Illinois Gives Tax Credit Act
Rewards Donors with 25% Income Tax Credit
New law takes effect January 1, 2025
We are excited to announce new legislation – the Illinois Gives Tax Credit Act!
As of January 1, 2025, donors who give to an endowed fund at a qualified community foundation can receive a 25% State of Illinois income tax credit.
The Morton Community Foundation is a qualified community foundation and has already been approved by the Illinois Department of Revenue.
Quick facts:
An endowed fund is a permanent fund where the principle is never spent, the interest grows, and an annual distribution amount (MCF’s is 5%) is paid to charities annually…forever.
Donors Advised Funds are NOT eligible for this tax credit, but designated, field of interest, and scholarship funds DO qualify.
This is a State of Illinois income tax credit. Considering 90% of Americans take the federal standard deduction, this is one way for donors to get a tax deduction above the standard federal deduction.
Local charities can talk with their donors about this tax credit and encourage donors to gift to that charity’s designated fund at MCF. The donor will receive the tax credit and the charity will receive annual income from that gift. Many donors can contribute to a charity’s designated fund at MCF.
Donors (or their accountants) need to create an account at https://mytax.illinois.gov/_/ in order to receive the tax credit. You can download a step-by-step guide to setting up your mytax.illinois account by clicking the button below
Steps for Donors to Utilize MyTax Illinois for Qualified Charitable Foundations (QCF) Donations
Verify Eligibility to File on MyTax Illinois:
Ensure that you have previously filed a Form IL-1040, Illinois Individual Income Tax Return, with the Illinois Department of Revenue.
If this is your first time using MyTax Illinois, confirm that your mailing address on file with the Illinois Department of Revenue is current, as this will be critical for receiving correspondence.
Set Up Your MyTax Illinois Account:
Go to the MyTax Illinois website (mytax.illinois.gov).
You will need a Letter ID from a notice issued by the Illinois Department of Revenue within the last 90 days. If you already have this, proceed with creating your account.
If you do not have a Letter ID, click “Cancel” on the login creation page and select the “Request a Letter ID” link in the Individuals panel of the homepage.
A notice with the Letter ID will be mailed to the address on file within 10 days.
Apply for a Contribution Authorization Certificate (CAC):
Once your MyTax Illinois account is active, log in and apply for a CAC by selecting the Qualified Charitable Foundation (QCF) from a dropdown menu.
Enter the donation amount you plan to give to the QCF. Double-check all details to ensure accuracy.
Submit your application. The CAC will typically be available in your MyTax Illinois account shortly after submission.
Provide the CAC to the QCF:
Once you receive your CAC, give a copy of it to the QCF. This can often be done via email or in person, depending on the QCF’s preferences.
Make Your Donation:
Complete your donation to the QCF within 15 calendar days of the CAC’s issuance. Missing this deadline will invalidate the CAC.
QCF Confirmation:
The QCF will log into their MyTax Illinois account, locate the CAC you provided, and confirm that the donation has been received.
Receive Your Certificate of Receipt (COR):
After the QCF confirms your donation, a Certificate of Receipt (COR) will be issued to you. This document will be available in your MyTax Illinois account, typically within one day.
Save the COR, as you will need it when filing your taxes next year to claim your credit.
Troubleshooting and Support:
If you encounter any issues, such as delays in receiving your Letter ID, difficulties setting up your MyTax Illinois account, or problems obtaining your CAC or COR, contact the Illinois Department of Revenue for assistance.
By following these steps, you can successfully navigate the MyTax Illinois system and contribute to a Qualified Charitable Foundation while ensuring compliance with all state requirements.
Illinois Gives Tax Credit Act
What is the official name of the legislation?
Illinois Gives Tax Credit Act
HB4951/Public Act 103-0592, Article 170
What does it do?
Provides a 25% State of Illinois charitable income tax credit to donors who contribute to an endowed fund at a community foundation in Illinois that is in compliance with National Standards.
Is this a federal tax credit?
No, only for Illinois income tax.
Can a taxpayer get a federal charitable deduction and IL Gives Tax Credit on the same dollar?
For individual taxpayers, yes. For other types of taxpayers (i.e., corporations, partnerships, estates, and trusts), no. The starting point for calculating IL state income taxes is the federal Adjusted Gross Income (AGI). For individuals, on the Form 1040, itemized deductions such as the federal charitable deduction are subtracted on the federal return on line 12, after calculating the AGI on line 11. Thus, an individual can in fact take both an itemized federal charitable deduction and an IL Gives Tax Credit on the same gift, without increasing the cost to the state. This double incentive will be a powerful tool to generate more individual giving. But, the same does not apply to corporations, partnerships, estates, and trusts. The new law corrects for this to ensure that the state doesn’t take a double hit on charitable gifts from those taxpayers.
Who qualifies as a “donor”?
Any Illinois taxpayer, including individual and joint filers, corporations, partnerships, trusts, and estates can make an eligible gift to an eligible institution.
Do I have to be an Illinois resident?
No, as long as you pay Illinois income tax.
What is an “eligible gift”?
A donation to an endowed fund at an Illinois community foundation that is in compliance with National Standards. The Morton Community Foundation is Accredited in compliance with National Standards.
What assets can be gifted?
Any asset that a community foundation already accepts per that CF’s Gift Acceptance Policy.
What is an “endowed fund”?
A fund where the principal is held in perpetuity and the income is used for grantmaking. At the Morton Community Foundation, our endowment spending policy is 5% annually, calculated on 4-year rolling average.
What types of funds can be endowed?
At the Morton Community Foundation, “eligible” endowments include designated, field of interest, scholarship, and agency/nonprofit funds.
Are donor advised funds included in “eligible” endowments?
No.
Can a donor create a new endowed fund at the MCF to be the recipient of these eligible gifts?
Yes. A donor can choose to donate to an existing endowment (see our fund list HERE; please note that this list is combination of both endowed and non-endowed funds; please read each description carefully). If a donor would like to create a new endowed fund that is designated to a specific nonprofit (designated fund), dedicated to an issue of concern (field of interest fund), or a scholarship that they design, this can be done before January 1, 2025, so that it is ready to accept donations that are eligible for this tax credit.
What is an agency endowment?
A designated endowment is created by a donor – an agency endowment is created by the nonprofit who is setting it up to be a permanent, long-term source of income. The public is welcome to donate to any agency endowment at the MCF and apply for the tax credit.
Does MCF have its own operating endowment?
Yes, it’s called the Leadership Forever Fund. This endowment is eligible to receive gifts within this new legislation.
What is National Standards?
Community Foundations National Standards® (National Standards) is an accreditation program created by community foundations for community foundations. They are peer-driven, voluntary, and self-regulatory. National Standards accreditation represents operational effectiveness to foster excellence in community philanthropy. Community foundations reconfirm their accreditation every three years. The Morton Community Foundation is accredited in National Standards.
Are there limits or caps on the credit?
Yes. The cost to the State of IL is capped at $5 million. The maximum tax credit per filer is $100,000, but to get that tax credit, you’d have to donate $400,000 because it’s a 25% credit. The program is limited to supporting causes and programs in Illinois and cannot be used to support causes in other states; this keeps Illinois dollars circulating in the Illinois economy. Finally, the program will sunset after 5 years (at the end of 2029) unless it is extended beyond that date by the IL General Assembly.
Can one community foundation's donors claim the entire $5m?
No. IL Gives Act caps the amount any one community foundation may receive at 15% of the total, which is intended to ensure that rural areas and areas with less community wealth are able to benefit. At its maximum potential, this may generate $3 million in additional private donations per year for any single community foundation. Especially in rural areas, this can make a sizeable difference.
How are these donations documented?
This is still a work in process, but any gift to any community foundation is already documented and the donor receives a charitable tax receipt, which includes the date of the gift and the fact that no goods or services were provided in exchange for the gift. The Illinois Department of Revenue will be creating the paperwork and process for donors to claim this 25% income tax credit. MCF will be sharing updates as they occur between now and January 1st.
Can these endowed funds benefit charities outside of Illinois?
No. Each endowed fund that receives gifts eligible under this Act must award grants to charities for their operations and programming that occur within the State of Illinois. Because MCF’s service territory is the Morton area, this should be of little concern.
Are ALL charitable gifts to ANY charitable organization eligible for this tax credit?
No. Only gifts to non-DAF (Donor Advised Fund) permanent endowments at community foundations in compliance with National Standards are eligible to get the state tax credit (until we reach the statewide cap of $5M). Gifts to other charities, private foundations, and family foundations are not eligible for this tax credit.
We are happy to answer any questions you have – or collect your questions to then take to the Alliance of Illinois Community Foundations and the Illinois Department of Revenue for reply.
We will continue to post updates as we learn them.
It’s a great time for philanthropy in Illinois!