IRS pushes back against Murphy’s federal tax ‘workaround’

Posted: Updated:
WASHINGTON, D.C. -

The Internal Revenue Service is pushing back against a bill recently passed in New Jersey to counteract the Trump administration’s tax bill.

The tax overhaul bill placed a $10,000 cap on state and local taxes.

Some New Jersey lawmakers from both political parties said that the bill unfairly targeted New Jersey families because in most cases property taxes were above $10,000. 

RELATED: NJ leaders devise ways to save residents money in wake of tax reform

Gov. Murphy signed a bill that would allow towns to set up charitable funds for their residents to donate 90 percent of their tax bills too, in exchange for tax credits. It would allow them to avoid the cap.

But the IRS is pushing against that plan. The agency says that it gets to decide what is deductible, not states. Anyone trying to take deductions that they aren’t entitled to could face punishment.

New Jersey Attorney General Gurbir Grewal sent a letter to the IRS that said in part, “The IRS should not play politics. Instead, it must confirm its longstanding interpretation of federal law...Should the IRS and Treasury Department continue down this path, New Jersey will have no choice but to challenge the new rule in court.”

Sen. Bob Menendez said that 32 other states and Washington, D.C. have implemented similar funds for years. He said that he feels that the Trump administration is targeting the state of New Jersey.

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