N.Y. Budget Watchdog Endorses Cuomo Federal Tax Workaround

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By Gerald B. Silverman

Gov. Andrew M. Cuomo’s (D) plan to create two statewide charitable funds to mitigate the impact of the $10,000 federal cap on state and local tax deductions has picked up the support of a budget watchdog group in New York.

The Citizens Budget Commission released a report March 19 that endorses the plan and generally supports Cuomo’s idea for another way to avoid the cap—creation of a new voluntary payroll tax. The report urged the state to selectively decouple from the federal tax code and to take more time to review all the ramifications of the federal tax law.

The report comes less than a week after the Legislature rejected Cuomo’s charitable funds proposal in their one-house budget resolutions. Cuomo will be pushing for the measure, along with creation of a new payroll tax, in budget negotiations with top legislative leaders this month.

The report also comes as Cuomo has opened up another front in his battle against Republicans in Washington over the federal tax law. In a March 15 letter to Rep. John J. Faso (R-N.Y.) and the state’s Republican congressional delegation, Cuomo said the congressman was trying to “sabotage” efforts by New York to mitigate the impact of the SALT deduction cap.

Cuomo attacked Faso for seeking an IRS opinion on the governor’s plan to create charitable funds as a workaround to the 2017 federal tax act ( Pub. L. No. 115-97).

Cuomo is calling for creation of two statewide charitable funds that would allow taxpayers to make contributions and get a federal tax deduction and receive a state tax credit. The funds would provide support for state education and health care programs.

War of Words

Faso sent a Feb. 26 letter to David Kautter, assistant secretary for tax policy at the U.S. Department of the Treasury, asking Treasury and the IRS to issue “guidance and a formal opinion letter” on whether contributions to the state funds would be considered deductible. Faso voted against the federal tax bill along with four of the state’s nine Republican representatives,

In his letter, Cuomo said “I don’t know how you could be seeking an IRS opinion when New York State has not even passed a law on which they could opine.”

“Second, I don’t know why you would be trying to sabotage the State Legislature’s efforts to undo the damage you have done to New York State taxpayers,” Cuomo said.

The war of words continued when Faso wrote back to Cuomo: “Can you seriously believe that New Yorkers should be encouraged to donate to such a foundation without knowing whether the IRS will accept such contributions as a qualifying charitable donation? Should the state legislature be asked to enact such a law without knowing if these donations will pass muster with the IRS?”

To contact the reporter on this story: Gerald B. Silverman in Albany, N.Y., at gsilverman@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

For More Information

Text of the report is at http://src.bna.com/w98.

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