Would you believe the state of Iowa will pay you to establish a permanent charitable fund to benefit your community? It may sound too good to be true, but in fact, the state of Iowa is doing just that. Through the Endow Iowa Tax Credit Program, the state offers community-minded citizens a 25 percent tax credit when they establish an endowed fund with a qualified community foundation. Donors can receive a state tax credit of 25 percent of the amount of the gift in addition to the usual federal income tax deductions that accompany a charitable donation. Donors can qualify for as much as $100,000 in tax credits annually, and this incentive is also available to businesses and financial institutions.
Why is the state of Iowa doing this? Because - between the years 2010 to 2020, approximately $1.8 billion of wealth in Iowa will be transferred from one generation to the next according to research conducted by the Community Vitality Center at Iowa State University. Over this decade, it is anticipated that hundreds of millions of Iowa dollars will transfer to relatives who do not live in Iowa or to nonprofit organizations and institutions located outside of the state. To encourage Iowans to keep their assets in Iowa, the Iowa State Legislature established the Endow Iowa Tax Credit Program. This program incentivizes Iowans to keep part of their assets here at home as a permanent investment in quality of life and the betterment of Iowa communities.
The Fort Dodge Community Foundation and United Way has recently launched a new initiative that is focused on building a permanent endowment for Fort Dodge and Webster County. Called The Fort Dodge Endowment, this initiative provides the structure to build an endowment to support charitable organizations and community causes. In essence, The Fort Dodge Endowment serves as a permanent ''savings account'' for the greater Fort Dodge and Webster County community.
Creating an endowed charitable fund through the Fort Dodge Community Foundation and United Way gives citizens the opportunity to give back to the place they call home; the place where they raised their family, made their living and shared their lives with lifelong friends and neighbors. Endowed funds are held in perpetuity and generate support for a diverse range of community projects, charitable causes and nonprofit organizations that are addressing the needs of our community today, and for years to come. These funds are prudently invested to grow over time. A portion of the earnings from the funds' balance (usually 4 percent to 5 percent) are paid out on an annual basis to support community needs and charitable causes specified by the donor. The remainder of the investment yield is returned to the principal so the funds will continue to grow become a permanent source of community capital, helping do good work today and in the future.
A very attractive characteristic of The Fort Dodge Endowment is the flexibility and freedom it offers donors. Endowed funds with the Community Foundation can support a wide range of community needs and causes including human services, education, health, recreation, arts and culture, environment, community beautification, public safety, youth development, economic development and more. This flexibility offers donors the ability to satisfy their personal philanthropic goals and wishes through one donor-advised endowment fund. If a citizen has a passion for a specific organization such as a library, a museum, a school or any nonprofit organization, the he/she can establish a fund specifically for that organization and receive the 25 percent tax credit.
In essence, donors who endow their gifts can make a difference in their community during their lifetime and, at same the time, provide a gift that lasts forever. An endowment fund can be your family's legacy. Grants will continue to be made in the name of the fund the donor establishes so the donor or his/her family's charitable wishes are preserved. It can create a vision for a better community long after their lifetime and touch the lives of citizens, children and families for decades to come. The organizations and causes supported by the fund will help develop solutions to community challenges and build a stronger and more vital community.
Why establish an endowment fund with the FD Community Foundation and United Way?
1. I care deeply about my community and want to see it develop and prosper for future generations.
2. I want to create a personal or family legacy in my community that will last well after I am gone.
3. I want to create a fund that can make a significant and lasting impact on my community.
4. I want to establish a fund that will recognize and honor a loved one for perpetuity.
5. I want to support important charitable causes and community needs.
6. I want the flexibility to be able to decide how my charitable dollars will be used.
7. I want to receive maximum tax benefit for my charitable contribution under state and federal tax laws.
8. I want to receive an additional tax credit of 25 percent of the amount of the gift.
9. I want to make sure my gift is invested prudently and managed professionally.
10. I want to establish a fund that does not have the costs and taxes associated with establishing a private foundation.
What an endowed gift could mean to you
Amount of gift$10,000
Endow Iowa tax credit 2,500
Net federal tax deduction 10,000
Federal tax savings 3,500
Total tax savings 6,000
Net cost of gift 4,000
The Iowa Tax credit is 25 percent of the charitable gift made to a permanently endowed fund at a community foundation - maximum annual Endow Iowa tax credit per taxpayer is $100,000.
** The entire amount of the gift is deductible on federal taxes - not state.
*** Individual marginal tax rates vary.
**** Assumes that individual taxpayer utilizes Schedule A (itemized deductions on their federal tax return) and is in a 35 percent tax bracket.
FD Community Foundation and United Way
The Fort Dodge Community Foundation and United Way is an independent public charity that enables people with philanthropic interests to develop lasting legacies through funds that support causes, programs and organizations that they care about in their community.
Serving Fort Dodge, Webster County and north central Iowa, the Fort Dodge Community Foundation and United Way develops charitable resources to support important community programs, services and projects that will benefit the public good and improve the quality of life of all citizens, families and youths.
Grants from the funds managed by the Foundation support a wide range of charitable causes and nonprofit organizations that address a wide range of current and future community needs.
The Fort Dodge Endowment also provides donors the opportunity to establish a planned gift with the Fort Dodge Community Foundation and United Way such as a gift of cash, stock, real estate, insurance or other assets through a will or a charitable remainder trust. Planned gifts are a charitable alternative that provide citizens with a meaningful way to support the charitable causes they are passionate about and want to see thrive for the long term.
All across Iowa people are working hand-in-hand to ensure their local communities thrive for generations to come. By partnering with the Fort Dodge Community Foundation and United Way, citizens can build endowments to fund the charitable causes in their community they care about most deeply. Remember - ''One small seed planted today and nurtured over time, can provide shade for generations to come.'' By establishing an endowment fund at the Fort Dodge Community Foundation and United Way today, donors are planting a seed that will grow over time, providing necessary resources for future generations and helping their community grow and prosper - today, tomorrow and forever.
For more information on the Fort Dodge Endowment and the Endow Iowa Tax Credit Program, contact the Fort Dodge Community Foundation and United Way at 573-3179 or talk with your professional financial adviser.
Randy Kuhlman is chief executive officer of the Fort Dodge Community Foundation and United Way.