetts. The principal purpose of the organization must be to provide meals, foodstuffs, shelter, housing or services to low-income residents and must be qualified by the Attorney General. This matter was heard by the Joint Committee on Taxation on February 25, 1998. |
| Senator Richard Moore
(617) 722-1420 |
S1562, sponsored by Senator Richard Moore (D), provides a tax credit of 10% with a limit of $10,000 for contributions to specified Massachusetts charitable organizations. The legislation does not list organizations. The bill has been accompanied by a study order H4509 which is presently in the House Rules Committee. | |
| Michigan | Senator William Schuette
(517) 373-7946 |
SB696, introduced by Senator William Schuette (R), allows taxpayers filing a joint return to take a credit not to exceed $50 for individuals or $100 for joint filers, for contributions to a 501(c)(3) organization. The matter is presently in the House Finance Committee. |
| Representative Mark Schauer
(517) 373-0555 |
HB4022 is offered by Representative Mark Schauer (D). The legislation allows taxpayers to take a credit of 50% of the amount contributed to a community foundation, shelter for the homeless, food kitchen or bank, or any other entity whose primary purpose is to provide services to the indigent. However, the legislation imposes different limitations for residents and nonresidents. For nonresidents, the credit cannot exceed $100 for individual returns and $200 for joint returns. For residents, the credit cannot exceed 10% of the taxpayer's liability before claiming any credits or $5,000, whichever is less. The matter is presently in the House Committee on Tax Policy. | |
| Representative Jack Horton
(517) 373-0218 |
HB4708, offered by Representative Jack Horton (R), proposes a tax credit for cash donations made to qualified charities, not to exceed $500 for individuals and $1,000 for joint returns. If the credit exceeds the taxpayer's liability, that portion of the credit will be refunded. Contributions must be made specifically to qualified 501(c)(3) organizations that distribute at least 85% of the funds collected to provide services to individuals and families for the purpose of alleviating poverty. The matter is presently in the House Committee on Tax Policy. | |
| Representative Kirk Profit
(517) 373-1771 |
HB5055, introduced by Representative Kirk Profit (D), allows a credit against the tax imposed for an amount equal to that which the taxpayer contributes to 501(c)(3) organizations, which may not exceed $50 for individual or $100 for joint returns. The matter is presently in the House Committee on Tax Policy. | |
| Minnesota | Representative Henry VanDellen (612) 296-5511 | HF9, filed by Representative Henry VanDellen (R), allows for a credit for qualified charitable contributions whose primary purpose is providing benefits for low-income persons. The maximum credit allowed is $125. The matter is currently pending in the House Taxation Committee. |
| Representative Michelle Rifenberg (612) 296-1069 | HF1778, filed by Representative Michelle Rifenberg (R), is identical to Representative VanDellen's HF9. | |
| Representative Timothy Pawlenty (612) 296-4128 | HF3079, sponsored by Representative Tim Pawlenty (R), provides a credit equal to 75% of qualified charitable contributions, but not to exceed $200 for joint filers and $100 for individuals. A qualified charity must meet specific requirements, of which at least 70% of its total expenditures provide direct services for individuals whose annual incomes do not exceed 185% of the poverty level. Direct services is defined as any benefit or service intended to prevent or alleviate poverty, including, but not limited to, provision of food, meals, shelter, employment counseling and training, and drug or alcohol abuse counseling. This matter did not pass Committee. |
Proposed Legislation
| STATE | SPONSOR | LEGISLATION |
| New Jersey | Senator David Hoyle
(919) 733-5734 |
S165, filed by Senator David Hoyle (D), would increase the income tax credit for charitable contributions by nonitemizers to 7% from the current 2.75%. If passed, the bill would benefit 71% of North Carolina taxpayers who are nonitemizers. This matter is presently in the House Finance Committee. |
| New York | Representative Robert Sweeney (518) 455-5787 | AO8912, “An act to amend the tax law, in relation to charitable contributions,” is offered by Representative Robert Sweeney (D). This proposal would allow nonitemizers to deduct charitable contributions for an amount equal to 50% of the excess of $500. The matter is presently in the New York General Assembly Ways and Means Committee. |
| North Carolina | Representative Edward McMahan (704) 733-5732 | In the previous session, Representative Edward McMahan filed H1165, which would have provided a deduction for charitable contributions. This matter was the result of a study investigating proposals that would initiate more charitable giving within the state of North Carolina. Though the bill was not passed into law, there is a strong possibility the proposal will be refiled. |
| Ohio | Representative Patrick Tiberi
(614) 664-6030 |
H107 has been filed by Representative Patrick Tiberi (R). This proposal would authorize a state income tax deduction for contributions to charitable organizations with a maximum deduction of $500. The Ohio deduction would be for charitable contributions for which a federal deduction is allowable, rather than actually claimed. As such, the Ohio deduction could be claimed by nonitemizers. |
| Representative Jim Jordan
(614) 466-1507 |
H325, filed by Representative Jim Jordan (R), grants a refundable income tax credit for contributions to charitable organizations for use in preventing or alleviating poverty. The credit may be for up to $460 of contributions for individuals and $920 for joint returns. The credit is refundable, meaning that if the amount of the credit exceeds the liability due with a tax return, the taxpayer is entitled to a refund. Organizations that qualify must spend at least 75% of total program expenditures for the prevention or alleviation of poverty. | |
| Pennsylvania | Representative Jere Strittmatter (717) 787-5451 | H1885, filed by Representative Jere Strittmatter (R), provides a charity tax credit for contributions to organizations that provide direct assistance to individuals with the intent of alleviating poverty. These organizations must also apply at least 75% of annual revenues in direct assistance to low-income individuals or other qualified charitable organizations. This credit will be 50% of the monetary amount donated, but shall not exceed 25% of the individual's tax liability. Charitable organizations must also apply to the Pennsylvania Department of State as a qualifying entity under this act. |
| Senator Melissa Hart
(717) 787-6538 |
S1253, filed by Senator Melissa Hart (R), proposes to allow Pennsylvania taxpayers to reduce what they owe in the state personal income tax by contributing to in-state organizations that provide direct assistance to the poor. The legislation would grant a 10% tax credit that would increase by 5% until, in year four, the total tax credit would be 25% of donations to qualifying charities, with a maximum of 25% of the taxpayer's personal income liability. Again, only qualified charities would be eligible to receive these tax deductible contributions. Such organizations would apply at least 75% of revenues in direct assistance to low-income individuals and receive no more than 50% of their funding from government sources. The primary intent of this legislation is to shift some of the responsibility for assisting the poor from the government to local organizations and in effect increase the resources of these specific charities. |
5. This list is not exhaustive, but only indicative of the types of tax credits that states currently offer. State enterprise zone tax credits are common, however the regulations differ from state to state.
Go to:
Table of Contents
Appendix I: BHI Nonprofit Organization Survey Results
The Beacon Hill Institute for Public Policy Research focuses on federal, state and local economic policies as they affect Massachusetts citizens and businesses. The institute conducts research and educational programs to provide timely, concise and readable analyses that help voters, policy makers and opinion leaders understand today's leading public policy issues.
© March 1998 Beacon Hill Institute at Suffolk University
ISBN 1-886320-04-7
HTML format revised on 9/26/02 15:51