California Senate approves tax workaround News
California Senate approves tax workaround

The California Senate [official website] approved Senate Bill 227 [materials] Tuesday in an attempt to protect its taxpayers from the recent tax overhaul [JURIST report] and its cap on individual deductions for state and local taxes.

The new federal tax law limits the individual deduction for state and local taxes to $10,000, which mostly hurts wealthier Californians. The new law would allow taxpayers to reduce their state taxes by 85 percent of their contribution and then make a charitable contribution instead.

The bill passed with a vote of 27-7 in the Senate and now heads to the Democratic-controlled state Assembly and then to Governor Jerry Brown, a Democrat, for signing. The Assembly will also need to pass legislation that creates the charity.

Lawmakers and leadership in New York and New Jersey are considering similar measures, as well as lawsuits [WSJ report].