BILL NUMBER: S9524

SPONSOR: GOUNARDES
 
TITLE OF BILL:

An act to amend the tax law, in relation to itemized deductions for
charitable contributions

 
PURPOSE OR GENERAL IDEA OF BILL:

To repeal the state personal income tax deduction for charitable
contributions for filers making over $10 million

 
SUMMARY OF PROVISIONS:

  Section  one  of  this  bill  amends  paragraph 2 of subsection (g) of
section 615 of Tax  Law  to  repeal  the  state  match  of  the  federal
deduction  for  charitable contributions, provided in Section 170 of the
Internal Revenue Code (IRC, for filers making over $10 million.

  Section two sets the effective date.

              

 
JUSTIFICATION:

The federal government allows taxpayers to make a sizable  deduction  of
their  personal income tax (PIT) liability when they donate to 501(c)(3)
public charities under 26 U.S. Code § 170. Taxpayers who choose to item-
ize their deductions can lower their adjusted gross income by up to  60%
by  donating  to  organizations  that operate for religious, charitable,
scientific, literary, or  educational  purposes  or  the  prevention  of
cruelty  to  animals  or  children. They can also deduct the fair market
value of any donated goods, such as clothing or household items, and  20
-  50%  of  their  AGI for other non-cash contributions like appreciated
real property.

New York provides a state-level match of this generous federal deduction
under Tax Law Section 615(g), but not for every income level PIT  filers
making  more than $1 million can only claim 50% of the federal deduction
on their state returns, for example, while filers making more  than  $10
million  are  limited to a 25% match. The FY25 Executive Budget recently
proposed a permanent extension of the 25% cap of the federal  deduction,
which otherwise would have expired in 2025, concluding that allowing the
cap  to sunset would have cost the state $350 million. This existing 25%
cap on the federal match also underscores the reality that PIT filers at
such a high income threshold do not need much assistance from the  state
to incentivize their continued giving.

This  bill  goes  one  step  further  to repeal the match of the federal
deduction entirely for PIT filers making more than $10 million, yielding
an additional $329 million to the  state  that  can  then  be  used  for
healthcare,  education,  climate  investments, or other poverty-fighting
tax expenditures which are targeted at  low  and  middle  income  filers
rather  than  the very wealthy. While charitable giving is always lauda-
ble, the existing, incredibly generous  federal  deduction  will  likely
mean  that  this subset of filers will continue to dedicate some portion
of their income towards nonprofits.   Furthermore,  the  fact  that  the
federal deduction can only be claimed when a taxpayer chooses to itemize
their  deductions,  rather  than  claiming the standard deduction, means
that it benefits a mere ten percent of filers.
This bill represents common sense fiscal policy, repealing  an  unneces-
sary  tax  break  for  very  wealthy  filers  while yielding nearly $330
million back to the state's general fund which can  be  better  used  to
support  the  more  than ninety percent of PIT filers who do not itemize
their deductions.

 
PRIOR LEGISLATIVE HISTORY:

None

 
FISCAL IMPLICATIONS:

$329 million positive fiscal impact

 
EFFECTIVE DATE:
This act shall take effect immediately and apply to taxable years begin-
ning on or after the effective date.