ARIZONA STATE TAX CREDIT

Each year Arizona taxpayers are entitled to a $200 tax credit on their state taxes by sending a check to a qualifying non-profit organization. The Child Crisis Center- East Valley, Inc is a qualifying 501(C)(3) charity.

Below are some of the guidelines issued by the State of Arizona. For more in-depth information you may access the following web site – www.revenue.state.az.us/welflist.htm.

CREDIT FOR CONTRIBUTIONS TO A QUALIFYING CHARITY

How can a taxpayer know that a charity meets the criteria to be considered a qualifying charity?

The taxpayer should ask to see a copy of the certification letter that the charity is required to send the Department of Revenue. Also, the taxpayer may contact the department to see if an organization has filed a certification letter. See the section on Qualifying Charitable Organizations below for further information.

The taxpayer should also ask the following questions of the charity:

1. Is the charity exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code? Or is the organization a designated community action agency that receives community services block grant program monies pursuant to 42 United States Code Section 9901? Please note that community action agencies qualify only AFTER May 29, 1998.

2. Does the charity spend at least fifty percent of its budget on services to Arizona residents who receive Temporary Assistance for Needy Families benefits or are considered low income households?

Can a taxpayer give to a qualifying charitable organization through an umbrella-type charitable organization?

Yes. A taxpayer must designate that the donation be directed to a member charitable organization or member group fund that would qualify on a stand-alone basis.

Must a taxpayer itemize deductions in order to qualify for the credit?

Yes. A taxpayer must itemize deductions and deduct charitable contributions on the Arizona state income tax return at least once in order to establish a baseline year and amount. The credit is then figured on the amounts over and above the baseline amount.

How does a taxpayer determine the baseline year and amount?

If a taxpayer itemized deductions and deducted charitable contributions in 1996, that is by law the baseline year. The baseline amount is the total dollar amount of charitable contributions deducted on Schedule A. This amount includes the total contributions deducted pursuant to Section 170 of the Internal Revenue Code including cash amounts, property, or mileage amounts. Therefore, if a taxpayer deducted a total of $500 in charitable contributions in 1996, that is the baseline amount.

If a taxpayer did not itemize deductions and deduct charitable contributions in 1996, then the baseline year is by law the first taxable year after 1996 that the taxpayer itemizes deductions and deducts charitable contributions.

How is the credit amount figured once a taxpayer has established a baseline?

Credit dollars are allowed on the amounts above the baseline dollar amount. For instance, if a taxpayer has a baseline amount of $500, the taxpayer must give $700 in total contributions that includes $200 to a qualifying charitable organization to receive a $200 tax credit. Likewise, a taxpayer could give $600 in total contributions, including $200 to a qualifying charitable organization, and receive a $100 tax credit.