Montana Form Qec - Qualified Endowment Credit

Form QEC Instructions

What is a qualified endowment?

Estates and trusts. The credit you may claim, and unused

amounts your beneficiaries may claim, depend on the form

A qualified endowment is a permanent, irrevocable fund

of contribution you make. If your contribution is a planned

established for a specific charitable, religious, educational,

gift, you may claim the 40% amount and if it is a direct

or eleemosynary (philanthropic) purpose that is held by:

contribution to a permanent endowment, you may claim the

20% amount. The maximum credit for an estate or trust is

●

A tax-exempt 501(c)(3) corporation formed under

$10,000.

the laws of Montana, or

Any amount not used by an estate or trust can be attributed

●

A bank or trust company holding an endowment

to each beneficiary in the same proportion used to report

fund on behalf of a Montana or foreign 501(c)(3)

the beneficiary’s income for Montana income tax purposes.

organization.

This amount should be reported to the beneficiary on

What is a permanent irrevocable fund?

Montana Schedule K-1.

This is a fund that is comprised of one or more assets

What information do I have to include with my tax

that are invested for the production or growth of income,

return when I claim this credit?

the principal of which must be retained and the income

of which may be added to the principal or expended.

Individuals. If you are filing a paper return, include

Investment assets may include cash, securities, mutual

a copy of Form QEC and receipt with your individual

funds, or other investment assets. A “building fund” or other

income tax return.

fund that is used to accumulate contributions that will be

C corporations. If you are filing a paper return, include

expended is not a permanent irrevocable fund. A fund from

a copy of Form QEC and receipt with your corporation

which contributions are expended directly for constructing,

license tax return.

renovating or purchasing operational assets, such as

Estates and trusts. If you are filing a paper return,

buildings or equipment, is not a permanent irrevocable

fund.

include a copy of Form QEC and receipt with your

income tax return for estates and trusts.

Who is entitled to the qualified endowment credit

You will need to complete a separate Form QEC for each

and how much is the credit?

gift you are claiming the credit for. For example, if you

Individuals. You are entitled to a credit against your tax

are a partner in a partnership that makes a qualifying

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

contribution, and you, as an individual, also make a

gift portion of a planned gift. Only the contributions you

qualifying contribution, you would need to complete two

make in the form of a planned gift qualify for the credit.

forms. You would then combine the credit amounts from

both forms to calculate your total credit on your income

The maximum credit you may claim against your individual

tax return. The maximum total credit that you can claim is

income tax liability for all contributions you make or are

$10,000.

passed through to you from a pass-through entity is

$10,000, whether you are single or married.

If you file electronically, you do not need to mail this form to

us unless we contact you for a copy.

C corporations. If you are a C corporation engaged in

an active trade or business, you are entitled to a credit

If I claim the qualified endowment credit, can I

equal to 20% of your charitable contributions to a qualified

also take a charitable deduction for the amount of

endowment. Your contributions do not have to be in the

the gift?

form of a planned gift.

No. The amount of your contribution that is used to

A C corporation’s credit cannot exceed the lower of its

calculate your qualified endowment credit cannot also be

corporation license tax liability or $10,000.

claimed as a charitable contribution on your Montana tax

S corporations, partnerships and limited liability

return. You can claim a charitable deduction for that portion

companies. If you are an S corporation, partnership, or

of the contribution not used to calculate this credit.

limited liability company, do not complete this form.

What happens if I recover my charitable gift this

The contributions of an S corporation, partnership,

year?

or limited liability company are passed through to

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

shareholders, partners, or members in the same proportion

have to include as income the amount previously deducted,

used to report the corporation’s, partnership’s or limited

to the extent it reduced your individual income tax or

liability company’s income or loss for Montana tax

corporation license tax. You will also need to increase the

purposes; this amount should be reported to owners on

amount of tax due by the amount of the credit previously

Montana Schedule K-1.

allowed.

The pass-through entity’s contributions do not have to be in

the form of a planned gift.

Montana Form Qec - Qualified Endowment Credit - 2012 Page 2

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