Schutte & Hilgendorf – Prescott Accountants

WORKING POOR CREDIT MODIFIED

Effective for years beginning after December 31, 2008, the Arizona tax credit for contributions to certain charities (normally referred to as the “working poor” credit is modified.  The base year test is repealed and replaced solely with the requirement that a taxpayer claiming the credit must itemize deductions for the year the credit is claimed.

Certification of organizations is also changed.  The prior purely self-certified status is removed, and replaced by more specific tests, along with the ability of the Arizona Department of Revenue to examine charities for compliance, as well as reject the initial application of a charity for qualified status.  All charities that had certified themselves as a qualifying charitable organization under prior law will be required to recertify their status in order to qualify for the credit in 2009 and later years.

Qualifying charities must submit certification statements, signed by an officer of the organization under penalty of perjury, that include the following:

*    Documentation of the entities qualification as a charity under IRC §501(c)(3) or that it is a designated community action agency that receives community services block grant money under 42 USC §9901;
*    The organization’s budget for the prior year and the amount spent on services for residents of Arizona who either a) receive temporary assistance for needy family benefits, b) are low income residents of the state or c) are chronically ill or physically disabled children, and;
*    A statement that the organization plans to continue to spend at least 50% of its budget on services benefitting the groups listed above

The Arizona Department of Revenue (AZDOR)  is granted the authority to reject applications that do not meet these requirements, and to examine an organization’s compliance with the requirements to be a qualified. (SB2286, Chapter 80, 1st Session 49th Legislature)

(Taken from ASCPA tax listserve per Ed Zollars, CPA, Phoenix Arizona)

For more information, contact Schutte & Hilgendorf, Prescott CPAs providing accounting, auditing, and tax services to individuals, business, and non-profit organizations.