For more up-to-date info on this topic, see Rev. Proc. 2019-12 PDF (PDF). Does the proposed regulation governing contributions in exchange for state and local tax credits affect the ability of a business that makes a payment under such a program to deduct the payment as an ordinary and necessary business expense? No, the proposed regulation addresses the deductibility of such payments as charitable contributions under § 170. It does not affect the availability of a business expense deduction under § 162. A business taxpayer making a payment to a charitable or government entity described in § 170(c) is generally permitted to deduct the entire payment as an ordinary and necessary business expense under § 162 if the payment is made with a business purpose. The rules permitting an ordinary and necessary business expense deduction under § 162 apply to a taxpayer engaged in carrying on a trade or business regardless of the form of the business. Updates on the implementation of the Tax Cuts and Jobs Act can be found on the Tax Reform page of IRS.gov. Disclaimer These FAQs are not included in the Internal Revenue Bulletin, and therefore may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case.