Jefferson City, Missouri – Because of Missouri’s annual cap on food pantry tax credits, the well-intended act of donating to food pantries is surprising many taxpayers financially. Claims for credit this year exceeded the state’s $1.75 million cap, resulting in less rewards and unanticipated expenses for contributors.
Taxpayers who donated to food pantries, homeless shelters, and soup kitchens hoping to claim up to $2,500 in tax credits only got 87.8% of the stated amount, according the Missouri Department of Revenue. This shortfall is due to claims totaled about $2 million this year, surpassing the cap. Each contributor therefore received less than the expected full credit amount, and many were unaware they would be liable for the difference plus associated interest and penalties.
Designed to encourage donations to important programs, the tax credit offers little room for waiving interest and penalties should the maximum be exceeded. Department spokesman Anne Marie Moy said, “Interest is statutory and cannot be waived.” Because of similar limitation limits, taxpayers have often received less than 75% of their requested credit amounts over the past two years.
The problem also touches on other charity deductions, including the champion for children tax credit, which supports organizations helping children in court or crises. Like the food pantry tax credit, this has seen apportionment when claims exceed its cap.
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State Representative Brenda Shields voiced concerns after learning taxpayers were fined for unintentionally surpassing the credit maximum. One constituent’s experience drew her attention and helped her to realize that many others went through similar circumstances.
“It’s annoying,” Shields said. “It discourages people from doing what we want them to do, which is to contribute to our local food pantries.”
Shields has proposed legislation to address these issues by providing a 60-day grace period for taxpayers to pay the balance or arrange payment plans after receiving a disallowance notice. Her measure attempts to minimize the financial impact on donors, especially those who depend on the same food pantries she supports, by also seeking to apply this grace period to the advocate for children credit.
Although the present system lets the unused credit be carried over for up to three years, this doesn’t really help to reduce the immediate financial load caused by interest and penalties. For instance, under the existing system a taxpayer claiming the maximum $2,500 would only be authorized for $2,195. Should they find themselves unable to pay the $305 difference right away, penalties and interest would be charged immediately at $21.35.
This scenario draws attention to the difficulties in Missouri’s tax credit system for charitable contributions, where well-intentioned citizens may be determented from future giving with such fines in place. Many strive for a system that truly respects the philanthropic spirit as well as financial reality of Missouri’s citizens as legislators like Shields advocate reforms.
