Treasury Finishes Rules Ending State Tax-Cap Workarounds

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Treasury Finishes Rules Ending State Tax-Cap Workarounds

Post by southerndoc » Wed Jun 12, 2019 7:20 am ... 1560284101

Unfortunately that requires a subscription, but in essence: Treasury ends the tax deduction workaround for using tax credits to donate to private schools, hospitals, etc.

I used Georgia's GOAL program to donate $2,500 to my daughter's private elementary school. At least my state taxes won't be affected, but I can't take the $2,500 as a charitable contribution now.

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Re: Treasury Finishes Rules Ending State Tax-Cap Workarounds

Post by SovereignInvestor » Wed Jun 12, 2019 7:26 am

Usually when something violates the spirit of the law, here the tax reform which sought to cap SALT deductions, The IRS would strike it down. The workarounds definitionally tried to violate the spirit of the law. It's better there's a ruling rather than individuals not know and some take the risk and get penalized.

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Re: Treasury Finishes Rules Ending State Tax-Cap Workarounds

Post by Stinky » Wed Jun 12, 2019 8:15 am

Not only "blue states" were affected by this change. The article mentions that Georgia, Arizona, and Alabama had pre-existing programs that are impacted by the IRS rule.

If there's one good thing in the article, it's that it becomes effective for contributions after 8/27/2018. Presumably, prior guidance would be effective for contributions received before that date. I know that the Alabama program reached its $30 million maximum for 2018 well before August 27, so those folks were unaffected.
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Re: Treasury Finishes Rules Ending State Tax-Cap Workarounds

Post by rkhusky » Thu Jun 13, 2019 7:31 am

Glad I am in the standard deduction realm now and don't need to keep track of deductions.

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Re: Treasury Finishes Rules Ending State Tax-Cap Workarounds

Post by trueblueky » Thu Jun 13, 2019 8:50 am ... ax-credits

Here is the link to the Federal Register on this.

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Re: Treasury Finishes Rules Ending State Tax-Cap Workarounds

Post by TBillT » Thu Jun 13, 2019 6:36 pm

I should have posted a version of the article I saw.
Sounds like there are still some SALT work-arounds out there, some companies are paying the State tax for the employee, and then the company can deduct the tax paid. Some other stuff business owners can do.

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Re: Treasury Finishes Rules Ending State Tax-Cap Workarounds

Post by LadyGeek » Thu Jun 13, 2019 7:56 pm

This discussion is on-topic, as it is a regulation published for public comments. The difference between legislation and regulation is in this post: Re: Political comments and proposed tax plan remain off-topic
LadyGeek wrote:
Fri Nov 03, 2017 8:46 pm
I should also explain the difference between legislation and regulations. Legislation is US law. After Congressional bills become laws, Federal agencies are responsible for putting those laws into action through regulations. This process may include the following steps:*
  1. An agency initiates a rulemaking activity, and adds an entry to its Regulatory Agenda
  2. A Proposed Rule or other document is published to
  3. The public is given the opportunity to comment on this rule for a specified timeframe
  4. Final Rules can be accessed on
Therefore, "regulations" are rules imposed by the departments and agencies of the Federal Government. The Internal Revenue Service is a federal agency under the U.S. Treasury Department (also a Federal agency).**

We permit discussions regarding "proposed regulation" when they are published for public comment. Here's an example: Fiduciary Standard - Now open for public comments,

** Source: Internal Revenue Service ,
The wiki explains how the rule fits into the legislative picture: Hierarchy of tax authority

Here is the final regulation as published in Contributions in Exchange for State or Local Tax Credits - Rule Document

Effective date: These regulations are effective August 12, 2019.
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