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North Dakota taxpayers may receive credit for gifts to endowments

North Dakota legislators continue to move the state to the cutting edge of state charitable income tax credits with legislation providing tax credits for gifts made to qualified North Dakota endowments. Giving to endowments through the Valley City State University Foundation will help VCSU better meet the needs of students and programs that benefit North Dakota communities.
Barely a handful of states offer charitable tax credits of any kind, and only one other state offers credits similar to what North Dakota now offers. This tax credit makes it possible for individuals and financial institutions to give more, and through their contributions, have a greater impact on the state's quality of life.

A qualified endowment is defined as an "irrevocable fund held by a North Dakota incorporated or established organization that is a qualified nonprofit organization; or a bank or trust company holding the fund on behalf of a qualified nonprofit organization."

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.

Businesses and Financial Institutions

Businesses and financial institutions (C corporations, S corporations, estates, limited liability companies and trusts) that make gifts to qualified endowments may qualify for a state income tax credit, which amounts to 40 percent of the value of the gift, up to a maximum credit of $10,000 per year. Businesses may carry forward any unused credit for up to three taxable years (financial institutions excluded).

Individuals

Planned gifts by individuals qualify for an income tax credit of 40 percent for gifts up to a maximum credit of $10,000 per person, $20,000 for a married couple with any excess unused credit to carry forward 3 years. This tax credit for planned gifts is also unique to North Dakota and gives North Dakotans a remarkable opportunity to make meaningful gifts to their favorite charities and get significant reduction in their income tax bills. An individual may receive a 40 percent tax credit for contributions of $5,000 or more (lump sum or aggregate in one year) to a qualified North Dakota endowment. If a donor is in the 35 percent federal tax bracket, the tax benefit may look like this:
Gift amount5,000$25,000$50,000
Federal tax deduction-$1,750-$8,750-$17,500
N.D. state income tax credit-$2,000-$10,000-$20,000
Net cost$1,250$6,250$12,500
This information is provided for educational purposes only. Please consult your own attorney, accountant or financial advisor for advice on your situation. To learn more about giving to a VCSU endowment, contact the VCSU Foundation Office at 701.845.7203 or 800.532.8641 x37203.