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Charities urge donors to give before tax credit dies


Brian J. O'Connor - Detroit News Finance Editor

A tax credit that raised $100 million last year for Michigan charities — and gave taxpayers more than $40 million in write-offs on their state returns — expires at the end of the year, and charities are pushing to make sure donors take advantage of the Credit for Charitable Gifts before it disappears on Jan. 1.

More than 250,000 taxpayers claimed one or more of the three Michigan charitable tax credits in 2010, which are aimed at Michigan colleges and universities, public libraries and museums, public broadcasting stations, homeless shelters, food banks and community foundations.

Charities don't know how much of their donations are threatened by the decision by Gov. Rick Snyder and the Legislature to kill the credit. But they're pushing to make sure donors claim it this year and know that charities will need help to make up any shortfall after it ends.

"It will affect people's giving," said Elisabeth Mirer, director of development for the South Oakland Shelter in Lathrup Village. "It really was a great program, and it saddens us that it's going away. All charities are going to struggle a little bit with the end of the tax credit."

The credit has been on the books in Michigan since 1967, and since 1989 it has given a 50 percent tax write-off for contributions to institutions that the state also pays to support, such as homeless shelters, food banks, community foundations and public universities. Even after giving back 50 cents on the dollar, the donations still reduced the amount of money those institutions required from the state.

The credit gives a maximum of $100 back to a single taxpayer and $200 for a couple filing jointly for eligible donations. Estates, trusts and businesses can get
up to $5,000 in credits for their contributions that, in the right circumstances, could cut the cost of a $10,000 gift to $3,300 after state and federal deductions.

Businesses also can get a "super credit" of up to $100,000 for half of all contributions of more than $50,000 to a municipality or certain art, historical or zoological institutions.

Since the tax credit isn't refundable, it only offsets whatever amount a taxpayer owes the state. Last year, the credit cost Michigan $43 million for nearly $100
million in donations, according to state figures and the Community Foundation of Southeast Michigan. But with Snyder's tax reform package, the credit was
eliminated, along with others, to pare business taxes and close a $1.5 billion gap in the state budget.

As charities across the state launch their holiday and year-end fundraising campaigns, executives say they'll highlight the expiring credit to their donors.

"There's a general effort to try and get the word out on how to take advantage of the credits," said Robin Ferriby, vice president of philanthropic services for the Community Foundation. Some organizations are sending special mailings or will spotlight the credit, while the Community Foundation's website at www.cfsem.org has an online calculator that figures the total state and federal write-offs for any eligible contribution.

While the charities are trying to raise awareness of the doomed credit, they don't know exactly what the demise of the tax write-off might cost them in 2012 or even how much of their income is strictly generated by the credit.

"Studies have shown that people give to charity because they care about the cause, but tax policy influences how much people are able to give," Ferriby said.
"We anticipate that with the loss of the tax credit, people will give to charities they've supported in the past, but they will give less because it costs them more."

Charities also fear loss of the incentive could keep people from making first-time donations that often turn into continuing support, noted Tracy Muscat, associate vice president of development at Wayne State University.

"Something like the Michigan tax credit can be that one extra incentive, especially in a tough economy, that will encourage a donor to make that first gift,"
Muscat said. "If we look at our most generous donors, all giving $1 million or more, 69 percent of those individuals started out with gifts between $3 and $500."

The decision to end the longtime tax credit was opposed by nonprofit groups, but their protests were lost in the uproar over other credits axed in the governor's budget, such as historic preservation tax credits, film incentives and the earned income tax credit, as well as the move to tax pensions, explained Kyle Caldwell, CEO of the Michigan Nonprofit Association.

"We were saying we could cut it to $16 million and still get double to triple the amount of leverage if you keep the tax credit," Caldwell said.

Instead, Snyder's budget focused on restructuring the state budget to eliminate Michigan's convoluted business tax scheme while shifting $1.7 billion in taxes
away from companies and taking $1.5 billion more from individual taxpayers. The upshot was elimination of exemptions for the elderly and children, cuts to school aid and homestead tax credits and less money for universities, community groups and cultural institutions, as well as ending a slew of tax credits that
included the charity write-off.

Groups opposed to repealing the charitable tax credit tried to explain that the relatively small expenditure provided a great deal of government support for
community and cultural groups.

"Unfortunately, it was not enough to get the Legislature and governor to reconsider," Caldwell said.

Although there aren't any bills pending to restore the credit, Caldwell added that the Snyder administration and legislative leaders have said they might consider adding an appropriation for a tax credit to the annual budget on a year-to-year basis, as was done with the incentive for filmmakers.

"They aren't talking about appropriations yet, so we don't know if that's a genuine offer or just speculation," he said.

In the meantime, charities point out that the tax credit's end comes at a time when homeless shelters, food banks, universities and community foundations are all trying to do more with less, and when the hard-hit less fortunate citizens of Metro Detroit need help the most.

"Everybody's struggling. It's not an easy economy, especially in Michigan, but it seems like a small price to pay for that safety net," said Mirer of the South
Oakland Shelter. "Next year is going to be very telling."
 
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