On June 11, 2019 the IRS announced that final regulations had been issued regarding the impact the receipt of state and local tax credits will have on charitable contributions (Rule 84 FR 27513). These regulations also include safe harbor provisions, which may provide a benefit to taxpayers in certain circumstances (IRS Notice 2019-12).

At the request of the North Dakota Association of Nonprofit Organizations, Anne M. Stoll, CPA at Eide Bailly LLC, has provided an article to specifically address the impacts of the final IRS regulations on SALT and state giving tax credits related to North Dakota’s existing giving incentives.

We are encouraging our donors and fund holders to acquaint themselves with the new regulations and refer any questions or concerns to their tax advisor.

Regardless of the changes, the Foundation strongly believes that the 40% North Dakota Tax Credit for Endowment Gifts remains a positive incentive for donors and charitable organizations alike. By making a qualifying gift, you can lower the net cost of your contribution and increase its impact in our region.

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FINAL IRS REGULATIONS

State Tax Credit for Endowment Gifts

Endowments are a sustainable forever gift. Many donors choose to establish or add to existing endowment funds to provide a vital base source of funding that may allow the organization to carry on, even in lean years.

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. Effective for taxable years starting in 2011.
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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.
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State Tax Credit for Planned or Deferred Gifts

Individuals may make a qualified deferred gift to a qualified ND nonprofit organization or to a qualified ND endowment fund. The Community Foundation of Grand Forks, East Grand Forks & Region and 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.

Example: A couple enters into a $200,000 charitable gift annuity agreement with the 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.
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Definitions Under State Law

Qualified nonprofit organization: A qualified nonprofit organization is a tax-exempt charitable organization under federal income tax law that meets either of the following sets of criteria:

• It is incorporated or established in North Dakota and maintains a physical location in North Dakota.
• It is incorporated or established in a state bordering North Dakota; maintains a physical location outside North Dakota that is within five miles of a North Dakota city with a population of 5,000 or more that does not have a hospital; and supports or benefits a hospital, nursing home, medical center, or any combination of these.

Qualified endowment: A qualified endowment fund is a permanent, irrevocable fund that is held by a qualified nonprofit organization (or by a bank or trust company on behalf of the qualified nonprofit organization); is comprised of cash, securities, mutual funds, or other investment assets; is established for a specific religious, educational, or other charitable purpose; and is only allowed to disburse the income from, or the increase in value of, the assets contributed to the fund.

Planned Gift: A planned gift is a gift that qualifies as a charitable contribution for federal income tax purposes and is made using one of the following gifting methods:

• Charitable remainder unitrust (CRUT)
• Charitable remainder annuity trust (CRAT)
• Pooled income fund trust
• Charitable lead unitrust (CLUT)
• Charitable lead annuity trust (CLAT)
• Charitable gift annuity
• Deferred charitable gift annuity
• Charitable life estate agreement
• Donation of a paid-up life insurance policy

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If you would like to make a donation to one of the Community Foundation's endowment funds that qualify for the tax credit, you may donate online or send a check made out to the Community Foundation with the name of the fund in the memo line to:

Community Foundation
620 DeMers Avenue
Grand Forks, ND 58201

You will receive a receipt from the Community Foundation once your donation is processed.
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One Family's Forever Gift

Greg and Susan Opp care about helping others. So they made a forever gift. The 40% North Dakota Tax Credit helped them make it. Personal experience with Hospice programs in North Dakota helped the Opp’s realize how important it is to provide a predictable stream of income to nonprofit organizations like Hospice.
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“Hospice has been a gift to several of our family members,” says Greg. “We wanted to make sure others in need receive such care.” Greg and Susan give because they see the needs that exist and know they are blessed with the ability to make a difference. “The tax credit allowed us to give far more than we initially would have given. This is a true payback for us.”
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