Impact of the Montana Endowment Tax Credit

Originally enacted in 1997, the Montana Income Tax Credit for Endowed Philanthropy encourages charitable giving to qualified endowments by offering incentives to Montana taxpayers. The Montana Department of Revenue (DOR) reports that the tax credit has been claimed on over $121 million in gifts to Montana charitable endowments from 1997 to 2012. Other sources estimate the amount of gifts due to the credit to be significantly higher. Assuming a standard endowment distribution rate of 5%, these gifts create at least $600,000 in distributions to Montana nonprofits every year.

Although it is not possible to discern the motivations of the donor to determine whether the tax credit caused these gifts, the amount of gifts given to charitable endowments would almost certainly be lower in the absence of the credit.

Table 1: Amount of Endowment Credit Claimed and the Gift Amount used to Claim the Credit 

 

Individual 

 

Corporate 

Year 

Credit
Claimed
 

Credit
Percentage
 

Gift Amount
used to
Claim Credit
 

 

Credit
Claimed
 

Credit
Percentage
 

Gift Amount
used to
Claim Credit
 

1997

$1,332,693

50%

$2,665,386


 

$173,972

50%

$347,944

1998

$3,191,145

50%

$6,576,468


 

$380,512

50%

$761,024

1999

$5,547,290

50%

$11,320,098


 

$652,025

50%

$1,304,050

2000

$6,960,128

50%

$14,243,846


 

$751,549

50%

$1,503,098

2001

$7,410,957

50%

$15,100,822


 

$712,539

50%

$1,425,078

2002

$1,610,509

40%

$4,236,953


 

$108,087

20%

$540,435

2003

$2,138,607

40%

$5,449,240


 

$112,435

20%

$562,175

2004

$2,502,605

40%

$6,462,603


 

$131,866

20%

$659,330

2005

$2,491,431

40%

$6,228,578


 

$159,309

20%

$796,545

2006

$3,164,764

40%

$8,112,566


 

$197,833

20%

$989,165

2007

$3,037,790

40%

$7,147,088


 

$134,927

20%

$674,635

2008

$1,990,411

40%

$4,976,028


 

$35,256

20%

$176,280

2009

$1,808,443

40%

$4,521,108


 

$94,899

20%

$474,445

2010

$1,827,181

40%

$4,567,953


 

$42,830

20%

$214,150

2011

$1,784,717

40%

$4,461,793

  $45,911 20% $229,555

2012

$2,072,754

40%

$5,181,885

  $60,406 20% $302,030

2013

$2,124,379 40% $5,310,948        

Total 

$50,996,204 

 

$115,269,204 

 

3,794,346 

 

$10,960,299 

Source: Montana Department of Revenue. Corporate amounts are based on the year forms were filed.  

The above table reports the gift amount used to claim the charitable endowment credit according to information provided by the DOR. However, the actual amount of gifts given to Montana's charitable endowments is likely to be significantly higher because any gift amount given over the amount used to claim the credit would not be reported on the tax form. For example, assume a single taxpayer gave a $50,000 gift in 2004; the credit percentage in 2004 was 40%. The amount of the tax credit is calculated by multiplying the gift amount by the credit percentage, but is limited to $10,000 per taxpayer. The taxpayer would calculate a credit amount of $20,000 ($50,000*40%), but could only claim a credit of $10,000. The taxpayer would claim a $10,000 credit on their tax forms, and the DOR would only record a gift amount of $25,000 ($10,000/ 40%). The other $25,000 given by the taxpayer would not be recorded.