MSU President's Column for Traill County Tribune
October 25, 2014
One million reasons to make an endowment gift to Mayville State University
On July 31, 2013, the North Dakota legislature did something quite amazing. They allocated oil revenue tax dollars to help improve higher education in North Dakota by creating a pool of match dollars for the state-approved projects to enhance higher education.
Mayville State University received a $1 million pool of matching dollars. For every dollar raised for endowment until December 31, 2014, Mayville State will receive a 50% match. Every dollar given to a new or existing scholarship endowment fund at Mayville State qualifies for the matching dollars.
A person who pays North Dakota income tax has another great reason to make an endowment gift - the North Dakota endowment state tax credit. For any gift of $5,000 or more given in the 2014 tax year, North Dakota tax filers will receive a 40% income tax credit.
Many donors have discovered that between the state income tax credit of 40% and their federal deduction, the cost of a $5,000 gift is reduced to a net cost of approximately $1,600. The leverage of a gift is elevated even greater with the addition of the 50% match on a gift to an endowment.
For example, a gift of $25,000, plus the 50% match equals $37,500. Deduct the 40% tax credit of $10,000, and now the cost of the gift is $15,000. Then deduct a federal tax deduction of $7,000 (using 28%). A net cost of $8,000 produces a $37,000 gift! Using the same scenario, a $50,000 gift has a net cost of $16,000.
A donor can receive retirement income on his or her gift and still get the match and the endowment credit. Gift annuities give guaranteed annual income for one or two lives at a more attractive rate than money in a CD or savings account. At the end of life, the remainder of the annuity funds on an endowment, together with the 50% match, creates an endowment fund today. A gift annuity can be funded with cash or stock.
Gift annuities offer the following key benefits:
- Federal tax deduction on the gift;
- Avoiding of capital gains on highly appreciated assets like stock or land;
- Part of the annual payout is tax-free;
- Very attractive rates, as high as 9%, annually (based on age) guaranteed for life;
- State match can be given on the federal tax deductible amount of the gift annuity;
- Amount of gift annuity is removed from taxable estate, lowering estate taxes.
Charitable trusts also offer a high retirement income option and trigger the match on the endowment credit. Trusts have some very special benefits as well, including:
- Federal tax deduction on the gift;
- Avoiding of capital gains on highly appreciated assets like stock or land;
- Trust is revalued each year, allowing for an increasing income stream;
- State match can be given on the federal tax deductible amount of the trust;
- Amount of trust is removed from taxable estate, lowering estate taxes;
- Can pay out for life or a period of years for one or more lives;
- At the end of the trust period, the remainder of the trust funds an endowment and the 50% state match creates an endowment today.
If you designate Mayville State as the irrevocable beneficiary of a gift in your will or as an irrevocable beneficiary of a portion of your life insurance policy, IRA, 401K or pension before the end of 2014, the 50% match will be triggered this year. You can literally do good now with an asset you plan to give later!
Making an irrevocable gift of one of these assets includes key tax benefits. It removes the asset from your estate, thus lowering your liability for estate tax. You receive a federal tax deduction on the value of the gift in the year that you create the irrevocable gift. Today’s value of the future gift qualifies for the 50% North Dakota match if given before December 31, 2014.
In this era of rising tuition, MSU’s tuition remains low. Students receive a high quality education in a private school environment. Maybe that’s why we have several years in a row of record enrollment. As of official reporting in September 1,081 students were enrolled, and when their education is complete, they’ll go off to jobs in North Dakota and beyond to make a different for all of us. What better investment could there be? Making a gift to fund an endowment means a student will get a chance at an education, a chance that they may not have had without you. YOU can make it happen!
For more information, contact John Klocke, Executive Director of the MSU Foundation, at john.j.klocke@mayvillestate.edu or 701-788-4787.