Tax credits encourage Nebraskans to give to endowments

For the past two years, there has been a way Nebraskans have been able to earn a $5,000 tax credit.

The Nebraska Charitable Tax Credit allows those who make planned gifts to permanent endowment funds of qualifying Nebraska nonprofits to earn tax credits.

Maxine Maul, who is working with Endow Nebraska, recently told members of the Fremont Area Community Foundation’s Legacy Society about the program and its benefits.

The current statute, which has a sunset of 2010, provides a maximum annual credit of $5,000 for individual and corporate taxpayers, a

15 percent credit for the federal contribution value of the irrevocable planned gifts from individuals and a 10 percent credit for outright gifts from corporations.

Qualifying planned gifts include pooled income funds, retained life estates, paid-up life insurance policies, charitable lead trusts, charitable remainder trusts and charitable gift annuities.

“You all know, you your hearts, why you give to your communities and to the non-profits and organizations that mean so much to you,” she said. “It is about social responsibility. It is about giving back to your home communities that supported you through your life.”

Growing permanent endowments in the state is important, Maul said, and now is the time. About $258 billion will be transferred between generations in next 40 years, she said.

In the first year of the program, $102,470 in credits were issued based on $3,356,250 in donations received by non-profit endowments.

But getting the tax credits can be a bit tricky, she said. Of the 107 people who filed for the credits, only

30 were approved. Forty-three were denied because there was no documentation and another 34 were denied for non-qualifying reasons.

Tax and estate professionals still were learning about the program, she said.

With the original legislation set to expire on Jan. 1, 2010, Endow Nebraska will be working to get a new bill through the Legislature in 2009. It will seek a maximum annual credit of $10,000 per taxpayer, with five years carry forward, a 50 percent credit for present value of irrevocable planned gifts from individuals and S corporations, a 25 percent credit for outright gifts by individuals and all corporations and a cap of $3.5 million in total credits available each tax year. It also would seek an effective date of Jan. 1, 2009, and a sunset of Jan. 1, 2016.

Now is a good time to build endowments, Maul said.

“It’s particularly important that we talk about it today given the state of the economy in this country,” she said. “It is at these times that non-profits have more and more requests for help. People who need their help, particularly if that non-profit is the human services area. At the same time, it’s more difficult for those non-profits to raise money. So it is particularly important that we build endowments to help those non-profits.”