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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 that meets ALL of the following provisions:

  • 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.
  • Provide services that meet immediate basic needs.
  • Serves Arizona residents who 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.
  • Spends at least 50% of its budget on qualified services to qualified Arizona residents.
  • Affirm that it will continue spending at least 50% of its budget on qualified services to qualified Arizona residents.

A charity must 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.

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 $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.

What is a Qualifying Foster Care Charitable Organization?

A Qualifying Foster Care Charitable Organization is a charity which meets the requirements for a Qualifying Charitable Organization in addition to:

  • Providing ongoing services to at least 200 qualified individuals in the foster care system.
  • Spending at least 50% of its budget on ongoing services to qualified individuals in the foster care system.

A charity must apply for and meet all requirements of the law 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. A “qualified individual” means a foster child  as defined in section A.R.S. §8-501 or a person who is under twenty-one years of age and who is participating  in a transitional independent living program as prescribed by section A.R.S. §8-521.01.

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 $500. Taxpayers filing as “married filing separate” may claim a maximum credit of $500. Taxpayers that file as “married filing joint” may claim a maximum credit of $1,000.

 

How does my organization become a Qualifying Charitable Organization or Qualifying Foster Care Charitable Organization?

A charitable organization must complete the application form and submit it along with required documentation to the Department of Revenue. See the Application Instructions for additional details.

Will we receive any proof of certification if we are considered a Qualifying Charitable Organization or Qualifying Foster Care Charitable Organization?

Yes, the Department will send a certificate to the “Primary Point of Contact” for your organization which is indicated on the application form.

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

The department may periodically request organizations to recertify their status. In these situations, we will request the specific information necessary to remain certified. A new application is only necessary for Qualifying Charitable Organizations that wish to apply to be considered a Qualifying Foster Care Charitable Organization.

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 children?

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.

What is the definition of a foster child?

A foster child is a child that is 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.

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 Qualifying Charitable Organization (QCO) or Qualifying Foster Care Organization (QFCO) that is certified by the Department of Revenue (DOR). DOR will no longer publish a list of umbrella organizations. In order for the donation to qualify for the individual income tax credit, the umbrella organization will need to provide a receipt designating that 100% of the donation will be distributed to the named QCO or QFCO.
As an alternative to donating to a specific QCO or QFCO, an umbrella organization may set up specific funds in which 100% of the monies donated to the funds are distributed to either QCO or QFCO charities. The taxpayer may donate to one of these funds but the umbrella organization will need to provide a receipt certifying that either 100% of the fund money donated will be distributed to QCOs certified by DOR or 100% of the fund will be distributed to QFCOs that are certified by DOR.

Can donors claim any portion of their contributions to Qualifying Foster Care Charitable Organizations as credit for donations to a Qualifying Charitable Organization?

No. Donations to Qualifying Foster Care Charitable Organizations (QFCO) will be claimed on Arizona Form 352. A contribution to a QFCO does not qualify for, and cannot be included in, a credit claimed on Form 321 for contributions made to a Qualifying Charitable Organization.

Do donor contributions to Qualifying Charitable Organizations and Qualifying Foster Care Charitable Organizations influence the amount that can be claimed for each credit?

No. Beginning with the 2016 tax year, donations to Qualifying Charitable Organizations and donations to Qualifying Foster Care Charitable Organizations will be claimed as separate credits with separate limitations for each. Because these are nonrefundable credits, the total amount of each credit that a taxpayer may use for the taxable year cannot be greater than the tax liability shown on the tax return.

What is the period for making eligible contributions?

Beginning with the 2016 tax year, credit eligible contributions made to a Qualifying Charitable Organization or Qualifying Foster Care Charitable Organization that are made on or before April 15th (the 15th day of the fourth month following the close of the taxable year) may be applied to either the current or the preceding taxable year and is considered to have been made on the last day of that taxable year.

Where is the Working Poor Tax Credit?

What was formerly known as the Working Poor Credit is now officially known as the Credit for Donations made to Qualifying Charitable Organizations. This change was made in 2013 to reflect the expansion of the credit to include foster care organizations. Your organization should refer to this credit as the Credit for Donations made to Qualifying Charitable Organizations in your materials and for anything you provide to your donors. Donors who search for information from the Arizona Department of Revenue using the terminology “Working Poor Credit” will be unable to find current information.

For more information contact:

Jaclyn AaronsCooke
Arizona Department of Revenue, OERA
P.O. Box 29099
Phoenix, AZ  85038

QCO@azdor.gov
602-716-6282
602-716-7991 fax