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Montana State Tax Credit For Endowed Philanthropy
The 2003 Montana Legislative Session House Bill 616 enacted amendments to the state charitable endowment tax credit law returning it to 2001 levels. As of July 1, 2003, the following information reflects the current application of the Montana State Tax Credit to Planned Gifts.
BACKGROUND
Montana is the only state in the Union that offers a tax credit to individuals and businesses for charitable giving. The tax credit provides several benefits to Montanans, as well as providing benefits to non-profit organizations that work to address pressing community needs and services.
Purpose
The Montana State Tax Credit for Endowed Philanthropy is designed to promote endowed philanthropy, and it encourages individuals to make charitable commitments now for the future of Montana.
HOW IT WORKS
Benefit
The tax credit allows donors to pay less in Montana income taxes by giving a qualifying planned gift to a Montana charitable endowment. When you make a planned gift to The Nature Conservancy you will receive tax benefits while also directing your dollars to future conservation needs in Montana. Unlike a deduction, a tax credit is a dollar-for-dollar reduction of Montana income tax liability.
Tax Credit for Individuals
The tax credit for planned gifts from individuals is 40% of the present value of the contribution to a maximum of $10,000 per year, per individual.
Tax Credit for Corporations
The tax credit for outright gifts or planned gifts from corporations is 20% of the present value of the contribution to a maximum of $10,000 per year, per business entity (applies to corporations, small businesses, partnerships, or LLC taxpayers).
TYPES OF PLANNED GIFTS
Planned Gifts
Planned gifts are generally used by individuals and families to make an irrevocable commitment of a principal asset for the future benefit of charity. At the same time, the donor may retain the use of some assets during his lifetime. For the purpose of the Montana State Tax Credit, planned gifts can be made using any of the following techniques:
- Charitable Remainder Unitrusts
- Charitable Remainder Annuity Trusts
- Charitable Lead Trusts
- Charitable Gift Annuities
- Charitable Life Estate Agreements
- Deferred Gift Annuities
- Pooled Income Funds
- Paid-up Life Insurance Policies
More information on these giving options.
Here, you will find definitions, giving options, and examples of how different types of gifts can provide tax and income benefits while supporting The Nature Conservancy.
EXAMPLES OF PLANNED GIFTS
How best to make a planned gift depends on several factors. Once you determine if you want to maximize your tax savings; balance your tax savings with retirement planning; maximize your current income; or earn a fixed or variable income stream from your planned gift, The Nature Conservancy staff will provide a tailored proposal using the appropriate giving vehicle for you. The following are two different examples of the benefits associated with making a planned gift to The Nature Conservancy of Montana.
Deferred Gift Annuity
Mr. and Mrs. Smith make an irrevocable gift of $25,000 cash or securities ($5,000 is the minimum gift for a charitable gift annuity) to The Nature Conservancy of Montana at the age of 50 to fund a deferred gift annuity. They are both 50 years old and defer their first annuity payment until they are 80 at which time they will receive a fixed annual income of $1,250 paid by the Conservancy.
In addition to the federal charitable deduction of approximately $23,491.50, they would also receive a Montana State Tax Credit for 40% of the present value of the gift (the federal charitable deduction) or: $23,491.40 x .40 = $9,396.60 in Montana State Tax savings.
Note: In this example, the Smiths have maximized their state tax savings by selecting a 5% annuity pay-out rate and deferring a fixed annual income for thirty years.
Growth and Income Fund
Mr. and Mrs. Hill are 70 years old and make a gift of $50,000 cash or securities to The Nature Conservancy of Montana in exchange for approximately $1,500 annual income paid by The Nature Conservancy.
In addition to the federal charitable deduction of approximately $27,458.50, they would also receive a Montana State Tax Credit for 40% of the present value of the gift (the federal charitable deduction) or: $27,458.50 X .40 = $10,983.40 in Montana State Tax savings.
Note: In this example, the Hills maximized their Montana State Tax Credit savings and started receiving income immediately. The $1,500 annual income is determined by the growth or decline in the value of the pooled principal. The Nature Conservancy’s Growth & Income Fund aims to provide the beneficiary with a modest level of income initially, but to increase income over time through future growth of principal.
Restrictions
The following restrictions apply:
- The maximum credit that may be claimed from all gifts in a year per individual is $10,000.
- The credit may not exceed the taxpayer’s income tax liability.
- The gift may not be claimed as both a deduction and a credit on Montana taxes.
- The credit must be applied to the tax year in which the contribution is made.
TAX FORM AND BACKGROUND
Form MT-QEC-02
The Montana Department of Revenue Form MT-QEC-02 for claiming the Qualified Endowment Credit is available in PDF format and is available here.
Montana Code
For more information on the enabling legislation, or to obtain information from the state on planned giving and charitable gifts in Montana
For More Information
The Nature Conservancy of Montana is able to accept gifts to our qualified endowment. In Montana, please contact Walter Long or (406) 443-0303 for more information on how you might make a planned gift to help the Conservancy protect our natural heritage and take advantage of the Montana State Tax Credit for Endowed Philanthropy.
