State May Remove Itemized Deduction Tax Cap for Donations

In 2011 Governor Neil Abercrombie and state lawmakers placed a tax cap on itemized deduction.  The logic behind this was that higher-income taxpayers would lose some tax relief and would be forced to pay additional money to the state government.  However, this plan had some unintended consequences when may wealthy donors decided to drastically reduce the amount of charitable donations that they made each year.  Nonprofit organizations are now making an appeal to state government to remove charitable donations from the deduction tax cap.  This would cost the state about $12 million per year in revenue, but Governor Abercombie noted that the state is in a much better financial situation than it was two years ago.

President and Chief Executive Officer of the Hawaii Community Foundation, Kelvin Taketa, commented, "It was really clear that people were caught by surprise about the itemized deduction cap and really felt that it was having an impact on individuals and families decisions' to give.  I think they looked at this and saw a revenue replacement strategy for some other things they were trying to do that did not have enough support.  And they put that in there without even realizing the ramifications of what it was going to mean."  The Hawaii Community Foundation estimates that charities and nonprofits in the state collect about $600 million each year in donations.

Source: Honolulu Star Advertiser, 6-17-2013, www.staradvertiser.com
Posted by Jeff Uyemura-Reyes, Broker-in-Charge, REALTOR®
Global Executive Realty, LLC
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