Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
By Che Odom
California, New York, and other high-tax states may recategorize taxes as charitable contributions as a way around the GOP’s limit of a popular break.
Under the new GOP tax plan, taxpayers who itemize will be allowed to deduct up to $10,000 of state and local taxes paid—property taxes and either income taxes or sales taxes. Currently, taxpayers may deduct state and local taxes without limit.
The cap is expected to hit taxpayers in New York, Connecticut, California, and New Jersey the hardest, but that could change.
States could, in essence, accept charitable contributions instead of taxes, and those contributions would be deductible on federal returns.
University of California Hastings College of the Law Associate Professor Manoj Viswanathan told Bloomberg Tax that taxpayers in high-tax states could take advantage of state-level initiatives that would reclassify state and local tax payments as federal charitable donations, allowing them to “double dip” and obtain state and federal tax benefits from a single donation.
The state and local deduction is one of the largest single revenue sources in the GOP tax bill, which passed both houses of Congress but still faces a procedural vote in the U.S. House Dec. 21. President Donald Trump Dec. 20 declared victory after it passed the Senate, saying it not only lowered taxes but essentially repealed the Affordable Care Act by ending the penalties for those who don’t have health insurance.
In October, California Gov. Jerry Brown (D) and New York Gov. Andrew Cuomo (D) said in a call with reporters that their states might consider a legal challenge if the deduction is repealed or limited. Calls to the governors’ offices Dec. 20 weren’t immediately returned.
Limiting the SALT deduction could affect as many as 6 million Californians—one of every three taxpaying households in the state—according to state Finance Department Director Michael Cohen.
Americans Against Double Taxation—a coalition of state and local government groups, realtors and other organizations that fought for the full deduction—told Bloomberg Tax in an email Dec. 20 that the tax bill “overturns more than 100 years of sound tax policy that protected taxpayers from double taxation.”
New Orleans Mayor Mitch Landrieu (D), president of the U.S. Conference of Mayors, said in an emailed statement that his organization’s support of the deduction helped avert “full elimination,” but criticized the tax bill’s repeal of the individual mandate under the Affordable Care Act.
The bill “will make our cities harder to live in and harder to run effectively—all for the benefit of wealthy political donors,” Landrieu said.
To contact the reporter on this story: Che Odom in Washington at email@example.com
To contact the editor responsible for this story: Ryan C. Tuck at firstname.lastname@example.org
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)