Many Wisconsinites head south for more than the warmer weather; they are also looking for ways to reduce the tax burden on their wealth. With Wisconsinites and their wealth leaving the state, there are fewer funds available to invest in local communities.
What if there was a financial incentive for them to keep their money in Wisconsin? What if the incentive encouraged an investment in their local Wisconsin community?
Wisconsin Philanthropy Network, in collaboration with community foundations across Wisconsin, have formed a taskforce to get a bill passed that would provide a financial incentive for donors to invest locally.
Through combined efforts, the “Endow Wisconsin” Initiative has begun.
What is the “Endow Wisconsin” Initiative?
“Endow Wisconsin” encourages individuals to use their wealth to help communities grow, by giving them a tax credit when a donation is given to a permanent endowment at an accredited community foundation.
The donor’s incentive is receiving a state tax credit, calculated as a percentage of the donation amount.
The benefits
A community foundation is a grantmaking public charity created by and for a community. It is supported by local donors and governed by a board of private citizens. An accredited community foundation has confirmed compliance with The National Standards for U.S. Community Foundations. According to the National Standards website, to achieve a confirmation of compliance, community foundations must undergo, “an extensive review of their organizational and financial policies and procedures.”
Gifts to an endowment at an accredited community foundation creates lasting change in the community. An endowment fund is a permanent fund of donated money. Contributions to endowments are held as principal, and invested to grow over time and generate income. The endowment pays out a portion of the earnings annually and accredited community foundations will use it to make foundation grants and community investments.
By having community foundations manage the endowments, more grantmaking will take place to local nonprofits in the community. The community foundation’s spending policy will dictate their annual payout rate of the endowment’s value for grants to nonprofits. Typically, the annual payout rate is 5 percent.
With their donation to an endowment, the donor increases the long-term resources available for their community. “Endow Wisconsin” will give donors a financial incentive to make an alternative donating option to support local nonprofits. Making a donation to an endowment is a long term gift, compared to an annual gift (which is used immediately for program delivery). Endowments provide long-term viability and stability to support nonprofits in the community by having an ongoing stream of income for their operations.
Several other states have already established tax credits for donations to endowments, including Iowa, Massachusetts, Maryland, Montana, and North Dakota. Since 2003, “Endow Iowa” has seen “more than $115 million invested in community foundations, improving resident’s lives both now and for years to come.” Several other states are working on bills to enact charitable giving tax credits in their states, including Ohio, Indiana, Illinois, and Minnesota.
What comes next?
The “Endow Wisconsin” taskforce will be working to educate government officials and the public about the role of community foundations and the importance of endowments. The plan is to get the tax incentive legislation included in the 2017-2019 state budget.
“Endow Wisconsin” creates the opportunity for Wisconsin to hold onto its resident’s assets to help communities grow. It encourages Wisconsinites to partner with their local community foundation to build a stronger community. If passed, this legislation will incentivize Wisconsinites to invest in their communities.
To learn more about Endow Wisconsin, visit wiphilanthropy.org/initiatives/endow-wisconsin-initiative.
Melinda VerDuin, communications and marketing manager, Wisconsin Philanthropy Network (formerly Donors Forum of Wisconsin). Read more about our new name, membership opportunities and philanthropic resources at www.wiphilanthropy.org.
