Will NJ create a tax deduction to reward charitable giving?
David Levinsky @davidlevinsky
Legislation to create a New Jersey deduction for charitable donations hasn't received the same attention as some other measures being considered by lawmakers during the current lame-duck session, but nonprofit advocates say they're still pushing for its passage.
TRENTON — Thousands of New Jersey nonprofits are hoping that the season's holiday spirit moves people to give to more than just friends and loved ones.
On Giving Tuesday, they're also wishing residents' generosity extends to their organizations and the missions they perform, and they're advocating that those New Jersey residents who do make donations can receive a little something back in return: a deduction on their state income taxes.
A bill to enact the deduction was already approved by the Senate in March but it has not moved in the Assembly, where it is still pending before that chamber's Budget Committee. Advocates are hoping it might get a hearing soon so that the Assembly can consider it before the lame-duck ends.
"We're definitely still pushing it and trying to get it done during the lame-duck," said Doug Schoenberger, government affairs specialist for the Center for Nonprofits.
Unlike the federal tax code, which allows taxpayers who itemize to deduct charitable contributions to qualifying nonprofits, New Jersey doesn't allow residents to write off such donations from their state income taxes.
The legislation to create a state deduction for such gifts would largely mirror the federal one only the deduction would be restricted to contributions to New Jersey-based nonprofits.
Legislation to create the deduction has been kicked around by lawmakers for over a decade without ever becoming law but supporters believe it has a better chance now due to federal tax law changes, which have limited how much residents can deduct for their state and local taxes.
The federal government's $10,000 cap on those deductions has forced some New Jersey residents to pay higher federal taxes, leaving them less discretionary money to give to charitable causes. Supporters argue that a state deduction will both encourage them to give to New Jersey groups and help ease their tax pain.
Also, because the federal tax law increased the standard deduction, fewer taxpayers itemize on their returns, advocates say, giving them less incentive to donate to nonprofits, at the same time that demand for their services and programs has increased.
Schoenberger said creating a New Jersey deduction would provide a reward for taxpayers who help fuel the good work they do. It will also help keep thousands of of New Jersey workers employed.
"It provides tax relief for New Jersey citizens and it's also a work bill since 10% of the workforce is employed by nonprofits," Schoenberger said Monday. "(A state deduction) could help out a lot of people across the (income) strata."
The Assembly Budget Committee is expected to meet on Dec. 9 but it's still unknown what bills the panel might consider.
A source familiar with the Assembly's legislative agenda said the charitable deduction bill is believed to be "still in the mix" for advancement during the lame-duck session. However, it's not clear where it might stand compared to other priorities.
Legislation that fails to reach the governor's desk before the session ends in mid-January must be reintroduced during the new session and advanced again through committees.
It's also unknown whether Gov. Phil Murphy is likely to sign the charitable deduction bill if it makes it to his desk. Though Murphy has been an outspoken critic of the federal government's cap on the state and local taxes deduction, he has not commented publicly about creating a new deduction for in-state charitable donations.
A fiscal note prepared by the Office of Legislative Services estimated that the state could lose between $215 million to $365 million if the deduction is enacted.
That's no small sum for a state with finances that are already strained by pension and health care bills, as well as other obligations, such as increasing funding for public schools and NJ Transit and other Murphy initiatives, such as expanding pre-school programs and making community colleges tuition-free.
Supporters have argued the economic benefits from creating the deduction outweigh its expense. In fact, creating the deduction was among the recommendations put forward by the Economic and Fiscal Policy Workgroup, a bipartisan task force of lawmakers, economists and tax experts formed by Senate President Stephen Sweeney last year to review the state's finances and tax laws.