NEXT DOORS {ahead of the curve} FUEL OF THE NONPROFIT COMMUNITY Tom Evans | Contributing Editor Arizona’s nonprofits are becoming increasingly fueled by Arizona’s tax credit contributions. And despite changes on the federal level, these tax credits appear to be here to stay. First, for the uninitiated — the state of Arizona offers an opportunity to receive a dollar-for-dollar credit on your state income taxes when you donate to qualified organizations in five categories: • Arizona Qualifying Charitable Organizations , a catch-all for a broad swath of nonprofits. Limits are $400 for individuals and $800 for married couples. • Qualifying Foster Care Organizations , with limits of $500 for individuals and $1,000 for married couples. • Public School Tax Credit Organizations , Tax Credit Contributions Becoming the 30 FRONTDOORS MEDIA | NOVEMBER 2018

with limits of $200 and $400. • Private School Tuition Organizations , for which limits increased this year to $555 for individuals and $1,110 for couples. • Certified School Tuition Organizations — which may receive your contribution if you’ve already maxed out the Private School Tuition Organization credit first — for which limits increased to $552 individually and $1,103 for married couples. If it sounds too good to be true, it’s actually not. You can absolutely give your money to a qualified charity and/or tuition organization instead of giving it to state government. So, over time, these contributions have become increasingly popular for Arizona residents. And, as you might imagine, for the nonprofits that receive the gifts. “Many nonprofits have grown dependent on Arizona tax credit contributions,” said Jarrett Ransom, president and CEO of The Rayvan Group, a nonprofit fundraising consulting firm. “This past year has been a roller-coaster ride for these nonprofits as we all sit on the edge of our seats to see what changes will be made. But one thing I have noticed is that more charities are promoting the tax credit angle year-round and not just near tax time anymore. They are including it in their newsletters, online and other collateral, and at fundraising events.” The roller-coaster ride she’s referring to is happening on the federal level. In the past, tax credit contributions could be treated the same as any other charitable contributions on your federal tax returns — a huge bonus for donors. But the IRS is currently contemplating ending this deductibility, among other changes that took place as part of the Tax Cuts and Jobs Act of 2017. “There were two substantial changes at the federal level that will impact how tax credit contributions are reported and, in some cases, the economic benefit of making the contributions,” said Brenda Blunt, tax partner with Eide Bailly LLP, a prominent national accounting firm. “Prior to these changes, Arizona tax credit contributions were essentially ‘free’ for individuals to make up to the donation limits, assuming the donor had an Arizona income tax liability sufficient to absorb the credits.” Nevertheless, these contributions are still an inviting way for tens of thousands of Arizonans to support their favorite charitable causes. “These contributions are very critical to our local nonprofit community,” Ransom said. “Organizations often designate these annual funds to a specific program or purpose … I always coach my clients to never become too dependent on one particular revenue stream. The healthiest nonprofits have a large pool of individual donors. This revenue stream should make up approximately 75 percent of an organization’s revenue stream. A challenge is that the tax credit donations also typically fall into the individual donor category, too.” But as long as tax credit contributions continue to be an option — and there’s no sign at the moment that the state legislature is going to repeal them — they will continue to be a fundraising tool in the nonprofit community. And that’s my segue into a little plug — Frontdoors Media is launching its 2018-19 Tax Credit Directory, our way of spotlighting eligible and deserving nonprofits from throughout the community in each of the eligible categories. You’ll find it on our website at frontdoorsmedia.com and in print as well, and we encourage you to use it as a resource as you plan your tax returns. So maybe tax season isn’t the most wonderful time of the year. But for the nonprofit community, it’s becoming a critical time for their funding and sustainability. Tom Evans CONTRIBUTING EDITOR @TEvans927 NOVEMBER 2018 | FRONTDOORS MEDIA 31