WASHINGTON, D.C. — U.S. Congressman Josh Gottheimer asked U.S. Treasury Secretary Janet Yellen to help save North Jersey families on their taxes by reinstating the ability for taxpayers to make charitable donations to their towns to receive a tax credit on their local tax bills.
In light of the harmful cap on the State and Local Tax (SALT) deduction from the 2017 Tax Hike Bill, Gottheimer has been a proponent of restoring the value of the SALT deduction by providing a tax deduction for taxpayers who make charitable contributions to their state or other local governments.
Then, in June 2019, under the previous Administration, the Treasury Department and the IRS finalized a rule in a massive regulatory overreach — without any legislative basis and against both legal precedent and decades of previous IRS approval — that placed a limit on these charitable deductions, fully outside of the scope of Congressional intent when it comes to the tax treatment of these donations.
“It is imperative that we work together to get our tax policy right and cut taxes for hard-working Americans as we continue to fight this pandemic. Given the level of need in this country, we should be trying to encourage charitable giving as much as possible to help those that need additional help,” Congressman Gottheimer said in a letter this week to U.S. Treasury Secretary Yellen.
Last Congress, Gottheimer introduced a bipartisan Joint Resolution in the House of Representatives to fully repeal the Treasury Department’s massive regulatory overreach that prohibits states like New Jersey and New York from allowing towns and municipalities to use charitable funds to offer real tax relief to their communities.
A copy of the letter is available HERE the text of which is provided below.
January 25, 2021
Honorable Janet Yellen Honorable Charles Rettig
Secretary Commissioner
U.S. Department of the Treasury Internal Revenue Service
1500 Pennsylvania Avenue N.W. 1111 Constitution Avenue N.W.
Washington, D.C. 20220 Washington, D.C. 20220
Dear Secretary Yellen and Commissioner Rettig:
Our nation’s nonprofit charities, serving those in our community with the greatest needs, are struggling, now more than ever. Congress recognized this and, as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act (P.L. 116–136), included multiple tax adjustments designed to help them. Chief among the changes is a new $300 charitable deduction available to tax filers who take the standard deduction when filing their taxes for 2020, as opposed to itemizing their deductions. Even so, there are widespread news reports [1] that charities are still having difficulties contending with the ongoing COVID-19 pandemic, as the ensuing economic recession has simultaneously suppressed charitable giving while raising the community’s need for these organizations.
To address these challenges, thirty-three states offer tax credits that encourage charitable giving to certain causes. More than one hundred of these state charitable tax credits exist, providing support to services such as foster care in Arizona, constructing playgrounds in Louisiana, or developing affordable housing in Illinois. [2] Regrettably, the Internal Revenue Service’s rule entitled “Contributions in Exchange for State or Local Tax Credits” (RIN: 1545-BO89), published in the Federal Register as a final regulation on June 13, 2019, [3] places an unnecessary burden on states’ ability to offer tax credits for residents who donate to these charities. If Congress had intended to eliminate tax benefits for donors to these long-standing programs, language to do as much would have been included in P.L.115-97, the tax law enacted in December 2017. For this reason, I urge you to act swiftly to roll back this disastrous rule.
It is imperative that we work together to get our tax policy right and cut taxes for hard-working Americans as we continue to fight this pandemic. Given the level of need in this country, we should be trying to encourage charitable giving as much as possible to help those that need additional help. I look forward to your responses on this important matter.
Sincerely,
Josh Gottheimer
MEMBER OF CONGRESS
[1] https://www.wsj.com/articles/while-covid-19-donations-soar-other-charities-see-a-big-hit-to-funds-11596913200
[2] Bankman, Joseph and Gamage, David and Goldin, Jacob and Hemel, Daniel Jacob and Shanske, Darien and Stark, Kirk J. and Ventry, Dennis J. and Viswanathan, Manoj. “Federal Income Tax Treatment of Charitable Contributions Entitling Donor to a State Tax Credit.” UCLA School of Law, Law-Econ Research Paper No. 18-02; UC Hastings Research Paper No. 264.
[3] 84 Fed. Reg. 27513
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