LEGISLATIVE FISCAL ESTIMATE
SENATE, No. 2179
STATE OF NEW JERSEY
218th LEGISLATURE
DATED: MARCH 8, 2019
SUMMARY
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Synopsis: |
Allows gross income tax deduction for charitable contributions to certain New Jersey-based charitable organizations. |
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Type of Impact: |
Annual State revenue loss to Property Tax Relief Fund. |
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Agencies Affected: |
Department of the Treasury. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
FY 2020 and Thereafter |
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Annual State Revenue Loss |
Indeterminate |
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· The Office of Legislative Services (OLS) is unable to determine the exact magnitude of the State gross income tax revenue loss from the charitable contribution deduction provided in this bill, given the absence of information on contributions by New Jersey gross income taxpayers to qualified New Jersey-based charitable organizations. Subject to certain assumptions, however, the OLS estimates that the annual revenue loss could range from $215 million to $365 million.
BILL DESCRIPTION
This bill allows New Jersey gross income taxpayers to deduct from gross income charitable contributions they make to qualified New Jersey-based charitable organizations in taxable years beginning on or after the January 1 next following the date of enactment. The deduction is limited to the amount of charitable contributions that is allowable as a deduction from federal adjusted gross income.
The bill defines “qualified New Jersey-based charitable organization” as a charitable organization that is registered pursuant to the "Charitable Registration and Investigation Act," or an organization that is exempt from the registration requirements of that act, and that maintains an office, employs persons, and provides services in this State.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS is unable to determine the exact magnitude of the State gross income tax revenue loss from the charitable contribution deduction provided in this bill, given the absence of information on contributions by New Jersey gross income taxpayers to qualified New Jersey-based charitable organizations. Subject to certain assumptions, however, the OLS estimates that the annual revenue loss could range from $215 million to $365 million.
Internal Revenue Service (IRS) data indicate that 1.5 million New Jersey taxpayers claimed $6.7 billion in itemized charitable deductions on their federal tax year 2016 returns. But these data are of limited use for purposes of this estimate. For one, they do not comprise the entire New Jersey taxable return population, since more than half of New Jersey taxpayers do not itemize deductions on their federal returns. The IRS data also do not indicate whether deductions were to qualified New Jersey-based charitable organizations, as the term is defined in the bill.
Notwithstanding these limitations, assuming that three-quarters of the $6.7 billion in charitable contributions deducted at the federal level would be deductible at the State level if the bill were enacted, the potential pool of New Jersey taxpayer charitable contributions would approximate $5.0 billion. Multiplying that amount by effective tax rates of 3.5 percent and 6.0 percent yields an estimated State tax revenue loss of $175 million to $300 million per year. This range, however, does not account for taxpayers who make charitable contributions but do not itemize deductions on their federal returns.
Data included in “Giving USA 2018: The Annual Report on Philanthropy for the Year 2017” allows for an estimate of charitable contributions by taxpayers who do not claim itemized deductions on their federal tax returns. The report was produced by the Indiana University Lilly Family School of Philanthropy for the Giving USA Foundation. According to the report, charitable giving by American individuals, bequests, foundations, and corporations to United States charities equaled an estimated $410 billion in 2017. Giving by individuals represented approximately 70 percent of the total, or $287 billion. This amount is about 22 percent higher than the $235.7 billion taxpayers nationwide itemized on their federal income tax returns in tax year 2016. If that extra 22 percent is applied to the $175 million to $300 million range estimated above to account for charitable donations by New Jersey taxpayers who do not itemize deductions on their federal income tax returns, the range of the estimated annual State revenue loss increases to $215 million to $365 million.
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Section: |
Revenue, Finance and Appropriations |
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Analyst: |
Revenue Analyst |
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Approved: |
Frank W. Haines III Legislative Budget and Finance Officer |
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).