The way the Children’s Promise Tax Credit works is businesses and individuals donate to eligible organizations that help children. Then they fill out a form and send it to the state’s Department of Revenue.
For businesses, the credit is a dollar for dollar up to 50 percent of its state tax liability.
Individual taxpayers can receive a dollar for dollar credit up to $1,000 of their liability. Those without a liability have five years to apply the credit before it expires.
House Bill 1613 passed nearly unopposed in the legislature this session and went in effect on July 1.
There is a $5 million cap for corporate donations that was reached soon after the credit went into effect. Individuals wanting to participate have a $3 million cap.
Sean Milner is the executive director of the Baptist Children’s Village, which receives 37 percent of its funding from individual donations, but none from state or federal funds. He said he’s had a hard time explaining the new tax to donors for an unusual reason.
“The law is so good that people are having a hard time understanding it. Not because it’s difficult to understand, but quite honestly it makes too much sense and people aren’t used to things coming out of the legislature that make this much sense,” Milner said. “The idea that you can give your money to someone who’s serving the state’s needs as opposed to having to pay taxes, that’s difficult for people to understand.”
According to the state Department of Revenue, $2,751,042.18 of the individual credit has yet to be allocated.
Milner says that the number of allocated credits doesn’t show how much of an impact the credit has had on his donors. He said that most of his donors, who are individuals giving between $25 and $100, aren’t itemizing and won’t be taking advantage of the credit’s advantages.
He said when his organization sent out a letter with directions on how to utilize the new credit to existing donors, the checks continued to flow in despite most not taking advantage of the program.
“Everybody is so generous in Mississippi. They give money and expect nothing in return,” Milner said. “They don’t report this or keep the receipt to put on their taxes for some kind of receipt. It’s a great law and it’s taking a little while for people to catch on.”
Erin Kate Goode is the executive director of the Jackson-based Center for Pregnancy Choices Metro Area. She said donations to her organization, which uses a licensed medical clinic to educate pregnant women about their choices including adoption and parenting, have been three times as much as the same time last year.
While she has a donor that is matching gifts during that time, she says the tax credit is definitely helping.
“The gifts have been a higher level than they were last year,” Goode said. “It (the credit) frees people up to give more.”
Milner said another advantage of the credit is that it creates a partnership between childcare agencies, the business community, and general public and that the benefits from that relationship has yet to be seen.
Bob Anderson is a CPC donor and a board member and says that he hopes that people don’t get lost in applying for the tax credit, which he says is not difficult.
“The pot of money for it (the tax credit) is largely there this year, but I think in the future, it’s going to go a lot quicker,” Anderson said. “This credit is a great way to direct money to these organizations that directly help children. A lot of government organizations have a lot of overhead, but the CPC and organizations like them are very streamlined, very efficient. I used to joke they could cut a nickel in half and make 20 cents out of it.
The DOR will accept applications from businesses starting January 1 by email for the credit for 2020.