Tax Cuts for NJ & NY Families

WASHINGTON, D.C. — Today, June 3, 2022, Members of Congress sent a letter urging the U.S. Treasury Department and the Internal Revenue Service (IRS) to help save middle class families on their taxes by reinstating the ability for taxpayers to make charitable donations to their towns and receive a tax credit on their local tax bills. The letter is led by Congressman Josh Gottheimer (NJ-5), joined by Congresswoman Mikie Sherrill (NJ-11) and Congressman Tom Suozzi (NY-3).

In light of the disastrous 2017 cap on the State and Local Tax (SALT) deduction, the charitable tax deduction helped restore 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.

“The 2017 Tax Hike Bill (P.L.115-97) inadvertently reduced the incentive to make charitable donations by capping the State and Local Tax deduction and by reducing the number of taxpayers that itemize their tax filings. In the wake of the unfair SALT cap, many states sought to provide relief to their taxpayers by allowing them to make charitable donations to alleviate the new tax burden placed on them by Washington. In response to these state initiatives, the IRS issued a rule…which had the perverse effect of further limiting the incentive to make charitable donations,” the Members wrote in a letter to Treasury Secretary Yellen and IRS Commissioner Rettig. “If Congress had intended to eliminate tax benefits for donors to these long-standing programs, language to do so would have been included in P.L.115-97. For this reason, we urge you to act swiftly to roll back this disastrous rule.”

Thirty-three states offer tax credits that encourage charitable giving to certain causes, and the IRS rule unnecessarily restricts the ability of states to incentivize charitable donations to support local services. 

More than one hundred state charitable tax credits exist, supporting services such as foster care in Arizona, the construction of playgrounds in Louisiana, and the development of affordable housing in Illinois.

Read the full text of the letter here and below.

​​June 3, 2022

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:

As Americans struggle with rising costs and sustained economic turmoil caused by the COVID-19 pandemic, we encourage you to take immediate action to support nonprofit charities. Charities depend on donations to sustain their activities that often benefit the most vulnerable members of our communities. The 2017 Tax Hike Bill (P.L.115-97) inadvertently reduced the incentive to make charitable donations by capping the State and Local Tax (SALT) deduction and by reducing the number of taxpayers that itemize their tax filings. In the wake of the unfair SALT cap, many states sought to provide relief to their taxpayers by allowing them to make charitable donations to alleviate the new tax burden placed on them by Washington. In response to these state initiatives, the IRS issued a rule, the “Contributions in Exchange for State or Local Tax Credits” (RIN: 1545-BO89), which had the perverse effect of further limiting the incentive to make charitable donations.

We ask you to support state-led efforts to increase charitable giving by repealing the Internal Revenue Service’s rule, published in the Federal Register as a final regulation on June 13, 2019.  Thirty-three states offer tax credits that encourage charitable giving to certain causes, and this rule unnecessarily restricts the ability of states to incentivize charitable donations to nonprofits. More than one hundred state charitable tax credits exist, supporting services such as foster care in Arizona, the construction of playgrounds in Louisiana, and the development of affordable housing in Illinois.  If Congress had intended to eliminate tax benefits for donors to these long-standing programs, language to do so would have been included in P.L.115-97. For this reason, we urge you to act swiftly to roll back this disastrous rule.

Congress and the Administration must work together to improve our tax code and cut taxes for hard-working Americans. As we recover from the pandemic, we should encourage charitable giving as much as possible to help those in need. Thank you for considering our request. We look forward to your responses on this important matter.

Sincerely,

MEMBERS OF CONGRESS

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