Over the past decade, legislators have been looking for ways to increase private charitable giving and direct these resources to programs that serve low-income people. To further these goals, Arizona enacted a charitable tax credit in 1997 as part of the states welfare reforms. This brief examines the structure of the Arizona program, the initial effects on giving, and the types of organizations that benefited from the charitable tax credit. It concludes that although the Arizona charitable tax credit stimulated some additional giving during relatively good economic times (1998-1999), it is not a panacea for funding the nonprofit sector. The jury is still out as to whether it may weaken a broad array of organizations that create community cohesiveness and civil society.