Tax Benefits

Federal and State Tax Benefits

Donations to the FM Area Foundation generally qualify for a deduction on your client’s federal and state income tax return.

ND Charitable Income Tax Credit

If your clients are North Dakota taxpayers, they may be able to claim a credit of 40% on a minimum donation of $5,000 to a qualified endowment through the North Dakota Charitable Income Tax Credit. This is on top of the savings they receive on their federal tax return by itemizing qualifying charitable donations. 

By taking advantage of both the state tax credit and federal tax deduction, your clients can significantly lower the net cost of their contributions and triple its impact. 

40% tax credit for individuals

Gifts made by an individual to a qualified endowment fund are eligible for the 40% tax credit if the aggregate of that year's gifts are equal to $5,000 or more. 

The maximum credit amount that may be claimed is $10,000 for an individual or $20,000 for married individuals filing jointly. 

Example: Mrs. Smith, a North Dakota resident, donates $20,000 in cash to an endowment fund. She receives an $8,000 tax credit (40%) on her North Dakota return. If she is in the 28% Federal tax bracket, her Federal tax savings are $3,360 (28% of $12,000). The "cost" of her $20,000 gift is offset by $11,360 in tax savings.

40% tax credit for businesses

Gifts made by a business entity to a qualified endowment fund are also eligible for a 40% tax credit. They, too, have an annual limitation of $10,000. 

In some cases the entity will "pass through" some or all of the credit to the business owners or to the beneficiaries of the trust or estate.

Example: Partnership XYZ has three equal partners. They would each receive a $3,000 tax credit available for use on their North Dakota individual income tax returns if the partnership qualifies for a $9,000 credit. 

Funds that qualify 

Donors wanting to take advantage of the tax credit can either:

  1. Create their own qualifying fund or
  2. Give to an existing fund

We have a number of endowed, agency funds that already qualify for the North Dakota Charitable Income Tax Credit. Agency funds are created to permanently support the operations of a particular nonprofit organization. Or you can help your client set up their own qualified permanently endowed fund at the FM Area Foundation.

Donors who decide to create or add to an endowment do so because they understand the importance of supporting the organization not only during their lifetime, but for generations to come. 

For more information, contact Greg Diehl at greg@areafoundation.org or 701.234.0756.