North Dakota 40% Tax Credit for Charitable Giving
The State of North Dakota encourages charitable giving by offering individuals and businesses a 40% tax credit for qualifying gifts. Cash gifts from individuals must be $5000 or greater and must be placed in a qualifying endowment. The tax credit is equal to 40% of the charitable deduction up to a maximum tax credit of $10,000 per year per taxpayer or $20,000 per year per couple filing jointly. The credit may be carried forward for three years.
This unique tax credit also applies to planned or deferred gifts (e.g. charitable trusts, gift annuities, life insurance policies, etc.) to a qualified ND charitable nonprofit or a qualified ND endowment.
The 40% tax credit was introduced in 2007 as an opportunity for businesses, only.It was extended to individuals during North Dakota’s 2011 legislative session. Law makers believe the tax credit helps to build communities and to enrich the lives of North Dakotans by supporting the work of the state’s 3,300 charitable nonprofit organizations. The tax credit:
- Empowers North Dakotans to give more and have greater impact in our state.
- Keeps money in ND and working to address important needs of our citizens.
- Builds nonprofit sustainability and supports charitable missions.
- Strengthens quality of life in North Dakota.
To qualify, cash gifts must be placed into a permanent endowment that benefits a North Dakota charitable nonprofit organization.
State Tax Credit for Endowment Gifts
Individualsmay receive a state tax credit for a contribution of $5,000 or more (lump sum or aggregate in one year) to a qualified ND 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.
Businesses (C corporations, S corporations,estates, limited liability companies, trusts and financial institutions) that pay state income tax may receive a 40% credit up to a maximum credit of $10,000 for contributions to a qualified ND endowment.Effective for taxable years starting in 2007. Financial institutions were included in 2011.
State Tax Credit for Planned or Deferred Gifts
Individuals may receive a state tax credit for a planned gift (e.g., charitable remainder trusts, charitable gift annuities, life insurance policies, etc.) to a qualified N.D. charitable nonprofit or a qualified N.D. 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 2007.
Definitions under State Law
Qualified nonprofit organization– a N.D. 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, a community foundation or a bank or trust company holding the fund on behalf of a qualified nonprofit organization.
See N.D. Century Code 57-38-01.21 and 57-35.3 for details.