Tax Credit Contributions Boost Arizona Nonprofits, Benefit Residents
With Tax Day coming April 18, now’s the time to make an impact — view our Arizona Tax Credit Giving Guide above and read the article below to learn more!
The past couple of years have been transformative and difficult for the nonprofit community. But there’s one program that has helped them weather the storm.
More nonprofits than ever are relying on tax credit contributions, which provide donations to nonprofits while giving donors a break on state income taxes.
The state of Arizona offers an opportunity to receive a dollar-for-dollar credit on your state income taxes when you donate to qualified organizations in five categories:
1) Arizona Qualifying Charitable Organizations, which provide basic needs to qualifying low-income families and individuals, the chronically ill and disabled. Limits are $400 for individuals and $800 for married couples.
2) Qualifying Foster Care Organizations, with limits of $500 for individuals and $1,000 for married couples.
3) Public School Tax Credit Organizations, with limits of $200 and $400.
4) Private School Tuition Organizations for Individuals, with limits of $1,219 for individuals and $2,435 for married couples. These limits are the combined maximum contributions under the original law passed in 1997 and the expansion of the law passed in 2012.
5) Private School Tuition Organizations for Corporations. According to Barrie Petty, executive director of the Arizona Private Education Scholarship Fund, C-Corporations, S-Corporations, LLCs and Insurance companies can qualify for two types of credits. The Low-Income Tax Credit supports low-income students in private schools, and the Disabled/Displaced Tax Credit supports disabled students and students in (or who have been in) foster care. Because there are statewide caps for both credits ($135 million and $6 million, respectively), applications for approval are made by the Private School Tuition Organization to the Arizona Department of Revenue on behalf of the donor.
Brenda Blunt, a partner at Eide Bailly LLP, said the corporate tax credits can benefit many people who own their own companies.
“Readers who own one or more Arizona corporations can also benefit, either directly or indirectly, by contributions their businesses make to Private School Tuition Organizations,” she said. “For owners of S-Corporations (generally flow-through entities in which the owners, not the business, pay the tax), see Arizona Form 335-I and 341-I instructions. For owners of C-Corporations (generally taxable corporations), contact a qualifying Private School Tuition Organization for more information.”
Some think it’s too good to be true, but it’s not. You can give to a qualified charity or tuition organization instead of giving it to the state government for taxes. Over time, these contributions have become increasingly popular for residents and beneficial for nonprofits.
Gerald Wissink, CEO of BHHS Legacy Foundation, said tax credit contributions have a tremendous impact on specific programs, such as the foundation’s Legacy Connection initiatives, as well as the nonprofits the foundation supports.
“Tax credit contributions help us support Legacy Connection’s Backpack Buddies program,” he said. “This is a program that provides back-to- school supplies and clothing that Title I children need when they return to school, enhancing their confidence and ability to focus on education. One in four students in this state lives in poverty. Thanks to tax credit donations, we can make a powerful difference in the lives of Arizona families.”
Additionally, Petty said the private school tax credits help students and families who might not otherwise be able to afford their tuition.
“Because of the Private School Tax Credit program, financial ability to pay does not preclude children from attending the schools that best fit their needs,” she said. “As a result, private schools are more diverse, and children from all backgrounds are thriving and reaching their potential.”
Blunt added that many people who received COVID stimulus payments from the federal government may not have needed the infusion of money, and it could be put to good use by Arizona charities.
“The COVID-19 stimulus payments families received in 2021 are tax-free and came with no restrictions. So, those monies can still be used to make tax credit contributions,” she said. “While a lot of folks really needed those stimulus payments to help make up for lost or reduced wages or increased expenses related to the pandemic, there were many people who received the payments and did not really need them.
“Giving that money to a tax credit-qualifying organization is a great tax-advantaged way to help the most vulnerable people in our community,” Blunt said.
Wissink agreed that these contributions are an important way for Arizonans to support their favorite charitable causes, whether during difficult times or smooth sailing.
“This is a chance for our community to invest in Arizona’s future,” he said. “Thanks to the Arizona Charitable Tax Credit, you can decrease your Arizona tax bill — or increase your refund — by $400 or $800. That means your gift ends up costing you nothing. It is a simple but powerful way to reach out and impact our community.”
For a complete list of qualifying charitable organizations and qualifying foster care organizations, visit azdor.gov/tax-credits/contributions-qcos-and-qfcos.
Organizations are also added on an ongoing basis, so it may be worth your time to check back before year-end and again before April 15, 2022 — the last day 2021 tax credit contributions can be made.
Tax Credit Guide for the Bullhead City area: