• An individual taxpayer, partnership, S-corporation, or limited liability company does so by making a gift of cash or property in the form of a planned gift to a qualified endowment to benefit a tax-exempt organization.

• A corporation likewise does so by making a gift to a qualified endowment of a Nebraska incorporated or established nonprofit 501(c)(3) organization.

1. Type of gifts
   • Irrevocable planned gifts made by individuals, partnerships, S-corporations, and limited liability companies which include gifts made using the following techniques
     • Charitable gift annuities (both current and deferred, IRC 26 U.S.C. 1011(b)): You make a gift of cash or appreciated property to a Nebraska nonprofit, get immediate tax benefits, and ensure that you or someone else you designate receive periodic fixed income payments for life. After the death of all income beneficiaries, the residual transfers to the Nebraska nonprofit's qualified endowment.
     • Charitable remainder trusts (both unitrusts and annuity trusts, IRC 26 U.S.C. 664): You place cash or appreciated property in a trust that pays annual income to you (or a named beneficiary) for life or, at your option, for a set term of years in addition to being for life. After your death, the remainder of the trust transfers to the Nebraska nonprofit's qualified endowment.
     • Charitable lead trusts (both unitrusts and annuity trusts, IRC 26 U.S.C. 170(f)(2)(B)): You place cash or appreciated property in a trust that pays a fixed amount to the Nebraska nonprofit's qualified endowment for the number of years you select. Once this period ends, the assets held by the trust are transferred to the beneficiaries you name, including yourself.
     • Pooled income funds (IRC 26 U.S.C. 642(c)(5)): You place cash or appreciated property in a trust at a Nebraska nonprofit that is comingled with other donors' gifts. You retain an interest in the gift you contributed and are entitled to a pro rata share of income based upon your participation in the pool relative to other donors.
     • Charitable life estate agreements (IRC 26 U.S.C. 170(f)(3)(B)): You enter into an agreement whereby you contribute a remainder interest in property such as a personal residence, farm, or ranch while you may continue to live and maintain the property during your lifetime. After your death, the property transfers to the Nebraska nonprofit's qualified endowment.
     • Paid-up life insurance policies (IRC 26 U.S.C. 170): You designate the Nebraska nonprofit's qualified endowment as the sole owner and beneficiary of a paid-up life insurance policy.
   • Outright gifts made by C corporations to a qualified endowment.
2. To Nebraska nonprofit organizations (including places of worship) with a 501(c)(3) designation from the Internal Revenue Service.
3. Specifically for a qualified endowment fund at the charity (to be used as a source of permanent capital for the Nebraska organization).
4. Made between January 1, 2006 and December 31, 2009 (or for corporations, partnerships, and limited liability companies operating on a fiscal year that is not the calendar year, on the fiscal year beginning in 2006).

A tax credit entitles the taxpayer to subtract the amount of the credit (dollar-for-dollar) from the total state income tax bill. Therefore, a credit - reduces your total tax; whereas, a tax deduction is subtracted from your adjusted gross income before you calculate your state income taxes. Therefore, a deduction - reduces your gross income.

Example:

John Smith is 65 years old and recently retired. Although he has a portfolio of appreciated stock, he does not have as much income because of his retirement. He would like to receive a modest, but consistent, steady stream of income and unlock some of the gain in his appreciated stock without realizing a capital gain burden at one time.

John decides to give $10,000 worth of his appreciated stock to a Nebraska nonprofit organization to establish a charitable gift annuity. With this gift, he is guaranteed a quarterly income of 6% ($600) for the rest of his life. A portion of the quarterly income is tax-free because it is tied to a charitable gift and a portion is taxed as ordinary income. After John's death, any funds remaining in the gift annuity are then deposited into that Nebraska nonprofit's qualified endowment.

Below are the calculations illustrating the state tax credit for which John is eligible. This example was determined as of July 19, 2005. The results vary at least monthly. Please check with your tax advisor or your nonprofit organization for current values:

6.0% Charitable Gift Annuity Example
Prepared by EndowNebraska July 19, 2005

Billions of Nebraska dollars are leaving the state forever, with the transfer of wealth to heirs who no longer live in the state. With access to this wealth, nonprofits chartered and doing business in the state can build their capacity to deliver services to all residents, contributing to a high quality of life. This tax credit provides an additional incentive which encourages donors to invest a portion of what is being transferred into the endowment funds of Nebraska's nonprofit organizations and community foundations.

There are many reasons to consider a state incentive for charitable giving, particularly for endowments for Nebraska nonprofits:

• The state is at a critical juncture in terms of its philanthropic potential. An estimated $258 billion will be transferred from one generation to the next over the next 50 years ($5.2 billion annually). Much of this wealth will be lost to federal estate taxes or to heirs residing outside the state (Transfer of Wealth Study, Nebraska Community Foundation, 2001).

• Between 1998 and 2000, Nebraska lost over $339 million of wealth to federal estate taxes. A large opportunity exists for Nebraska to retain this wealth from residents in the form of charitable dollars to benefit our communities (Statistics of Income Bulletin, 2002).

• A poll of rural Nebraskans found that only 4% of those surveyed had made charitable plans for their community in their estates. While this is devastating considering that an estimated $94 billion will be transferred between generations over the next 50 years in rural Nebraska alone, it represents the opportunity to educate people about how to use their wealth locally to enhance the quality of life in their communities (CARI Research Report, University of Nebraska, 2002).

• In 2001 when Nebraska's economy was down 2.8% (and the U.S. economy down 2.9%), giving in Nebraska declined 17.4% compared to only a 4% decline nationally (George McCully, President, Catalogue for Philanthropy, November 2003).

• While Nebraskans with incomes of $1 million or more are ranked 4th in total amount of charitable contributions as a percentage of gross income (giving 9.5%) against residents of other states, Nebraskans with incomes of less than $1 million are ranked between 9th and 19th in comparable generosity (giving between 2.9% and 4.3% of gross income) leaving ample opportunity to create incentives for increased giving (Chronicle ofPhilanthropy, 2002).

• Nebraska's 6,400 active nonprofit organizations serve the public good and fill critical gaps not fully addressed by the business and government sectors without raising taxes. However, these organizations face increasing demand for their services, caused by weak local economies and declining federal and state support.

• Permanent endowments provide stable income to support the work of nonprofits, thereby helping them better serve the needs of Nebraska residents and their communities well into the future.