Fillable Montana Form Qec - Qualified Endowment Credit

General Instructions

invested. This pooled fund creates a diversiﬁ ed portfolio in

What is a qualiﬁ ed endowment?

which all participants receive a share of the earnings.

A qualiﬁ ed endowment is a permanent, irrevocable fund that is

• Charitable lead unitrust. This is a trust in which property is

held by:

transferred and invested by the trustee who each year pays a

ﬁ xed percentage of the unitrust value, revalued annually, to the

• A tax-exempt 501(c)(3) corporation formed under the laws of

charity for a term of years or during the lives of speciﬁ ed linear

Montana, or

descendants, with the remainder interest then transferring to

• A bank or trust company holding an endowment fund on behalf

private beneﬁ ciaries named by the donor.

of a Montana or foreign 501(c)(3) organization.

What is a “permanent irrevocable fund”?

• Charitable lead annuity trust. This is a trust in which property

is transferred and invested by the trustee who each year

For tax years beginning on or after January 1, 2007, a permanent

irrevocable fund is now deﬁ ned as a fund comprised of cash,

pays a ﬁ xed dollar amount to the charity for a term of years

securities, mutual funds or other investment assets established

or lifetime(s), with the remainder interest then transferring to

for a speciﬁ c charitable, religious, educational or eleemosynary

private beneﬁ ciaries named by the donor.

(relating to charity) purposes and invested for the production

In order for the following two annuities to qualify for a charitable

or growth of income, or both, that may either be added to the

deduction or the qualiﬁ ed endowment credit, these annuities

principal or expended. The term does not include a fund held by

have to be given to a charitable organization that, at the time

or for a tax-exempt organization for the direct expenditure for

the annuity is issued, have:

constructing, renovating or purchasing operational assets such as

• a minimum of $300,000 net worth or a minimum $100,000

buildings or equipment.

in unrestricted cash, cash equivalent or public traded

Who is entitled to the qualiﬁ ed endowment credit and how

much is the credit?

securities;

If you are an individual, a beneﬁ ciary of an estate or trust or a C

• been in business for at least 3 years; and

corporation, or an estate, you are entitled to a credit against your

• one-half of the outstanding annuity is maintained in a

tax liability equal to 40% of the present value of the charitable gift

portion of a planned gift.

separate annuity fund

If you are a C corporation, an S corporation, partnership, trust,

If the above requirements are not met, the gift annuity must

estate or a limited liability company, you are entitled to a credit

be commercially insured by a licensed insurance company

against your tax liability equal to 20% of the outright charitable

qualiﬁ ed to do business in Montana.

contribution to a qualiﬁ ed endowment.

• Charitable gift annuity. This is the transfer of cash or property

The maximum credit that you may claim for contributions made

to a charity in exchange for the charity’s promise to pay the

from all sources in the year is $10,000. If you are married and

donor and, if applicable, the surviving annuitant, a lifetime

both spouses gave a qualiﬁ ed gift, each spouse is entitled to a

maximum $10,000 credit. Your credit cannot exceed your tax

annuity. This type of annuity is considered a bargain sale that

liability and you cannot carry back or carry forward any unused

results in part taxable gain and a charitable deduction.

credit.

• Deferred charitable gift annuity. This is an annuity in which

If you are an S corporation, partnership, or limited liability

payments to the donor do not begin until a future date.

company your credit is attributed to your shareholders, partners,

• Charitable life estate agreement. This is a gift to a charity of

members or managers in the same proportion used to report the

a personal residence that is subject to a reserved life estate.

corporation’s, partnership’s or limited liability company’s income or

• Paid-up life insurance policy. This is a life insurance policy in

loss for Montana tax purposes.

which all the premiums have been paid that usually entitle the

What types of planned gifts qualify for this credit?

donor to a current deduction equal to the cost of replacing the

In order to qualify for the endowment credit, an individual must

policy with a single premium life insurance policy at the donor’s

contribute an irrevocable planned gift with the remainder to a

current age.

permanent endowment. The types of gifts that qualify for this

credit and a description of these gifts are:

If I claim the qualiﬁ ed endowment credit, can I also take a

charitable deduction for the amount of the gift?

• Charitable remainder unitrust. This is a trust in which

No. The amount of your contribution that is used to calculate

property is transferred and invested by the trustee who each

your qualiﬁ ed endowment credit cannot also be claimed as a

year pays a ﬁ xed percent of the unitrust value, revalued

charitable contribution on your Montana tax return. You can claim

annually, to one or more private income beneﬁ ciaries for the

a charitable deduction for that portion of the contribution not used

life of beneﬁ ciaries, a term of years, or both, with the remainder

to calculate this credit.

interest in the trust transferring to, or for the use of the charity,

What happens if I recover my charitable gift this year?

or retained by the trust for the use of the charity.

If a charitable gift is recovered in the current year, you will have to

• Charitable remainder annuity trust. This is a trust in which

include as income the amount previously deducted, to the extent

property is transferred and invested by the trustee who each

it reduced your individual income tax or corporation license tax,

year pays a ﬁ xed dollar amount to one or more private income

and increase the amount of tax due by the amount of the credit

beneﬁ ciaries for the life of the beneﬁ ciaries, a term of years, or

previously allowed.

both, with the remainder interest in the trust then transferring

To learn more about the endowments state-wide, visit the

to, or for the use of the charity, or retained by the trust for the

Governor’s Task Force on Endowed Philanthropy website at http://

use of the charity.

Questions? Please call us at (406) 444-6900 or TDD (406) 444-

• Pooled income fund trust. This is a trust in which property

2830 for hearing impaired.

contributed by donors is pooled together with other investors.

All the assets transferred to the fund are added together and

Montana Form Qec - Qualified Endowment Credit - 2007 Page 2

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