The Endow Kentucky Program, along with the Endow Kentucky Commission, was established during the 2010 Regular Legislative Session with the approval of Senate Bill 227. Endow Kentucky was created in an effort to increase philanthropic activity to support communities across the Commonwealth.
The Endow Kentucky Tax Credit enables any Kentucky taxpayer (business or individual) t0 receive a state tax credit of up to 20% of their charitable gift to a permanent endowment fund at their local community foundation (up to $10,000 per taxpayer). This limited time opportunity is available for fiscal years 2013 and 2014. Each fiscal year has $500,000 in tax credits available.
Unlike a tax deduction, a credit is taken off the tax bill dollar for dollar. So, if a donor has a Kentucky tax bill of $1,000, a donation of $5,000 through Endow Kentucky would eliminate that tax altogether (20% of $5,000 is $1,000).
What Gifts Qualify for the Endow KY Tax Credit?
Gifts can be cash or appreciated stock, and must be made to a qualified community foundation. The Lake Area Foundation (LAF) is currently applying for qualified community foundation status. Donors may give any amount to an existing endowment at LAF or you have the option to start a new endowment fund or give to an existing fund.
Things to Know About the Endow KY Tax Credit:
- Before making a gift, the donor must file an application with the Kentucky Department of Revenue for preliminary approval of the intended charitable gift. If approved, the department will issue a preliminary approval letter.
- Within 30 days of receiving the approval letter, the donor must make the contribution to the endowment fund at LAF.
- Within 10 days of making the gift, the donor must send proof of the gift to the department, which will review the provided proof and issue a letter of final approval.
- The nonrefundable credit is available for taxable years 2013 and 2014.
- The credit may be taken against individual income tax, corporation income tax and limited liability entity tax.
- The credit may be up to 20 percent (20%) of the value of the endowment gift provided by the taxpayer, not to exceed $10,000. The credit will be less than 20% if the total credits requested exceed the total credit cap.
- Any approved Endow Kentucky Tax Credit that cannot be utilized by the taxpayer during a particular taxable year may be carried forward for use in a subsequent taxable year, for a period not to exceed 5 years.
- The total amount of the credits that may be awarded is limited to $500,000 in each fiscal year.
- A taxpayer providing a charitable gift to a permanent endowment fund of a qualified community foundation, its affiliate foundation or county specific component fund, may file an application form for preliminary credit authorization with the Kentucky Department of Revenue.
- July 1-7, 2012 is the first period to apply for the 2013 credit. All applications for preliminary credit approval will be treated as having been filed at the same time if they are received during the specified period to apply. If the tax credit cap of $500,000 is exceeded during an application period, then all credits receiving preliminary authorization will be pro-rated by a percentage of the tax credit cap divided by the total amount receiving preliminary authorization.
- The Department of Revenue will issue a notice of preliminary approval for the tax credit to the taxpayer.
- The Department will review the proof provided by the taxpayer (Schedule ENDOW completed by the recipient foundation) and—if the information is accurate—issue a final tax credit approval letter to the taxpayer.
- The taxpayer should keep a copy of the final tax credit approval letter for their records.
- The Dept. of Revenue is tracking the total tax credit allocated to date on its website (http://revenue.ky.gov/).