Illinois Gives Tax Credit Act Q&A

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!