charity tax credit
(3) Definitions and rules In this subsection: (A) Charity tax credit The term “charity tax credit” means a nonrefundable credit against State income tax (or, in the case of a State that does not impose an income tax, a comparable benefit) that is allowable for contributions, in cash or in kind, to qualified charities. (B) Qualified charity (i) In general The term “qualified charity” means any organization— (I) that is— (aa) described in section 501(c)(3) of title 26 and exempt from tax under section 501(a) of such title; (bb) an eligible entity; or (cc) a public housing agency as defined in section 1437a(b)(6) of this title ; (II) that is certified by the appropriate State authority as meeting the requirements of clauses (iii) and (iv); and (III) if such organization is otherwise required to file a return under section 6033 of such title, that elects to treat the information required to be furnished by clause (v) as being specified in section 6033(b) of such title. (ii) Certain contributions to collection organizations treated as contributions to qualified charity (I) In general A contribution to a collection organization shall be treated as a contribution to a qualified charity if the donor designates in writing that the contribution is for the qualified charity. (II) Collection organization The term “collection organization” means an organization described in section 501(c)(3) of such title and exempt from tax under section 501(a) of such title— (aa) that solicits and collects gifts and grants that, by agreement, are distributed to qualified charities; (bb) that distributes to qualified charities at least 90 percent of the gifts and grants the organization receives that are designated for such qualified charities; and (cc) that meets the requirements of clause (vi). (iii) Charity must primarily assist poor individuals (I) In general An organization meets the requirements of this clause only if the appropriate State authority reasonably expects that the predominant activity of such organization will be the provision of direct services within the United States to individuals and families whose annual incomes generally do not exceed 185 percent of the poverty line in order to prevent or alleviate poverty among such individuals and families. (II) No recordkeeping in certain cases An organization shall not be required to establish or maintain records with respect to the incomes of individuals and families for purposes of subclause (I) if such individuals or families are members of groups that are generally recognized as including substantially only individuals and families described in subclause (I). (III) Food aid and homeless shelters Except as otherwise provided by the appropriate State authority, for purposes of subclause (I), services to individuals in the form of— (aa) donations of food or meals; or (bb) temporary shelter to homeless individuals; shall be treated as provided to individuals described in subclause (I) if the location and provision of such services are such that the service provider may reasonably conclude that the beneficiaries of such services are predominantly individuals described in subclause (I). (iv) Minimum expense requirement (I) In general An organization meets the requirements of this clause only if the appropriate State authority reasonably expects that the annual poverty program expenses of such organization will not be less than 75 percent of the annual aggregate expenses of such organization. (II) Poverty program expense For purposes of subclause (I)— (aa) In general The term “poverty program expense” means any expense in providing direct services referred to in clause (iii). (bb) Exceptions Such term shall not include any management or general expense, any expense for the purpose of influencing legislation (as defined in section 4911(d) of title 26 ), any expense for the purpose of fundraising, any expense for a legal service provided on behalf of any individual referred to in clause (iii), any expense for providing tuition assistance relating to compulsory school attendance, and any expense that consists of a payment to an affiliate of the organization. (v) Reporting requirement The information required to be furnished under this clause about an organization is— (I) the percentages determined by dividing the following categories of the organization’s expenses for the year by the total expenses of the organization for the year: expenses for direct services, management expenses, general expenses, fundraising expenses, and payments to affiliates; and (II) the category or categories (including food, shelter, education, substance abuse prevention or treatment, job training, or other) of services that constitute predominant activities of the organization. (vi) Additional requirements for collection organizations The requirements of this clause are met if the organization— (I) maintains separate accounting for revenues and expenses; and (II) makes available to the public information on the administrative and fundraising costs of the organization, and information as to the organizations receiving funds from the organization and the amount of such funds. (vii) Special rule for States requiring tax uniformity In the case of a State— (I) that has a constitutional requirement of tax uniformity; and (II) that, as of December 31, 1997 , imposed a tax on personal income with— (aa) a single flat rate applicable to all earned and unearned income (except insofar as any amount is not taxed pursuant to tax forgiveness provisions); and (bb) no generally available exemptions or deductions to individuals; the requirement of paragraph (2) shall be treated as met if the amount of the credit described in paragraph (2) is limited to a uniform percentage (but not greater than 25 percent) of State personal income tax liability (determined without regard to credits).