NY passes law to get around SALT limit

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pshonore
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NY passes law to get around SALT limit

Post by pshonore » Wed Apr 04, 2018 10:00 am

NY has passed a law to "challenge" the new SALT limits of 10K. I doubt the Feds will be happy about this.

https://www.taxprotoday.com/news/new-yo ... reform-law
New York is the first of the blue states to actually pass a change in its tax laws, giving taxpayers a way to make their tax payments through a new payroll tax system or a charitable fund. The new federal tax law doesn’t impose limits on either payroll taxes or the charitable deduction.

Under the changes, employers in New York State would be able to opt-in to a new voluntary payroll tax system, known as the Employer Compensation Expense Program, or ECEP. Businesses that opt in would be subject to a 5 percent tax on all annual payroll expenses in excess of $40,000 per employee, phased in over three years beginning on Jan. 1, 2019. The current personal income tax system would remain in place, and a new tax credit corresponding in value to the ECEP would cut the personal income tax on wages and ensure that state filers subject to the ECEP would not experience a decline in take-home pay.

The budget also sets up two new state-run charitable contribution funds to replace property taxes where taxpayers can pay money to support health care and education. Donations to these funds would provide a reduction in local property taxes via a local credit equal to a percentage of the donation.

“We went from an income tax primarily to a payroll tax,” said Cuomo. “Property taxes move to a charitable donation tax. Again, it's optional. Some employers will do it, some local governments will do it, but it's our best attempt to avoid the federal assault. The real answer is to repeal SALT. That's what has to be done. That has to be done in Washington. I think that should be the priority for any congressional member who says they represent the State of New York because this provision hurts every New Yorker, period. There's a cap that they say it protects over the $10,000 cap. It's baloney. This hurts the state, it hurts the state economy. The ultimate solution is repeal, and I'll be talking about that through the November elections. But in the meantime, get out of the way of the missile is always good advice in life as well as in tax policy.”

Treasury Secretary Steven Mnuchin has already expressed skepticism about whether such workarounds would be allowed by the Internal Revenue Service, however. In January he called the effort to transform property taxes into charitable contributions “ridiculous” (see Trump’s SALT ‘war revisited: Most blue staters will get tax cut).

Da5id
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Re: NY passes law to get around SALT limit

Post by Da5id » Wed Apr 04, 2018 10:08 am

An analysis can be found here, prospects dubious: https://taxfoundation.org/new-yorks-new ... ise-taxes/

I don't see how this can be discussed in bogleheads given rules on politics and future rules/regulations. NY residents should clearly use some caution until the IRS issues rulings/guidance/statements on the NY law and whether, for example, they will consider the new "charities" bonafide. The magic 8 ball says "reply hazy, try again".

BeerTooth
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Re: NY passes law to get around SALT limit

Post by BeerTooth » Wed Apr 04, 2018 10:19 am

Da5id wrote:
Wed Apr 04, 2018 10:08 am
An analysis can be found here, prospects dubious: https://taxfoundation.org/new-yorks-new ... ise-taxes/

I don't see how this can be discussed in bogleheads given rules on politics and future rules/regulations. NY residents should clearly use some caution until the IRS issues rulings/guidance/statements on the NY law and whether, for example, they will consider the new "charities" bonafide. The magic 8 ball says "reply hazy, try again".
" On net, New York is up $10,000 and the wealthy taxpayer is up $27,000. Win-win, except, again, for the taxpayers nationwide who have to make up the difference or bear the cost of lower federal revenues."

my well of sympathy must have run dry...

EddyB
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Re: NY passes law to get around SALT limit

Post by EddyB » Wed Apr 04, 2018 11:30 am

Da5id wrote:
Wed Apr 04, 2018 10:08 am
An analysis can be found here, prospects dubious: https://taxfoundation.org/new-yorks-new ... ise-taxes/

I don't see how this can be discussed in bogleheads given rules on politics and future rules/regulations. NY residents should clearly use some caution until the IRS issues rulings/guidance/statements on the NY law and whether, for example, they will consider the new "charities" bonafide. The magic 8 ball says "reply hazy, try again".
Without getting into any political aspects of it, for years other states have had programs similar to the NY charitable-contribution program, and they've been permitted to stand, but not in a way that is irreversible. Taxpayers who would consider it may want to read, e.g., this memo https://www.irs.gov/pub/irs-wd/1105010.pdf and do their own research, or talk to a tax professional (although my assessment is that at the consumer level many of them are uninformed about the issue or share Da5id's conclusion of "reply hazy, try again"!).

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Re: NY passes law to get around SALT limit

Post by SuzBanyan » Wed Apr 04, 2018 11:53 am

For those in NY intrigued by the new law passed as part of the recent state budget, an analysis of deductibility was published in January, 2018, by a number of tax policy experts, entitled, “Federal income Tax Treatment of Charitable Contibutions Entitling Donors to State Tax Credits.” It can be read here: https://ssrn.com/abstract=3098291

The conclusion was that historically the value of a charitable deduction was not reduced by the state tax benefit received by the contributing taxpayer. While Congress could change this (and the IRS might be able to change it, depending on the details), such a change would “raise significant administrability concerns....”

pancake19
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Re: NY passes law to get around SALT limit

Post by pancake19 » Wed Apr 04, 2018 12:11 pm

Is the proposed new deductibility for individuals really focused on property tax here?

The payroll tax topic seems to be a credit for employers and not employees, am I wrong?
Last edited by pancake19 on Wed Apr 04, 2018 12:23 pm, edited 1 time in total.

bengt
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Re: NY passes law to get around SALT limit

Post by bengt » Wed Apr 04, 2018 12:19 pm

It is fair to say that there is 100% probability that IRS disagrees with this trick. In fact, it has made it clear already.
Naturally, after years of court battles, NY taxpayer using this trick could prevail. But that is a long-shot, so good luck for anybody trying this.

Da5id
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Re: NY passes law to get around SALT limit

Post by Da5id » Wed Apr 04, 2018 12:30 pm

SuzBanyan wrote:
Wed Apr 04, 2018 11:53 am
For those in NY intrigued by the new law passed as part of the recent state budget, an analysis of deductibility was published in January, 2018, by a number of tax policy experts, entitled, “Federal income Tax Treatment of Charitable Contibutions Entitling Donors to State Tax Credits.” It can be read here: https://ssrn.com/abstract=3098291

The conclusion was that historically the value of a charitable deduction was not reduced by the state tax benefit received by the contributing taxpayer. While Congress could change this (and the IRS might be able to change it, depending on the details), such a change would “raise significant administrability concerns....”
Can't comment on the accuracy of the tax guys, other than to say it is not inconceivable they have an ax to grind. Experts seem to differ here, e.g. the NY Times article cites a guy as saying this is quite questionable.
Several states have considered allowing municipalities to form nonprofit organizations that property owners would make payments to in lieu of property taxes, and then claim the “donations” as charitable write-offs on their federal taxes. The I.R.S. has not issued any formal guidance on those ideas, but Jared Walczak, a senior policy analyst at the Tax Foundation, said the New York law will push the issue, and he called the plan “legally fraught.”

“I think it’s quite possible that now that New York has adopted such legislation through the budget, and other states are considering it, that we may see I.R.S. guidance clearly disallowing this,” Mr. Walczak said. “Existing case law already makes this plain, but states have muddied the water.”
Seems like the safest bet for NY residents remains to wait as long as possible before doing the donation as things may sort themselves out before the end of the year one way or another.

Oddly, I note that my cash contributions to my temple are split by the temple into parts I get direct benefit from (not deductible) and deductible parts. As are my contributions to charities that give me things (or they certify I got no benefit from the contribution in the acknowledgement letter). I wonder why those are different than the State cases cited by the experts above?

EddyB
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Re: NY passes law to get around SALT limit

Post by EddyB » Wed Apr 04, 2018 12:36 pm

bengt wrote:
Wed Apr 04, 2018 12:19 pm
It is fair to say that there is 100% probability that IRS disagrees with this trick. In fact, it has made it clear already.
Naturally, after years of court battles, NY taxpayer using this trick could prevail. But that is a long-shot, so good luck for anybody trying this.
That the Office of Chief Counsel previously reached the opposite conclusion regarding a similar program makes it hard for me to understand why some people are so certain that the IRS would challenge this (or win)---if you have specific reasons for your view, I'd be interested in hearing them. This is actionable for me, as my state has a number of longstanding programs that auction off state tax credits based on contributions to charities that support specific state interests, and I'll soon need to decide whether to participate in the auctions.

From the memo I linked above:

ISSUES
Is a payment of cash to either a state agency or a charitable organization considered a charitable contribution under § 170 of the Internal Revenue Code or a payment of state tax possibly deductible under § 164 if, instead of a state tax charitable deduction, the payment entitles the taxpayer to a transferable state tax charitable credit?
Is a transfer of property to either a state agency or a charitable organization considered a charitable contribution under § 170 or a disposition of property under § 1001 coupled with a possible deduction under § 164 if, instead of a state tax charitable deduction, the transfer entitles the taxpayer to a transferable state tax charitable credit?

CONCLUSIONS
In the instant case, the payment is considered a charitable contribution under § 170, not a payment of tax possibly deductible under § 164.
In the instant case, the transfer of property is considered a charitable contribution under § 170, not a disposition of the property in satisfaction of the state tax liability.

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Artsdoctor
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Re: NY passes law to get around SALT limit

Post by Artsdoctor » Wed Apr 04, 2018 12:36 pm

This concept is not new although the details are varied. We have had this in California for several years:

https://www.ftb.ca.gov/individuals/Coll ... edit.shtml

I think there is plenty of wiggle room when it comes to changing around the percentages, but I don't see how the IRS would argue against one state when another state has been up and running for several years with the blessing of the IRS.

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dodecahedron
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Re: NY passes law to get around SALT limit

Post by dodecahedron » Wed Apr 04, 2018 12:41 pm

pancake19 wrote:
Wed Apr 04, 2018 12:11 pm
The payroll tax topic seems to be a credit for employers and not employees, am I wrong?
Employers would pay the payroll tax but the amount paid by the employer would be a credit against the employee's NYS income tax liability.

In general, under current law, payroll taxes paid by employers are excludible from the employee's taxable income. (For example, FICA and FUTA taxes paid by employers are not included in box 1 wages on your W-2.)

Excludibility is even better than deductibility for a number of reasons. (E.g., it reduces AGI as well as taxable income, it does not require itemizing and foregoing the standard deduction. It may also reduce Box 3 and Box 5 on your W-2, thereby decreasing SS and Medicare taxes.)

It remains to be seen whether the IRS and Congress will allow this NYS employer payroll tax to be treated in the same manner that other employer paid payroll taxes have been treated and are still being treated.

bengt
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Re: NY passes law to get around SALT limit

Post by bengt » Wed Apr 04, 2018 12:54 pm

For starters, https://www.washingtonpost.com/news/won ... its-doomed
The California measure would allow residents to make “charitable” contributions to a new state-run nonprofit group in exchange for a credit that would offset their state tax burden. Classifying the payments as charitable contributions rather than local taxes would help Californians avoid hitting the cap..
Two former Treasury officials and five former IRS officials — including a former IRS commissioner, an attorney who served in the IRS chief counsel's office, and a director of the IRS's nonprofit division — have told The Washington Post that the agency could view the charitable contributions as an attempt to get around the Republican tax law, and issue guidance saying that it will view these payments as taxes subject to the cap. That could throw the issue to the courts...
Two former IRS trial attorneys working in the private sector in California gave similar judgments...
“Suddenly, if you make a contribution, you’re relieved of your tax obligation? No. I’d be very surprised if this withstood IRS scrutiny.”
I'll give this exactly 100% probability that IRS disagrees with NY. Courts will decide eventually.

rkhusky
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Re: NY passes law to get around SALT limit

Post by rkhusky » Wed Apr 04, 2018 1:02 pm

I thought you could not benefit from charitable contributions? And, if you did, you had to subtract the value of the benefit from the charitable contribution? While the state can certainly reduce its own tax through this mechanism, that does not necessarily mean that the federal government has to accept it.
Last edited by rkhusky on Wed Apr 04, 2018 1:07 pm, edited 1 time in total.

Da5id
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Re: NY passes law to get around SALT limit

Post by Da5id » Wed Apr 04, 2018 1:07 pm

rkhusky wrote:
Wed Apr 04, 2018 1:02 pm
I thought you could not benefit from charitable contributions? And, if you did, you had to subtract the value of the benefit from the charitable contribution?
Well, that certainly applies to normal charity. See, e.g, https://www.irs.gov/publications/p526#e ... 1000229650, which says:
If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. Also see Contributions From Which You Benefit under Contributions You Can't Deduct, later.

If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. For the excess amount to qualify, you must pay it with the intent to make a charitable contribution.
Same doc says:
Federal, state, and local
governments, if your contribution is
solely for public purposes (for
example, a gift to reduce the public
debt or maintain a public park)
The tax professors cited above clearly would know this, but I gather this is a different category of contribution?

libralibra
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Re: NY passes law to get around SALT limit

Post by libralibra » Wed Apr 04, 2018 1:10 pm

Wish this option had been available for all those years I was paying AMT.

rkhusky
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Re: NY passes law to get around SALT limit

Post by rkhusky » Wed Apr 04, 2018 1:11 pm

Da5id wrote:
Wed Apr 04, 2018 1:07 pm
The tax professors cited above clearly would know this, but I gather this is a different category of contribution?
Thanks. I missed the post by SuzBanyan above.

bengt
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Re: NY passes law to get around SALT limit

Post by bengt » Wed Apr 04, 2018 1:18 pm

To keep this thread actionable and within the limits of allowable discussion:

This NY trick is not confirmed by the IRS and will extremely unlikely be allowed by the IRS.
So the (higher) courts will eventually decide on this. Quoting some law profs supporting or refuting this does not change the facts and is hence pointless debate here.

NY taxpayers need to take this unclarity into account i.e. similar to many other gray-area tax avoidance strategies. If you use this, you will face years of uncertainty and potential penalties for underpayment. Use your own judgment.

SuzBanyan
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Re: NY passes law to get around SALT limit

Post by SuzBanyan » Wed Apr 04, 2018 1:21 pm

Dan Shapiro, a tax professor at NYU, argues that the increase in payroll tax in exchange for an employee tax credit and the charitable contribution in exchange for the same is consistent with the underlying principals on the 2017 Tax law:

“But this [payroll tax] provision, like that pertaining to the Charitable Gifts Trust Fund, has the potential to mitigate the adverse consequences to New York State residents of the 2017 tax act's largely repealing state and local income tax deductions. And it does so within the 2017 act's deliberate contours, which were based on the view that employer business expenses, like individuals' charitable contributions, should generally be treated more favorably than individuals' payments of state income tax liability. So both provisions can reasonably be viewed as wholly consistent with the intent behind the 2017 tax act.”

http://danshaviro.blogspot.com

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Re: NY passes law to get around SALT limit

Post by czeckers » Wed Apr 04, 2018 1:26 pm

Property taxes as charitable contributions. Hahaha.
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Re: NY passes law to get around SALT limit

Post by missingdonut » Wed Apr 04, 2018 1:29 pm

This always happens -- the federal government makes a change, and states amend their laws in light of the change. It happens all the time, on various topics and from the various political sides.

The problem with the IRS writing regulations against this is twofold: (1) it will be difficult to write in a manner that does not also go against existing allowed incentive programs or current state payroll taxes such as unemployment taxes, and (2) such a regulation will invite court challenges based on the IRS overstating its authority.

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Re: NY passes law to get around SALT limit

Post by EddyB » Wed Apr 04, 2018 1:42 pm

bengt wrote:
Wed Apr 04, 2018 1:18 pm
To keep this thread actionable and within the limits of allowable discussion:

This NY trick is not confirmed by the IRS and will extremely unlikely be allowed by the IRS.
So the (higher) courts will eventually decide on this. Quoting some law profs supporting or refuting this does not change the facts and is hence pointless debate here.

NY taxpayers need to take this unclarity into account i.e. similar to many other gray-area tax avoidance strategies. If you use this, you will face years of uncertainty and potential penalties for underpayment. Use your own judgment.
For others who are considering decisions for similar programs, note that those law profs cite decisions from two separate circuit courts (including the circuit I live in) that allowed substantially similar programs (so thanks for that, SuzBanyan). That is, there is some actual authority out there to consider, not just academic opinion based on abstract principle, or journalistic coverage of what may be political opinions.

Da5id
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Re: NY passes law to get around SALT limit

Post by Da5id » Wed Apr 04, 2018 1:47 pm

EddyB wrote:
Wed Apr 04, 2018 1:42 pm
For others who are considering decisions for similar programs, note that those law profs cite decisions from two separate circuit courts (including the circuit I live in) that allowed substantially similar programs (so thanks for that, SuzBanyan). That is, there is some actual authority out there to consider, not just academic opinion based on abstract principle, or journalistic coverage of what may be political opinions.
Fair enough. If I lived in NY I'd wait until December to see how things shake out though.

Flashes1
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Re: NY passes law to get around SALT limit

Post by Flashes1 » Wed Apr 04, 2018 1:51 pm

In the meantime, NY tax accountants and CPA's will have a strong 2018.

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Artsdoctor
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Re: NY passes law to get around SALT limit

Post by Artsdoctor » Wed Apr 04, 2018 2:01 pm

They say that "timing is everything" although I'm still not clear how some tax relief could be thwarted by a well-crafted program. As I posted above, CA has been offering this program, which is different from the NY program but with a similar end result, since 2014. They have awarded up to nearly $10M in annual credits from 2014-2017, but it looks like they've slated $500M in credits for 2018. The IRS has not contested this program to date and I find it hard to believe that they would penalize people retroactively going back several years. I can't be sure, but if they're allocating $500M for 2018, it could appear that they're looking at the new tax law's effects; or, they could have widened the scope of people and entities which might find this more attractive.

http://www.treasurer.ca.gov/cefa/catc/index.asp

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Re: NY passes law to get around SALT limit

Post by bengt » Wed Apr 04, 2018 2:14 pm

Artsdoctor wrote:
Wed Apr 04, 2018 2:01 pm
They say that "timing is everything" although I'm still not clear how some tax relief could be thwarted by a well-crafted program. As I posted above, CA has been offering this program, which is different from the NY program but with a similar end result, since 2014. They have awarded up to nearly $10M in annual credits from 2014-2017, but it looks like they've slated $500M in credits for 2018. The IRS has not contested this program to date and I find it hard to believe that they would penalize people retroactively going back several years. I can't be sure, but if they're allocating $500M for 2018, it could appear that they're looking at the new tax law's effects; or, they could have widened the scope of people and entities which might find this more attractive.

http://www.treasurer.ca.gov/cefa/catc/index.asp
This CA tax credit ("College Access Tax Credit Fund") is for specific, limited purpose. It is not general purpose tax evasion strategy, with the public statements admitting that it is meant to do tax evasion.

Da5id
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Re: NY passes law to get around SALT limit

Post by Da5id » Wed Apr 04, 2018 2:17 pm

bengt wrote:
Wed Apr 04, 2018 2:14 pm
Artsdoctor wrote:
Wed Apr 04, 2018 2:01 pm
They say that "timing is everything" although I'm still not clear how some tax relief could be thwarted by a well-crafted program. As I posted above, CA has been offering this program, which is different from the NY program but with a similar end result, since 2014. They have awarded up to nearly $10M in annual credits from 2014-2017, but it looks like they've slated $500M in credits for 2018. The IRS has not contested this program to date and I find it hard to believe that they would penalize people retroactively going back several years. I can't be sure, but if they're allocating $500M for 2018, it could appear that they're looking at the new tax law's effects; or, they could have widened the scope of people and entities which might find this more attractive.

http://www.treasurer.ca.gov/cefa/catc/index.asp
This CA tax credit ("College Access Tax Credit Fund") is for specific, limited purpose. It is not general purpose tax evasion strategy, with the public statements admitting that it is meant to do tax evasion.
Here is another analysis which is doubtful that this will fly from a guy who sounds kind of credible to my non-expert reading: https://www.jdsupra.com/legalnews/chari ... nce-12831/

I'd not be completely confident in either direction. Wait and see still seems the wiser course to me.

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celia
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Re: NY passes law to get around SALT limit

Post by celia » Wed Apr 04, 2018 2:29 pm

The recent changes in federal tax law seemed to make things a little simpler. The above programs make things more complicated.

No wonder the average person has trouble understanding their taxes!

Don't we promote simplicity on this board, where possible?

libralibra
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Re: NY passes law to get around SALT limit

Post by libralibra » Wed Apr 04, 2018 2:40 pm

Artsdoctor wrote:
Wed Apr 04, 2018 2:01 pm
They say that "timing is everything" although I'm still not clear how some tax relief could be thwarted by a well-crafted program. As I posted above, CA has been offering this program, which is different from the NY program but with a similar end result, since 2014. They have awarded up to nearly $10M in annual credits from 2014-2017, but it looks like they've slated $500M in credits for 2018. The IRS has not contested this program to date and I find it hard to believe that they would penalize people retroactively going back several years. I can't be sure, but if they're allocating $500M for 2018, it could appear that they're looking at the new tax law's effects; or, they could have widened the scope of people and entities which might find this more attractive.

http://www.treasurer.ca.gov/cefa/catc/index.asp
From reading the details, you get a 50% CA tax credit for your contribution along with a federal deduction. So say you are in AMT at the 35% marginal rate. Best case for a 10k donation is 5k off CA taxes and 3.5k off fed taxes.

ps. I would think the IRS could rightly also chop your deduction in half since you benefited from the donation.

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Phineas J. Whoopee
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Re: NY passes law to get around SALT limit

Post by Phineas J. Whoopee » Wed Apr 04, 2018 3:28 pm

I believe this topic must be acceptable because, as OP references, it is already enacted legislation.

Whether it's a good or bad idea might descend into politics.

PJW

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Re: NY passes law to get around SALT limit

Post by SuzBanyan » Wed Apr 04, 2018 3:35 pm

Phineas J. Whoopee wrote:
Wed Apr 04, 2018 3:28 pm
I believe this topic must be acceptable because, as OP references, it is already enacted legislation.

Whether it's a good or bad idea might descend into a political discussion.

PJW
It also seems actionable for those in NY. Businesses will have to decide whether to opt in to the new payroll tax and individual taxpayers may want to consider how much and when to pay (or withhold) state and property tax in light of the option to receive a state tax credit.

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Re: NY passes law to get around SALT limit

Post by blevine » Wed Apr 04, 2018 3:59 pm

One minor detail nobody has questioned.
You get a PERCENTAGE of payments to this new charity as a reduction in property taxes.
If that's 100% fine, if not, don't see why people would give to such "charity".
Anyone know how that % would be determined ?

Also not sure if this helps. With $24k in standard deduction, would have to have lots of other deductions
or very large property taxes to bother making payments to this "charity". So I would be able to deduct $10k
in state income tax (if I still pay that after the other change that is up to my employer), then convert $14k in
property taxes to charity, resulting in the same $24k deduction as the standard deduction. So one would have to pay more than $14k in property
taxes and have it all reduced by the offsetting charity, for this to be beneficial. Many in NYS do pay more than $14k,
in property tax, but certainly not all, and it remains TBD if you can get the full amount of property tax reduced, possibly
making this even less valuable to less people.

Clearly the NYS gov is running for president soon..

crystalbank
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Re: NY passes law to get around SALT limit

Post by crystalbank » Wed Apr 04, 2018 4:28 pm

It's interesting to see states pass various measures. Connecticut passed a measure that would tax pass through income and offset personal income tax liability with a credit.

http://www.taxanalysts.org/content/conn ... ually-work

I wonder what CA will eventually do.

Edit: Nevermind. Apparently nothing is passed yet.
Last edited by crystalbank on Wed Apr 04, 2018 4:40 pm, edited 1 time in total.

Chuck
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Re: NY passes law to get around SALT limit

Post by Chuck » Wed Apr 04, 2018 4:33 pm

blevine wrote:
Wed Apr 04, 2018 3:59 pm
Also not sure if this helps. With $24k in standard deduction, would have to have lots of other deductions
or very large property taxes to bother making payments to this "charity". [...] Many in NYS do pay more than $14k,
in property tax, but certainly not all, and it remains TBD if you can get the full amount of property tax reduced, possibly
making this even less valuable to less people.
The people targeted by this measure are paying $100,000 or more in SALT. So yes, it is important and valuable to those people.

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Re: NY passes law to get around SALT limit

Post by SuzBanyan » Wed Apr 04, 2018 4:39 pm

crystalbank wrote:
Wed Apr 04, 2018 4:28 pm
It's interesting to see states pass various measures. Connecticut passed a measure that would tax pass through income and offset personal income tax liability with a credit.

http://www.taxanalysts.org/content/conn ... ually-work

I wonder what CA will eventually do.
I’m not in Connecticut, but I don’t think SB11 has been passed. I don’t believe anything in response to the 2017 Federal tax bill has been passed at this time. Discussion of either would therefore be premature.

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Re: NY passes law to get around SALT limit

Post by blevine » Wed Apr 04, 2018 4:46 pm

Chuck wrote:
Wed Apr 04, 2018 4:33 pm
blevine wrote:
Wed Apr 04, 2018 3:59 pm
Also not sure if this helps. With $24k in standard deduction, would have to have lots of other deductions
or very large property taxes to bother making payments to this "charity". [...] Many in NYS do pay more than $14k,
in property tax, but certainly not all, and it remains TBD if you can get the full amount of property tax reduced, possibly
making this even less valuable to less people.
The people targeted by this measure are paying $100,000 or more in SALT. So yes, it is important and valuable to those people.
As I said, many do pay more, but this is only going to help a minority of state residents.
As with many NYS PR stunts, they announce new measures to help a few edge cases that get max PR value.
Similar to the free public college stunt. Many in NYS were already getting free public college.
Tuition was $6k/year at CUNY and SUNY and that level is conveniently the sum of fed/state subsidies for low income students.
My son attended a CUNY for a year, almost nobody was paying tuition BEFORE the free tuition plan was announced.

And my comments are based on the propety tax issue.
It is up to your employer to take advantage of this and reduce the S in Salt. Your part as taxpayer is limited to whether to contribute to the charity instead of prop tax. My comments related to fact that if you are left with as little as $10k in state income tax after this payroll tax, and you have under $14k of prop tax to reduce, your total deduction may still be less than the std deduction. i pay very high state income tax, but i dont think this will cause me to itemize, therefore I wont likely use the charity.

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Re: NY passes law to get around SALT limit

Post by whomever » Wed Apr 04, 2018 5:40 pm

Presumably, if this stands every state could do the same.

Is there any reason every state wouldn't enact a 50% income tax (IIUC, 50% of AGI is the usual charitable limit), off set by the charitable deduction? That would have a rather large impact on federal tax revenues.

Da5id
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Re: NY passes law to get around SALT limit

Post by Da5id » Wed Apr 04, 2018 5:53 pm

whomever wrote:
Wed Apr 04, 2018 5:40 pm
Presumably, if this stands every state could do the same.

Is there any reason every state wouldn't enact a 50% income tax (IIUC, 50% of AGI is the usual charitable limit), off set by the charitable deduction? That would have a rather large impact on federal tax revenues.
Most citizens in most states don't have issues with SALT limits. California and New York SALT deduction changes had the biggest impact I think.

Deduction isn't same as credit. Most may not want half their income taken by state, if I understand what you are saying.

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Re: NY passes law to get around SALT limit

Post by rkhusky » Wed Apr 04, 2018 7:10 pm

Chuck wrote:
Wed Apr 04, 2018 4:33 pm
blevine wrote:
Wed Apr 04, 2018 3:59 pm
Also not sure if this helps. With $24k in standard deduction, would have to have lots of other deductions
or very large property taxes to bother making payments to this "charity". [...] Many in NYS do pay more than $14k,
in property tax, but certainly not all, and it remains TBD if you can get the full amount of property tax reduced, possibly
making this even less valuable to less people.
The people targeted by this measure are paying $100,000 or more in SALT. So yes, it is important and valuable to those people.
+1. The 1-percenters have a lot of clout with state government, whatever the political leanings. But I don't remember this level of hue and cry when the feds limited mortgage interest deductions. I certainly don't remember states trying to game the tax rules to protect their citizens.

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Re: NY passes law to get around SALT limit

Post by Chuck » Thu Apr 05, 2018 9:45 am

rkhusky wrote:
Wed Apr 04, 2018 7:10 pm
+1. The 1-percenters have a lot of clout with state government, whatever the political leanings. But I don't remember this level of hue and cry when the feds limited mortgage interest deductions. I certainly don't remember states trying to game the tax rules to protect their citizens.
In NY, the top 10% earners are responsible for 67% of tax revenue. (https://www.tax.ny.gov/research/stats/s ... eturns.htm) High income residents are moving to more tax-friendly states. The government has been RAISING taxes to compensate, which is only driving people out more quickly. (NY is one of few states whose population is actually declining.) There isn't a hue and cry, it's mostly happening quietly. And who knows when it will change from a slow out-migration to a death spiral.

I'm held in NY by a good-paying job with great benefits at a strong company. That is enough to overcome the ridiculous taxes and mandatory fees and burdensome regulations. My wife and I agree that job is the only thing, and if that begins to look shaky, it's NC, FL, TX, here we come.

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Re: NY passes law to get around SALT limit

Post by bsteiner » Thu Apr 05, 2018 10:42 am

Chuck wrote:
Thu Apr 05, 2018 9:45 am
...
In NY, the top 10% earners are responsible for 67% of tax revenue. ...
That's the case in many states. New York has a relatively large number of high income taxpayers, and many extremely high income taxpayers, so in this case of New York this isn't surprising.
Chuck wrote:
Thu Apr 05, 2018 9:45 am
... High income residents are moving to more tax-friendly states. The government has been RAISING taxes to compensate, which is only driving people out more quickly. ...
New York has been lowering its income tax rates for some time. I remember when the top rate was 15% (15.375% for a while with a temporary surcharge). The top rate is now 6.85% (8.82% above about $2,155,350 on a joint return for a few years due to another temporary surcharge). https://www.tax.ny.gov/pdf/current_forms/it/it2105i.pdf.

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Re: NY passes law to get around SALT limit

Post by Chuck » Thu Apr 05, 2018 10:58 am

I didn't mean to get into a debate about tax policy. One can go here (https://taxfoundation.org/publications/ ... -rankings/) to look at how states compare. Living in NY, I have paid taxes since about 2001, and I have never seen my taxes go down. If there have been decreases before that, I was a child then, so it is outside my experience.

I was simply reacting to the comment about how SALT deduction workarounds are "only going to help a minority of state residents" and therefore doesn't matter much. In fact, this minority of residents pay the majority of tax, so it matters quite a bit to state government finances.

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Re: NY passes law to get around SALT limit

Post by GodelianKnot » Thu Apr 05, 2018 11:15 am

blevine wrote:
Wed Apr 04, 2018 3:59 pm
Also not sure if this helps. With $24k in standard deduction, would have to have lots of other deductions
or very large property taxes to bother making payments to this "charity". So I would be able to deduct $10k
in state income tax (if I still pay that after the other change that is up to my employer), then convert $14k in
property taxes to charity, resulting in the same $24k deduction as the standard deduction. So one would have to pay more than $14k in property
taxes and have it all reduced by the offsetting charity, for this to be beneficial. Many in NYS do pay more than $14k,
in property tax, but certainly not all, and it remains TBD if you can get the full amount of property tax reduced, possibly
making this even less valuable to less people.
If you have ~10k in property taxes, you probably also have a significant mortgage interest deduction. Probably most people over ~7k property tax in NY would benefit if they could deduct it. It's still pretty easy to get over the standard deduction in NY if you own property.

randomguy
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Re: NY passes law to get around SALT limit

Post by randomguy » Thu Apr 05, 2018 11:42 am

whomever wrote:
Wed Apr 04, 2018 5:40 pm
Presumably, if this stands every state could do the same.

Is there any reason every state wouldn't enact a 50% income tax (IIUC, 50% of AGI is the usual charitable limit), off set by the charitable deduction? That would have a rather large impact on federal tax revenues.
It should be noted that this problem has existed for a long time and states have done nothing. All those workers who paid state taxes but didn't itemize didn't get a deduction. States could have adopted things like employer payroll taxes to keep more money in state but didn't. Maybe now that it is a high earners issue it will cause more action.

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Re: NY passes law to get around SALT limit

Post by skepticalobserver » Thu Apr 05, 2018 11:46 am

A step-transaction, no?

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Re: NY passes law to get around SALT limit

Post by blevine » Thu Apr 05, 2018 8:16 pm

GodelianKnot wrote:
Thu Apr 05, 2018 11:15 am
blevine wrote:
Wed Apr 04, 2018 3:59 pm
Also not sure if this helps. With $24k in standard deduction, would have to have lots of other deductions
or very large property taxes to bother making payments to this "charity". So I would be able to deduct $10k
in state income tax (if I still pay that after the other change that is up to my employer), then convert $14k in
property taxes to charity, resulting in the same $24k deduction as the standard deduction. So one would have to pay more than $14k in property
taxes and have it all reduced by the offsetting charity, for this to be beneficial. Many in NYS do pay more than $14k,
in property tax, but certainly not all, and it remains TBD if you can get the full amount of property tax reduced, possibly
making this even less valuable to less people.
If you have ~10k in property taxes, you probably also have a significant mortgage interest deduction. Probably most people over ~7k property tax in NY would benefit if they could deduct it. It's still pretty easy to get over the standard deduction in NY if you own property.
No more home equity debt deduction, but yes if you have a first mortgage, I suppose one can go lover.
So for those of us downstate with high property taxes and mortgages, yes. For those in lower cost areas, maybe not.

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Re: NY passes law to get around SALT limit

Post by jehovasfitness » Thu Apr 05, 2018 8:51 pm

Is discussing new laws not political?

I sometimes struggle with the board rules on the political issue when it impacts the very nature of this site

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Re: NY passes law to get around SALT limit

Post by littlebird » Thu Apr 05, 2018 9:49 pm

AZ has had tax credits for 501(c)3's that support private school "scholarships", and for direct contributions to public schools for certain activities for a number of years.

https://www.azdor.gov/TaxCredits/School ... duals.aspx

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Re: NY passes law to get around SALT limit

Post by LadyGeek » Thu Apr 05, 2018 9:50 pm

Legislation which has not yet been signed into law is off-topic. Here's why: Political comments and proposed tax plan remain off-topic NY state has enacted legislation, which may be discussed.

However, the majority of comments are conjecturing on "gaming the system", "the one-percenters", "it's a PR stunt", etc. The discussion is derailed. For these reasons, this thread has run its course and is locked.

I also removed several off-topic posts providing opinions of the political process. See: Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
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