Legislative Update on Charitable Deductions 3/5/2018

Earlier in February, Governor Phil Scott released details on his tax reform plan, the Working Family Taxpayer Protection Act, to ensure “Vermonters don’t see a surprise $30 million tax increase due to changes in federal law”. This included a proposed five percent tax credit for charitable contributions. Governor Scott said: “The large increase to the standard deduction and shift away from itemized deductions at the federal level might discourage many filers from donating to charity.  This measure will re-incentivize charitable giving, make the benefits of giving available to all Vermont taxpayers (whether or not they itemize their deductions at the federal level), and strengthen the connection between Vermont charitable organizations and all members of the community.”

 

We checked with the House Ways & Means Committee to see if there has been any movement on the Governor’s proposal. According to committee member Representative Cynthia Browning, a bill combining both income tax reforms and education finance reforms is about to be voted out of House Ways & Means. “This includes a version of the Governor’s proposal but with a variation. The five percent deduction is in the HWM proposal to be applied to up to $10,000 in contributions. This means that all income levels can take advantage of the credit, but the amount that high income/big donors can use to reduce their tax liability is much less. They would still get the benefit of the federal deduction”. The bill will be voted out of the House and move into the Senate (likely the Education and Finance committees). After this bill is voted there will be a bill number under which we will be able to view drafts and testimony.

 

This proposal would change the way charitable deductions are currently taken by Vermont tax payers. Instead of being able to deduct the dollar value of the charitable contribution from the income to be taxed, the tax payer would take a tax credit, which reduces the actual dollar amount of taxes owed, for 5% of the value of your contributions up to $10,000.  According to Rep. Browing, This makes it easier for all Vermonters to access this credit for their donations but does not allow the highest income taxpayers to disproportionately reduce there tax obligation.

 

See also VTDigger’s coverage of the House Ways and Means Committee passed on 2/28 income tax plan.


In the meantime, Governor Scott has issued a reminder to Vermonters to consider charitable contributions when filing their taxes. Vermont taxpayers have the opportunity to direct their tax refunds or tax payments to support four Vermont charitable organizations that have been specifically named in Vermont law.

Filers may enter the amount they wish to contribute to one or more of these charitable organizations on Form IN-111, Vermont Income Tax Return:

 

 

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