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Update on QCO (Qualifying Charitable Organization) Tax Credit Concerns

If your organization is a QCO, important information follows.

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It has come to the Alliance’s attention that some nonprofits that qualify for the state’s charitable tax credit as qualified charitable organizations (QCO) have fallen off the 2021 qualifying list without their knowledge.  Some organizations were not aware of this until they were contacted by donors trying to give a gift.  The Alliance recently met with the Department of Revenue to better understand the issues and to share feedback on challenges experienced by our members.

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The Alliance understands how important the tax credit is to many of our members, and we are committed to doing whatever we can to advocate on your behalf. Thank you to the members who brought this issue to our attention allowing us to spring to action.

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We would like to share the following information and tips for our nonprofit members that qualify as QCOs.

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We recommend you check to confirm your organization is still on the annual QCO or QFCO lists which can be found herern

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If your organization is not on the 2021 QCO list and you believe you should be, please:rn rn

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1.     Double check any and all email addresses that could have received information from DOR about recertification and make sure yourrn organization has responded to communication received from DOR. Remember to check your junk or spam folders.rn

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2.     If you have not received any communication from DOR and believe you should be on the list, contact DOR:
rn Email: QCO@azdor.gov
Phone number: (602) 716-6372 ext. 2
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3.     If you do not receive timely communication back from DOR or are experiencing other challenges, please email Robyn Reyff, Alliancern Membership Manager by clicking here.rn

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Background:
Qualifying Charitable Organizations (QCOs) and Qualifying Foster Care Charitable Organizations (QFCOs) are certified by the Arizona Department of Revenue to receive contributions eligible for the tax credit. This certification only pertains to the Arizona tax credit program. This program does not apply to general licensing, operations, or the deductibility of donations to charitable organizations.

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Important Information for Nonprofits to Know about the QCO:

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  • To become a QCO or QFCO, a charitable organization must complete the application form and submit it along with required documentation to ADOR.rn
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    • Charitable organizations may apply for certification at any time during the year. Certification is valid beginning January 1 of the year that an organization is approved. Applications will generally require two to four weeks for processing.rn
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    • If your organization meets the qualifications, ADOR will then send a certificate to the primary point of contact for the charitable organization as indicated on the application form.rn
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  • ADOR may periodically request organizations to recertify their status and will request specific information necessary to remain certified.rn
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    • QCOs and QFCOs are periodically recertified to verify that they continue to meet legal requirements.
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    • Qualifying organizations do not need to recertify annually. Each year, approximately 15-20{592f8c7c8c8b9ae4dc802fde18bb1ca44654f2582e5e375fbd59d148d420668f} of the organizations are required to be recertified. Requests for recertification are sent to organizations and apply to the next calendar year.
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    • Recertification does not have a specific due date; however, donations made to the requested organizations after January 1 will not be eligible for the tax credit until those organizations have been recertified.rn rn
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  • Because ADOR may need to contact the organization for a variety of purposes over time, including for recertifying, it is critical that organizations provide updated primary point of contact information to ADOR if and when changes are made.rn
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  • If a QCO wishes to be considered a QFCO, a new application would be necessary.
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Timing of Tax Credits and Tax Filings – Possible Issues

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Arizona law allows taxpayers to donate up until April 15 (or tax day) of the current year and apply the tax credit to the previous tax year.  For example, a taxpayer can give on April 14 of 2021 and decide to claim the credit on their 2020 tax return.  Because of this, there are two sections on Form 321 that can cause confusion. You can see Arizona Form 321 and Instructions Directions here.

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  • For donations made in 2020, a taxpayer must use the 2020 QCO/QFCO list.
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  • For donations made from January 1, 2021 to April 15, 2021, a taxpayer must use the 2021 QCO/QFCO list – even if they plan to count it towards their 2020 tax year.
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The Alliance has heard that this may be causing confusion. 

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  • If you are aware that a CPA has questions or concerns, please ask them to contact the DOR STAT Team Contact: Elizabeth Bruno atAZtaxhelp@azdor.gov.rn
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  • If a donor or CPA makes you aware that a tax preparation software they are using is not seeing the difference between 2021 and 2020 QCO lists, please let Robyn Reyff know by clicking here.  For example, if someone gave to a QCO in 2020 but the software is rejecting the QCO because they are not on the 2021 list, we need to know. The Alliance will need the name of software being used so we can alert DOR to the issue.
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