Revenue Administrative Bulletin 1992-10
Approved: March 31, 1992
INCOME AND SINGLE BUSINESS TAXES - CREDIT FOR CASH DONATIONS TO ELIGIBLE SHELTERS FOR THE HOMELESS, FOOD KITCHENS, AND FOOD BANKS
RAB-92-10. This bulletin describes the new credit authorized under section 38c of the Single Business Tax Act by Public Act 170 of 1991 and section 261 of the Income Tax Act by Public Act 171 of 1991. It establishes guidelines for eligible donations and describes the qualifications for eligible shelters, food kitchens, food banks, and other entities whose primary purpose is to provide overnight accommodation, food, or meals to persons who are indigent.
For purposes of this bulletin, the credit will be called the "homeless credit."
PUBLIC ACTS 170 AND 171 OF 1991
The Michigan legislature has authorized a nonrefundable credit under the Income Tax Act and the Single Business Tax Act for cash contributions to a qualifying shelter for homeless persons, food kitchen, food bank, or other entity whose primary purpose is to provide overnight accommodation, food, or meals to persons who are indigent.
The credit allowed is 50% of the cash contributed by the taxpayer not to exceed the following limits:
- $100 for a taxpayer other than a resident estate or trust filing singly under the Income Tax Act;
- $200 for a husband and wife filing a joint return under the Income Tax Act;
- The lesser of 10% of the taxpayer's tax liability for the tax year before claiming any credits allowed by the Income Tax Act or $5,000 for a resident estate or trust;
- The lesser of 5% of the taxpayer's tax liability for the tax year before claiming any credits allowed by the Single Business Tax Act or $5,000 for taxpayers filing under the Single Business Tax Act.
The credit is authorized for tax years beginning after December 31, 1991, through the 1994 tax year, and is subject to a cap of $1.5 million. In the case of fiscal year taxpayers filing a single business tax (SBT) return, the credit is authorized for fiscal tax years beginning after December 31, 1991, and ending within the calendar year 1994. In the case of fiscal year taxpayers filing an individual income tax return, the credit is available for fiscal tax years ending within calendar year 1992 through fiscal years ending within the calendar year 1994.
Example: A fiscal year SBT taxpayer has a tax year that began on February 1, 1991, and ends January 31, 1992. The taxpayer makes a cash contribution to an eligible shelter on December 24, 1991, and again on January 15, 1992. Neither contribution is eligible for the credit. The taxpayer's fiscal tax year began before December 31, 1991 (i.e., on February 1, 1991), and thus, the contributions were made during an ineligible tax year. If the taxpayer makes cash contributions after February 1, 1992, to an eligible shelter, those contributions can be properly claimed on the taxpayer's return for the fiscal year that ends January 31, 1993.
The homeless credit does not apply in a tax year for which the aggregate amount of the homeless credit claimed by all taxpayers for all prior tax years exceeds $1.5 million.
To be eligible for the homeless credit, a contribution must meet all of the following requirements:
- The contribution is made in cash, as defined below;
- The contribution is made to an organization whose primary purpose is the delivery of food, meals or shelter to indigent persons; and
- The contribution to the organization is tax deductible for the donor either as a charitable contribution or business expense deduction under the Internal Revenue Code (IRC).
Cash Contributions Only
The law permits a credit for cash contributions only. A contribution paid in U.S. currency, by personal check, money order or credit card, will be considered a cash contribution.
In-kind contributions such as food, clothes, linens, furniture, personal services, or gifts of appreciated property such as stock, real estate, or the like will not qualify for the credit. A gift certificate to a local grocery store or retailer will not qualify as a cash contribution, but will be treated as an in-kind contribution.
Written Acknowledgment Required
To substantiate the claim for credit, the taxpayer shall obtain a written acknowledgment of the contribution from the shelter, food kitchen, food bank or other qualifying organization. The written acknowledgment shall indicate the date and amount of the contribution. The taxpayer shall retain this acknowledgment with his or her tax records for the tax year.
Nature of Qualifying Organizations
The law allows a credit for cash contributions to a shelter for homeless persons, a food kitchen, a food bank, or other entity, the primary purpose of which is to provide overnight accommodation, food, or meals to persons who are indigent, provided that the entity is one for which a cash contribution is tax deductible under the Internal Revenue Code.
If an organization does not provide food, meals or shelter to indigent persons but provides other services which are not covered by the credit, such as the provision of clothing or emergency utility assistance, that organization is not eligible for the credit. Examples include Goodwill Industries and St. Vincent de Paul Society.
The following do not qualify for the state tax credit even though a deduction may be available to the donor for federal tax purposes and even though shelter or meals may be provided to indigent persons:
- An organization which has a primary purpose other than the delivery of food, meals or shelter to indigent persons such as a church, a school, a veterans post or other IRC 170(c) entity will not qualify, even though it offers a food kitchen, food bank or shelter services to indigent persons.
- IRC 170(g) provides a federal tax deduction for amounts paid to maintain foreign exchange students as members of the taxpayer's household. A taxpayer who establishes a food bank or food kitchen in his or her home for the benefit of these students will not qualify.
Determination of Eligibility
An entity may request that the Treasury Department determine whether a contribution to that entity qualifies under the homeless credit. The Treasury Department shall make a determination and respond to a request no later than 30 days after the request is received.
Requests should be addressed to:
Hearings and Tax Research Division
P.O. Box 15128
Treasury Building, 1st Floor
Lansing, MI 48901
For general information, call (517) 373-3672.
RELATIONSHIP TO PUBLIC CONTRIBUTIONS CREDIT
AND COMMUNITY FOUNDATION CREDIT
The homeless credit is computed separately from the credit authorized by section 260 of the Income Tax Act of 1967, as amended, MCL 206.260; MSA 7.557(1260), and section 38 of the Single Business Tax Act, as amended, MCL 208.38; MSA 7.558(38), for contributions to public institutions such as a public broadcast system, an institution of higher learning, a public library, a municipality or other authorized recipient.
It is also computed separately from the credit authorized by section 261 of the Income Tax Act of 1967, as amended, MCL 205.261; MSA 7.557(1261) and section 38c of the Single Business Tax Act, as amended, MCL 208.38c; MSA 7.558(38c), for contributions to certified community foundations.
For example, a taxpayer filing a Michigan income tax return, singly, who contributes $200 to a Michigan public broadcast system, $200 to a certified community foundation, and $200 to an eligible shelter during 1992 may claim a $100 public contributions credit, a $100 community foundation credit, and a $100 homeless credit on his or her 1992 income tax return.