IRS Stops NJ's Attempts To Bypass Trump Tax Law

The Internal Revenue Service has announced final regulations that bar attempts by New Jersey and other states to find ways to circumvent President Trump's tax reform law.

The IRS announced Tuesday that New Jersey cannot bypass a $10,000 cap on state and local tax (SALT) deductions imposed by the Republican tax law of 2017.

The IRS effectively nullified New Jersey legislation passed last year that allowed municipalities to establish charitable funds where taxpayers can donate in return for a property tax credit.

The legislation was intended to protect New Jersey taxpayers from a potential increase in the federal income tax as a result of the Trump Administration's cap on the state and local tax deduction (SALT).

The IRS didn't provide a specific reason for the decision other than saying: "The Treasury Department and the IRS continue to consider issuing future guidance on a number of issues raised by commenters."

Read more: Trump's Tax Plan: How Much Each New Jersey Town Could Pay

The announcement drew ire from New Jersey officials, particularly U.S. Rep. Bill Pascrell, D-Passaic, who said the Trump administration "seems to wake up in the morning trying to think up ways to screw my state."

Gov. Phil Murphy also said the IRS "made clear it is not interested in fairness for New Jersey’s taxpayers."

"Instead, it protects President Trump’s politicization of the federal tax code," he said. "Finalizing a rule that prohibits us from following decades of precedent to protect our residents’ tax deductions is a gut-punch to middle-class families who know that the Trump tax plan is a complete sham."

Murphy said he will continue to fight alongside the state's Congressional delegation and other states to restore the residents’ SALT deductions.

New Jersey's legislation, sponsored by Assembly Democrats John McKeon, Mila Jasey and Roy Freiman, permitted a local unit, consisting of a municipality, county or school district, to establish one or more charitable funds for specific public purposes, and permit local property tax credits in association with such donations.

Pascrell, meanwhile, said the Republican tax law was passed to "bring deliberate pain to states like New Jersey."

"And it did, stealing our state and local tax deduction the middle class has long used to line the pockets of the one percent and big business," he said. "Our state and others have sought to provide relief to taxpayers, and now Trump and (the Treasury Department) are going out of their way to block us.

"We will not rest in seeking ways to help our constituents counter the impact of Republicans’ vicious policies. This isn’t over.”

Pascrell is the lead sponsor of H.R. 1142, otherwise known as the "Stop the Attack on Local Taxpayers Act of 2019," which would remove the SALT cap.