Pass Through Entities
Pass-Through Entities (“S” Corporations, partnerships, and LLCs) can donate up to 50% of their Alabama income tax liability to Scholarships for Kids and potentially receive a federal benefit as well.
In August, the Department of Treasury issued new regulations that could allow your business to make a donation to Scholarships for Kids with the full state income tax credit, and in addition, treat it as a business expense for federal tax purposes. In other words, your business could reduce its taxable income with a deductible expense on the federal side, and you could reduce your personal Alabama state income tax liability dollar-for-dollar in the amount of your business’s donation. The net effect is potentially a combined federal and state tax benefit greater than the total dollar amount of the donation.
Any assessment of whether your business could meet the provisions of the new regulations must be based on your particular facts and circumstances. Our friends at Maynard Cooper and Gale have prepared a memorandum (included in the links below) explaining the new regulations for discussion with your tax professional.
In all cases, please consult with your tax advisor. If you have questions or need assistance making your gift, please contact Mary Claire McDougald at (205)769-0278 or firstname.lastname@example.org.