Caveat IRS: Problems with Abandoning the Full Deduction Rule

11 Pages Posted:  

Joseph Bankman

Stanford Law School

David Gamage

Indiana University Maurer School of Law

Jacob Goldin

Stanford Law School

Daniel Jacob Hemel

University of Chicago - Law School

Darien Shanske

University of California, Davis - School of Law

Kirk J. Stark

University of California, Los Angeles (UCLA) - School of Law

Dennis J. Ventry

University of California, Davis - School of Law

Manoj Viswanathan

University of California Hastings College of the Law

Date Written: May 7, 2018

Abstract

Several states have passed - and many more are considering - new tax credits that would reduce tax liability based on donations made by a taxpayer in support of various state, local or non-profit programs. In general, taxpayer contributions to qualifying organizations — including public charities and private foundations, as well as federal, state, local, and tribal governments — are eligible for the federal charitable contribution deduction under section 170. In a previous article, we explained how current law supports the view that qualifying charitable contributions are deductible under section 170, even when the donor derives some federal or state tax benefit by making the donation. We referred to this treatment as the “full deduction rule.”
Some commentators have suggested that Treasury and the IRS could change existing law, whether through new regulations or by issuing a new interpretation of existing regulations, to limit the deductibility of taxpayer contributions when they trigger a state or local tax benefit to the donor. Many legal and administrative concerns are associated with those actions. In this report, we argue that even if the IRS has the legal authority to implement the changes absent new legislation, it should decline to do so.

Keywords: Charitable Deduction, State and Local Tax Deduction

Suggested Citation

Bankman, Joseph and Gamage, David and Goldin, Jacob and Hemel, Daniel Jacob and Shanske, Darien and Stark , Kirk J. and Ventry, Dennis J. and Viswanathan, Manoj, Caveat IRS: Problems with Abandoning the Full Deduction Rule (May 7, 2018). State Tax Notes, Vol. 88, No. 6, 2018. Available at SSRN: https://ssrn.com/abstract=

Joseph Bankman

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-725-3825 (Phone)
650-725-7663 (Fax)

David Gamage

Indiana University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States

HOME PAGE: http://www.law.indiana.edu/about/people/bio.php?name=gamage-david

Jacob Goldin

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

Daniel Jacob Hemel

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

Darien Shanske

University of California, Davis - School of Law ( email )

400 Mrak Hall Dr
Davis, CA CA 95616-5201

Kirk J. Stark (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-825-7470 (Phone)

Dennis J. Ventry

University of California, Davis - School of Law ( email )

UC Davis School of Law
400 Mrak Hall Drive
Davis, CA 95616-5201
United States
530-752-4566 (Phone)

Manoj Viswanathan

University of California Hastings College of the Law ( email )

200 McAllister Street
San Francisco, CA 94102
United States

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