In This Week's Edition of Snapshot…
- JCT Estimates Number of Itemizers Under New Tax Law
- IRS Issues Guidelines on New Opportunity Zones
- FEMA Seeks Youths
- Commerce Releases New Strategic Plan
- In the States: SALT Workaround Bills Advance
The Joint Committee on Taxation (JCT)—a nonpartisan committee of the U.S. Congress tasked with supporting the House and Senate tax-writing committees by providing expertise and analysis—released a updated analysis of the impact the new tax law will have on the number of taxpayers who itemize.
JCT estimates that the percentage of total taxpayers who itemize will decrease from 31% in 2017 to just 13% in 2018—with the number of taxpayers claiming the charitable deduction decreasing by more than half to just 17.2 million.
Earlier this month, the IRS issued guidelines for the nominating process for “opportunity zones”—a new program which was passed into law in late 2017 as part of the tax reform legislation. Opportunity zones are geographic areas designated using low-income community census tracts (a map of eligible communities can be found here), wherein exist tax incentives for investors that re-invest their unrealized capital gains into “opportunity funds.” Governors of every state may nominate up to 25% of the state’s low-income community tracts to receive the opportunity zone designation, and these nominations must be submitted by March 21, 2018.
Opportunity zone eligibility is based on the 2011-2015 American Community Survey (ACS) data through the Census Bureau. The Community Development Financial Institutions (CDFI) Fund launched a website to provide information about the designation process.
The Federal Emergency Management Agency (FEMA) is looking for young people to join the Youth Preparedness Council. According to an email from FEMA, “FEMA is seeking applicants for the Youth Preparedness Council, which brings together teens from across the country who are interested and engaged in community preparedness. Council members are selected based on their dedication to public service, their efforts in making a difference in their communities, and their potential to expand their impact as national leaders for preparedness. Students in 8th through 11th grade are eligible to apply.” Those interested in applying must do so no later than March 18, 2018, and new members will be announced in May 2018.
Earlier this month, the U.S. Department of Commerce released their strategic plan for 2018 – 2022. According to a blog by Sec. Wilbur Ross, “Knowing that innovation is a key driver of economic advancement, we are placing an increased emphasis on the commercial opportunities of space exploration and aquaculture while our scientists are conducting foundational research in areas ranging from artificial intelligence to quantum computing. Our patent professionals are also working to improve the protection of intellectual property so that creators can profit from their inventions. … To maintain America’s leadership in next-generation technologies, we are making important advances in data, cybersecurity, and encryption technology. Our economists and statisticians are improving Commerce data that American businesses and communities use to plan investments and identify growth opportunities. Every level of the Department will be engaged to ensure that we conduct the most accurate, secure, and technologically-advanced decennial census in history.”
The plan, titled Helping the American Economy Grow, sets out five goals to achieve over the five-year period: Accelerate American Leadership; Enhance Job Creation; Strengthen U.S. Economic and National Security; Fulfill Constitutional Requirements and Support Economic Activity; and, Deliver Customer-Centric Service Excellence.
Exclusive from our colleagues at the National Council of Nonprofits.
State lawmakers are aggressively promoting bills to relieve taxpayers of the effects of the $10,000 cap on federal itemized deductions of state and local tax (SALT) deductions enacted as part of the Tax Cuts and Jobs Act. Although the details of the bills vary, generally each would give taxpayers tax credits on their state or local taxes in exchange for contributions to tax-exempt organizations controlled by state or local governments while also allowing the taxpayers to claim charitable deductions on federal taxes.
The California Senate last month passed a bill sponsored by the Senate President that would provide a tax credit equal to 85 percent of the amount contributed to a state-run nonprofit. Legislators in Illinois, Nebraska, and Washington State have introduced bills to create state “excellence funds” that would provide dollar-for-dollar tax credits against the taxpayer’s tax liability while treating the payment as a charitable donation. An Illinois House committee passed and amended its bill to specifically focus on education. The Nebraska Senate Revenue Committee is set to hear its bill this week, and the bill in Washington State failed to meet legislative deadlines.
New York Governor Cuomo announced last week his intention to propose legislation to create two new state-operated Charitable Contribution Funds to accept donations for improving health care and education. Taxpayers who itemize deductions could claim these charitable contributions as deductions on their federal tax returns while receiving an 85 percent state tax credit in the subsequent year. As described, his bill would also authorize local governments to create similar charitable funds that provide property tax credits.
New Jersey lawmakers introduced and hastily advanced legislation on Thursday that would authorize local governments to set up organizations for specific purposes, such as police or schools, which residents could pay into and get credit toward their property taxes. Similarly, Connecticut Governor Malloy is looking to authorize municipalities to create charitable organizations and allow taxpayers to reclassify property tax payments as charitable donations.
The legislative proposals raise numerous questions ranging from the legality of such a tax workaround scheme to potential effects on donor and public behavior, blurring of lines between government and nonprofit independence, and funding for critical public programs. Some scholars have come out against the approaches while some nonprofit professionals are lending their support.