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FAQ’s for Charitable Organizations - Qualifying as a Charitable Organization

For a list of Qualifying Charitable Organizations click here.

What is a Qualifying Charitable Organization?

A Qualifying Charitable Organization is a charity that is exempt from federal income taxes under
Section a 501(c)(3) or is a designated community action agency that receives community
services block grant program monies pursuant to 42 United States Code Section 9901. Further,
the organization must spend at least 50% of its budget on services to Arizona residents who
either receive temporary assistance for needy families (TANF) benefits, are low income
residents whose household income is less than 150% of the federal poverty level, or are
chronically ill or physically disabled children and show that the charity plans to continue
spending at least 50% of its budget on services to those described above. A charity has to apply
for and meet all requirements of the law to be considered as a Qualifying Charitable
Organization. Approved charities’ names are listed on the Department of Revenue’s website.

What kind of services must the Qualifying Charitable Organization provide?

“Services” is defined as cash assistance, medical care, child care, food, clothing, shelter, job
placement and job training services or any other assistance that is reasonably necessary to
meet immediate basic needs and that is provided and used in this state.

Who are low income residents of this state?

Low income residents are persons whose household income is less than one hundred fifty
percent of the federal poverty level.

Who are chronically ill or physically disabled resident children of this state?

Chronically ill or physically disabled children means children who are under twenty‐one years of
age and whose primary diagnosis is a severe physical condition which may require ongoing,
medical or surgical intervention.

How does my organization become a Qualifying Charitable Organization?

A charitable organization must submit written certification on a prescribed application form to
the Department of Revenue along with other information and documents. The charitable
organization must:


1) be a charitable organization that is exempt from federal income taxes under Section
501(c)(3) of the Internal Revenue Code or is a designated community action agency that
receives community services block grant program monies pursuant to 42 United States Code
Section 9901.


2) spend at least fifty percent of its money on services to Arizona residents who receive
Temporary Assistance for Needy Families (TANF) benefits or to Arizona resident low‐income
households or to chronically ill or physically disabled children who are Arizona residents.
“Services” means cash assistance, medical care, child care, food, clothing, shelter, job
placement and job training services or any other assistance that is reasonably necessary to
meet immediate basic needs and that is provided and used in this state.


3) provide financial data indicating the organization’s budget for the prior operating year and
the amount of that budget spent on services to residents of Arizona who either receive
Temporary Assistance of Needy Families (TANF) benefits, are low income residents of Arizona
or are chronically ill or physically disabled children and


4) state that the organization plans to continue spending at least fifty percent of the budget in
the future on services to residents of Arizona who receive Temporary Assistance of Needy
Families (TANF) benefits, are low income residents of Arizona or are chronically ill or physically
disabled children.


The organization must also notify the Department of any changes that may affect its
qualifications. The certification or change letters should be mailed to:


Elaine Smith
Office of Economic Research & Analysis
P O Box 29099
Phoenix, AZ 85038

esmith@azdor.gov
602-716-6924

Will the Department send us a certification if we are to be considered a Qualifying Charitable Organization?

Yes, the Department will send a qualifying charitable organization certificate to the charitable
organization.

My organization is already considered a Qualifying Charitable Organization. Do we have to recertify our status under the new law?

No.  You only have to complete a new application if you apply to be considered as a Qualifying Foster Care Charitable Organization.

Will the Department publish a list of Qualifying Charitable Organizations?

Yes. 

How much can a taxpayer claim for the credit for contributions to Qualifying Charitable Organizations?

Taxpayers filing as “single” and “head of household” status may claim a maximum credit of
$200. Taxpayers filing as “married filing separate” may claim a maximum credit of $200.
Taxpayers that file as “married filing joint” may claim a maximum credit of $400.

Does the taxpayer have to itemize deductions to claim the credit for contributions to Qualifying Charitable Organizations?

No. Starting with the 2013 tax year, taxpayers do not have to itemize deductions to claim a
credit for contributions to a qualifying charitable organization. For 2012 and prior, taxpayers
were required to itemize deductions on their Arizona return in order to claim a credit for
contributions to a qualifying charitable organization.

Can a taxpayer give to a Qualifying Charitable Organization through an umbrella‐type charitable organization?

Yes. The taxpayer must designate that the donation is directed to a member Qualifying
Charitable Organization or member group fund that would qualify on a stand‐alone basis.
Umbrella organizations are listed on the Department’s website listing at the end of the list of
Qualifying Charitable Organizations.

What is the tax credit for Qualifying Foster Care Charitable Organizations?

Recent legislation in 2013 allows for a Qualifying Charitable Organization to apply to be
considered as a Qualifying Foster Care Charitable Organization. To become a Qualifying Foster
Care Charitable Organization, an organization must first meet all requirements to be a
Qualifying Charitable Organization. In addition to meeting those requirements, a Qualifying
Charitable Organization must provide ongoing services to at least 200 foster children in Arizona
and spend at least 50% of its budget on ongoing services to foster children in Arizona to be
considered as a Qualifying Foster Care Charitable Organization. Approved Qualifying Foster
Care Charitable Organizations’ names are listed on the Department of Revenue’s website listing
after the list of Qualifying Charitable Organizations.

What is the definition of a foster child?

A child currently in the Arizona foster care system. The child is either:
• In a foster home with relatives approved by the Department of Economic Security (DES).
• With a child welfare agency licensed by the DES Office of Licensing, Certification, and
Regulation.
Children being fostered by agencies/organizations outside of DES are not considered foster
children for purposes of the Qualifying Foster Care Charitable Organization credit.

How much can a taxpayer claim for the credit for contributions to Qualifying Foster Care Charitable Organizations?

Taxpayers filing as “single” and “head of household” status may claim a maximum credit of
$400. Taxpayers filing as “married filing separate” may claim a maximum credit of $400.
Taxpayers that file as “married filing joint” may claim a maximum credit of $800.

Are there any examples of contributions to help clarify the difference between Qualifying Charitable Organizations and Qualifying Foster Care Charitable Organizations ?

Yes. Here are several example scenarios for illustration purposes only:


Example 1:
A single taxpayer donates $350 to a QCO and $0 to a QFCO.
• Step 1 QCO credit : Of the $350 contribution, $200 is eligible for the credit. The excess
$150 is not eligible for the credit.
• Step 2 QFCO credit : None.
• Step 3: Total of QCO and QFCO credits: $200 tax credit for the 2013 tax year.


Example 2:
A single taxpayer donates $0 to a QCO and $350 to a QFCO.
• Step 1 QCO credit : None.
• Step 2 QFCO credit : Of the $350 contribution, $350 is eligible for the credit.
• Step 3: Total of QCO and QFCO credits: $350 tax credit for the 2013 tax year.


Example 3:
A single taxpayer donates $450 to a QCO and $300 to a QFCO.
• Step 1 QCO credit : Of the $450 contribution, $200 is eligible for the credit. The excess
$250 is not eligible for the credit.
• Step 2 QFCO credit : Of the $300 contribution, $200 is eligible for the credit. The excess
$100 is not eligible for the credit.
• Step 3: Total of QCO and QFCO credits: $400 tax credit for the 2013 tax year.


Example 4:
A single taxpayer donates $300 to a QCO and $75 to a QFCO.
• Step 1 QCO credit : Of the $300 contribution, $200 is eligible for the credit. The excess
$100 is not eligible for the credit.
• Step 2 QFCO credit : Of the $75 contribution, $75 is eligible for the credit.
• Step 3: Total of QCO and QFCO credits: $275 tax credit for the 2013 tax year.


Example 5:
A single taxpayer donates $150 to a QCO and $400 to a QFCO.
• Step 1 QCO credit : Of the $150 contribution, $150 is eligible for the credit.
• Step 2 QFCO credit : Of the $400 contribution, $250 is eligible for the credit. The excess
$150 is not eligible for the credit.
• Step 3: Total of QCO and QFCO credits: $400 tax credit for the 2013 tax year.

For a List of Qualifying Charitable Organizations click here

For more information Contact

Elaine Smith
Office of Economic Research & Analysis
P O Box 29099
Phoenix, AZ 85038

esmith@azdor.gov
602-716-6924 Telephone
602-716-7991 fax
 

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