LOS ANGELES — California legislation would allowing state taxpayers to "donate" income taxes to the state to evade the $10,000 cap on state and local deductions in the GOP’s recently passed tax bill.
“The Republican tax plan gives corporations and hedge-fund managers a trillion-dollar tax cut and expects California taxpayers to foot the bill,” said sponsor Kevin De Leon, Senate president pro tempore and a Los Angeles Democrat. “We won’t allow California residents to be the casualty of this disastrous tax scheme.”
Senate Bill 227, the Protect California Taxpayers Act, would allow taxpayers to make a charitable donation to the California Excellence Fund, and in return receive a dollar-for-dollar tax credit on the full amount of their contribution.
The first $10,000 would be handled as it was prior to the GOP tax bill, but taxpayers would have the option of making a charitable donation to the state for the remainder.
Money from the fund would just go into the general fund to pay for state operations.
Ratings analysts have said the elimination of state and local deductions could harm high tax states.
The legislation capitalizes on the fact that the GOP bill didn’t limit deductions for charitable donations.
Six million California representing one-third of taxpayers in the state itemized deductions on their tax returns, claiming an average of $18,438 for state and local taxes, according to De Leon. The measure would allow taxpayers to deduct their contribution to the Fund from their federal taxes, as they have historically done with their state tax payments.
SB 227 is modeled after laws De León authored in 2014, SB 798 and SB 174, which provided tax credits on charitable donations made to state college affordability grants, like the Cal Grant program.
Seventeen states use the model to fund private education.
Under the bill, the treasurer would establish a procedure for the public to make contributions to the fund and then taxpayers could obtain a certification from the treasurer for the credit allowed. The bill would require the treasurer to provide the franchise tax board a copy of the certifications issued.
Senators Ben Allen, D-Santa Monica, and Jerry Hill, D-San Mateo, co-authored the bill.
“This legislation will protect Californians from losing money as a result of the federal tax ripoff,” said Hill, adding that the measure, “will help many of my constituents and residents all over the state.”