Opposing view: Let residents cope with the new tax policies

The IRS recently announced plans to make it harder for states to encourage individuals to donate to charities. As the attorney general for New Jersey, a state that embraces incentives for charitable programs, I think that’s a bad idea — and it goes beyond the IRS’ power. It also makes it more difficult for my state’s residents to cope with the backward tax policies the federal government imposed on us last year.

New Jersey recently joined other states in providing taxpayers with the option to make charitable contributions to their local governments, and to get a 90 percent property tax credit if they do. Now the IRS is saying: Not so fast. If someone gets tax credits in return for donations, the IRS will no longer treat them as “charitable.”

But here is what the IRS is leaving out: At least 33 states have 100 programs under which taxpayers get credits for the donations they make to state and local governments and nonprofits. And that is a good thing, because these programs encourage taxpayers to support natural resource preservation, hospitals, schools, domestic violence victims and more. If tax incentives encourage individuals to donate, that is cause for celebration, not protest.

What troubles me most, however, is that the IRS plans have no basis in law. Courts have explained that individuals are entitled to deductions for charitable donations even if they get a state benefit in return. The federal tax deduction for charitable donations is the perfect example — the deduction is a financial benefit that taxpayers get, but it doesn’t undermine the donor’s charitable intent. Credits are no different.

Even the IRS has previously agreed. In 2011, its Office of Chief Counsel issued guidance agreeing that payments to governments and charities are deductible, even when they entitle the taxpayer to a tax credit. Continuity and predictability are essential to sound tax policy, and the IRS has no reason for changing course now.

The IRS should drop its plans to upend 100 state incentive programs.