How Can Appy for the Working Poor Tax Credit?

If your organization did not submit an application to be a qualifying organization in 2010:

Steps to become a qualifying organization:

Determine if you truly qualify. Read carefully the Qualifying Criteria below and decide if your organization clearly meets the requirements of the law. In the past, nonprofit organizations who do not meet the criteria were placed on the ADOR list because there was no review. Now that ADOR is reviewing information from nonprofits, those organizations will not be approved. Be sure that you are not one of those organizations before proceeding. You can submit your application to ADOR at any time.
Decide who should prepare your application. You might think that, because this information is being providing to the state tax agency, it is primarily a financial document. However, a demonstration of how your organization fits the state law’s definition of organizations serving the working poor is fundamentally a matter of clearly communicating your services and the population you serve. Therefore, it is advisable to have the person who writes grant applications or other communications for your organization prepare the information for ADOR.
Prepare your application. Review the application materials at ADOR. In preparing your application, think about it from the standpoint of someone who does not know anything about your organization or even your service area. Is it clear how your services fit the definition of qualifying services? Is it clear that the population you serve matches one of the qualifying populations? And, of course, are you clearly demonstrating that more than 50 percent of your budget provides those services to that population?
Ask someone to review your application. Before submitting the final documents to ADOR, ask someone who is not familiar with your organization to review your application to see if it clearly articulates how you should qualify. If this person has questions, the chances are good that ADOR will have questions too, and could deny your application.
5. Submit your application to ADOR. The information on the website explains the process for application.

Qualifying Criteria:

State law (Arizona Revised Statutes 43-1088) includes four basic criteria that nonprofits must meet in order to be considered a qualifying organization. Read the law carefully and determine whether your organization fits. It is helpful to think of these four criteria in order:

You must be a 501(c)3 nonprofit. This is the easy one; you should be used to providing proof of your status with the IRS. If you are not a 501(c)3, there is no need to go to the next criteria: you do not qualify.
You must be providing one or more services defined in the law. There is some room for interpretation here, but your application must clearly articulate how your services fit the law’s description. For example, if you provide cash assistance, it is pretty straightforward. But if you provide basic needs services which are not specifically named in the law, you will need to clearly explain how they should be considered basic services. If you are not providing one or more of these services, you will not qualify. (This is the most common reason organizations are denied qualification.)
You must be providing the services you named in Criteria 2 for one of the three populations defined in the law. While the definition of the populations is pretty clear, be sure that your application articulates what data your use for the population you serve. If you do not have information on your population about the income or other qualifying criteria, it may be difficult to qualify.
Finally, you must demonstrate that 50 percent or more of your organization’s budget is dedicated to the qualifying services (Criteria 2) for the qualifying population (Criteria 3). And you must demonstrate that you will continue spending 50 percent or more for these services. This is the financial part of the application, but again, be sure that your financial data clearly support the narrative which explains your services and population served. If you clearly demonstrate this fourth criteria, you should be in a good position to be approved as a qualifying organization.

Two more things to remember:

If your organization does not qualify for the Arizona state working poor tax credit, that does not mean your donors cannot obtain a tax deduction, as long as you are a 501(c)3 nonprofit. This credit is separate from normal tax deductions, and is intended to be an additional incentive for you to attract donors, if you qualify. The qualification of your nonprofit for the working poor tax credit under Arizona state law has no bearing on normal tax deductibility of donations to your nonprofit under state and federal income tax laws.
If your organization’s services and budget change in the future, such that you may qualify for the working poor tax credit, you may submit a new application to ADOR at any time.