Lawmakers want to add New Jersey to list of states that allow state income-tax deduction for charitable giving

With New Jersey’s charities being leaned on heavily during the coronavirus pandemic, a bipartisan tandem of lawmakers is looking to boost the finances of nonprofit organizations by offering a tax incentive to their donors.

In recent days, Sens. Tom Kean (R-Union) and Troy Singleton (D-Burlington) have introduced a bill that would allow those who make a donation during the pandemic to deduct the amount from their state income taxes.

If enacted, New Jersey would join — at least on a temporary basis — a long list of states that already allow some form of a state-level tax deduction to encourage charitable giving, just as the federal government does.

New Jersey residents who donate during the pandemic wouldn’t see any tax benefits until next year. But the bill could provide a big boost for the charities right away as they meet a soaring demand for services.

“There are a lot of charities out there that are aggressively helping people in every area that people are focused on right now,” Kean said. “The impact in a positive way for the charities happens now.”

“This is really trying to influence behavior, trying to tell folks to put some money out there for these folks, and these organizations,” Singleton said.

Needed help in a state that’s reeling

New Jersey has been hit hard by the still-unfolding pandemic, trailing only neighboring New York in reported COVID-19 infections and fatalities.

New claims for unemployment benefits have also surged in New Jersey as strict social-distancing measures ordered by Gov. Phil Murphy to slow the rate of infections have shut down many businesses that have been deemed “nonessential.”

Not surprisingly, the demand for services provided by food banks, food pantries, and other charitable organizations has increased across the state, even as some individuals and companies could be cutting back on charitable giving to help ease their own economic hardships.

The idea behind the new state tax break would be to help keep the funding flowing to charitable organizations at a time when the demand is at its peak and people sitting at home are wondering what they can do to help their own communities and neighborhoods.

“So many folks want to be helpful,” Singleton said.

“They understand the charities in their neighborhoods, in their zip codes, are really doing a good job in real time,” Kean said.

Looking to allow deductions permanently

The two lawmakers have tried during more normal times to establish a state-level tax break for charitable giving, arguing that New Jersey should join a big group of states, including neighboring New York and Delaware, that already do so,

But prior bills have never made it across the finish line, in part due to concerns about how the proposed tax break could impact the state’s perennially tight finances. In fact, some prior estimates have pegged the potential cost of the tax break at over $300 million a year.

With the coronavirus now putting the state budget under even more strain, the lawmakers’ latest proposal calls for the size of the tax benefit to be capped on an annual basis at $20,000 for a married couple filing jointly, and $10,000 for single filers.

The tax break would also only apply to charitable contributions that are made during a publicly declared health emergency in New Jersey, and only for donations given to a “qualified New Jersey-based charitable organization.” To meet that definition, the organization must be registered pursuant to the “Charitable Registration and Investigation Act,” or be exempt from its registration requirements, and maintain an office, employ persons, and provide services in this state, according to the bill.

Singleton said as much as 10% of the state’s total private-sector workforce is employed by nonprofit organizations, which he suggested provides even more reason to support the tax break amid the broader economic struggles brought on by the pandemic.

He also said the deduction, if established on a temporary basis, could function like a pilot program to help demonstrate how providing a boost to charitable giving could benefit New Jersey more broadly going forward.

“This is something that should be done with permanency,” added Kean.

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