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Information on tax credits through the Neighborhood Assistance Program (NAP) was presented by Timothy Thurman, Certified Public Accountant to area citizens along with members and volunteers of the H.O.P.E. Coalition during a special dinner at the Community Activity Center last Thursday night.

H.O.P.E has depended financially upon the donations of citizens through the NAP program, since its formation in 1995. According to H.O.P.E President, Bob Mickey, the organization has been experiencing financial difficulty since last May, and has been running solely through the help of volunteers who give generous donations of their time, some as much as 40 hours per week.

According to information provided by the H.O.P.E Coalition, “The Neighborhood Assistance Program (NAP), administered by the Department of Economic Development, was designed to assist endangered communities and their residents in the improvement of the quality of life. Assistance through NAP can be granted to a qualifying not-for-profit organization for a project if the neighborhood does not have the ability within its own resources to deal with the factors challenging its existence as a viable and stable neighborhood. The program enables donors to redirect their Missouri tax dollars to local projects, while reducing administrative and overhead costs that would have been incurred if the same program was administered by a government agency. This form of state assistance requires no transfer of dollars. Instead, the nonprofit organization assumes full responsibility for securing the desired financial support through their own fundraising efforts. The state’s role is to approve projects and process tax credits for eligible donors that contribute to a NAP project.

The credit equals up to 70 percent for some projects in rural communities. Donors may claim the tax credits when they file their Missouri tax return. As an incentive, the tax credit not only maximizes the amount a donor might give, but also provides an opportunity for businesses, state government and the nonprofit sector to build and sustain communities by establishing a solid partnership.”

The dinner and presentation last Thursday night was held in the hopes of evoking a desire to donate money and commodities through the NAP program in citizens of Western Johnson County in order to better equip H.O.P.E financially.

Mickey gave attendees of the presentation some background information on the H.O.P.E Coalition, including the thought process behind its formation in 1995. “Some individuals were concerned after a teenager was killed in a car wreck,” Mickey explained. “They were also concerned about the use of alcohol and drugs.”

According to Mickey, the organization formed from that point, becoming a non-profit organization receiving its first NAP Grant a short while later. “That provided the funding to get it off the ground,” Mickey said. “Then, the old Holden Manufacturing building was donated to the H.O.P.E Coalition through the NAP program, and they (the building’s owners) received a tax credit for that.”

Mickey told program attendees H.O.P.E had originally planned to construct a gymnasium inside the old manufacturing building, but once engineers examined the options, it was found to be impossible.

H.O.P.E board members decided to use land behind the manufacturing building to construct a new gymnasium. “At first it seemed kind of like a pipe dream because it was so expensive,” Mickey said. “Then, we were blessed with a large federal block grant.” Between the first NAP grant and the block grant, H.O.P.E was able to realize its dream of constructing an activity center (the Community Activity Center (CAC)) where the community could enjoy events.

According to Mickey and other H.O.P.E board members, the organization serves several purposes and through the H.O.P.E Service Center and the CAC, a multitude of community-oriented events have been happening.

The service center provides a number of charitable services, including the clothes closet, Harvesters Food Drop, WIC Nutrition Program, G.E.D. online class, beginner’s computer classes, intermediate computer classes, an emergency supply room, home schoolers online and a bargain sales room. These charities and classes are organized through a cooperation between H.O.P.E, the Holden Ministerial Association and United Way. The office manager for the service center is Crystal Harper. The center is also served by a number of volunteers.

The CAC has become a favorite location for some of Holden’s most popular events. The CAC offers basketball and volleyball tournaments and leagues, family nights, movie nights, church activity nights, seasonal activities, a walking track, senior fitness, mini clinics, gym rental, lock-ins, indoor garage sales, carnivals and craft fairs. Recently, several Holden Fall Fiesta events were held at the CAC. Currently, the CAC is staffed by part-time labor and is operated through a four-person, volunteer board consisting of Amy Morrison, Rusty Hartwell, Susan Jennings and Julie Carver.

After a brief report from Jane Christenson on the service center and a short discussion of happenings at the activity center, Mickey introduced Thurman to the dinner’s attendees.
Thurman, a Certified Public Accountant from Higginsville, explained the NAP program to those in attendance.

According to Thurman and information provided by H.O.P.E, any person, firm or corporation in business in the State of Missouri, including individuals who own their own business, own and operate a farm or receive income from rental property are eligible to qualify for a 70 percent tax credit through the NAP program.

Thurman stressed the contributions do not have to be cash. Farmers may donate commodities, such as unsold grain to charitable organizations such as H.O.P.E who participate in the NAP program and receive the 70 percent tax credit. In turn, the charitable organization may then sell the donated commodity, thereby earning money to assist in the operation of their business.

According to information provided by Thurman, an advantage of farmers donating to organizations in this way is a charitable contribution of unsold inventory removes the income before recognition, and avoids the need to claim a charitable itemized deduction on taxes.

In addition, self-employment taxes will be decreased if unsold inventory is donated and Schedule F net income is below the self-employment tax minimums.

For example, Jon Doe, a cash method farmer normally reports net Schedule F income of about $40,000 on his joint return. He contributes $2,000 annually to charity, but his total itemized deductions do not exceed the standard deduction amount. John decides to contribute $2,000 of unsold grain to charity, rather than selling the grain and donating the cash.

The result of Jon Doe’s action is a reduction in his federal and Missouri income taxes by $420 and his self-employment tax by $283, for a total savings of $703.

“On the contribution of farm commodities, for it to really count and get the job done, it has to be done right,” Thurman explained. According to information provided by Thurman, there are several Department of Economic Development requirements for commodity gifting.

First, the taxpayer must be a cash-basis farmer. An accrual-basis farmer receives no financial benefit from a charitable gift of raised commodities, since income is reported as it is earned. A charitable contribution of unsold raised commodities is only effective if it constitutes inventory of an active farm proprietor or partner. A gift of unsold crop-share rents by a farm landlord would trigger taxation to the donor as an assignment of income.
Second, it is suggested crops raised in the year prior are gifted as opposed to the present year. The reason for this is if the current year’s crop is contributed, the cost of raising the crops is not allowed as a Schedule F deduction on taxes, but rather is deducted as a Schedule A contribution.

It is also required proof be provided that the crop was transferred to a charity. The rule of thumb for providing this proof is for the farmer to deliver the commodity to the elevator and obtain a warehouse or storage receipt made out to the charity.

The receipt should then be given to the charity with a letter from the donor stating the commodity may be sold as the charity sees fit. The buyer/grain elevator should not issue a check to the charity before receiving instruction from them.

If these steps are not followed, the IRS will treat this transfer as if the grain were sold by the donor, who then contributed the cash to the charity, negating any potential tax savings.

Other persons eligible to donate to the NAP program and receive tax credit include corporations filing Missouri Form 1120, sole proprietorships filing Missouri Federal Form 1040, schedule c and Missouri Form 1040, individuals reporting income from rental property or royalties filing Federal Form 1040, schedule E or Missouri Form 1040, small business corporations filing Missouri Form 1120S, business partnerships filing Missouri Form 1065, financial institutions filing Missouri Financial Tax Returns, insurance companies filing their income tax return with the Missouri Department of Insurance, an individual partner in a partnership or individual shareholder in an s-corp or a limited liability corporation/partnership filing Missouri Form 1120, 1120S or 1065.

In addition to farm commodities, cash donations, real estate donations, equipment and supplies, labor and technical assistance, professional services and stocks and bonds are all eligible donations for the NAP credit.

In addition to the tax savings generated by donating to a NAP eligible organization, donors have six tax periods after giving their gift in which to claim the credit, under a five-year carry-forward provision. Any balance remaining after the sixth year is forfeited.

“What NAP allows us to do is control how the state spends the biggest portion of our money,” Thurman explained. “In other words, we have control over roughly 80 percent of it... It only costs you a little bit to make sure 80 percent (of tax dollars) stays right here in your community, in your organization or whatever project you’re supporting.”

Anyone with questions about the NAP program or those persons interested in donating money to the H.O.P.E Coalition, thereby taking advantage of the 70 percent tax credit, should contact the H.O.P.E Coalition at (816) 732-4357.

By Christi Stowe
News Editor