North Dakota’s Income Tax Credit
for gifts to North Dakota Community Foundation Funds
Below is information concerning a law passed by the 2011 North Dakota Legislature. This law is quite advantageous for donors who give to the North Dakota Community Foundation and all of our component funds, as it allows for generous tax credits for the types of gifts outlined below. Please feel free to contact Kevin Dvorak at 701-222-8349 or email Kevin for additional information.
Signing of Bill SB2160, April 27th, 2011
North Dakota Tax Credit for Charitable Giving
The Legislature has approved and Governor Dalrymple has signed into
law
Senate Bill 2160. This law allows for generous tax CREDITS for
individuals and business who give specific types of gifts to North
Dakota charities. The credit may be carried forward for 3 additional
tax years if it cannot all be used in one year.
State Tax Credit for Planned or Deferred Gifts
Individuals may make a qualified deferred gift to a qualified North Dakota nonprofit organization. The North Dakota Community Foundation and all of its component funds are considered qualified charities. The tax credit is 40% of the charitable deduction allowed by the IRS up to a maximum of $10,000 per year per taxpayer or $20,000 per year per couple filing jointly. Effective for taxable years starting in 2007.For example, a couple enters into a $200,000 charitable gift annuity agreement with the North Dakota Community Foundation. The IRS allows them to deduct $100,000 from their federal taxable income as a charitable gift. The couple would qualify for a $20,000 ND Income tax Credit. They could take up to 4 years to take the credit against their ND Income tax liability. The credit is limited to the amount of their income tax liability.
State Tax Credit for Endowment Gifts
Businesses (C corporations, S corporations, estates, limited liability companies, trusts, and financial institutions) that pay ND income tax may take a 40% credit up to a total of $10,000 for gifts to the qualified endowment fund of a qualified North Dakota charity. All of NDCF’s endowment funds are qualified under this law. Effective for taxable years starting in 2011.Individuals may receive a state tax credit for a contribution for $5,000 or more (lump sum or aggregate in one year) to a qualified North Dakota endowment. The tax credit is 40% of the charitable deduction allowed by the IRS up to a maximum credit of $10,000 per year per taxpayer or $20,000 per year per couple filing jointly. Effective for taxable years starting in 2011.
In all of the above, the credit may be carried forward for 3 additional tax years if it cannot all be used in one year.
Definitions Under State Law
Qualified nonprofit organization—a North Dakota incorporated or established 501(c)(3) organization to which contributions qualify for federal charitable income tax deductions with an established business presence or location in North Dakota.Qualified endowment—a permanent, irrevocable fund (comprising cash, securities, mutual funds, or other investment assets established for a specific charitable, religious, or educational purpose and invested for the production or growth of income, or both, which may either be added to principal or expended) held by a qualified nonprofit organization or bank or trust company holding the fund on behalf of a qualified nonprofit organization.
Resources
$2,000 vs $5,000 - Give more, get more
28% Tax Braket Example - Cash vs Appreciated Assets
35% Tax Braket Example - Cash vs Appreciated Assets
ND Century Code - ND Tax Credit
Nothing in these materials is intended to provide legal or tax advice, please consult your professional tax advisor for specific information about your situation.