Qualifying to receive tax credit donations in Arizona

The latest view on not-for-profit accounting issues

direct donor benefits, nonprofit accounting, fundraising expensesNot too long ago, I attended a presentation on Arizona tax credits for donations to qualifying charitable organization, sponsored by Child Crisis Arizona. I had the pleasure of not only attending the event with Donna, an amazing tax partner here at Henry+Horne, but also of listening to an excellent portion of the presentation done by a Henry+Horne Tax Manager (Brock).  Donna wrote a blog for donors and their tax deductible donations, pointing out how important it is to know the date of the recertifications for these organizations done by the State. From a nonprofit organization’s perspective, it’s important to know and understand the recertification process and how to qualify for tax credit donations.

Don’t miss: Arizona credits to qualifying charitable and qualifying foster organizations

In order to be a Qualifying Charitable Organization (QCO) and/or Qualifying Foster Care Charitable Organization (QFCO), a nonprofit organization must receive certification from the state. There are big advantages to being a QCO or QFCO since the donor can receive tax credits for their donations. A nonprofit organization has to complete an application to obtain this status, which can be done at any time during the year. Certification is valid beginning on January 1 of the year that an organization is approved, but you need to know that it can take several weeks to process the application. Once the organization is certified, you’re set until the state requests a recertification, which is done on a periodic basis (no specific time frame).  In other words, you do not need to complete an application every year.

You may be wondering, how do I qualify?  To be a QCO, you need to meet ALL of these criteria:

  • Exempt under 501(c)(3)
  • Provide services that meet immediate basic needs (cash assistance, medical care, child care, food, clothing, shelter, job training/placement)
  • Serve Arizona residents who receive TANF benefits, are low income, or are chronically ill or physically disabled individuals (ill and disabled must be under 21 years old)
  • Spends at least 50% of its budget on qualified services to the Arizona residents described above and affirms it will continue to do so

Don’t miss: How to get organized for tax time

Note that “chronically ill or physically disabled individuals” above is relatively new.  So if your organization didn’t qualify in the past because it wasn’t serving low income residents, it may qualify now.

To qualify as a FQCO requires all of the QCO criteria, plus the organization must provide ongoing services to at least 200 individuals in the foster care program and spend at least 50% of its budget on those individuals.

So if you haven’t applied in the past, and you meet the criteria above, now is the time to get the application submitted to take advantage of opportunities for increased tax credit donations!

For all your non-profit tax questions, please contact your Henry+Horne consultant. For more on how Henry+Horne can help your non-profit, check out our Industries page.

Colette Kamps, CPA