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Montana Endowment Tax Credit

What is the Montana Endowment Tax Credit (METC)
The METC is a credit available to be applied against your Montana income tax liability. A credit reduces your tax liability dollar for dollar.

Who can take advantage of the METC?
Both individuals and businesses can take advantage of the METC.

How can an individual utilize the METC?
The rules for individuals are governed by Montana Code Sections 15-30-2327 and 15-30-2328.

An individual must make a planned gift to a qualified charitable organization that will ultimately go to a permanent endowment.

What type of gift is a planned gift?
Charitable Remainder Trust
Charitable Lead Trust
Charitable Gift Annuity
Deferred Charitable Gift Annuity
Paid-up Life Insurance
Charitable Life Estate

How much is the credit for individuals?
The credit is calculated as 40% of charitable portion of the gift, up to a maximum of $10,000, per individual. Spouses can each utilize the full credit for a total of $20,000 in a tax year.

An example: If a single person, age 75, enters into a charitable gift annuity of $25,000 in December, 2013. He will receive a lifetime annuity of $1,450 per year. The charitable portion of his gift would be calculated as $11,066 (which would be the tax deduction amount for Federal income tax purposes) and the METC would be:

11,066 x 40% = $4,426.20 METC

What else does an individual need to know about the METC?
The credit is only available in the year you make your planned gift. If you are unable to use the full credit in that year, there is no carry forward or carry back.

The credit is non-refundable, which means that it cannot reduce your income tax liability to less than zero.
Under the statute you are required to hold an income interest for five (5) years from the date of the gift.

What type of business entity can take advantage of the METC?
The rules for the METC and business entities are governed by Montana Code Annotated Sections 15-31-161 and 15-31-162.

Business entities that can take advantage of the credit include: small business corporation (S-Corp), partnerships, limited liability companies, and corporations. You should always seek the counsel of your accountant to determine if your business entity will qualify.

How can a business entity take advantage of the METC?
A business entity can make a gift directly to a permanent endowment of a qualified charity.

How is the credit calculated for a business entity?
The credit is calculated at 20% of the value of the gift, up to a maximum of $10,000.

What else does a business entity need to know about the METC?
The credit is only available in the year of the gift. If you are unable to use the full credit in that year, there is no carry forward or carry back.

The credit is non-refundable, which means that it cannot reduce income tax liability to less than zero.

Additional information

The METC for both individuals and business entities was recently extended until December 31, 2019.

If you would like a personalized illustration or additional information, please contact The Office of Estate, Trust and Gift Planning.

Please consult your tax professional prior to entering into any METC gift.