Upcoming IRS rules could chill these tax credit programs

A main point of contention among tax experts is whether these programs are similar to the new plans sprouting in New York and New Jersey.

“None of these [existing] programs were designed as ways to reduce federal tax liability,” said Jared Walczak, senior policy analyst at the Tax Foundation. “They are intended to promote giving, and the tax deductions weren’t capped when they were created.”

A key distinction is whether the contribution is made to provide a charitable benefit or paid in lieu of a tax.

“Any payment made in satisfaction of a liability is considered a tax payment,” Walczak said.

Rosen of Baker & McKenzie, however, said that it’s difficult to draw a legal distinction between the new SALT workarounds and plans that already exist.

He said that the tax code considers two points when it comes to charitable contributions: Is the organization entitled to receive charitable contributions? Did the donor receive something of value in exchange for the donation?

“If you have an old car in your driveway and you hear an ad for Kars for Kids, then you just want to get rid of the car,” Rosen said. “You don’t need to have a charitable intent to make the contribution.”