Alaska's Educational Tax Credit
Corporations can now get up to $5 million in tax credits!
The legislature expanded the Alaska Higher Education Tax Credit to increase the credit amount for corporations making contributions in support of education. The revised law allows companies to take up to a $5 million tax credit when they support the University of Alaska. Further changes include: the addition of the term ‘facility’ to some sections to allow support of educational facilities, and the allowance for the tax credit to be applied towards multiple taxes paid by a company. This legislation applies to accredited Alaska two-year or four year colleges, secondary school level vocational education courses, programs, and facilities. is designed to allow companies or corporations an opportunity to lessen their tax burdens while at the same time benefiting the University of Alaska. Companies who pay any of the following taxes can realize a substantial tax savings:
- Income Tax
- Insurance Premium Tax/Title Insurance Premium Tax
- Oil and Gas Production Tax
- Fisheries Business Tax/Fisheries Landing Tax
- Mining License Tax
A company who owes any of these taxes has the option of making a contribution to the University Foundation and claim the Alaska Educational Tax Credit for up 50 percent of the first $100,000 of a gift, and up to 100 percent of the next $100,000-$300,000 of the donation. For donations $300,000-$10,000,000, 50 percent is eligible for the AETC, up to a maximum of $5 million in any one tax year.
For example:
- A company owes the state of Alaska $200,000 in taxes (any of the taxes listed above)
- The company makes a $200,000 gift to the University
- The company claims the Alaska Educational Tax Credit against their tax liability of $150,000
- 50% of the first $100,000 plus 100% of the second $100,000 of the gift to the University
- Each gift made to the University can only be claimed for credit on only one of the state taxes listed above
- BOTTOM LINE: The University has greatly benefited from the $200,000 gift and the company's tax bill has been reduced from $200,000 to only $32,500*
*The Federal Tax Savings for the charitable contribution is calculated using an assumed marginal tax rate of 35%. The Federal Tax Savings is decreased by the amount of the state tax deduction lost, times the rate of 35%.