The Illinois Gives Tax Credit Act:  A Primer on an exciting opportunity for individual and corporate donors as well as for non-profit organizations looking to build a sustainable source of funding.

Written by Dan Ross, CFNIL President

Earlier this year, the Illinois General Assembly approved the Illinois Gives Tax Credit Act, which was signed into law by Governor Pritzker shortly thereafter.  This bipartisan bill provides for a 25% state income tax credit for charitable donations made beginning 1/1/2025 to eligible permanent endowments held by community foundations that are in compliance with the National Standards for Community Foundations. The goal of this legislation is to provide Illinois taxpayers with a strong incentive to support permanent funding sources for those organizations providing critical services in our communities. We are very grateful to the individuals and organizations that worked to get this important legislation passed, many of whom are peers in the community foundation sector here in Illinois.

I would encourage you to talk to your tax professionals about the applicability of this important legislation to you, and please do not hesitate to reach out to us at the Community Foundation of Northern Illinois (CFNIL) as well. We will communicate the final rules once they are published but think now about how the Illinois Gives act might impact your charitable portfolio and tax liability as it is expected these tax credits will be in high demand after the first of the year. I also invite you to attend a webinar about Illinois Gives hosted and presented by CFNIL on January 13, 2025. Register for the webinar here.

In the meantime, here’s what we DO know:

What is an endowment: An endowment is a fund that is designed to last forever. It is invested in such a way that it will be able to make distributions, more commonly referred to as grants, to charitable organizations while preserving the principal, or original amount(s) donated. Over time, endowed funds tend to grant out more money than was originally donated while the fund’s principal balance grows as well. Endowments are a powerful tool to support long-term sustainability and can also be a very meaningful way for individuals and organizations to secure their legacy.

How “Illinois Gives” works: Individuals, corporations, estates, and trusts who donate on or after 1/1/2025 to an existing or newly created endowed fund held at an eligible organization like CFNIL (accredited by the National Standards for Community Foundations), will receive a 25% tax credit for those donations up to $400,000.  Said another way, a $400,000 donation to an eligible fund will result in a $100,000 Illinois tax credit.  In addition to the state tax credit, individuals who itemize on their federal income tax returns may be eligible to recognize the full amount of their gift as a tax deduction on their federal taxes. 

What types of funds can be supported:  Eligible donations can be used to support existing or newly created endowed funds that provide resources to single causes or organizations within the state.  At CFNIL, we have many existing funds that support our community-wide grantmaking efforts as well as funds that support specific organizations. Donors also have the option of creating a new fund that supports eligible grantmaking, or a nonprofit organization in our community could also open a fund for purposes of soliciting eligible donations.  It is believed that endowed scholarship funds will also most likely be eligible for these types of donations.

What types of things can be donated:  It is anticipated that any donation type that is accepted at a community foundation would be eligible for the credit. At CFNIL, this would including cash, appreciated stock, Required Minimum Distributions from IRA accounts, other Qualified Charitable Distributions from IRA accounts, real estate, collectibles, and more.

Limitations: In addition to the $400,000 limitation described above, the State has capped its maximum tax credit exposure to $5,000,000 per year, or a total of $20,000,000 in donations in a give year. Furthermore, no single foundation can receive more than $3,000,000 in eligible donations in a single year.  The State has also mandated that the dollars that are eligible for the tax credit be used to support endowments that provide support only within the state of Illinois. This legislation will sunset after 5 years unless it is renewed.

What we don’t know:  The state of Illinois has not written the final rules for this legislation.  It appears that these rules may be approved as early as 12/13/2024, but we do not know how long it will be until that information is disseminated to the public.  We have been informed that we can start accepting eligible donations on 1/1/2025 with the goal of distributing the tax credit on a “first come, first served” basis. 

Register for CFNIL's "Getting Ready for I|llinois Gives" Webinar to be held January 13, 2025