Democratic Senators Call for Illinois Action on State Tax Cap

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By Michael J. Bologna

Illinois’ two U.S. Senators and nine Democratic members of Congress called on Republican Gov. Bruce Rauner to mitigate the state and local impacts of the new federal tax law.

In a March 6 letter to Rauner, the Democratic lawmakers focused their attention on revisions to the deduction for state and local taxes paid (SALT), which is expected to have an impact on taxpayers in high income and property tax states such as Illinois, New Jersey, New York, and California.

The 2017 federal tax act ( Pub. L. No. 115-97) permits taxpayers who itemize to deduct their state sales, individual income, and property taxes up to $10,000 beginning this year. The deduction previously was unlimited, a critical feature for taxpayers in Illinois where state and local taxes can easily cross the $10,000 limit.

The Illinois delegation, led by Sens. Dick Durbin and Tammy Duckworth (D), said Rauner has a responsibility to “ensure Illinois residents are not unfairly burdened by the newly-imposed $10,000 cap on SALT deductions that allows double taxation of our constituents.”

The letter estimated more than 400,000 Illinois taxpayers would see tax hikes of almost $1,000 in 2019 as a result of the Trump tax program. The Democrats emphasized that 1.9 million Illinois households took the state and local tax deduction in 2015. Many broke past the new cap because the average deduction totaled $12,523.

It wasn’t immediately clear how Rauner might approach the letter, and administration officials didn’t immediately respond to a request for comment. In the past, Rauner has portrayed the new burdens under the SALT deduction as an argument for his goals of lower property taxes and a rollback of the income tax hike enacted by state lawmakers last summer.

Potential Responses

The letter references several potential responses, including campaigns in New York and California that would permit taxpayers to contribute state and local taxes owed above the $10,000 cap to a state charity.

The Illinois House is considering a similar plan under H.B. 4237. The bill creates an income tax credit equal to taxpayer contributions to a new “Illinois Excellence Fund.” Dollars contributed to the Illinois Excellence Fund must be used for “exclusively public” purposes, as specified under Section 170 of the Internal Revenue Code pertaining to charitable contributions and gifts.

H.B. 4237 passed the House Revenue and Finance Committee Feb. 14. The bill could be debated in the Democrat-controlled House in a matter of weeks.

The federal lawmakers’ letter also references efforts by New York and New Jersey to legally challenge the SALT provisions of the new tax law on constitutional grounds.

“The lawsuit would likely argue that the provision discriminates against high-SALT states like Illinois, New Jersey and New York and violates their 10th Amendment rights,” the letter states.

Prepayment Concerns

Democratic lawmakers on Capitol Hill aren’t the only ones concerned about the effect of the new SALT deduction limitation on Illinois taxpayers.

Rep. Peter Roskam (R-Ill.) is working closely with the Treasury Department and the Internal Revenue Service as they consider whether Illinois residents can deduct their 2017 prepaid property taxes without limitation, according to a GOP aide.

The IRS said in a Dec. 27 news release (IR-2017-210) that taxpayers could only deduct their prepaid 2018 property taxes if the levy had been assessed by local officials and paid in 2017.

The guidance doesn’t, however, address Illinois’ unique situation, the aide said. The state requires payment of property taxes in arrears, meaning residents will be paying 2017 property taxes in 2018.

With assistance from Laura Davison in Washington

To contact the reporter on this story: Michael J. Bologna in Chicago at

To contact the editor responsible for this story: Ryan C. Tuck at

For More Information

Text of the letter is at

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