Individual income tax: credit; credit for donations to endowment fund of community foundations; provide for. Amends 1967 PA 281 (MCL 206.1 - 206.847) by adding sec. 261.
SB 132 would amend Michigan’s Income Tax Act to create a new individual income tax credit for donations made to the endowment fund of a certified community foundation. Beginning with tax years starting on or after January 1, 2026, eligible taxpayers could claim a credit equal to 50% of their contribution, subject to caps: up to $100 for most filers, $200 for joint returns, and for resident estates or trusts, up to 10% of pre-credit tax liability or $5,000, whichever is less. The credit is nonrefundable, so it can reduce tax owed but cannot generate a refund beyond the taxpayer’s liability.
To qualify, the taxpayer must receive a gift acknowledgment from the community foundation showing the contribution was made to an endowment fund. For resident estates and trusts, the contribution amount used to calculate the credit must not already have been deducted in determining federal taxable income. The bill also requires the Department of Treasury to report annually to the House and Senate finance committees on the total credits claimed in the prior tax year.
The bill defines “community foundation” for this credit by reference to the Michigan Community Foundation Act, but it lowers the certification asset threshold for this purpose to at least $1 million and requires the organization to apply for certification by May 15 of the tax year. In effect, the bill creates a targeted tax incentive for charitable giving to local or regional community foundation endowments and adds a new administrative certification process for qualifying organizations.
The available voting history suggests the bill was generally well received in the Senate, passing committee 7-0 and then passing the Senate on third reading by a 26-11 vote. That pattern indicates broad support, but not unanimity, likely reflecting some disagreement over whether the state should subsidize charitable donations through the tax code and how broadly the credit should be available. No committee transcript was provided, so the specific arguments for or against the bill are not available in the record here.
The main point of contention appears to be the policy choice to use state revenue to encourage private donations, especially given the credit’s fiscal cost and the fact that it benefits donors who can afford to contribute to endowments. Supporters likely view it as a way to strengthen community foundations and local philanthropy, while critics may question whether the tax credit is the best use of public funds or whether the eligibility and certification rules are sufficiently targeted.
SB 132 would add a new section 261 to the Michigan Income Tax Act, creating a state income tax credit for contributions to community foundation endowment funds. It would affect individual taxpayers, joint filers, and resident estates or trusts, while also imposing certification and reporting duties on the Department of Treasury. The bill would not make the credit refundable and would require annual reporting to legislative finance committees on the total amount claimed.
The bill appears to have had favorable overall sentiment in the Senate, as shown by unanimous committee approval and a comfortable floor passage. The vote pattern suggests support for encouraging charitable giving through tax incentives, though the 26-11 floor vote also shows meaningful opposition. Because no transcript excerpts are available, the record does not show detailed debate, but the divided floor vote indicates some senators were unconvinced about the credit’s policy merits or fiscal impact.
The likely points of contention are whether the state should forgo tax revenue to subsidize donations to community foundation endowments, whether the credit is too limited or too generous, and whether the $1 million asset threshold and certification process appropriately define eligible organizations. Opponents may also object to the nonrefundable nature of the credit’s structure or to the possibility that the benefit primarily aids higher-income donors and estates, while supporters likely emphasize local philanthropy, endowment growth, and community investment.