Will Contributions Slow When Michigan State Charitable Deduction Expires?

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November 7, 2011; Source: Detroit News | In Michigan, a state tax credit available since 1967 for charitable donations is due to expire on Dec. 31, and fundraisers are urging their donors to give now before that happens. The credit gives the taxpayer fifty cents back on the dollar contribution—the credit offsets taxes and is not given as a refund. Last year the credit cost the state $43 million on $100 million in donations

According to Michigan Radio, the credit allows Michigan taxpayers to essentially double their contribution when they give to community foundations, homeless shelters, food banks, and public institutions (such as Michigan universities, museums, public libraries, and public broadcasting stations).

The tax credit has been eliminated as part of the governor’s plan to pay for a business tax cut. According to the Detroit News, 250,000 made use of the credit in 2010, and it earned $100 million for Michigan charities and provided $40 million in write-offs.

Charities are trying to raise awareness of the doomed credit, but they don’t know exactly what the demise of the tax write-off might cost them in 2012, or even how much of their income is strictly generated by the credit. Robin Ferriby, vice president of philanthropic services for the Community Foundation for Southeast Michigan, says the effect of the expiration is unclear. “Studies have shown that people give to charity because they care about the cause, but tax policy influences how much people are able to give,” Ferriby said. “We anticipate that with the loss of the tax credit, people will give to charities they’ve supported in the past, but they will give less because it costs them more.”—Ruth McCambridge