ND's 40% Income Tax Credit
The 2011 North Dakota State Legislature passed a law that 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. Most of NDCF's component funds qualify for this tax credit. Here is some basic information about this incentive. If you have any questions, please contact Kevin Dvorak at 701-222-8349.
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.
Also, did you know that the above credits are permanent and do not have sunset periods? Call us to get additional details.
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.
If you would like to make a donation to one of NDCF's endowment funds that qualify for the tax credit, you may donate online, or send a check made out to North Dakota Community Foundation with the name of the fund in the memo line to:
PO Box 387
Bismarck, ND 58502-0387
You will receive a receipt from NDCF once your donation is processed.
NDCF Funds That Qualify for the 40% State Tax Credit
The majority of funds managed by NDCF are qualified endowment funds. For help in selecting an existing endowment fund, or to start your own named endowment fund, please contact our Bismarck office at 701-222-8349.