WASHINGTON -- State Attorney General Gurbir S. Grewal said he would challenge any efforts by President Donald Trump's administration to overturn the state's plan to get around the federal law to preserve a big property tax break for New Jersey residents.
Grewal reacted after the Internal Revenue Service and Treasury Department said they would develop regulations in response to efforts by New Jersey and other states to set up charitable funds that would not be subject to the $10,000 cap deducting state and local taxes imposed by the Republican tax law.
The attorney general told acting IRS Commissioner David J. Kautter in a letter that the state's tax credit is similar to those in more than 30 other states and follows previous a guidance from the agency.
"The IRS should not play politics," Grewal said. "Instead, it must confirm its longstanding interpretation of federal law. Should the IRS and Treasury Department continue down this path, New Jersey will have no choice but to challenge the new rule in court."
The IRS and Treasury said the federal government, not the states, will decide whether such contributions are tax-deductible and Grewal said it appears the answer will be no.
"I ask you to think twice before going down that misguided road," Grewal said. "The IRS's longstanding approach, supported by precedent and policy, supports what New Jersey has done."
Gov. Phil Murphy earlier this month signed legislation in response to the Republican tax bill's limit on the deduction, which primarily affects high-tax, Democratic-run states that send billions of dollars more to Washington than they get back in services.
The legislation was passed along party lines under a special procedure that prevented a Senate filibuster and excluded Democrats from any meaningful participation in drafting the bill.
Every member of the New Jersey congressional delegation but Rep. Tom MacArthur, R-3rd Dist., opposed the bill, as did the state's business community.
Under the tax bill, more than 1 in 10 New Jersey taxpayers would see their taxes rise under the new law, more than any other state, according to the Tax Policy Center.
While the GOP agreed to a $10,000 cap rather than eliminate the deduction entirely, the average deduction for Garden State residents in 2015 was $17,850, according to the Pew Charitable Trusts.
"It has always been this administration's intent to impose a tax hike on New Jersey families, so I'm not surprised they are taking aim at the state's charitable tax cut plan," said Rep. Josh Gottheimer, D-5th Dist. "They can't just hose New Jersey taxpayers to the benefit of moocher states."
Jonathan D. Salant may be reached at jsalant@njadvancemedia.com. Follow him on Twitter @JDSalant or on Facebook. Find NJ.com Politics on Facebook