State Tax Credit for Gifts to MnSCU Fact Sheet

Objective:

To encourage increased levels of private support to public and private colleges and universities in Minnesota.

Proposal:

Enact legislation allowing individuals to claim a 50 percent tax credit for donations to one or more accredited institutions of higher education or related foundations in Minnesota. The maximum credit would be $500 per individual or $1,000 per joint return.

Supporters:

University of Minnesota, University of Minnesota Foundation, Minnesota Private College Council, Minnesota State Colleges and Universities

Rationale:

The economic, social and cultural vitality of Minnesota depends on a high quality and financially strong system of higher education.

• Minnesota's network of colleges and universities enrolls 266,000 students annually, most of whom are from Minnesota and stay in the state to work after graduation. Graduates of Minnesota colleges and universities are the major source of the state's teachers, doctors, dentists, lawyers, business people, social workers and other professionals.
• Research conducted at Minnesota colleges and universities is the economic engine which has created hundreds of major industries, thousands of corporations and tens of thousands of jobs in the state. These companies, in turn, have added billions of dollars to our economy.
• Businesses, non-profit and government agencies rely on Minnesota colleges and universities not only for research work, but as a resource for lifelong learning.
• A 15-year study of spending by the nation's 48 contiguous states on safety, health care, transportation, and other services found that only spending on education resulted in measurable economic growth.

Paying the Cost of Higher Education:

Minnesota's support of colleges and universities has declined from 15.5 percent of the state's operating budget in 1987 to 11.2 percent targeted for the next biennium. Unfortunately, colleges and universities have had to increase tuition to absorb rising costs. In the past decade, tuition has risen 214 percent at Minnesota state universities, 212 percent at private colleges and 183 percent at the University of Minnesota. This cannot continue.

A partial, long-term solution is to raise the level of private support of Minnesota's colleges and universities for scholarships, faculty support, research grants, and academic programs. The proposed tax credit is an innovative public-private partnership to encourage giving, providing a powerful incentive to all taxpaying Minnesotans to make donations that will benefit the state's accredited colleges and universities and the 266,000 students attending them.

Experience of Other States:

Some 14 other U.S. states offer a tax credit for donations to their institutions of higher education. Michigan and Indiana have had programs for 26 years and 10 years respec tively, and are considered the most successful. Tax credits in Michigan in 1993 totaled $22 million (representing gifts in excess of $44 million for higher education as well as a few other causes) and $8 million in Indiana (for gifts in excess of $16 million). Other states have enacted programs more recently and have less experience, but generally the concept is considered sound and successful in generating incremental pri vate support.

Likely Impact:

It is difficult to predict with precision how much in incremental private gifts would be generated by this provision in Minnesota. One important variable would be how well the provision is marketed by the colleges and universities. Another factor would be whether the state adds this item as a line on its simplified, one-page, individual tax return. It is likely that such a program would begin slowly and gain momentum as more taxpayers learn about the benefit and how to claim it. In Indiana, which allows a $100 credit for individuals and $200 for couples, the aggregate credits granted to individuals rose 8 percent the first year to $5.3 million and leveled off to a 4 percent annual growth rate. After nine years, about $7 million in credits are granted annually.

Authors:

SENATE

Chief author: John Hottinger, Democrat-Mankato

Co-authors: Bill Belanger, Republican-Bloomington
Carol Flynn, Democrat-Minneapolis
Tom Neuville, Republican-Northfield
LeRoy Stumpf, Democrat-Thief River Falls

HOUSE

Chief author: Gene Pelowski, Jr., Democrat-Winona

Co-authors: Tom Huntley, Democrat-Duluth
Edgar Olson, Democrat-Fosston
Bill Macklin, Republican-Lakeville
Roxann Daggett, Republican-Fergus Falls

For more information, contact:

Gerald Fischer or Linda Berg, University of Minnesota Foundation, (612) 624-3333

David Laird or Gary McVey, Minnesota Private College Council, (612) 228-9061

Chris Roberts, Jack Rhodes, Minnesota State Colleges and Universities, (612) 296-6277

Robert Tennessen, O'Connor & Hannan L.L.P., (612) 343-1224