As Representative Josh Gottheimer (CD 2) said, “The Trump [and Congress] Tax Hike bill bill took a two-by four to the State of New Jersey, gutting the State And Local Tax (SALT) deduction, sharply limiting NJ’s property tax deduction and imposing a massive Tax Hike on Jersey family and business.” It capped the federal IRS tax deduction at $10,000 on local property, income and sales taxes. In our state many residents routinely deduct considerably more. As a result, estimates indicate that one in ten NJ households will see an increase in their federal taxes.
Governor Murphy championed, and our Legislature passed, bill (S1893) in February allowing municipalities to establish charitable funds where tax-payers can donate in return for a property tax deduction. The new law “directs the State Treasurer and DLG’s to adopt immediately such rules and regulations necessary to effectuate the bill.” Unfortunately, these NJ rules and regs are not yet available, and we are running out of time in order to have any impact on current year taxes.
The IRS has also failed to issue any clear ruling as to whether it will accept this SALT charitable contribution program. Nonetheless, there are currently 30 similar tax credit program in 22 other states where the IRS has accepted the framework.
Neither the State nor any municipality in New Jersey has yet to implement the plan. The Teaneck Municipal Council in its meeting this week appeared supportive with Councilman Keith Kaplan explaining the benefits both on our federal and state tax returns. Teaneck Township Manager William Broughton has attended a meeting on the matter and will continue to pursue it. However, he expressed concern over the lack of state regs and the myriad details/complexity of the program in terms of deciding which groups the municipality would fund and by how much, how/when to pay the groups, and how/when to credit homeowners property tax accounts. Mayor Mohammed Hameeduddin summed up the matter saying, we are conceptually in favor but the devil is in the details and the need is not being able to be sued by homeowners who might be impacted negatively.
The State should implement the regs expeditiously. With so many other states already operating similar plans under approval of the IRS, it seems unlikely the IRS will disapprove this SALT version. Municipalities are champing at the bit. Tax payers, angry at how unfair the regulations are to a high-state tax system, are eager for relief.
In an Addams family movie the chilly Wednesday Addams says, “Please pass the salt.” Morticia responds, “And what do we say?” Wednesday answers, “NOW.”