Charitable Contribution Law
Governor Murphy signed into law S-1893 which allows local governing bodies to establish a charitable fund and permit property tax credits in association with certain donations. The law requires regulations concerning these charitable funds to be promulgated by the New Jersey Departments of Community Affairs, Treasury, Education and Banking and Insurance. To date, regulations have not been finalized. In addition, at the Federal level, the Treasury Department and the IRS have publicized that regulations will be forthcoming addressing the federal tax treatment of contributions made to these local charitable funds. The Township will provide notification to local taxpayers once the regulations from the various State agencies are made available. We will also relay any information publicized by the Federal Treasury Department or IRS on this subject.
AUGUST 27, 2018 UPDATE: The IRS has published a notice of proposed rulemaking and notification of public hearing regarding contributions in exchange for State or Local tax credits. The proposed regulations will assist taxpayers in understanding the relationship between the federal charitable contribution deduction and the new limitation on the deduction for state and local tax payments.
The Treasury Department and the IRS believe that when a taxpayer receives a tax credit in return for a contribution, the receipt of this tax benefit constitutes a quid pro quo that may preclude a full deduction. Please read the IRS Notice of Proposed Rulemaking below for further information.
NOVEMBER 20, 2018 UPDATE
Following the passage of the “Tax Cuts and Jobs Act of 2017”, the State of New Jersey adopted P.L. 2018, c.11 (LINK below) which provides a vehicle for local taxpayers to make charitable donations and receive property tax credits.
On August 27, 2018, the IRS published a Notice of Proposed Rulemaking: “Contributions in Exchange for State or Local Tax Credits”, raising serious questions about the legality of New Jersey’s new law (LINK below).
The State of New Jersey has since announced plans to institute a legal challenge to the IRS concerning its stated position.
The Township has reviewed guidance issued by the State of New Jersey and consulted with State officials and professional organizations. At this time, in light of the uncertainty surrounding this issue, New Jersey municipalities are in a holding pattern awaiting further clarification concerning the legality of accepting and applying charitable donations to property tax liabilities.
We will continue to keep you posted as new information becomes available.
For additional information: