Qualified Endowment Credit

The Qualified Endowment Credit is a nonrefundable tax credit for individuals and businesses that make a qualifying charitable contribution to a qualified endowment in Montana.

Eligibility

The credit is available based on the type of gift made — either a planned gift or an outright (direct) gift.

  • Planned Gifts – Individuals, corporations, partnerships, trusts, and estates may take the credit if they make a qualifying planned gift to a qualified endowment.
  • Outright Gifts – Corporations, partnerships, and estates may take the credit if they make an outright gift to a qualified endowment.

Note: Outright gifts made by individuals or trusts do not qualify.

Charitable Contribution Requirements

The gift must be made to a qualified endowment, as defined in 15-30-2327, MCA.

A qualified endowment is a permanent, irrevocable fund established for a specific charitable, religious, educational, or philanthropic purpose that is held by:

  • A tax-exempt 501(c)(3) corporation formed under the laws of Montana, or
  • A bank or trust company holding an endowment fund on behalf of a Montana or Montana-based affiliate of a foreign 501(c)(3) organization.

Planned gifts that qualify for this credit are irrevocable contributions using the any of the following methods:

  • Charitable remainder unitrust
  • Charitable remainder annuity trust
  • Pooled income fund trust
  • Charitable lead unitrust
  • Charitable lead annuity trust
  • Charitable life estate agreement
  • Paid-up life insurance policy
  • Charitable gift annuity
  • Deferred charitable gift annuity

Outright gifts to a qualified endowment made by an individual or trust are not eligible for the credit. Individuals and trusts must make a planned gift to receive the credit.

Benefit

Individuals, estates, trusts, corporations, and partnerships that make a planned gift to a qualified endowment can take a nonrefundable tax credit of 40% of the present value of the gift, up to $15,000.

Corporations, partnerships, and estates that make an outright gift to a qualified endowment can take a nonrefundable tax credit of 20% of the gift, up to $15,000.

S corporations and partnerships pass the credit to its members, partners, or shareholders in the same proportion used to report the entity’s income or loss for Montana tax purposes. This amount is reported to the owner on Montana Schedule K-1. Estates and trusts pass the credit to beneficiaries in the same proportion used to report the beneficiary’s income from the estate for Montana income tax purposes.

The credit is nonrefundable and any excess cannot be carried over.

Claiming the Credit

  • Claim on Form QEC – Qualified Endowment Credit.
  • Any amount used to claim the credit that was taken as a deduction must be added back when determining Montana taxable income.
  • If any amount of the gift is recovered in the current year, it must be included as income on the taxpayer’s tax return. The amount of tax due needs to be increased by the amount of the credit previously allowed.

Forms and Resources

Related Laws