S2179 —

S2179 SBAFiscal StatementEstimate 3/4/19 SENATE BUDGET AND APPROPRIATIONS COMMITTEE   STATEMENTLEGISLATIVE TOFISCAL  ESTIMATE SENATE, No.

 2179 STATE OF NEW JERSEY 218th LEGISLATURE   DATED:

 MARCHMARCH 4,8, 2019          TheSUMMARY Senate  BudgetSynopsis: and Appropriations Committee reports favorably Senate Bill No.

2179.Allows gross income tax deduction for charitable contributions to certain New Jersey-based charitable organizations.

     Type Senateof BillImpact: No.

2179Annual allowsState arevenue Newloss Jersey gross income tax deduction for charitable contributions that are made to certainProperty NewTax Jersey-basedRelief charitableFund. organizations to encourage philanthropic giving to Garden State charities.

     Agencies TheAffected: bill allows a New Jersey gross income taxpayer to deduct from gross income the contributions made by the taxpayer during the taxable year to a qualified New Jersey-based charitable organization.  The bill provides that the amount of the deduction is limited to the amount allowable as a deduction from federal adjusted gross income by the taxpayer for the federal taxable year pursuant to section 170 of the federal Internal Revenue Code.

     Department Theof bill provides that the NewTreasury. Jersey gross income tax deduction mirrors the federal income tax deduction for charitable contributions, and is allowed without regard to whether the federal itemized deduction is taken by the taxpayer.

    Office of Legislative Services Estimate Fiscal Impact FY 2020 and Thereafter   Annual State Revenue Loss Indeterminate         ·         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  billFISCAL takesANALYSIS effect  immediatelyEXECUTIVE uponBRANCH enactment  and      appliesNone toreceived. charitable contributions that are made in taxable years beginning on or after the January next following the date of enactment.

  FISCAL  IMPACT: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.

      TheInternal OfficeRevenue ofService Legislative(IRS) Servicesdata (OLS)indicate isthat unable1.5 tomillion determineNew theJersey exacttaxpayers magnitudeclaimed of$6.7 thebillion Statein grossitemized incomecharitable deductions on their federal tax revenueyear loss2016 fromreturns.  theBut charitablethese contributiondata deductionare providedof inlimited use for purposes of this bill,estimate.  givenFor theone, absencethey ofdo informationnot oncomprise contributionsthe byentire New Jersey grosstaxable incomereturn taxpayerspopulation, tosince qualifiedmore Newthan Jersey-basedhalf charitableof organizations. New SubjectJersey totaxpayers certaindo assumptions,not however,itemize thedeductions OLSon estimatestheir thatfederal thereturns.  annualThe revenueIRS lossdata couldalso rangedo fromnot $215indicate millionwhether deductions were to $365qualified million.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.

  Section:

Revenue, Finance and Appropriations Analyst:

Jordan M.

DiGiovanni Revenue Analyst 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.).