Financial Facts

September 20, 2018

Under proposed regulations issued by the IRS, transfers to a state agency or charitable organization in lieu of paying state and local taxes would be deductible as a charitable contribution only to the extent that the taxpayer making the donation did not receive a quid pro quo. Contributions that result in a state or local tax credit in return for a contribution would not be deductible for federal tax purposes to the extent of the credit. Contributions that result in a state or local tax deduction may be deductible for federal tax purposes.

The proposed rules outline the history of the IRS’s and courts’ positions on whether a donor has received something of value in return for the charitable contribution in which case the deduction under Sec. 170 must be reduced or eliminated.

VACo Contact: Vicky Steinruck

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