Frequently Asked Questions About the Tax Credit

If you have a question about the Montana Charitable Giving Tax Credit? Find the answer here or, if you don't see your question, send us an email. All questions and comments are welcome.

What is the Montana Tax Credit for Charitable Endowment gifts?
Through this unique tax credit incentive, a Montana taxpayer receives a reduction on the taxes s/he owes - up to $10,000 per year - by making a qualified charitable contribution to a qualified endowment.

Who can take advantage of Montana's Endowment Tax Credit?
Any person or business that pays income taxes to the State of Montana.

How can I take advantage of this Tax Credit?
An individual taxpayer can claim the tax credit by making a gift of cash or property (in the form of a planned gift) to a qualified endowment to benefit a tax-exempt charitable 501(c)(3) nonprofit organization.

A business likewise does so by making a cash gift to a qualified endowment to benefit a tax-exempt charitable 501(c)(3) nonprofit organization.

PLEASE NOTE: To be sure that your contribution is a qualified one made to a qualified endowment and that you are able to take full advantage of this Tax Credit, you should consult a professional financial advisor and a representative of the charitable 501(c)(3) nonprofit organization to which you are making your gift.

What is a qualified endowment?
An endowment is a financial asset created by a donation made to a non-profit group or institution in the form of investment funds or other property that has a stated purpose at the bequest of the donor. Most endowments are designed to keep the principal amount intact while using the investment income from dividends for charitable efforts.

To be “qualified” for the tax credit, the endowment must be a permanent, irrevocable fund held by a Montana organization that is an IRS-designated 501(c)(3) tax-exempt charitable organization. The endowment may be held and managed by the tax-exempt charitable 501(c)(3) nonprofit organization or by a bank or trust company on behalf of a tax-exempt charitable 501(c)(3) nonprofit organization.

How can my business take advantage of the Montana Endowment Tax Credit?
By making a contribution to the qualified endowment of a charitable 501(c)(3) nonprofit organization. To be sure that your contribution is a qualified one made to a qualified endowment and that you are able to take full advantage of this Tax Credit, you should consult a professional financial advisor and a representative of the charitable 501(c)(3) nonprofit organization to which you are making your gift.

How much do I have to be able to contribute in order to qualify for the Tax Credit?
The law governing tax credits to qualified endowments doesn ́t specify a minimum amount to qualify. Some charitable 501(c)(3) nonprofit organizations may have their own policies on gift amounts.

I already give an outright gift to a charitable 501(c)(3) nonprofit organization. What are the advantages of giving to a qualified endowment instead?
A gift to an endowment will help ensure the charitable 501(c)(3) nonprofit organization ́s sustainability and provide a source of permanent income. A one-time gift to an endowment could provide an annual return equivalent to the gift you make every year, effectively endowing your annual gift to your favorite charity.

What is the maximum tax credit I can claim through the Montana Endowment Tax Credit?
A taxpayer is allowed a tax credit in an amount equal to 40% of the present value of the aggregate amount of the charitable gift portion of a planned gift made by the taxpayer during the year to any qualified endowment. The maximum credit that may be claimed by a taxpayer for contributions made from all sources in a year is $10,000 per individual or $20,000 per couple. The credit may not exceed the taxpayer ́s income tax liability.

What is a planned gift?
A "planned gift" is an irrevocable contribution to a permanent endowment held by a tax- exempt charitable 501(c)(3) nonprofit organization, or for a tax-exempt organization, when the contribution uses any of the following techniques that are authorized under the Internal Revenue Code:

  1. charitable remainder unitrusts;
  2. charitable remainder annuity trusts;
  3. pooled income fund trusts;
  4. charitable lead unitrusts;
  5. charitable lead annuity trusts;
  6. charitable gift annuities;
  7. deferred charitable gift annuities;
  8. charitable life estate agreements;
  9. paid-up life insurance policies;

For more information, visit the Montana Community Foundation website.

What is the Governor's Task Force on Endowments and Philanthropy?
Established in 1995 by Montana Governor Marc Racicot, and continued by Governors Martz and Schweitzer, the Task Force is a nonpartisan group comprised of representatives of charitable organizations, financial advisors, policymakers, philanthropists, and others who volunteer their time and energy to pursue a very simple mission: to make Montana and its communities better places through the promotion of increased charitable giving.

Where can I find more information on charitable giving in Montana and the nation?
The Montana Nonprofit Association provides information about charitable giving in Montana and nationwide.

What endowments currently exist in Montana?
There are many endowments benefiting nonprofits across the state, along with scholarship funds and permanent donor advised funds that make charitable grants. First, check with your favorite nonprofit to find out if they have an endowment. The Montana Community Foundation also manages more than 500 endowment funds, which are listed on their website.

How can a charitable 501(c)(3) nonprofit organization set up a qualified endowment?
Consult with a financial professional or contact the Montana Community Foundation for more information.

As a financial advisor, how can I increase my knowledge about vehicles for philanthropic giving, so I can better advise my clients?
The Montana Community Foundation provides resources on charitable giving for professional advisors. The Chronicle of Philanthropy website is also a good resource.