Donations That Turn into Tax Credits

First off, full disclosure, I sit on the board at Carson Valley Children's Aid. One of our affiliate organizations, Norristown Neighborhood Center (NNC), is using this program to raise money for its programming, which is how I learned about this tremendous opportunity.

The name of the program is the Neighborhood Assistance Program (NAP). The goal is to encourage corporations to invest directly in projects that help distressed neighborhoods. The state is incentivizing corporations to do so by offering a state tax credit of 75% of the donated amount. What does that mean? You donate $5000 to an organization, like NNC. The state then awards your corporation with $3250 in tax credits, but you get the full benefit/credit of having donated $5000.

If you are like many companies and pay very little state tax, you can SELL the credits on the exchange or to another business with a large tax liability, for CASH. The going rate is about $0.85 on the dollar, so your $5000 donation will net you approximately $2762.50 in cash.

This is completely legal, similar to the R&D Tax credit program, but it isn't widely known. Here is a great chart that explains how the charity must apply for this program, which serves as a vetting process for the corporations (donors).

The goal of this program is to have corporations invest directly to programs that help the community. What is the actual downside? I have yet to find it. The caveat to this program is that you must start the process right away. You need to write a letter of intent that states that you plan on donating X dollars to XYZ organization and fill out the application before the September 30th deadline.

Why this information isn't known throughout the business community is beyond me, but I thought I might share it so that we can all do some good in the communities in which we live and work.

Please feel free to pass this information along to other companies as well.

And if you choose to move forward with NNC, the people there are more than willing to help you fill out the paperwork. They even have a letter of intent for you to copy and paste into the body of your company's letterhead, cutting down the application time to mere minutes.