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Crain's Detroit: Michigan nonprofits: Bring back charitable tax credit in budget talks

May 28, 2024

May 28, 2024 05:46 AM

LANSING — Nonprofit leaders are pressing Michigan lawmakers to restore a tax credit for donations to community foundation endowment funds, saying it would boost charitable giving — particularly by middle- and low-income residents — that fell off when the credit was eliminated in a tax overhaul more than a decade ago.

The push comes as legislators and Gov. Gretchen Whitmer work to finalize the next state budget.

The reinstated tax credit, which is proposed in Senate Bill 127 and House Bill 4531, would benefit nonprofits that park their endowed funds with community foundations, which support a broad range of charitable activities within a specific geographic area. The nonprofits typically receive a portion of their funds annually while the remaining assets grow over time.

Michiganders could claim an income tax credit for half of their donation. The credit would be capped at $100 for single filers and $200 for joint filers. Resident estates and trusts could get a credit for 10% of their liability or $5,000, whichever is less.

Community Foundation for Southeast Michigan President and CEO Ric DeVore said for $3 million — the estimated state revenue loss from the credit — the state would see $6 million in additional charitable dollars supporting local communities.

"Because budget negotiations are ongoing, it's time to get this done now," he said.

Michigan Nonprofit Association President and CEO Kelley Kuhn said giving is sharply decreasing, especially among individuals. Individual donations declined 13% from 2021 to 2022, she said. Individuals gave 74% of all charitable contributions in 2012. It was 64% a decade later.

"These trends are very concerning to the health of nonprofits," Kuhn said. "We know tax incentives can be powerful tools to spur giving. The Michigan charitable tax credit unlocked opportunities for over 20 years by incentivizing families of all income levels to give charitable donations to endowed funds across the state, strengthening our nonprofits. Restoring the charitable tax credit for nonprofits with endowments at community foundations allows them to grow their flexible funding to respond to community needs now and into the future."

Charitable tax credits for community foundation endowment funds, homeless shelters, and food banks and kitchens were eliminated in the 2012 tax year when then-Gov. Rick Snyder and Republican lawmakers enacted a plan that, among other things, revised and slashed business taxes while ending numerous credits, deductions and exemptions.

Research from Grand Valley State University's Dorothy A. Johnson Center for Philanthropy shows that between 2011 and 2013, $400 donations dropped by 50% statewide and $200 donations decreased by nearly 28% statewide, according to Kyle Caldwell, president and CEO of the Council of Michigan Foundations.

The Senate last May voted 33-5 to restore the charitable tax credits, including for community foundation endowment funds. A House committee passed similar legislation in September, but it has not been voted on by the full House. Attempts to bring back the credits failed in previous two-year legislative sessions.

"The way this is structured, this is really trying to incentivize giving among middle- to low-income givers to build that long-term habit of giving that nonprofits need for their sustainability, especially as we look at the needs of communities growing," Caldwell said. "This is not made to build mega-donors. This is designed to build a pipeline."

The full article

Original Article: https://www.crainsdetroit.com/politics-policy/michigan-weighs-tax-credit-community-foundation-giving

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