Originally enacted in 1997 as the Montana Income Tax Credit for Endowed Philanthropy, it encourages charitable giving to qualified endowments by offering incentives to Montana taxpayers. It expires December 31, 2026.
The Montana Endowment Tax Credit allows donors to pay less in Montana state income taxes when they give a qualifying planned gift to a qualified Montana charitable endowment like the Whitefish Community Foundation’s permanent endowment fund or any of the Nonprofit Endowment Funds held by the Community Foundation.
An endowment is a fund held by a tax exempt organization where the principal of the fund is not wholly expendable. Only the interest and appreciation earned in an endowment fund can be used for current operations. Endowments are established to help Montanans meet long-term needs in our communities for education, social services, health care, economic development, the arts and more.
Individuals who make a planned gift to a qualified Montana endowment fund will receive a Montana tax credit of 40% of their gift, with a maximum credit of $10,000 ($20,000 for joint filers).
Businesses and corporations that make a direct gift to a qualified Montana endowment fund will receive a tax credit of 20% of their gift, with a maximum credit of $10,000. [Applies to corporations, small business corporations, partnership or limited liability company taxpayers.]
You contact Linda with the Whitefish Community Foundation and tell her how much you would like to donate – for this example we will use $20,000. She will show you the list of over 20 qualified Montana nonprofit endowment funds and ask you to choose which funds you would like to benefit with your gift. You may select either one or several funds or, you may set-up your own named permanent endowment fund. Linda will collect the information from you that she needs to draw up your paperwork and set up a deferred gift annuity, an easy planned gift that will allow you to take advantage of the tax credit.
For example, with a gift of $20,000, you would receive BOTH a federal charitable deduction of $18,057 and a Montana State tax credit of 40% of this gift (based on a joint gift) totaling approximately $7,222. This amount would be a direct credit to the taxes you owe to the State of Montana. (The amounts are hypothetical and will vary depending on life expectancy, age at the time of the gift and your income tax level). The Whitefish Community Foundation will hold this gift in an annuity fund where it is invested and grow with earnings. Once you release the contract on the deferred gift annuity, it will roll into the qualified endowment fund(s) you have designated with interest and be put to work benefiting our community. The gift must be held in a seperate annuity fund for a minimum of five years before it can be reassigned to your selected charity or named fund.
This is just one example of how you can take advantage of the Montana Tax Credit. There are many ways to set-up a planned gift that can help you with your end of year tax planning.
Call Linda at 406-863-1781 if you would like to set-up a gift to take advantage of the Montana Endowment Tax Credit.
Contact your financial advisor to see if the Montana Endowment Tax Credit is right for you.