New Jersey Gov. Phil Murphy (D) on Friday signed legislation providing a workaround to a controversial provision in the new federal tax law President TrumpDonald TrumpTrump defends indicted GOP congressman House to vote Thursday on holding Bannon in contempt Youngkin calls for investigation into Loudoun County School Board amid sexual assault allegations MORE signed late last year.
The legislation is designed to circumvent the law's $10,000 cap on the deduction for state and local taxes (SALT), which has been a top concern in high-tax states like New Jersey and New York.
Under the measure, New Jersey taxpayers would be able to make contributions to funds set up by state localities. In return, taxpayers would be able to receive a credit against their property taxes worth up to 90 percent of the contribution.
Taxpayers would also be able to deduct the donations on their federal tax returns by using the charitable contribution deduction.
"Getting this right is one of our administration’s most important tasks in creating a stronger and fairer New Jersey,” Murphy said in a statement.
New Jersey is the second state, after New York, to enact legislation to create a workaround to the SALT cap that involves charitable contributions.
But it's unclear if the IRS will recognize these types of arrangements.
Blue-state lawmakers have noted that the IRS has given the green light to states that give tax credits to taxpayers who make donations to private education. Still, some tax experts question whether the IRS would consider donations made as part of the SALT cap workaround charitable.