From the Star Ledger:
The state Senate began its work Thursday devising a way to prevent New Jersey taxpayers from losing a popular property tax break as a result of federal income tax reform.
Following the mold of other high-tax states looking to skirt the new $10,000 cap on state and local tax deductions taxpayers can claim, the state Senate Budget and Appropriations Committee advanced a bill allowing municipalities to set up charitable funds to substitute donations for property tax payments.
Under the scheme, taxpayers would make donations to the charitable fund and receive a credit against their property tax bill. They could in turn claim the payment as a charitable contribution, which is not subject to a cap.
It’s a maneuver championed by Gov. Phil Murphy, a Democrat who urged the Democratic-controlled state Legislature to act.
While local officials don’t have to wait for the state to pass a law before establishing charitable support funds, Murphy said he believed they would be on stronger footing with it.
The bill would give property owners a 90 percent tax credit — ostensibly to stand up to IRS scrutiny — for their contribution to the town, county or school district’s charitable support fund. And if an owner’s tax credits exceed their net property taxes owed, the fund would roll the credits forward for up to five years.
State Sen. Steve Oroho, R-Sussex, warned state lawmakers may be sending taxpayers down a risky path, as it’s unclear whether the Internal Revenue Service will bless these moves, which resemble a quid pro quo.
“The way the charitable contributions work is you’ve got to give something and get nothing in return,” Oroho said. “I’m not really sure how we can argue that you’re not getting anything in return.”
In fact, U.S. Treasury Secretary Steven Mnuchin last month called the idea, also considered by California, “ridiculous.”