WHAT IS AN ENDOWMENT?
Endowments are a sustainable forever gift.
A qualified endowment fund is a permanent, irrevocable fund that may expend only the income generated by, or the increase in value of, the assets contributed to it. Your contribution becomes principal, with its interest or gain in value becoming an ongoing resource. Endowment funds provide a vital base of funding that may allow your favorite organization to carry on, even in lean years.
Establishing or adding to an endowment is an act of great generosity and vision. Donors often do so to support the institution now and generations to come.
Many establish the fund to honor or memorialize a loved one, or an important figure in their life, ensuring that their name and generosity will forever be a guiding force in the charity’s success.
OUR MISSION
We help donors maximize their philanthropy to create a vibrant community full of opportunities for everyone.
Give Now, GIVE FOREVER
FOR MORE INFORMATION
on endowment giving, as well as state and federal tax credits and deductions, contact the FM Area Foundation at 701.234.0756 or visit us areafoundation.org.
Nothing in these materials is intended to provide legal or tax advice, please consult your professional tax advisor for specific information about your individual situation.
With the North Dakota Charitable Income Tax Credit of 40% , there has never been a better time to give a sustainable, lasting gift.
409 7th St. S, Fargo, ND 58103 701.234.0756 | areafoundation.org
YOUR GIFT BECOMES A FOREVER GIFT.
You know philanthropy is important, and you know it could help you save on your taxes. But the 40% tax credit really changes things.
It means you can make more of a difference—one that lasts forever.
With the North Dakota Charitable Income Tax Credit, you can claim a credit of 40% when making a charitable contribution in the form of an endowment gift or planned gift to a qualified North Dakota nonprofit organization or a qualified North Dakota endowment fund, like the FM Area Foundation.
>Endowment Funds
> Defered Gifts
> Planned Gifts
This is on top of the savings you can receive on your federal return by itemizing your qualifying charitable donations.
By taking advantage of both the state tax credit and federal tax deduction, you can significantly lower the net cost of your contribution and triple its impact.
We have a number of endowed agency funds that qualify for the North Dakota Charitable Income Tax Credit. Agency funds are created to permanently support the operations of a particular nonprofit organization.
SCAN HERE TO SEE WHICH FUNDS QUALIFY!
As you plan your giving this year, consider how the 40% tax credit can multiply the impact of your gift.
Whether you give to an established endowment fund, create a new endowment fund at the FM Area Foundation, or contribute a planned or deferred gift, your money goes farther helping support your favorite charities.
With the 40% tax credit, you can turn this year’s giving into a forever gift.
ONE FAMILY’S FOREVER
GIFT.
Mike and Peggy Bullinger care about helping others, and wanted to ensure their family tradition of giving by making a forever gift.
PLANNED GIFT DEFERRED GIFTS
The 40% North Dakota Charitable Income Tax Credit helped them make it happen.
DEFINITIONS
FOR INDIVIDUALS
Individuals may receive a state tax credit for a contribution for $5,000 or more (lump sum or aggregate in one year) to a qualified North Dakota endowment. The tax credit is 40% of the charitable deduction allowed by the IRS up to a maximum credit of $10,000 per year per taxpayer or $20,000 per year per couple filing jointly. Effective for taxable years starting in 2011.
Example: Mr. Jones, a North Dakota resident, donates $20,000 in cash to an endowment fund at the FM Area Foundation. He receives an $8,000 tax credit (40%) on his North Dakota return. If he is in the 28% federal tax bracket, his federal tax savings is $3,360 (28% of $12,000). The “cost” of his $20,000 gift is offset by $11,360 in tax savings.
FOR BUSINESSES
Businesses (C corporations, S corporations, estates, limited liability companies, trusts, and financial institutions) that pay ND income tax may take a 40% credit up to a total of $10,000 for gifts to the qualified endowment fund of a qualified North Dakota charity. Effective for taxable years starting in 2011.
In all of the above, the credit may be carried forward for 3 additional tax years if it cannot all be used in one year.
Individuals may make a qualified deferred gift to a qualified ND nonprofit organization or to a qualified ND endowment fund. The FM Area Foundation and its component funds are considered qualified charities. The tax credit is 40% of the charitable deduction allowed by the IRS up to a maximum of $10,000 per year per taxpayer or $20,000 per year per couple filing jointly. Effective for taxable years starting in 2007.
Example: A couple enters into a $200,000 charitable gift annuity agreement with the Community Foundation. The IRS allows them to deduct $100,000 from their federal taxable income as a charitable gift. The couple would qualify for a $20,000 ND Income Tax Credit. They could take up to 4 years to take the credit against their ND income tax liability. The credit is limited to the amount of their income tax liability.
ENDOWMENT FUNDS GENERAL TAX BENEFITS EXAMPLE
A planned gift is a gift that qualifies as a charitable contribution for federal income tax purposes and is made using one of the following gifting methods:
• Charitable remainder unitrust (CRUT)
• Charitable remainder annuity trust (CRAT)
• Pooled income fund trust
• Charitable lead unitrust (CLUT)
• Charitable lead annuity trust (CLAT)
• Charitable gift annuity
• Deferred charitable gift annuity
• Charitable life estate agreement
• Donation of a paid-up life insurance policy
The Mike and Peggy Bullinger Family Fund is an endowed fund at the FM Area Foundation that will provide support for the family’s favorite charities. “We are thrilled to engage our daughters as future advisors to our fund. Knowing that there will always be a family member to guide our charitable intent makes us feel great.”
Mike and Peggy give because they see needs that exist and know they are blessed with the ability to make a difference “The tax credit allowed us to give far more than we initially would have given and kickstart our family’s community giving,” said Mike.
Definitions
24% MARGINAL TAX RATE ON INDIVIDUAL RETURN
Gift Amount $5,000 $25,000 $50,000
Federal Estimated Tax Savings* $720 $3,600 $7,200
ND Income Tax Credit** $2,000 $10,000 $20,000
Net Cost of Contribution $2,280 $11,400 $22,800
*Assuming the marginal tax rate on an individual return is as listed and the donor can benefit from itemizing deductions on Federal Schedule A.
**Assuming ND income taxes would be high enough over a 4-year period to use up the credit. (Current year, plus three years carry forward.)
Talk to your tax adviser about Form ND-1PG for the planned gift tax credit and Form ND-1QEC for the endowment tax credit.
On June 11, 2019, the IRS announced that final regulations had been issued regarding the impact the receipt of state and local tax credits will have on charitable contributions (Rule 84 FR 27513). These regulations also include safe harbor provisions, which may provide a benefit to taxpayers in certain circumstances (IRS Notice 2019-12).
This information is provided for educational purposes only. Please consult your own attorney, accountant or financial advisor for advice on your situation.
Community foundation: A community foundation is a tax-exempt, nonprofit, autonomous, publicly supported, philanthropic institution with a long term goal of building permanent, named component funds established by many separate donors for the broad-based charitable benefit of the residents of a geographic area. The FM Area Foundation is the community foundation serving Cass County, N.D., and Clay County, Minn.
Qualified nonprofit organization: A North Dakota incorporated or established 501(c)(3) organization to which contributions qualify for federal charitable income tax deductions with an established business presence or location in North Dakota.
