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State Uses Tax Credits To Woo Nonprofit Donors

Nonprofits trying to increase donations can once more offer tax incentives in exchange for financial contributions.

NAP Credit Spreadsheet Screenshot

Photo: Indiana Housing & Community Development Agency

Neighborhood Assistance Program Credits provide tax incentives to individuals and businesses to encourage them to donate to community nonprofits.

The state of Indiana is trying to get more bang for its buck by using tax credits to encourage people to donate to nonprofits. Under the Neighborhood Assistance Program, the Indiana Housing & Community Development Agency offers funds to nonprofits that serve disadvantaged people and communities so that they can offer tax credits for donations.

Neighborhood Assistance Program (NAP) credits are essentially a two-for-one deal for the world of nonprofit fundraising. The national program, which is administered by a state agency, offers a 50% tax credit to anyone who donates at least $100 to a qualifying nonprofit.

A 50% credit means that if you donate, for example, $200 to a local organization, you get to subtract $100 from the taxes you owe. The nonprofit gets the $200 for their programs, and you end up paying $100 out of pocket.  The hope is that people will see it as good for their wallets–and the nonprofits–and donate more than they ordinarily would.

And the state gets a good deal too. By leveraging state dollars in this way, nonprofits get $100 for every $50 the state puts in.

Organizations are allotted a specific amount of money for the tax credits, called NAP credits, which are given to contributors. Towards the end of the year, organizations tend to run low on credits.  However, community organizations who received funds will have a new round of NAP credits to distribute when the new fiscal year starts on July 1.

24 Bloomington nonprofits were chosen to receive NAP credits, including Shalom Community Center, Habitat for Humanity, Mother Hubbard’s Cupboard, and the New Hope Family Shelter, due to open this summer. Organizations in other Indiana counties receiving NAP credits include the Brown County Literacy Coalition, Lawrence Co. Habitat for Humanity, and Catholic Charities Terre Haute.

To see if your favorite nonprofit received NAP credits for the 2011-2012 year, click here (pdf).

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