House Bill No. 434
Introduced By hibbard, marshall, grimes, feland, thomas, rose, hagener, soft, foster, r. johnson, m. hanson, beaudry, sprague, ohs, eck, mood, christiaens, menahan, waterman, walters, smith, hertel, anderson, bohlinger, harrington, ream, mahlum, hayne, holland, heavy runner, jenkins, mcculloch, lawson, sands, ahner, grosfield, swanson, clark, masolo, zook, j. johnson, hargrove, harper, pavlovich, shea, dowell, bookout, peck, kitzenberg, brooke, raney, ellingson, kottel, knox, simpson, squires, quilici, beck, halligan, wilson, burnett, denny, devaney, krenzler, grady, mcgee, curtiss, stovall, stang, bishop, benedict, ryan, bitney, carey, ellis, baer, mills, lynch, tash, sliter, simon, van valkenburg, franklin, mccarthy, mohl, wiseman, taylor
A Bill for an Act entitled: "An Act providing a tax credit for planned gifts by individuals and other gifts by corporations and estates made to qualified charitable endowment funds; and providing an immediate effective date, a retroactive applicability date, and a termination date."
WHEREAS, charitable endowments are permanent savings accounts, the income from which is perpetually committed to charitable purposes; and
WHEREAS, Montana-based charitable endowments can grow over time to become significant resources capable of funding many unanticipated and unmet needs of, and creating new opportunities for, Montana's citizens and their communities; and
WHEREAS, Montana's relatively weak tradition of endowed philanthropy can be demonstrated by comparing our state with the other 49 states, in that Montana ranks 44th in population and 41st in per capita income, but ranks 48th in foundation assets and 49th in foundation giving; and
WHEREAS, a planned gift is a type of charitable contribution that has the following three characteristics: first, it is composed typically of assets saved over the contributor's lifetime; second, it is conferred in connection with a carefully considered estate plan; and third, it transfers assets of the contributor to a charity prior to the contributor's death; and
WHEREAS, although planned gifts would appear to offer genuine financial potential for creating and expanding charitable endowments in Montana, in reality, planned gifts are so infrequently contributed in Montana that endowments in our state are not growing as fast as they are in other states; and
WHEREAS, planned gifts might be used more in funding charitable endowments in Montana if contributors could offset a significant portion of their gifts against their Montana income tax liabilities; and
WHEREAS, over the long term, income distributed from endowments can help achieve community goals and objectives when current funding from state and local government budgets may be limited; and
WHEREAS, local charitable endowments currently exist in almost every Montana community, and the existence of these widespread endowments offers everyone in Montana an opportunity to contribute endowed funding for their local communities; and
WHEREAS, community-based endowments in Montana have long-term potential to benefit all Montana communities by developing creative solutions to help individual communities meet growing needs and by helping these communities find transitions to self-sufficiency; and
WHEREAS, earnings from charitable endowments in Montana are distributed by volunteer boards of diverse community leaders to meet emerging community needs in such areas as education, arts and culture, social services, economic development, and health and the environment; and
WHEREAS, government cannot meet, nor should it be expected to meet, all of the needs of the state's communities because of its limited financial resources and because each community is in a better position to determine its own existing and future needs and opportunities; and
WHEREAS, tax credits provide financial incentives that encourage contributions for the establishment or expansion of charitable endowments in Montana; and
WHEREAS, the Legislature limits the tax credit created by [this act] to qualified permanent endowments held by tax-exempt organizations or by banks or trust companies on behalf of tax-exempt organizations; and
WHEREAS, for the purpose of renewing the tax credit created by [this act], it is the intent of the 55th Legislature that the state's cost of administering the tax credit may not exceed 5% of the total annual credits claimed.
Be it enacted by the Legislature of the State of Montana:
NEW SECTION. Section 1. Qualified endowments credit -- definitions. For the purposes of [section 2], the following definitions apply:
(1) "Planned gift" means an irrevocable contribution to a permanent endowment held by a tax-exempt organization, or
a tax-exempt organization, when the contribution uses any of the following techniques that are authorized under the
Internal Revenue Code:
(a) charitable remainder unitrusts, as defined by 26 U.S.C. 664;
(b) charitable remainder annuity trusts, as defined by 26 U.S.C. 664;
(c) pooled income fund trusts, as defined by 26 U.S.C. 642(c)(5);
(d) charitable lead unitrusts, qualifying under 26 U.S.C. 170(f)(2)(B);
(e) charitable lead annuity trusts, qualifying under 26 U.S.C. 170(f)(2)(B);
(f) charitable gift annuities, undertaken pursuant to 26 U.S.C. 1011(b);
(g) deferred charitable gift annuities, undertaken pursuant to 26 U.S.C. 1011(b);
(h) charitable life estate agreements, qualifying under 26 U.S.C. 170(f)(3)(B);
(i) paid-up life insurance policies, meeting the requirements of 26 U.S.C. 170.
(2) "Qualified endowment" means a permanent, irrevocable fund that is held by
an A MONTANA INCORPORATED OR
ESTABLISHED organization that:
(i) is a tax-exempt organization under 26 U.S.C. 501(c)(3); or (ii)(B) is a bank or trust company, as defined in Title 32, chapter 1, part 1, that is holding the fund on behalf of a
tax-exempt organization ; and (b) manages the principal, revenue, and disbursements of the endowment in a manner that guards against erosion by
meeting the prudent investor rule.
NEW SECTION. Section 2. Credit for contributions to qualified endowment. (1) A taxpayer is allowed a tax credit
against the taxes imposed by 15-30-103 or 15-31-101 in an amount equal to 50% of the present value of the aggregate
amount of the CHARITABLE gift portion of a planned gift made by the taxpayer during the year to any qualified
fund. The maximum credit that MAY be claimed by a taxpayer for contributions made from all sources in a
year is $10,000. The credit allowed under this section may not exceed the taxpayer's income tax liability.
(2) The credit allowed under this section may not be claimed by an individual taxpayer if the taxpayer has included the FULL AMOUNT OF THE contribution UPON WHICH THE AMOUNT OF THE CREDIT WAS COMPUTED as a deduction under 15-30-121(1) or 15-30-136(2).
(3) There is no carryback or carryforward of the credit permitted under this section, and the credit must be applied to the tax year in which the contribution is made.
NEW SECTION. Section 3. Credit for contribution by corporations to qualified endowment. A corporation is
allowed a credit IN AN AMOUNT EQUAL TO 50% OF A CHARITABLE GIFT against the taxes otherwise due under
15-31-101 for charitable contributions made to a qualified endowment, as defined in [section 1].
The credit must be in
accordance with the provisions of [section 2]. The maximum credit that may be claimed by a corporation for contributions
made from all sources in a year under this section is $10,000. The credit allowed under this section may not exceed the
corporate taxpayer's income tax liability. THE CREDIT ALLOWED UNDER THIS SECTION MAY NOT BE
CLAIMED BY A CORPORATION IF THE TAXPAYER HAS INCLUDED THE FULL AMOUNT OF THE
CONTRIBUTION UPON WHICH THE AMOUNT OF THE CREDIT WAS COMPUTED AS A DEDUCTION UNDER
15-31-114. There is no carryback or carryforward of the credit permitted under this section, and the credit must be applied
to the tax year in which the contribution is made.
NEW SECTION. Section 4. Small business corporation, partnership, and limited liability company credit for
contribution to qualified endowment. A contribution to a qualified endowment, as defined in [section 1], by a small
business corporation, as defined in 15-31-201, a partnership, or a limited liability company, as defined in 35-8-102,
qualifies for the credit provided in [section
2 3]. The credit must be attributed to shareholders, partners, or members or
managers of a limited liability company in the same proportion used to report the corporation's, partnership's, or limited
liability company's income or loss for Montana income tax purposes. The maximum credit that a shareholder of a small
business corporation, a partner of a partnership, or a member or manager of a limited liability company may claim in a year
is $10,000, subject to the limitations in [section 2(2)]. The credit allowed under this section may not exceed the taxpayer's
income tax liability. There is no carryback or carryforward of the credit permitted under this section, and the credit must be
applied to the tax year in which the contribution is made.
NEW SECTION. Section 5. Beneficiaries of estates -- credit for contribution to qualified endowment. A contribution
general endowment fund of a qualified endowment, as defined in [section 1], by an estate qualifies for the credit
provided in [section 2] IF THE CONTRIBUTION IS A PLANNED GIFT OR IN [SECTION 3] IF THE CONTRIBUTION
IS AN OUTRIGHT GIFT TO A QUALIFIED ENDOWMENT. Any credit not used by the estate may be attributed to each
beneficiary of the estate in the same proportion used to report the beneficiary's income from the estate for Montana income
tax purposes. The maximum amount of credit that a beneficiary may claim is $10,000, subject to the limitation in [section
2(2)], and the credit must be claimed in the year in which the contribution is made. The credit may not be carried forward
or carried back.
NEW SECTION. Section 6. Report on income tax credit to committee. The department shall report to the revenue oversight committee at least once each year the number and type of taxpayers claiming the credit under [section 2], the total amount of the credit claimed, and the department's cost associated with administering the credit.
NEW SECTION. Section 7. Codification instruction. (1) [Sections 1, 2, and 5] are intended to be codified as an integral part of Title 15, chapter 30, and the provisions of Title 15, chapter 30, apply to [sections 1, 2, and 5].
(2) [Sections 3 and 4] are intended to be codified as an integral part of Title 15, chapter 31, and the provisions of Title 15, chapter 31, apply to [sections 3 and 4].
(3) [Section 6] is intended to be codified as an integral part of Title 15, chapter 1, part 2, and the provisions of Title 15, chapter 1, part 2, apply to [section 6].
NEW SECTION. Section 8. Effective date -- retroactive applicability. [This act] is effective on passage and approval and applies retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 1996.
NEW SECTION. Section 9. Termination. [This act] terminates December 31, 2001.