Time Sensitive Data Requiring Immediate Action – State Tax Credit Charities
Dear Clients and Friends,
Since the new tax law was enacted last December, which (among other things), limits one’s state & local tax deduction to $10,000 per year, taxpayers and states have been busy developing “workarounds”. While these workarounds have taken multiple forms, the most common has been the creation of a state approved charitable organization which qualifies donors for a 100% state tax credit and a federal charitable donation deduction. What a great way to reduce one’s state income tax liability while creating a deduction that is charitable rather than a state income tax deduction subject to the $10,000 overall limit.
We got a heads up in late May that the Treasury department intended to publish regulations quashing or limiting this practice. We got those regulations yesterday, which shockingly, eliminate most charitable deductions for which the taxpayer received a “quid pro quo” in the form of a state tax credit, effective for payments made after August 27th, 2018.
Based on our understanding of the regulations, charitable deductions for contributions to the Oregon Charitable Trust, the Oregon Opportunity Grant Fund, the Individual Development Account programs, and any other similar state tax credit charities, will be eliminated for payments made after August 27th.
The Oregon Department of Revenue just announced an auction for the Oregon Opportunity Grant Fund but the auction isn’t final until August 31st which means (presumably) that even if one (1) makes a bid; (2) has the bid approved; and (3) sends in a cashier’s check by Monday, the transaction will likely not be treated as effective until the date of approval. Frankly though, we’re not sure about this. If you are interested in placing a bid on these tax credits, it must be done today by 5pm. That’s not much time. Minimum bid is $475 per $500 certificate. More information is available here https://www.oregon.gov/DOR/pages/auction.aspx
The Oregon Cultural Trust donation, however, is different. If you want to contribute and think you’ll still be able to itemize deductions in 2018 under the new law, you should seriously consider making that contribution no later than Monday to receive the full benefit. Note – if you intend to contribute to the Oregon Cultural Trust after Monday, there are situations in which your overall tax bill could actually increase due to the contribution.
Because these regulations are proposed, it’s possible they won’t be finalized in their current form. In fact, there may be such an outcry from the public and from states, that the August 27th date may be delayed. That said, we can’t be sure.
Please contact us with any questions.
Zirkle, Long & Associates, LLC