The Endow Kentucky Tax Credit enables any Kentucky taxpayer (business or individual) to receive a state tax credit of up to 20% of a charitable gift to a permanent endowment fund at a local community foundation (up to $10,000 per taxpayer) benefiting a Kentucky-based nonprofit. Married couples may receive a maximum of $20,000 in income tax credits. It’s important to note that the taxpayer does not have to be a Kentucky resident, but rather a business or individual which has tax liability with the state of Kentucky. The credit may be taken against individual income tax, corporate income tax, and limited liability entity tax.
For the 2016 tax year, a maximum of $1,000,000 of tax credits will be available beginning July 1st, 2016. The required application form will be available on the the Kentucky Department of Revenue website and posted on the Barnes Dennig Blog. July 1st-July 7th, 2016 is the first period in which to apply for the credit. All applications received during this time period will be treated as if received at the same time. Important note: File early, as all tax credits were depleted during the first week of last year’s application period.
Once the applications have been received and reviewed, donors will receive a preliminary approval letter from the state. Within 30 days of receiving this letter, donors must make the qualified contribution to the endowment fund. Proof of the gift is then sent to the state, and the Kentucky Department of Revenue will issue a letter of final approval to the taxpayer for use in filing their 2016 taxes.
Gifts can be cash or appreciated stock, and must be made to a qualified community foundation. All gifts are still eligible for Federal and State charitable tax deductions, in addition to this Kentucky tax credit which reduces the tax bill dollar for dollar. The Endow Kentucky Tax Credit is non-refundable, but can be carried forward for up to five years. This credit is currently slated to be available for the 2016 and 2017 tax years.