We support HB 18-1013, The Colorado Nonprofit Sustainability Act, sponsored by Rep. Alec Garnett (D-Denver) and Sen. Kevin Priola (R-Henderson)!
Unfortunately, 1013 was not funded by the General Assembly and will not become law in Colorado in 2018.
1013 proposed a tax credit for donations of cash to nonprofits' endowments. Donors would be able to claim a 25% tax credit for donations up to $20,000.
Key Facts about 1013
The tax credit is 25 percent of the amount of the cash donation. The maximum credit is $5,000 for a gift of $20,000 or more.
- Nonprofits receive $4 for each dollar the state awards in tax credits
- The tax credit is not refundable and must be used in the tax year of the donation.
- Donors claiming this tax credit can’t claim other state tax credits for the same donation.
- The state cannot award more than $12 million in tax credits to Colorado's donors.
Applies to individual donations of cash to eligible endowment funds. Eligible funds must be held by (or on behalf of) Colorado-organized and operated nonprofits and community foundations.
Eligible donations include:
- An additional gift to an endowment originally established by board-designated assets (i.e. quasi-endowment);
- A gift restricted by a donor to a true (permanent) or term endowment
Requires the nonprofit to provide documentation to verify the donor’s identity and that the donation qualifies for the credit.
Requires the donor to provide documentation of the gift to the Department of Revenue prior to filing taxes for the year of the donation.
The credit would be authorized for the next three years.
About Endowment Funds
- Assets are invested to grow in value, sustain nonprofits’ operations, and support their long-term goals.
- Preserve principal and spend income to make grants or provide direct services to communities.
- Enable boards or donors to set restrictions on the fund’s duration and how assets are used.
- May be managed directly by nonprofits, foundations, or foundations on behalf of nonprofits.
Benefits of Endowments and Endowment Tax Credits
Five states (IA, KY, MD, MT, ND) currently offer a tax credit for donations to charitable endowments. In these other states, endowment tax credits have:
Increased giving to help nonprofits support communities through services, expenditures, and grant-making.
- Since 2003, Endow Iowa reports more than 13,000 donations to Iowa Community Foundation's permanent endowment funds totaling in $115.4 million in giving.
- Donors gave $121 million to MT’s nonprofits between ’97 and 2012. Assuming a 5% standard distribution rate, $600,000 was distributed to MT nonprofits every year .
Introduced donors to the option of giving to an endowment. Donors are accustomed to giving a fixed amount that is spent immediately on programs. Donations to an endowment are invested to grow in value over time.
Helped nonprofits benefit from generational wealth transfer. Nationwide, an estimated $59 trillion will be transferred between 2007 and 2061, according to the Boston College Center on Wealth and Philanthropy. These credits have encouraged donors to make long-term gifts to nonprofits.