The 2011 legislation allows a 40% tax credit for gifts by individuals to a qualified endowment fund held by a qualifying North Dakota non profit organization. If an individual makes a gift(s) to such an endowment fund, the aggregate of the year’s gifts to a particular fund must be $5,000 or more. The maximum credits that may be claimed under this subsection are $10,000 ($25,000 in gifts) for an individual or $20,000 ($50,000 in gifts) for married individuals filing jointly. Unused credits may be carried forward for up to three additional tax years.
Example of Gifts to Multiple Endowments
Consider a donor who made a $20,000 gift to Endowment Fund A for Charity X. Additionally, the same donor made five gifts of $1,000 each to Endowment Fund B of Charity Y, in addition to making a $2,500 gift to Endowment Fund C of Charity Z. (All funds were “true endowments” and therefore all the gifts had the potential to qualify for the tax credits). Since the gifts to Endowment Fund C totaled less than $5,000, they do not qualify. The gifts to Charities X and Y do qualify; therefore, the total qualifying gifts were $25,000 and created a tax credit of $10,000.
Example of Tax Benefit to Individual Taxpayer
Mrs. Smith, a North Dakota resident, donates $20,000 in cash to your endowment fund. She receives an $8,000 tax credit (40%) on her ND return. If she is in the 28% Federal tax bracket, her Federal tax savings are $3,360 (28% of $12,000; $12,000 is the difference between the $20,000 charitable deduction offset by an $8,000 reduction in the state income tax deduction). The “cost” of her $20,000 gift is offset by $11,360 in tax savings (56.8% of the gift amount).