New California Legislation Would Allow State Taxpayers to Dodge a Key Part of President Trump's Tax Plan

A new proposal from a Los Angeles lawmaker has emerged aiming to help Californians evade a key provision of the federal tax overhaul passed last year.

Assembly Bill 2217 from Assemblywoman Autumn Burke (D-Marina del Rey) would create a tax-credit system linking charities, educational institutions, the state treasury and individual taxpayers in an effort to allow Californians to sidestep the new $10,000 federal cap on state and local tax deductions.

Under Burke’s plan, taxpayers could make a contribution to nonprofits, universities, community colleges or K-12 public school districts, and those entities would transfer 90% of that donation to the state. In turn, the state would lower a taxpayer’s state income tax liability by issuing a credit equal to 80% of the original donation. And by making a charitable donation, California taxpayers would be able to deduct that entire amount from their federal taxes, Burke said.

Burke said she had been consulting with tax experts to ensure the proposal, which was formally unveiled Wednesday, was legal.

“Obviously, we have some concern about the $10,000 cap,” Burke said. “We didn’t want to be rash. We wanted to be prudent.”

Burke is naming the tax credit program after Bridget “Biddy” Mason, a former slave who became a midwife and founded the First African Methodist Episcopal Church in Los Angeles, which now has 18,000 members. The bill will have its first legislative hearing on May 14 in the Assembly Committee on Revenue and Taxation, which Burke chairs.

AB 2217 is the second measure active in the Legislature that tries to allow Californians to get around the GOP tax plan. Senate Bill 227 from Sen. Kevin de León (D-Los Angeles) would let taxpayers donate to a new state-run nonprofit that would transfer the money directly to the treasury in exchange for a decrease in income tax liability of 85% of the original donation. De León’s bill passed the Senate in January and is awaiting action in the Assembly.

Some tax experts have criticized these efforts, which have emerged in high-tax states across the country, as being overly complex and unlikely to survive scrutiny by the Internal Revenue Service.

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