Lawmakers must increase Endow Iowa Tax Credit funding

The Endow Iowa Tax Credit program began in 2003 with an aim of capturing a percentage of the state’s transfer of wealth to support Iowa communities now and in the future. Without question, the program has been a huge success and a model for growing community-based endowments. Since the inception of Endow Iowa, Iowa community foundations have leveraged more than $336 million in permanent endowment fund gifts. The contributions were made through 43,564 donations. The beauty of endowment funds is that these dollars will continue to grow in perpetuity, improving lives for Iowans both now and for generations to come. Last year alone, Endow Iowa funds at Iowa community foundations granted over $20 million to nonprofits and charitable causes in the state.

Endow Iowa tax credits are awarded on a first-come, first-served basis to donors who make a gift to a permanent endowment fund, established for the benefit of an Iowa charitable cause, at a qualified community foundation in Iowa. Qualified community foundations are those accredited by National Standards for U.S. Community Foundations such as the Greater Cedar Rapids Community Foundation. The program is utilized by a wide range of donors, including individuals and businesses, with a majority of donations being $1,000 or less. The program began when the state Legislature made $2 million in tax credits available. Demand for the tax credits increased each year until 2013, when the allocation increased to $6 million. The demand has continued to grow.

Iowa community foundations have reached a challenging point in being able to realize the program’s full potential. The program is so successful that the credits are exhausted earlier and earlier each year. All 2020 credits were allocated before the end of 2019; all 2021 credits were allocated by December 2020; and all 2022 credits were allocated via a waitlist by September 2021. As a result, all Endow Iowa tax credit applications submitted from September 2021 on will be added to the 2023 waitlist. Without legislative action, we anticipate Endow Iowa tax credit applications being added to the 2024 waitlist as early as the first quarter of 2022.

Of course, this demand is a good problem. Iowans are investing in endowed funds at record rates in Iowa, but now they are waiting up to two years to realize this tax advantage. In order for this program to remain effective, Iowa community foundations will ask the legislature to increase the allocation to $10 million. For each public tax credit dollar allocated, four private philanthropy dollars are leveraged. Those funds are making an incredible impact in Linn County.

Since the program’s inception in 2003, donors have contributed nearly $50 million to qualifying endowed funds at the Greater Cedar Rapids Community Foundation, which holds more than 500 such funds, benefitting more than 660 local nonprofit organizations. These are the very organizations that make Linn County communities thrive by providing healthcare, education, human services, environmental protection, and cultural experiences.

Without an increase to the annual allocation of Endow Iowa tax credits, this problem will continue to compound in future years and Iowa communities may miss out on endowed gifts that could benefit their communities forever. This program not only benefits donors in Linn County, but also the nonprofits and communities they love. We hope the Legislature will see the continued value of this program and re-commit to the program’s goals with an increase in Endow Iowa funds for the future.

Kari McCann Boutell is president of the Iowa Council of Foundations. Les Garner is president and CEO of the Greater Cedar Rapids Community Foundation.