By: Sharon C. Lincoln, Anita S. Lichtblau, and Drew S. Douglas-Steele
The new year has started with some good news for MA charities and their supporters. Starting January 1, 2023, the long-delayed personal tax deduction for charitable giving has been reinstated for Massachusetts residents.
In addition to the federal charitable donation deduction, this reinstatement will permit Massachusetts residents to deduct charitable donations under state tax law. The state charitable deduction is “a tool that every Massachusetts nonprofit can use to encourage donations and promote giving,” explains Jim Klocke, the president and CEO of the Massachusetts Nonprofit Network in a recent Boston Business Journal op-ed, and “[b]est of all, it will strengthen support for the work that nonprofits do every day, to the benefit of the people they serve.”
In 2000, over two-thirds of Massachusetts voters originally approved a personal tax deduction for charitable giving, to take effect on January 1, 2001. The new law was intended to encourage charitable giving, as Massachusetts had recently been ranked 48th out of 50 states in the “generosity index” of the Catalogue for Philanthropy and Massachusetts was only one of eight states that did not allow a charitable deduction from taxable income at that time. (The 2000 Ballot Questions, with the rationale, are available here.)
However, due to recession-induced budget shortfalls, lawmakers decided in 2002 to suspend the implementation of the deduction until the state’s financial situation improved. It was scheduled to be reinstated in 2021, but was further delayed for an additional year during the height of the COVID-19 pandemic.
For Massachusetts taxpayers, this means that every charitable deduction they make can be deducted from their Massachusetts taxable income. For Massachusetts nonprofits, this will provide important support at a time when inflation and the subsequent prospect of a recession are a concern. As Klocke, who helped lead the effort to restore the deduction, noted, “It will support, promote, and encourage giving across Massachusetts.”
The Technical Information Release discussing the charitable tax deduction is available here.
Should you need assistance or have any questions concerning the revised Guide or nonprofit governance matters in general, contact Sharon C. Lincoln at firstname.lastname@example.org, Anita S. Lichtblau at email@example.com, Drew S. Douglas-Steele at firstname.lastname@example.org, or your Casner & Edwards attorney.