LIVINGSTON, NJ — In order to protect New Jersey taxpayers from an increase in the federal income tax as a result of the Trump Administration’s cap on the state and local tax deduction (SALT), Gov. Phil Murphy signed a law last week that will allow municipalities to establish charitable funds where taxpayers can donate in return for a property tax credit. At Mayor Ed Meinhardt’s request, Township Manager Barry Lewis explained the new legislation and how it will affect the Township of Livingston.
“Obviously Livingston, with our assessed values and taxes, is going to be one of the hardest hit by the inability to make those deductions,” Lewis said about the SALT cap. “In response, New Jersey, as did a number of other states, looked at ways that they could try and mitigate the impact and what was signed on Friday is a pretty comprehensive piece of legislation, which essentially authorizes local units—municipalities, boards of education and counties—to establish a charitable trust into which property owners can make charitable donations.
“The trust has to define certain public purposes; it cannot be as broad as our entire operation. So we have to identify specific public purposes that those charitable contributions would go to and the total amount that we could raise.”
In summary, Lewis said that when contributions are made, they will be transferred to the municipality, which will then use them for the specific purposes that are determined. According to Lewis, this would ultimately ease the pressure on the municipal budget in order to lower taxes.
The caveat, he said, is that in order for it to ease the overall tax bill for property owners, the board of education and the county would also need to create trusts of their own because the municipality only controls 18 percent of the total bill.
“We have less control of [the county], but I’m sure a lot of towns will be advocating for Essex County to have something as well,” said Lewis, who also explained the tax credit involved in charitable contributions. “Whatever you donate to the charitable contribution, you get a 90-percent tax credit, so in the end it costs you 10 percent. But at the higher tax brackets, the deduction would be worth 30-plus percent. So even after deducting 10 [percent], you’re still ahead of the game.”
Lewis said the municipality cannot introduce and adopt an ordinance to establish a trust until the legislation becomes effective on July 3. He added that the state is currently working on rules and regulations on how to implement the legislation, and that the township will follow the state for guidance.
The council intends to have an ordinance prepared for introduction at the first public meeting after July 3.