The proposal, passed by the state Senate last month, is seen as a test case for blue states trying to help their taxpayers avoid a giant increase under the GOP plan's $10,000 cap on deductions of state and local property taxes.
The California measure would allow residents to make “charitable” contributions to a new state-run nonprofit group in exchange for a credit that would offset their state tax burden. Classifying the payments as charitable contributions rather than local taxes would help Californians avoid hitting the cap.
But it is unclear that the federal government will greenlight the plan, which also still has to win approval by the state's Democratic governor and assembly.
Two former Treasury officials and five former IRS officials — including a former IRS commissioner, an attorney who served in the IRS chief counsel's office, and a director of the IRS's nonprofit division — have told The Washington Post that the agency could view the charitable contributions as an attempt to get around the Republican tax law, and issue guidance saying that it will view these payments as taxes subject to the cap. That could throw the issue to the courts.
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