House of Delegates passed in its 3rd and final reading a bill to increase the amount of allowable tax refundable donation from 10% to 12%
In the bill findings it states, “The Olbiil era Kelulau also finds that the increased percentage provides a greater tax benefit for working families and promotes enrollment and attendance in school. The employee tax payers and nonprofit corporations will benefit from raising the percentage of income tax available for refund…”
Palau law, 40 PNC Chapter 11, Section 1104, mandates the government to refund back to a tax payer the amount of money donated to a non-profit corporation or for school tuition of up to 10% of the total revenue earned or salary paid during the tax year.
The House bill 10-104-9, HDI proposes to increase the allowable refundable donation up to 12%. In addition to non-profit organizations, Palau Community College and Our Oceans 2020 Fund are also eligible for the tax refundable donation status.
Minister of Finance Elbuchel Sadang said that this increase might cost the government up to $500k on top the existing amount that they usually refund back each year.
“This money could go directly to fund some of the important programs needed right now, rather than returned back,” expressed Sadang.
Since this law became known in 1999, there has been an explosive growth of non-profit organizations from churches, to schools, to sports, to environmental groups, to traditional community groups and even to non-profit philanthropic entities created within companies competing for funds from private sector and individuals based on the law allowing for tax refundable donations.
Over a million dollars are refunded back each year to individuals and businesses that make donations each tax year to numerous non-profit on island. (L.N. Reklai)