August may feel like a slow month, but issues at the federal level just keep coming. In the last few weeks, we’ve written about the serious pending attack on the Johnson Amendment’s protection of nonprofits’ nonpartisanship, and the new federal tax law’s damaging provisions on nonprofit tax liability for unrelated business income and transportation benefits. These still hang over us and we continue to need your help.
This past Monday, the U.S. Treasury published a Notice of Proposed Rulemaking that would amend regulations on charitable contributions in response to state or local laws that allow “tax credits” for contributions that are essentially in place of taxes. This would provide a way for taxpayers to "circumvent" the tax bill’s new $10,000 cap on deductions for state and local taxes. As the Treasury’s Notice describes the regulations, "if a taxpayer makes a payment or transfers property to [a 501(c)3 organization] and receives a state or local tax credit in return for such payment, the tax credit constitutes a return benefit” and reduces the charitable contribution deduction.
While Maryland has not adopted a tax credit to circumvent the effect of the federal tax bill, the proposal would negatively impact the incentive of at least some donors who might plan to contribute under the new “Endow Maryland” or the longstanding “Community Investment Tax Credit” programs. In most cases, it would not apply to state "tax deductions" or to tax credits not exceeding 15%. Comments are being accepted electronically through October 11, as well as requests to speak at a hearing on November 5.
Please share with us with any comments you plan to submit or information on how this change may affect your nonprofit. Maryland Nonprofits plans to submit comments and work with partners to create a sample comment for others to use – but the number of separate comments submitted does make a difference, and your input is critical.
Thursday, August 30, 2018