I. State Issues
a. IRS Issues Regulations Invalidating NJ's SALT Cap Workaround
Yesterday, the IRS released proposed regulations which thwart efforts made by the State to lessen the impact felt from the recent changes to the Federal tax code, which placed a $10,000 cap on state and local tax (SALT) deductions.
In May, Governor Murphy signed into law a bill which allowed municipalities, counties, and school district to establish charitable funds, and authorized property-tax-payers who donated to these funds to receive a credit towards their property taxes for their charitable contributions. By creating these charitable funds and allowing for credits against property taxes, a taxpayer would be able to avoid the $10,000 cap on SALT deductions and instead fully deduct the amount of their property taxes as a charitable contribution.
From the onset the IRS signaled that they would not allow such workarounds that New Jersey and several other states enacted in response SALT cap. However, the IRS prior to enactment of a SALT cap, had allowed similar charitable contributions and credit structures to operate in other states. The proposed regulation would be effective against newly created workaround as well as structures existing prior to the federal tax changes.
The proposed regulations would eliminate the effectiveness of any workaround by reducing the deductions available for charitable contributions by the amount of any state or local tax credit the taxpayer receives or expects to receive in return. This eliminates any federal tax benefit a taxpayer would derive from making a charitable contribution to a municipal fund rather than simply paying their property tax bill.
As with any proposed regulation, there is a comment period open for 45 days. The League as well as our national affiliate, the National League of Cities, will be submitting comments on the proposal. The League will provide our members with any developments regarding these proposed regulations and will provide further insight upon further review of the proposals.
In response, both Governor Murphy and State Attorney General Gurbir Grewal expressed opposition to the proposal and that the State will challenge the proposal in Court if necessary.
Contact: Frank Marshall, Esq., League Staff Attorney, FMarshall@njslom.org , 609-695-3481 x137.
b. Attorney General Grewal Issues New Directive Aimed at Combating
Firearms Trafficking
On Wednesday, State Attorney General, Gurbir Grewal issued AG Directive 2018-4 which instructs all municipal law enforcement agencies within the State to participate in the ATF’s eTrace System “Collective Data Sharing” program.
The eTrace System, already utilized by law enforcement agencies, traces all crime guns recovered in NJ. The Collective Data Sharing program, which not all departments participated in, allows users to share information regarding crime guns such as, manufacturer or importer, dealer, and first purchases, with other eTrace System users who have also opted in to the program.
The goal of the Directive is to provide the State Police with additional data needed to “identify statewide patterns in sources of guns, and identify unlawful purchasers and bad faith dealers – which, in turn, will support prosecutions of straw purchasers and traffickers that illegally transport firearms into New Jersey.”
You should review the AG Directive with your municipal police chief to ensure all new requirements are being met.
Contact: Frank Marshall, Esq., League Staff Attorney FMarshall@njslom.org, 609-695-3481 x137.
c. Governor Signs Post-Retirement Volunteer Bill
On August 17 Governor Murphy signed into law A-1627/S-1873, which protects the pension rights of former employees who continue to serve their communities as volunteer first responders. The League strongly supported this legislation which stems from a League Conference resolution in 2014. That Resolution called for State action to correct Division of Pension and Benefits guidance on post-retirement employment restrictions for public employees. We thank the sponsors Senators Sarlo and Kean, Assemblywoman Schepisi, and Assemblymen Bucco, Auth, Danielson, and DiMaio for their efforts in advancing this legislative fix to permit volunteers to continue to serve their communities. For more on P.L. 2018, c. 96, which took effect on August 17, 2018, please see our recent blog post.
Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 x112.
d. Law Permits County to Change Assessment Calendar
On August 17 Governor Murphy signed into law A-538/S2257, which permits a county governing body, with approval of the county board of taxation, to revise the real property assessment calendar. Effective immediately, P.L. 2018, c. 94 permits a county governing body to adopt the revised real property assessment calendar that is used in the Real Property Assessment Demonstration Program. Adoption of the revised calendar does not require participation or adoption of the Real Property Assessment Demonstration Program. Currently, Monmouth and Gloucester counties are using the revised calendar.
If the county adopts the revised assessment calendar it is implemented on October 1st. The change in the calendar is permanent and the county is prohibited from adopting any other real property assessment calendar. For more on P.L. 2018, c.94 please see our recent blog post.
Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 x112.
e. Plastic Bag Bill Facing Veto
According to State Senator, and former Piscataway Mayor, Bob Smith and numerous Press reports, Governor Murphy intends to veto A-3267/S-2600. This bill would have placed a $0.05 fee on single-use carryout bags provided by certain types of stores to customers. The League opposed the bill, which, if signed as is, would have preempted local legislation on this matter.
The Governor is required to take definitive action on the bill by Monday, since both Houses of the Legislature will meet then. We await the Governor’s veto message, which will provide the reasons for his veto. We will keep you informed.
Contact: Jon Moran, Senior Legislative Analyst, jmoran@njslom.org, 609-695-3481, x121.
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