CREDIT FOR CONTRIBUTIONS TO A 
QUALIFYING CHARITY

For a list of Self Certifiable Charitable Organizations click here.

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:

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.

Can a federal or state audit affect a taxpayer's baseline year and/or dollar amount?

Yes. The baseline year could be changed or established if a taxpayer's deductions are changed to or from itemized or to or from standard, for instance. The dollar amount could change depending on allowed or disallowed contributions. Remember that a taxpayer is required to notify the state of any federal audit changes within 90 days of the audit becoming final.

How does a taxpayer figure the baseline year and amount if filing status changes due to divorce, marriage, remarriage, death of a spouse, or change of residency?

Taxpayers must establish a new baseline year and amount following a filing status change listed above. This includes a married/joint filing where the spouses are different.

QUALIFYING CHARITABLE ORGANIZATION

What is a qualifying charitable organization?

A qualifying charitable organization is a charitable organization that is exempt from federal income taxes under Section 501(c)(3) or is a designated community action agency that receives community services block grant program monies pursuant to 42 United Stated Code Section 9901. Please note that community action agencies qualify only AFTER May 29, 1998. Further the organization must spend at least 50 percent of its budget on services to Arizona residents who are TANF recipients or who are low income residents. Low income residents are persons whose household income is less than 150 percent of the federal poverty level.

What kind of services must the qualifying charitable organization provide?

Services means cash assistance, medical care, child care, food, clothing, shelter, or any other assistance that is reasonably necessary to meet immediate basic needs and that is provided and used in Arizona.  AFTER May 29, 1998, job placement services, job training, and tuition reimbursement for job training qualify.

Who are low income residents of this state?

Low income individuals are persons whose household income is less than 150 percent of the federal poverty level.

Must a qualifying charitable organization be certified?

Yes. A qualifying charitable organization must send a self-certification letter to the Department of Revenue. The letter must state that the charitable organization meets all criteria to be considered a qualifying charitable organization. The organization also must notify the Department of any changes that may affect its qualifications. The certification or change letters should be mailed to:

Arizona Department of Revenue
Offfice of Economic Research & Analysis
1600 W. Monroe
Phoenix, AZ 85007

Will the department send a certification back to the qualifying charitable organization?

No. This is a self-certification process.

Will the department publish or make available a list of qualifying charitable organizations?

Yes, for a list of Self Certifiable Charitable Organizations click here.