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Published in Nonprofits

Lawmakers, nonprofits again pursue state charitable tax credits

BY Sunday, July 04, 2021 04:00pm


new legislation session in Lansing this year has brought another attempt to reinstate tax credits for charitable contributions to homeless shelters, food kitchens, food banks or community foundations.

Introduced in February by Sen. Jim Runestad, R-White Lake, Senate Bill 113 mirrors previous efforts to reinstate the tax credits that were eliminated as part of broad statewide tax reforms in 2011. 

The bill would allow individuals to claim a tax credit of up to $100 or $200 for joint filers. In the case of estate or trusts, the credit is capped at 10 percent of the taxpayer’s total tax liability or $5,000, whichever is less. The bill would also require the state Department of Treasury to annually report to lawmakers the total amount of credits claimed in a year.

Similar legislation passed the state House last year with broad bipartisan support but failed to advance in the Senate.

Lawmakers and nonprofit advocates say eliminating the tax credits a decade ago had an immediate negative effect on the number and amount of contributions to nonprofits. A 2014 report from Grand Valley State University showed $200 donations fell 44 percent in the two years after the tax credits were repealed, while the number of first-time donors at the $200 level declined 37.5 percent in the same period.

Runestead has said in the past that restoring the previously eliminated tax credits would “increase important giving” to charitable groups.

Council of Michigan Foundations President and CEO Kyle Caldwell submitted written testimony on Runestead’s bill last month, saying the legislation “would incentivize first-time and low to middle income household charitable giving.”

Caldwell also noted that the latest bill would limit community foundation donations to endowments, which allow nonprofits to be more flexible in responding to local challenges.

“In summary, we support SB 133 because we know these types of incentives work to increase giving, and we know the huge positive effects on our local communities that come from increasing the capacity of nonprofits,” Caldwell wrote. “The time to begin the pipeline of charitable giving is now as we know the surge of public investment will not last forever.”

As in past sessions, the proposal faced opposition from the state Treasury Department over potential General Fund revenue losses. A Senate Fiscal Agency analysis from last month showed the bill would reduce General Fund revenue by about $22 million a year.

A spokesperson said the Treasury Department remains opposed “based on concerns related to the impact of lost revenue on the budget.”

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