Governor Murphy and Democratic legislative leaders in New Jersey say they’ll take whatever steps they can to challenge a proposed IRS rules change that could block the state’s workaround of the federal $10,000 cap on state and local tax deduction.
A state law enacted in response to federal tax code changes would allow resident to get a tax deduction for contributions to new charitable funds municipalities create to help pay for local services.
Assistant New Jersey Attorney General Jennifer Davenport says there doesn’t appear to be any sound or clear basis for the federal policy change that could upend that program.
“New Jersey’s approach is right under the law and it makes a lot of sense. And in the near future, we’ll be filing our formal objections to the proposed rule. And if IRS continues to refuse to change course, we will take them to court.”
Governor Murphy says the IRS is setting a dangerous precedent.
“They are saying that no matter what states may do, the rules as they exist and as they have been widely understood won’t apply because they’ll just change them if they don’t like what you’re doing. And it is absolutely regulatory overreach.”
Senate President Steve Sweeney says New Jersey officials are making a statement to Washington.
“New Jersey residents should be respected and treated fairly. This is an attack on us. We send far more than we get back. This isn’t fair and we are going to fix this one way or another.”
Assembly Speaker Craig Coughlin says the proposed IRS rules change isn’t fair.
“And we’re prepared to fight this as long as it takes in every form that it takes and ultimately to do whatever it takes to make sure New Jersey taxpayers are stuck up for.”
No municipalities in the state actually created a charitable deduction fund because they were awaiting the IRS ruling on whether that kind of arrangement was allowed.