Wednesday, September 12, 2018
Kirk Stark (UCLA) presents State Charitable Tax Expenditures Before and After the TCJA at Minnesota as part of its Perspectives on Taxation Lecture Series hosted by Kristin Hickman:
Many states have long provided 100% tax credits for gifts to certain state-designated transferees, while other states recently have enacted similar but less generous credits for gifts to state-established funds. Both types of credits raise the question whether a donor may claim a full charitable contribution deduction for such gifts or instead must reduce the deduction amount by the value of the state tax savings arising from the gift. If a full deduction can be claimed despite the state tax savings, as the IRS has long allowed, then donors can effectively convert nondeductible taxes to deductible gifts.
The answer to this question implicates one of the main sources of revenue under TCJA—the new $10,000 deduction limitation on state and local taxes—potentially jeopardizing several hundred billions dollars of expected federal revenue. The IRS is pursuing rulemaking on this topic, while advocates for state programs potentially affected by these regulations are positioning themselves to respond to potentially adverse guidance.