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.
An individual must make a planned gift to a qualified charitable organization that will ultimately go to a permanent endowment.
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.
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.
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.
The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes include federal taxes only. State income/estate taxes or state law may impact your results. Annuities are subject to regulation by the State of California. Payments under this agreement, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association. A charitable gift annuity is not regulated by the Oklahoma Insurance Department and is not protected by a guaranty association affiliated with the Oklahoma Insurance Department. Charitable gift annuities are not regulated by and are not under the jurisdiction of the South Dakota Division of Insurance.