TAXES/TREASURY: “Treasury Department tax experts are skeptical about states allowing taxpayers to make charitable contributions to circumvent a new cap on deductions for state and local taxes, a department official said Thursday [1-25-18].
The comments from Thomas West, the tax legislative counsel, serve as a warning to lawmakers in New York, New Jersey and California who are considering encouraging such donations with new state tax breaks.
The department is monitoring what states are doing and may issue a more formal notice if warranted to protect federal tax revenue, said Mr. West, who was speaking at a conference on Thursday. Treasury Secretary Steven Mnuchin previously called the idea ‘ridiculous.’… Lawmakers in high-tax states are considering ways of responding to the new tax law, which limits the individual deduction for state and local taxes to $10,000.
One option being considered in some states would take advantage of the fact that charitable contributions remain deductible against federal income taxes. States could set up funds and then give taxpayers a credit against their state and local income or property taxes for donations… Some legal experts say that approach would work under existing law.
Taxpayers typically can’t get credit for a donation when they get something of value from a charity in return, but tax benefits haven’t typically been treated that way. Many states have similar credits in place already, such as state income tax credits for conservation easement donations.
But Mr. West said the closer the benefit gets to 100%, the more questionable it is.”
-Richard Rubin, “Treasury Skeptical About States Allowing Charitable Giving to Work Around New Cap,” The Wall Street Journal online, Jan. 25, 2018 05:19pm