57-18 Exhibit - Urging State of New Jersey to Implement Charitable Trust in Lieu of Local Taxes Plan.pdf

FEDERAL  TAX  TREATMENT  OF  STATE  CHARITABLE  TAX  CREDITS     (apparently   Missouri)11  where   four   separate   programs   entitle   donors   to   state   tax   credits   with   unspecified   credit   percentages.   With   regard   to   each   of   the   four   programs   considered,   donors  may  contribute  cash  or  other  property.     The  legal  analysis  set  forth  in  the  2011  IRS  memo  is  straightforward.  The  memo   first   provides  an  overview  of  the  current  treatment  of  charitable  contributions  where  the  donor   receives   some   benefit   in   return,   noting   (consistent   with   the   analysis   above)   that   the   deduction  is  allowable  “only  to  the  extent  the  amount  transferred  exceeds  the  fair  market   value  of  the  benefit  received,  and  only  if  the  excess  amount  was  transferred  with  the  intent   of   making   a   gift.”12  Citing   judicial   holdings   in   McLennan   v.   United   States,13  Skripak   v.   Commissioner,14  and   Allen   v.   Commissioner,15  the   memo   reaffirms   the   well-­‐established   conclusion   that   the   “tax   benefit   of   a   federal   or   state   charitable   contribution   deduction   is   not  regarded  as  a  return  benefit  that  negates  charitable  intent,  reducing  or  eliminating  the   deduction   itself”   (emphasis   added).   In   addition,   citing   Browning   v.   Commissioner,16  the   memo   observes   that   the   value   of   the   deduction   “has   not   been   treated   as   an   item   of   income  under § 61,  in  the  form  of  an  amount  realized  on  the  transfer  under  § 1001.”17       In  each  of  the  court  cases  cited  in  the  memo,  the  value  of  state  tax  deduction  is  not   treated   as   a   payment   from   the   state   or   as   property   received   from   the   state   but   rather   as   a

te  tax  deduction  is  not   treated   as   a   payment   from   the   state   or   as   property   received   from   the   state   but   rather   as   a   reduction,  or  potential  reduction,  of  state  tax  liability.  In  other  words,  where  a  charitable   gift   entitles   the   donor   to   a   state   charitable   contribution   deduction,   the   Full   Deduction   Rule   applies   and   the   donor   is   not   required   to   reduce   the   amount   of   the   federal   charitable   contribution  deduction  under  Treas.  Reg.  Sec.  170A-­‐1(h)(2)(i)(B).                                                                                                                             11  While   Missouri   is   not   named   in   the   memorandum,   the   addressee   is   the   associate   area   counsel   in   Kansas  City,  and  Missouri  has  several  tax  credit  programs  that  match  the  descriptions  in  the  memo.   See  Mo.  Dep’t  of  Revenue,  Miscellaneous  Tax  Credits,  http://dor.mo.gov/taxcredit  (last  visited  Jan.   2,  2017).   12  CCA  201105010,  p.4.   13  23  Cl.  Ct.  99  (1991),  subsequent  proceedings,  24  Cl.  Ct.  102,  106  n.8  (1991),  aff’d,  994  F.2d  839   (Fed.   Cir.   1993)   (noting   that   “a   donation   of   property   for   the   exclusive   purpose   of   receiving   a   tax   deduction  does  not  vitiate  the  charitable  nature  of  the  contribution).”   14  84   T.C.   285,   319   (1985)   (noting   that   “a   taxpayer's   desire   to   avoid   or   eliminate   taxes   by   contributing  cash  or  property  to  charities  cannot  be  used  as  a  basis  for  disallowing  the  deduction   for  that  charitable  contribution”).   15  92   T.C.   1,   7   (1989)   (noting   that   “a  

 as  a  basis  for  disallowing  the  deduction   for  that  charitable  contribution”).   15  92   T.C.   1,   7   (1989)   (noting   that   “a   taxpayer's   desire   to   avoid   or   eliminate   taxes   by   contributing   cash   or   property   to   charities   cannot   be   used   as   a   basis   for   disallowing   the   deduction   for   that   charitable  contribution”).   16  109  T.C.  303,  325  (1997)  (“Respondent's  argument  suggests  that  a  taxpayer  making  a  gift  of  stock   worth  $100  to  a  charitable  organization  may  be  entitled  to  a  charitable  contribution  deduction  of   some   lesser   amount   on   account   of   the   economic   value   of   the   deduction.   That   suggestion   is   untenable.  The  regulations  provide  explicitly  that,  if  a  charitable  contribution  is  made  in  property,   the  amount  of  the  contribution  is  the  fair  market  value  of  the  property.”)   17  CCA  201105010,  p.4.   5