Flying Under the Radar in Iowa: Giving Incentives that Work

Ellen Remmer
Strategic Philanthropy
Wednesday, March 13, 2013

I’ve had the pleasure of visiting Iowa for the last nine years through some Annie E. Casey Foundation work and some strategy planning with the Greater Des Moines Community Foundation. They are doing some really smart, creative and important work out there and the city looks stunning with lots of great public art, a scenic riverwalk and beautiful cultural and civic buildings – much of this catalyzed by the philanthropic sector and a cadre of highly civically-minded business leaders. But my most recent trip to speak at the Iowa Council on Foundations’ Connect ’13: Community Foundation Networking Summit truly convinced me that folks all over Iowa are doing something really special, something that should be emulated by other states, and something that not enough people know about.

The “under the radar” story is Endow Iowa.  Some committed and visionary philanthropic leaders took it upon themselves about 10 years ago to lobby their legislature and governor to establish a tax credit for donors who made endowed gifts to community foundations.  The program offers a 25% state tax credit for any donor, regardless of whether they itemize deductions on their federal form; so that a gift of $10,000 actually costs the donor only $7,500.  The amount of total tax credits available has grown from about $2 million per year to $4.5 million annually (thus leveraging over $18.5 million in donations).  In its 10 years, the Iowa Council on Foundations estimates the program has produced over $115 million in endowments, made up of over 13,000 separate donations!

In 2012, the Endow Iowa program was so popular, the credits were exhausted.  When last reported, close to 1,000 applications were being carried over into 2013, donations totaling close to $4 million (and close to $1 million worth of tax credits).  Iowa legislators are currently reviewing a proposed bill that would increase Endow Iowa Tax Credits to $6.5 million.  The legislation has a retroactive provision which would allow those donors with applications being carried over to amend their 2012 tax returns if they wish to do so.

Why don’t we see more of these around the country?  Sadly, the Council of Michigan Foundations, which pioneered this approach to stimulating endowed philanthropy 20 years ago with the Community Foundation Tax Credit, lost the battle in the legislature in 2011 when the program was terminated.  The Montana legislature has had a fickle relationship with the approach, named the Montana Endowment Tax Credit, and never made it particularly large.  Kentucky has taken up the mantle, and here’s hoping that their modest program of $500,000 in credits will become as robust as Iowa; but where is everyone else?  Thinking short term it would seem.

The other story in Iowa is the 130 community foundations and their affiliates who engage over 1,500 citizens on their boards and advisory committees – 83 of them attended the summit. Maybe there’s something in the water or cornfields in Iowa.  Whatever it is, the spirit of civic engagement there is really phenomenal.  Stimulated in part by Endow Iowa, in part by the County Endowment Fund Program – which distributes a percentage of the state’s gaming tax revenue to community foundations in counties that do not hold a state issued gaming license – community foundations have sprung up across the state, primarily in the form of affiliates to the larger foundations.  While the dollars are still small, the energy, enthusiasm and commitment of thousands of Iowans is considerable and inspiring.