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West Virginia Year-End Charitable Giving Opportunity

As year-end approaches, consider making a contribution to a West Virginia nonprofit organization that is participating in the Neighborhood Investment Program (NIP).  This program was established by the West Virginia Legislature to increase charitable giving to West Virginia nonprofit organizations.  The NIP Advisory Board awarded $3 million in tax credits to 203 West Virginia nonprofit organizations for Fiscal Year 2016.  These organizations are allotted a set amount of NIP credit vouchers, which allow donors to receive a state tax credit equal to 50% of their qualifying gift.  Click here to view the nonprofit organizations which were awarded NIP credits. The gift must be a single contribution of $500 or more (some organizations set a $1,000 minimum gift).  To qualify, the donor must also obtain a NIP credit voucher from the organization.  Each organization has a limited number of credits so you will need to call to make sure the organization still has credits available.

You can claim this credit on your state income tax return regardless of whether you itemize deductions on your federal return.  The credit can also be used against WV Corporate Income Tax and Business & Franchise tax.  You have five years in which to use up the credit.  The only limitation is that you cannot use the credit to reduce your WV tax liability by more than one-half in any one tax year. 

This Program has been around since 1996 and has been a contributing factor in expanding the State’s charitable giving over the past 20 years allowing donors to double their gifts.  The Program is up for renewal in the upcoming West Virginia Legislative session.  We hope it will be renewed for another five years to continue to strengthen West Virginia’s nonprofit community and charitable giving level.

The illustration below illustrates the advantages of this credit as a result of the tax savings.  It may seem like a deal that is “too good to be true,” but in fact it is a very real incentive program of the State of West Virginia.

 

Utilizing a

NIP Credit

Not Utilizing

a NIP Credit

Contribution Amount

$500.00

$250.00

Less NIP State Tax Credit

($250.00)

$0.00

Cost of Contribution Without Federal Tax Deduction (A)

$250.00

$250.00

Less Federal Tax Deduction(1)

($140.00)

($70.00)

Cost of Contribution With Federal Tax Deduction (B)

$110.00

$180.00

 

 

 

 

 

 

 

 

 

(1) Federal deduction based upon contribution amount times federal tax rate. In this illustration, the taxpayer is assumed to be in the 28% tax bracket and to itemize deductions.

In this illustration, the person contributing $500 and who itemizes federal tax deductions ends up spending $70 less than the person only contributing $250 (see line B). For those who do not itemize federal deductions, the net cost of a $500 gift is still no more than the net cost of a $250 gift (see line A).

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About this Author

Melissa Watkins, taxation, business and commercial planning lawyer, Steptoe Johnson, morgantown Law Firm
Member

Melissa Watkins concentrates her practice in the areas of taxation, business and commercial planning, nonprofit tax issues, and other areas related to the establishment and operation of nonprofit organizations.  She is also a licensed certified public accountant.

304-598-8160