Donations North Dakotans reported as itemized deductions on individual federal tax returns to charities, humanitarian causes and public/private institutions, including religious organizations, totaled $196 million in 2005. That is an increase of $19 million (11 percent) from the $177 million in 2004. This growth follows a similar increase of $18 million (11 percent) the year before ($159 million in 2003 to $177 million in 2004).

This month’s “Economic Brief,” a monthly publication from the North Dakota State Data Center at North Dakota State University, focuses on the charitable nature of North Dakotans by looking at charitable contributions reported as itemized deductions on federal individual income tax returns. The Internal Revenue Service (IRS) publishes aggregate state data (including tax- deductible contributions or donations) from individual tax returns filed the previous calendar year.

“If we use IRS data as a reference, it shows that residents of North Dakota are very charitable, which is something I think most of us already know,” says Richard Rathge, State Data Center director. “Even though our income earnings are far below national averages, our charitable giving is nearly on par with the nation.”

However, there are important limitations with using IRS data to explore trends in donations or charitable giving in North Dakota.

First, only a small number of North Dakotans itemize their deductions on their federal individual income tax return. According to 2005 tax data, 19 percent of North Dakota taxpayers chose to itemize deductions on their tax returns (second lowest percentage in the nation).

A mortgage is one of the primary reasons for itemizing deductions. Thirty-six percent of households in North Dakota are owner-occupied with a mortgage, which is the second lowest proportion in the nation. This is paired with the fact that North Dakota has the 11th highest proportion of renters in the nation (33 percent of all households). For taxpayers who take the standard deduction, no details on their donations are available through the IRS.

Second, itemized deductions only capture giving that is tax deductible. Because of these limitations, one should be cautious in using IRS data to draw conclusions about how our state compares with other states. However, the IRS database is one of the few uniform means of tracking contributions during a period of time and by state.

For North Dakota, individual federal income tax returns with contributions as itemized deductions showed contributions averaging $4,045 per return in 2005, an 8 percent increase from $3,735 in 2004. Nationally, average charitable contributions increased 9 percent to $4,388 in 2005, which is up from $4,012 in 2004.

NDSU Agriculture Communication