New Illinois program will give incentive to taxpayers who donate to foundation endowments

A new program passed by state legislators offers all taxpayers a 25% state income tax credit for donations made to permanent endowments funds managed by community foundations.

The Illinois Gives Tax Credit Act will incentivize up to $100 million over the next five years, starting Jan. 1. The funds will be equally distributed among the certified community foundations in the state, including The Community Foundation for McHenry County. Each community foundation will be able to take a maximum of 15% of the $100 million, Alliance of Illinois Community Foundations Executive Director Amanda Standerfer said.

“It’s going to be very equitable,” she said. “It’s not going to get gobbled up by one or a few foundations.”

Taxpayers who don’t usually itemize deductions on their tax return will be able to use the program to receive a credit that lowers their adjusted gross income. For example, an $1,000 donation would receive a $250 credit, said Amy Heron, executive director of The Community Foundation for McHenry County.

“It’s really kind of a big deal,” Hernon said. “It’s kind of unheard of for the state of Illinois to offer such a tax credit.”

Another program passed, called the Workforce Development Through Charitable Loan Repayment Act, will begin Jan. 1, 2026. Community foundations can directly repay part or all of a worker’s student loans. Workers will not have to pay state income tax on the charitable loan repayments.

Standerfer describes the program as an “after the fact scholarship.”

“It allows us to help people that weren’t awarded on the front end that still have the financial burdens on the back end,” she said.

Currently, neither state nor federal governments offer a universal charitable tax credit program. In the past, the federal government offered a similar program, but it was shut down with the 2017 tax changes. Hernon said she hopes this will encourage more donations that will strengthen the community foundation and in turn strengthen surrounding nonprofits.

“People can give to our endowment, and that is going to be helping all of the nonprofits that we serve,” she said.

Forefront is Illinois’ statewide association for operating nonprofits and foundations and is a key part in getting this program off the ground. The association plans to educate organizations, communities and individuals on how to participate in the programs. Both will undergo a public rulemaking process in advance of their effective dates, according to a news release from Forefront.

“In enacting Illinois Gives, the state of Illinois recognizes that nonprofit businesses, which collectively employ 11% of our workforce, are vital contributors to our economy,” Forefront CEO Monique B. Jones said in the release.

The Community Foundation for McHenry County plans to provide information sessions later this summer to help donors and nonprofits participate.

“We are going to provide that vehicle for them and help them help their community,” she said. “It’s important for people to understand that it’s coming and to plan accordingly.”