Sunday, August 1, 2010

Virtue Isn’t Your ONLY Reward!

All charitable contributions are not alike with respect to tax advantages. Certain contributions qualify for The Neighborhood Assistance Act (NAA) Tax Credit, a Delaware state income tax credit for 50% of the amount contributed. The underlying premise for offering this credit is that a charitable program is more likely to achieve a positive impact if at least one individual and/or business owner is a personally invested stakeholder. The NAA credit also wisely leverages taxpayer dollars. For every $1 in foregone tax revenue, an eligible charitable program receives a $2 contribution.

The Delaware NAA program is overseen by the superb staff of DSHA. The process starts with an annual allocation of tax credits by the state legislature. Once the allocated credits have all been awarded to contributors the program is suspended pending an allocation for the next state year (July 1-June 30). It is not uncommon for the tax credits to be 100% spoken for well before the Delaware fiscal year ends. For this reason, I would recommend planning ahead. If a certain charitable program is near and dear to your heart and you would like to be able to be able to take advantage of this credit then speak to the charity about acquiring NAA approval ASAP.

To get started, the charity must submit general information about the organization (financials, 990, etc.) and a simple application for the program itself. (Some multi-faceted charities have numerous programs.) Once the program has been approved and a contributor identified, the charity submits another short form seeking both approval of the donation and reservation of the credits from the annual allocation.

Many states have programs which are as similar as they are different. Below find a comparison of some of the key features in place as of the date of this bog. Most of these programs are tweaked a little each year. I have also provided the current links to more information and application forms.

Name of Program:

DE      Neighborhood Assistant Act Tax Credit

MD     Community Investment Tax Credit

PA      Neighborhood Assistance Program, Neighborhood Partnership Program

NJ      Neighborhood Revitalization Tax Credit Program

VA      Neighborhood Assistance Program







Entities that may contribute

DE     Businesses and individuals who pay DE income taxes

MD     Businesses subject to income, public service company franchise tax or the insurance premiums tax and individuals who are domiciled in MD.

PA     Business firm (including pass through) authorized to conduct business in this Commonwealth and subject to income tax, bank and trust co shares tax, title insurance company franchise tax, insurance premiums tax, mutual thrift institutions tax.

NJ      Individuals and C Corporations

VA     Businesses and individuals who pay VA income taxes

Acceptable forms of contribution

DE      cash, goods, services, or real property

MD     cash, goods, or real property

PA      cash

NJ      cash

VA     Businesses: cash, goods, stock, real property, professional services, contracting services and rent or lease of the participating nonprofit's facilities. Individuals: cash or marketable securities.

Program eligibility

DE: Provide neighborhood assistance in an impoverished area, or provide neighborhood assistance for low- and moderate-income families. This includes Community Development Corporations or Community-Based Development Organizations. Non-profits may be considered eligible if the assistance meets the NAA Program definition of a qualified purpose, including any of the following: community services; crime prevention; economic development; education; affordable housing.

MD: Project or activity that is either located in or serving a community in a Priority Funding Area. Projects must be located in or serve residents of a Priority Funding Area and typically involve activities such as: education and youth services; housing and community development; job and self-sufficiency training; enhancing neighborhoods and business districts; arts, culture and historic preservation; economic development and tourism promotion; technical assistance and capacity building; services for at-risk populations.

PA: Projects must fall under one of the following categories: Affordable housing; education; health and social services; community economic development; job training; crime prevention; and neighborhood assistance.

NJ: Nonprofit organization programs for housing and economic development in low-low/moderate income neighborhoods.

VA: Providing assistance for impoverished people. Several of the activities sponsored by the program are education, job training, housing assistance, health care clinics and community services.

% of Donation Credited

DE      50%

MD      50% (may take both charitable deduction on state form & credit)

PA      75%-80%

NJ      100%

VA      40%

Minimum/Maximum contribution per year

DE      $5,000 individual/$10,000 business min and $200,000 max

MD     $500 min and $500,000 max

PA      $50,000/yr for 5 years min, $666,666 for one project in one year max

NJ      $25,000 min and $1,000,000 max

VA      $500 min & no max individual/$1,000 min & $437,500 max business

What type of taxes may be offset?

DE      Income tax

MD     Income tax

PA      Corporate Net Income Tax, Bank and Trust Company Shares Tax, Mutual Thrift Institutions Tax, Capital Stock – Franchise Tax, Insurance Premiums Tax or Title Insurance Company Shares Tax.

NJ      Corporate Business Tax, Savings Institution Act, Tax imposed on marine insurance companies, Tax imposed on insurers generally, Sewer and Water Utility Excise Tax, Petroleum Products Gross Receipts Tax

VA      Income

Most Recent Annual Allocation:

DE      $500,000

MD     $1,000,000

PA     unable to determine

NJ      $10,000,000

VA      unable to determine

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