New Jersey Charitable Giving Incentive Legislation Awaiting Action
Updated July 14, 2023
We are continuing to push for legislation to boost charitable giving in New Jersey by creating a state-level tax incentives for New Jerseyans to give to charity. A state-level charitable giving income tax deduction would provide much-needed financial support to nonprofits, many of which are continuing to face rising demand that has been outpacing funding.
Updated legislation, A-2532 (Murphy/Lopez) and S-2013 (Oroho/Singleton) would allow contributions to qualified New Jersey-based charitable organizations to be deducted from gross income regardless of whether the federal itemized deduction is taken by the taxpayer. This legislation would provide a tax reduction to all charitable givers – not just the top 12% who itemize – and would make it easier for generous New Jerseyans to donate while helping to ensure that charitable organizations can more effectively meet community needs.
Legislation to create this income deduction passed the Senate twice in previous legislative sessions but stalled in the Assembly.
Why this matters
- Nonprofits are vital to a thriving New Jersey, employing 10% of the state’s private workforce, providing essential programs and services, and pumping billions of dollars into the economy.
- Even before the COVID-19 pandemic hit, nonprofits for years had been laboring under a significant capacity gap stemming from the dueling challenges of rising demand for services and lagging funding.
- The COVID-19 crisis had a devastating impact on nonprofits, threatening their ability to provide programs and services in our communities, and putting many on the brink of elimination. Although there has been some improvement since the worst of the pandemic, the need for charities’ services is still rising, and funding is still not keeping pace.
- National data show that across the country, giving to charity has declined. According to the 2023 Giving USA report, total charitable giving from individuals, bequests, foundations and corporations dropped sharply in 2022 compared to the prior year. Economic uncertainty and stock market volatility are key factors in the decline, and the 2022 fallback comes off two years of especially strong giving in response to the pandemic and the heightened outcry for racial justice. But it’s also important to note that Congress enacted a modest non-itemizer charitable giving tax deduction during 2020 and 2021 as part of pandemic relief package, enabling all taxpayers to deduct at least a portion of their charitable gifts federally. This deduction expired at the end of 2021 and was no longer available in 2022.
- These trends, combined with the 2017 federal tax law that put the federal charitable deduction out of reach to all but an estimated 12% of taxpayers and capped state and local tax (SALT) deductions, have affected the ability of many New Jerseyans to give. This is especially concerning for smaller or mid-sized charities, which are far more likely to rely on donations and grants for a greater portion of their budgets. There are also major equity considerations as well, since organizations led by or primarily serving people of color and other historically excluded communities tend generally to be less well-funded than larger nonprofits.
- A-2532 and S-2013 would provide desperately needed relief by allowing New Jersey taxpayers – whether or not they itemize – to deduct contributions made to eligible New Jersey-based organizations. The beneficial impact that it could have for resource-stretched charities and all who rely on them, and on New Jerseyans hit hard by the federal tax law, would be significant.
- A state-level charitable giving deduction would provide relief to taxpayers at all income levels who donate to charity, and would provide an important incentive to give – or give more. It would serve as an important lifeline when nonprofits need it most.
- Expressing support for this legislation in 2020, The Star-Ledger editorial board noted, “In times of crisis, you get a greater appreciation for nonprofits, and this is one of those times. This bill deserves a chance.”
Resources
NJ Non-Profit Community Letter to Governor, State Legislature Urging Additional COVID-19 Relief (8/27/2020)
Star-Ledger Editorial: Most states allow tax deductions for charity donations, but NJ does not. Let’s change that (5/21/2020)
Center statement in support of S-2360 (5/12/2020)
Center statement in support of S-264 (3/16/2020)
Op-ed: New Jerseyans should be able to deduct charitable giving from their state taxes (7/2/2019)
Additional Background:
A-2532 (Murphy/Lopez) and S-2013 (Oroho/Singleton) would each permit a taxpayer to deduct from NJ income taxes the amount of charitable contributions made to a “qualified New Jersey-based charitable organization” equal to the amount that is allowable as a charitable deduction under federal income taxes. A taxpayer need not itemize on their federal return in order to claim the state deduction. A “qualified” New Jersey-based organizations is defined in both bills as:
a charitable organization that is registered pursuant to the “Charitable Registration and Investigation Act,” P.L.1994, c.16 (C.45:17A-18 et seq.), or an organization that is exempt from the registration requirements of that act pursuant to section 9 of P.L.1994, c.16 (C.45:17A-26), and that maintains an office, employs persons, and provides services in this State.
A-2532 would cap the contributions eligible for the deduction at up to $10,000 for an individual and $20,000 per couple; S-2013 does not include a cap.
A-2532 is awaiting consideration in the Assembly Community Development and Affairs Committee. S-2013 is in the Senate Budget and Appropriations Committee.
The Center has long supported the creation of a state-level giving incentive in New Jersey. For years, New Jersey charities have been grappling with the mounting pressures of skyrocketing demand for services while resources have failed to keep pace (as outlined in our recent survey report). Read our position statement on last session’s bill here.
We are working vigorously with advocacy partners to advance this legislation and to marshal champions and support in the Assembly. We are also advocating strongly for the federal Charitable Act, which would restore and expand the federal universal non-itemizer charitable deduction that that was enacted during the pandemic but which lapsed at the end of 2021.
For more information or to become involved, email Doug Schoenberger at doug @ njnonprofits.org or Linda Czipo at lczipo @ njnonprofits.org (remove spaces in the email address before sending).
Watch your email, our social media feeds, and this website for updates and action alerts.
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