Monday, July 5, 2010
As states continue to grapple with revenue shortfalls and other budgetary challenges, some are looking to reduce or cap individual taxpayers' deductions for charitable contributions.
Hawaii: Governor Linda Lingle vetoed a tax bill on Thursday, July 1, 2010 that would have placed a temproary cap on individual taxpayers' itemized deductions for state income tax purposes until the year 2016. Such a cap would have limited taxpayers' deductions for home mortgage interest, state taxes paid, unreimbursed job-related expenses, and charitable contributions. The Governor specifically noted that tax-exempt organizations' concern that the proposed cap would have affected their ability to raise funds. "It is a de facto tax increase that will adversely hurt certain individuals and businesses at a time when we should be encouraging investment and spending to recharge the economy," Lingle explained to Hawaii lawmakers in a separate letter.
New York: As previously blogged, Governor David Paterson and the state legislature appear to have agreed on a budget proposal that would restrict the charitable contributions deduction of approximately 3,500 New York taxpayers with more than $10 million in annual earnings to only 25 percent of their charitable contributions rather than the current 50 percent.