Skip to comments.California Proposes Dodgy State-Run Charity Scheme
Posted on 01/12/2018 10:25:45 PM PST by Oshkalaboomboom
The California state Senate is currently considering a bill that would devolve many of the states responsibilities to a state-sponsored charity.
The Republican tax plan that passed late last year abolished many deductions, including one that allowed taxpayers to deduct state and local income taxes from their taxable income. The result will be that residents of high-tax states will begin to feel the financial burden of their states taxes.
But while state and local income taxes are no longer deductible, charitable contributions are. As as a result, the California State Senate is currently considering SB 227, the Protect California Taxpayers Act, which would allow taxpayers to make charitable donation to the California Excellence Fund [a state-run charity], and in return receive a dollar-for-dollar tax credit on the full amount of their contribution, according to the office of president pro tempore and co-author of the bill, state Senator Kevin de Leon.
The Republican tax plan gives corporations and hedge-fund managers a trillion-dollar tax cut and expects California taxpayers to foot the bill, said de Leon. We wont allow California residents to be the casualty of this disastrous tax scheme.
In effect, the bill would disguise state taxes as a charitable contribution, which its proponents contend would make them tax deductible. The charity would perform public services normally performed by the state of California.
The bill is quite vague on which services would be performed by the state and which would be performed by the charity, specifying these charitable services only as public services as specified [by] the Internal Revenue Code, relating to charitable, etc., contributions and gifts.
While the donations to the California Excellence Fund would technically be voluntary, California residents would be financially penalized for not donating.
The bills proponents assert that it is similar to Californias College Access Tax Credits, which gave taxpayers a partial credit on their state taxes, and a charitable deduction on their federal taxes, in exchange for contributions to university grant programs The IRS has yet to issue a formal decision on whether it intends to treat these contributions as charitable deductions for assessing federal tax liability.
While several memoranda from the IRS chief counsel have been issued allowing similar state programs in the past, these memoranda are merely directives to local IRS offices, are not legally binding, and cannot be cited as legal precedent.
Overall, it is unclear whether even this program was permitted under federal law. The IRS does not typically allow taxpayers to receive reimbursement for charitable contributions, which is exactly what the bill proposes. If the provisions of the bill were to come into effect, residents of states like California would effectively circumvent the elimination of the state and local income tax deductions entirely.
My state income tax and property taxes are well beyond the $10,000 limit even in Idaho. The $24,000 standard deduction for married might well be a net "win" over SALT deduction. I haven't had the option of not itemizing in 40 years.
The moment the contributor receives a state tax credit for his contribution, that credit amount has to be deducted from his contribution amount and then its only the NET charitable contribution that may be federally deducted. In other words, zero fed deduction under this proposed silly scheme. This has been fed tax law for longer than I can remember. All the Sacramento political hacks are doing is political posturing. They cant save their taxpayer/contributors one red cent this way and they know it.
As a conservative Californian, I really do hope the RATs here try this and get their tit in a wringer with the Feds. Brown is on his way out, so this could lead to someone other than Any Twosome Newsom becoming governor.
We sure could use a good one for a change. We haven’t really had anything but a succession of dog turds since Ronald Reagan.
Residents of California would be free to pay state income tax with the new tax deduction limits. Or they could contribute to this bogus charity, collect a partial credit on their state tax and write the contribution off on their federal tax as a charitable contribution.
If there is no option NOT to pay either one, then it is a tax under a different name. I doubt if the IRS will allow it.
Also continuing the process of marginalizing religious charities and replacing them with “government charity”. The Church lost its soul when it supported government programs that eventually destroyed the infrastructure of hospitals, schools, etc. that early Catholics had built. Here in NJ the government basically put the Church out of business - with the support of the Church hierarchy.
I calculated my income taxes due as $12,000 and then paid with a donation of $5 to the charity.
What do you mean.....mandatory donation. If it’s mandatory, it’s not a charity. Plus, I gave to charity at church.
Would the IRS let us decide what we could consider a “charitable gift?” Of course not. So CA certainly should not be allowed to skirt tax laws either.
That approach keeps my employer from making a charitable donation to my "charity", who then donates the money to me, so that everyone gets a tax free income / deduction. I'm sure that, being politicians, they are by definition too stupid to understand that.
Only lawyers could devise such sophistry.
If payment is compulsory, it is a tax.
It’s my take this won’t even be formally enacted.
It would last just long enough to get into court. If they rigged the case to be tried by a Leftist judge, it would last through that, through the 9th Circuit Court of Appeals and finally be stricken down by the SCOTUS, the first sound court that would hear it.
Of course we never know about Sparky Roberts. I can easily see him ruling it isn’t a tax.
Maybe by that time Trump will get at least one SCOTUS pick.
That would be nice.
In his seven more years, he should get enough to protect us from the court for another 30-70 years, perhaps even more.
I know 70 years seems like a long time what with the normal life-span, but other cases will be judged by the rulings of Trump’s court, and those will be referenced decades beyond Trump and his appointments.
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