Stark Leads Effort to Soften Impact of New Tax Law in California

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UCLA School of Law professor Kirk J. Stark has been named a key consultant to California legislative leaders on an initiative to protect state taxpayers from potentially harsh consequences of the new federal tax bill that passed in December.

That law scales back the so-called SALT deduction, which allows taxpayers to deduct their state and local taxes on their federal returns. Californians, who have deducted roughly $20,000 a year under the current law, will only be able to deduct a maximum of $10,000 when the new law takes effect.

A plan to introduce state legislation in response to the federal law is being spearheaded by California state senate president pro tem Kevin de León, who has said that the new tax scheme “disproportionately harms California taxpayers.” De León asked Stark, Darien Shanske of UC Davis School of Law and Daniel Hemel of the University of Chicago Law School to help design changes to state law to address the shift.

Among other proposals, Stark has suggested that California may wish to consider providing a new state income tax credit for voluntary donations to certain state-designated funds. The idea is modeled on the state’s existing College Access Tax Credit Fund, which provides resources to support to Cal Grants, a state program funding financial aid for students from low-income households. State law allows donors to that fund to claim a state income tax credit for their gifts.

“State charitable tax credits are extremely common,” says Stark, the Barrall Family Professor of Tax Law and Policy and UCLA Law. “They encourage private giving to a wide range of charitable endeavors, and both the IRS and the courts have allowed donors to claim a full deduction for the amounts donated even though the credits generated enable donors to reduce their state tax liability.”

In a recent paper, Stark and seven co-authors provide a detailed analysis of the federal income tax treatment of state charitable tax credits.

Stark is a nationally renowned expert on tax law and policy, public finance and fiscal federalism. He is the co-author of leading legal casebooks on federal taxation and state and local taxation. Along with fellow UCLA Law professor Steven A. Bank and noted tax historian Joseph J. Thorndike, he co-wrote War and Taxes (2008, Urban Institute Press), about the history of taxation during wartime.

His work on De León’s tax plan has drawn national attention, including articles in the New York Times, the Los Angeles Times and USA Today.