Nonprofits are essential in connecting our communities with critical needs like housing, food, health care and more. Community foundations support their nonprofit partners in many ways, including managing endowed funds, ensuring they can be responsive to the evolving needs of the community now and in perpetuity.

The Community Foundation for Southeast Michigan (CFSEM) manages endowments for more than 230 nonprofit agency partners.

CFSEM shared more with CMF on the importance of endowed funds to support its nonprofit partners and communities.

Amid the pandemic, CFSEM was able to respond quickly and sent endowment distributions early to support its nonprofit partners.

“We recognized that our nonprofit partners needed funds regardless of how healthy they might have been before the pandemic,” Randy Ross, vice president of Philanthropic Services at CFSEM said. “Having those funds available for the community to be able to respond to whatever the needs were, was valuable.” 

Endowment funds provide a source of ongoing and reliable financial support to address charitable causes and can be invaluable in uncertain economic times when other support may no longer be available. Additionally, operating funds are often the most difficult to secure, and funds earned by the endowment can be used for operating costs.

“Unrestricted endowment distribution was hugely important for our nonprofit agencies because it’s flexible and a predictable source of income for them,” Matthew Lewis, director of Governance and Operations at CFSEM said. “Unlike some other sources of funding, which could be disrupted by a global pandemic, they could count on the endowed fund distribution.”

The Michigan Charitable Tax Credit, which was eliminated as part of tax reform in 2012, unlocked opportunities by incentivizing families of all income levels to give charitable donations to endowed funds across the state, strengthening our nonprofits. 

The tax credit allowed Michiganders to deduct 50% of their donation or gift in the $200 to $400 range to a Michigan community foundation, homeless shelter, food bank or public institution on their tax statements.

Research by the Johnson Center for Philanthropy found that from 2011 through 2013, there was a 50% decline in $400 donations and a 27.5% decline in $200 charitable donations.

“For us, the tax credit helps magnify that message about the importance of endowment funds and for some donors, it was their introduction to the community foundation,” Ross said.

According to CFSEM, after the tax credit was eliminated, gifts to endowed funds decreased significantly in 2012 and 2013.

In Lansing, the Capitol Region Community Foundation hosts more than 100 endowment funds for nonprofits in the community and the loss of the tax credit had an adverse effect on the growth of these funds.

Following the repeal of the tax credit, the Capital Region Community Foundation saw a total annual decrease of more than $100,000 in charitable gifts in the $200 to $400 range.

CMF’s Government Relations and Public Policy team is continuing to advocate for Michigan to reinstate the charitable tax credit to help to incentivize all Michigan residents to give.

CMF staff continues to find broad bipartisan support for the tax credits while educating lawmakers on the value for the communities they represent and the benefit of encouraging people to invest directly in their communities.

CMF is also encouraging members to connect directly with their lawmakers to educate them on the issue.

Recently, CMF member DJ Jones, executive director of the Petoskey-Harbor Springs Area Community Foundation and chair of CMF’s Advisory Cabinet, connected with his state lawmaker in support of restoring the charitable tax credit.

New legislation, House Bill 6451 and House Bill 6450, has been introduced that would restore the charitable tax credit for contributions made to endowed funds at community foundations and for contributions made to homeless shelters and food banks.

Community foundations interested in sample language and information to support outreach to policymakers and local media on the importance of this credit are invited to connect with Regina Bell, CMF’s director of government relations and public policy.

Want more?

Learn more about endowment funds at the Community Foundation for Southeast Michigan.