SENATE BILL No. 1415

September 12, 2006, Introduced by Senators ALLEN, BIRKHOLZ, KUIPERS, GEORGE, GARCIA, GOSCHKA and BROWN and referred to the Committee on Finance.

A bill to amend 1967 PA 281, entitled

"Income tax act of 1967,"

by amending section 261 (MCL 206.261), as amended by 2000 PA 195.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 261. (1) For the 1989 tax year and each tax year after

1989 and subject to the applicable limitations in this section, a

taxpayer may credit against the tax imposed by this act 50% of the

amount the taxpayer contributes during the tax year to an endowment

fund of a community foundation or for the 1992 tax year and each

tax year after 1992 and subject to the applicable limitations in

this section, a taxpayer may credit against the tax imposed by this

act 50% of the sum of the cash amount and of the value of food

items the taxpayer contributes during the tax year to a shelter for

homeless persons, food kitchen, food bank, or other entity located

in this state, the primary purpose of which is to provide overnight

accommodation, food, or meals to persons who are indigent if a

contribution to that entity is tax deductible for the donor under

the internal revenue code.

(2) For a taxpayer other than a resident estate or trust, the

credit allowed by this section for a contribution to a community

foundation shall not exceed $100.00, or $200.00 for a husband and

wife filing a joint return for tax years before the 2000 tax year

and $100.00 or $200.00 for a husband and wife filing a joint return

for tax years after the 1999 tax year. For the 1992 tax year and

each tax year after 1992, a taxpayer may claim an additional credit

under this section not to exceed $100.00, or $200.00 for a husband

and wife filing a joint return, for total cash contributions made

and the value of food items contributed in the tax year to shelters

for homeless persons, food kitchens, food banks, and, except for

community foundations, other entities allowed under subsection (1).

For a resident estate or trust, the credit allowed by this section

for a contribution to a community foundation shall not exceed 10%

of the taxpayer's tax liability for the tax year before claiming

any credits allowed by this act or $5,000.00, whichever is less.

For the 1992 tax year and each tax year after 1992, a resident

estate or trust may claim an additional credit under this section

not to exceed 10% of the taxpayer's tax liability for the tax year

before claiming any credits allowed by this act or $5,000.00,

whichever is less, for total cash contributions made and the value

of food items contributed in the tax year to shelters for homeless

persons, food kitchens, food banks, and, except for community

foundations, other entities allowed under subsection (1). For a

resident estate or trust, the amount used to calculate the credits

under this section shall not have been deducted in arriving at

federal taxable income.

(3) The credits allowed under this section are nonrefundable

so that a taxpayer shall not claim under this section a total

credit amount that reduces the taxpayer's tax liability to less

than zero.

(4) As used in this section, "community foundation" means an

organization that applies for certification on or before May 15 of

the tax year for which the taxpayer is claiming the credit and that

the department certifies for that tax year as meeting all of the

following requirements:

(a) Qualifies for exemption from federal income taxation under

section 501(c)(3) of the internal revenue code.

(b) Supports a broad range of charitable activities within the

specific geographic area of this state that it serves, such as a

municipality or county.

funds by seeking gifts and bequests from a wide range of potential

donors in the community or area served.

(d) Is publicly supported as defined by the regulations of the

United States department of treasury, 26 ~~C.F.R.~~ CFR 1.170A-

9(e)(10). To maintain certification, the community foundation shall

submit documentation to the department annually that demonstrates

compliance with this subdivision.

(e) Is not a supporting organization as an organization is

described in section 509(a)(3) of the internal revenue code and the

regulations of the United States department of treasury, 26 ~~C.F.R.~~

CFR 1.509(a)-4 and 1.509(a)-5.

(f) Meets the requirements for treatment as a single entity

contained in the regulations of the United States department of

treasury, 26 ~~C.F.R.~~ CFR 1.170A-9(e)(11).

(g) Except as provided in subsection (6), is incorporated or

established as a trust at least 6 months before the beginning of

the tax year for which the credit under this section is claimed and

that has an endowment value of at least $100,000.00 before the

expiration of 18 months after the community foundation is

incorporated or established.

(h) Has an independent governing body representing the general

public's interest and that is not appointed by a single outside

entity.

(i) Provides evidence to the department that the community

foundation has, before the expiration of 6 months after the

community foundation is incorporated or established, and maintains

continually during the tax year for which the credit under this

section is claimed, at least 1 part-time or full-time employee.

(j) For community foundations that have an endowment value of

$1,000,000.00 or more only, the community foundation is subject to

an annual independent financial audit and provides copies of that

audit to the department not more than 3 months after the completion

of the audit. For community foundations that have an endowment

value of less than $1,000,000.00, the community foundation is

subject to an annual review and an audit every third year.

(k) In addition to all other criteria listed in this

subsection for a community foundation that is incorporated or

established after the effective date of the amendatory act that

added this subdivision, operates in a county of this state that was

not served by a community foundation when the community foundation

was incorporated or established or operates as a geographic

component of an existing certified community foundation.

(5) An entity other than a community foundation may request

that the department determine if a contribution to that entity

qualifies for the credit under this section. The department shall

make a determination and respond to a request no later than 30 days

after the department receives the request.

(6) A taxpayer may claim a credit under this section for

contributions to a community foundation made before the expiration

of the 18-month period after a community foundation was

incorporated or established during which the community foundation

must build an endowment value of $100,000.00 as provided in

subsection (4)(g). If the community foundation does not reach the

required $100,000.00 endowment value during that 18-month period,

contributions to the community foundation made after the date on

which the 18-month period expires shall not be used to calculate a

credit under this section. At any time after the expiration of the

18-month period under subsection (4)(g) that the community

foundation has an endowment value of $100,000.00, the community

foundation may apply to the department for certification under this

section.