815-801-3035 info@fornwil.org

ILLINOIS GIVES ACT

THE FOUNDATION FOR NORTHWEST ILLINOIS

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!

This law was passed in Spring 2024 and provides a 25% State of Illinois tax credit to donors who give to endowed funds at community foundations across Illinois who are in compliance with National Standards.

This tax credit takes effect January 1, 2025, and will sunset after 5 years, unless extended. See further information below.

Steps for Donors to Secure the Illinois Gives Tax Credit

Information for our donors regarding the Illinois Gives Act:

Taxpayers (including individuals, joint filers, corporations, partnerships, trusts, and estates) that intend to donate may prepare by completing these 3 steps now:

  1. Read the IDOR Bulletin and Quick-Start Guide
  2. Create a MyTaxIllinois profile by requesting a letter ID. Once requested, IDOR will mail you a hard-copy letter within a few business days with your ID.
  3. Once you receive the Letter ID, return to MyTaxIllinois.gov to create your MyTax profile so that you can apply to receive the tax credit after January 1.
  4. Contact Jill Freese at 815-801-3035 or jill@fornwil.org to notify The Foundation of Northwest Illinois that you plan to participate in the program and make a gift AFTER 1/1/25.
  5. Apply to make a contribution to the Freeport Community Foundation (we are still listed by our previous name), your Qualified Community Foundation (QCF) through MyTax Illinois.
  6. Receive a Contribution Authorization Certificate (CAC) from IDOR through MyTax Illinois.
  7. Make the contribution(s) to The Foundation for Northwest Illinois within 10 business days after receiving the CAC.
  8. After receiving the contribution(s), we will confirm receipt within 30 business days and a COR will be created and issued to you through MyTax Illinois.

After receiving a COR, you may claim the credit on your next income tax return.

 


 

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.

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 Foundation for Northwest Illinois, our endowment spending policy is 3-5% annually, calculated on 3-year rolling average.

What types of funds can be endowed?

At The Foundation for Northwest Illinois, “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 Foundation to be the recipient of these eligible gifts?
Yes.  A donor can choose to donate to an existing endowment (see our fund list HERE).  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 prior to 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 and apply for the tax credit.

What is National Standards?
The Illinois Gives Act will incentivize charitable giving by Illinois taxpayers, at all income levels, by authorizing a state income tax credit for 25% of gifts to qualified community foundations’ permanent endowments beginning 1/1/25.

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.

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.  The Foundation for Northwest Illinois 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.

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 on the lllinois Gives Act tax credit. Please contact us at 815-801-3035 or info@fornwil.org.

We will continue to post updates as they become available.