Qualifying Charitable Contribution Subtraction for Taxpayers Claiming the Federal Standard

QUALIFYING CHARITABLE CONTRIBUTION SUBTRACTION FOR TAXPAYERS CLAIMING THE FEDERAL STANDARD DEDUCTION

regulation 39-22-104(4)(m).

(1)The subtraction for charitable contributions in excess of $500 for taxpayers who made their federal income tax election to claim the basic standard deduction under Internal Revenue Code (IRC) section 63(c)(2) is available in tax year 2001 in which state revenues exceeded the limitation on state fiscal year spending and tax years beginning on or after January 1, 2006.A taxpayer who claims the basic standard deduction on their federal income tax return pursuant to I.R.C. §63(c)(2) can subtract on their Colorado income tax return the amount of charitable contributions in excess of five hundred dollars that the taxpayer could have claimed pursuant to I.R.C. §170 if the taxpayer had not claimed the basic standard deduction. The subtraction is not available to taxpayers who are not allowed to claim the federal basic standard deduction, such as:

(a)Taxpayers for whom a dependency exemption is allowable to another taxpayer, even when a partial standard deduction is allowed under I.R.C.§63(c)(5);

(b)Married individuals filing separate returns, when one spouse itemizes deductions;

(c)Non-resident aliens;

(d)Any individual with a short tax year who is denied cannot claim the federal standard deduction because the individual has a short tax year; or

(e)Estates, trusts, or other entities which that are not "individuals”.

(2)Limitations.

(a)In determining the amount of the subtraction, I.R.C. § 170 shall govern, including the dollar limits on the amount of the contribution that can be claimed in any given tax year, any special rules regarding certain property, any limitations on contributions of clothing and household items, and what qualifies as a charitable contribution. To be eligible for subtraction contributions must qualify as a federal itemized deduction under §170 I.R.C. and collectively exceed a $500 threshold for the tax year.The limits applicable to §170 I.R.C. deductions apply in computing the maximum subtraction allowed. The subtraction is available to all individual Colorado taxpayers and will be applied in computing the tentative tax before apportionment for part-year and non-residents of Colorado.

(b)The charitable contribution subtraction is limited by a taxpayer’s contribution base as stated in I.R.C. § 170(b).

(c)Aggregation. The dollar amount of all charitable contributions for the tax year are aggregated to determine whether the value of the charitable contributions exceed the $500 threshold (i.e., the value of each contribution need not exceed the $500 threshold so long as the sum of all qualified contribution for the tax year exceed $500).

(3)Documentation and Substantiation.

(a)A taxpayer must comply with the substantiation requirements set forth in I.R.C. § 170, including qualified appraisals, limitations on clothing and household items, and the documentation of cash contributions.

(b)Any claims of charitable contributions in excess of the applicable federal standard deduction must be accompanied by a clear written explanation and documentation demonstrating why the federal standard deduction was claimed.

(4)Part-year and Nonresidents. The subtraction is available to taxpayers who are required to file a Colorado income tax return, including part-year and nonresident taxpayers. When computing the Colorado tax liability of a part-year resident or nonresident, the subtraction is applied to compute the tentative Colorado tax liability before the tentative Colorado tax is apportioned.

(5)Except as specified in paragraph 4) below, the subtraction is available only in tax years in which state revenues exceed limitations on state fiscal year spending by amounts established in §39-22-104(4)(m)(III), C.R.S. In October or November of each year, the State will certify whether there are sufficient excess revenues to make this subtraction available. See Regulation 39-22-120 for years in which the subtraction is available.

(6)Due to the passage of Referendum C ( §24-77-103.6, C.R.S.) during the November 2005 statewide election, the subtraction is available for tax years beginning on or after January 1, 2006 and is not reliant on a budget surplus.