NJ Politics Digest: IRS Takes Aim at State’s SALT Workaround

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President Donald Trump. Mark Wilson/Getty Images

Think you managed to preserve your federal tax deduction for state and local taxes? The IRS is warning that you’d better think again.

The tax agency warned Wednesday it was developing regulations to address efforts to allow people to get local tax credits for making “charitable” contributions to local governments, according to a report on northjersey.com. Those local efforts were prompted by changes in the Republican tax overhaul that limited deductions for state and local taxes to $10,000.

The IRS said Wednesday it is looking to close a loophole that allows the charitable credits for “taxes that the taxpayer is required to pay,” according to the report.
The tax agency warned that federal, not local law, applies when it comes to the federal income tax.

The tax credit scheme was inspired by the IRS allowing residents of other states to use such credits for things such as private school scholarships.
New Jersey politicians argue that the Republicans’ efforts to cap the state and local tax deductions are a political ploy aimed at Democratic states.

The report notes that the Tax Policy Center found that more New Jersey taxpayers will pay higher federal taxes this year as a result of the Republican tax plan than any other state.

Reaction to the IRS statement was split along party lines. Sen. Bob Menendez, a Democrat, said the Trump administration was using the IRS “as a political weapon to target New Jerseyans,” according to the report.
Menendez’s likely challenger in the November election, Republican Bob Hugin, said on Twitter that the state needs to take concrete steps to help its citizens.

“New Jerseyans don’t need gimmicks, they need real action,” said Hugin.

Quote of the Day: “We are not the problem.” — Patrick Colligan, president of the New Jersey State Policemen’s Benevolent Association, who points out most of his members are contractually barred from ecessively large sicktime payouts being targeted by proposed legislation.

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NJ Politics Digest: IRS Takes Aim at State’s SALT Workaround