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Proposed IRS rules would stop charity donors from 'double dipping'

Posted: 5:51 PM, Nov 19, 2018
Updated: 2018-11-19 21:49:32-05

The Thanksgiving Holiday Food Distribution Line at St.Marys Food Bank is a snapshot of the need for the work Valley charities are doing. To keep the lights on and the shelves stocked, organizations like St.Mary's count on Arizona Charitable Tax Credit donations.

Taxpayers can direct their state tax dollars to organizations of their choice like schools, food banks, shelters, and more. It's a dollar for dollar credit against taxes owed.

"Every dollar allows us to put seven pounds of food on the table," said Jerry Brown, spokesperson for St. Mary's. "So an $800 dollar tax credit means 5,600 pounds of food coming to the food bank."

Foster care-related organizations also benefit. Laura Pahules, executive director for Arizonans for Children said her facility gets about 75 percent of its funding through the program. But proposed regulations mean taxpayers may no longer be able to double dip or claim their charitable contribution on both federal and state returns. The new IRS rules would prohibit taxpayers from taking both the state credits and the federal deductions for donations made after August 27, 2018.

"You can still write it off, you just can't do both," said Gidget Schutte, from Schutte & Hilgendorf, a Prescott CPA firm. 

Schutte said the impact to these organizations isn't clear. Will some people no longer donate because there is less incentive when they file their federal taxes?

"I guess we don't know yet until the numbers come in to see what the effect is of not having the double dip benefit," she said.

Pahules said she hopes people will still give knowing the state tax benefit doesn't change. She said a large cut to their tax credit donations would mean a cut to the extras, like holiday parties. And for many foster children she said, it may be one of their only events of the year.  

"Any time there are changes, there are always going to be concerns," Pahules said. "We hope people realize they still get that state credit when they make that donation. With that tax credit even at just the state level, your money is staying in the state and going directly to programs you believe in."

The new IRS regulations are still a proposal at this point, however, Schutte said they are expected to be approved. They would then be retroactive to August 28, 2018.