Neighborhood Assistance Program (Tax Credits)

What is the Neighborhood Assistance Program?
The Neighborhood Assistance Program (NAP), created by the 1981 Virginia General Assembly, provides state income tax credits as incentives for individuals and businesses that contribute directly to approved nonprofit organizations designed to benefit impoverished people. Nonprofit organizations, including charitable and faith-based groups meeting all criteria, may participate. Contributions may be in the form of cash, goods, stock, real estate, professional services, and rent/lease of the participating nonprofit's facility. In return for their contributions, individuals and businesses receive credits that may be applied against their state income tax liability.

NAP is a unique state program, which emphasizes partnerships between the private and public sectors to assist the economically deprived. The program encourages defining local problems, designing local solutions, and using all available resources to improve the environment for both business and the community.

What Kinds of Organizations Qualify for "NAP" Credits?
Eligibility for NAP is limited to nonprofit organizations, including charitable and faith-based groups, whose primary function is to provide assistance for impoverished people. Some of the activities sponsored under the program include education, job training, housing assistance, health care clinics, and community services.

How Does the Neighborhood Assistance Program Work?
Organizations wishing to participate in NAP must submit an application to the Virginia Department of Social Services by the first business day in May of each year. Eligible nonprofits receive an allocation of tax credits that they can exchange for contributions from individuals and businesses during the program year. The program operates on the state fiscal year, beginning July 1 and ending June 30 the following year. Organizations are approved for a 12- month period and must reapply each year they wish to participate.

Individuals may receive a state tax credit for cash contributions. Through December 31, 2001, $50 is the minimum and $200 is the maximum cash donation allowed for an individual per taxable year for a 100% credit. Effective January 1, 2002, no tax credit for a cash donation of less than $900 or in excess of $1,666.67 for a maximum $750 in tax credits shall be issued to an individual or to married persons in a taxable year. The value of the tax credit is equal to 45% of the donation. Tax credits not usable by the individual for the period a contribution was made may be carried over to the extent usable for the next five succeeding taxable years. Individuals may claim the tax credit on their state income tax return only to the extent they have not claimed a deduction for such amount on their federal income tax return.

A business contributing to an approved NAP organization may receive a state tax credit for 45 percent of their total contribution. Tax credits are available if the contribution value is at least 889 or no more than $388,889. The minimum tax credit issued for a business contribution is $400 ($889 x .45). A contributing business may take a maximum of $175, ooo ($388,889 x .45) in NAP credits for any tax year. Tax credits not usable by the business for the period a contribution was made may be carried over to the extent usable for the next five succeeding taxable years,

If It's a Government Program, Isn't There a Lot of Red Tape?
Although many individuals and businesses are familiar with programs that require elaborate record keeping and reporting, NAP has a streamlined application and minimum record keeping requirements. Both the donor and the NAP organization are involved in the effort to maintain documentation of the contribution.

Application for approval as a NAP participant consists of submitting a completed application package including basic financial documentation and other general information to the Virginia Department of Social Services. Completed applications must be received in the Office of Community Services by the first business day of May for the next program year.
For donors, verification of a contribution consists of completing information on a one-page form and providing the NAP organization with documentation on the value of the contribution.

For additional information, please contact Maggie Wilson, Virginia Department of Social Services, Office of Community Services at (804) 692-1895.