“I have no doubt this is going to get challenged,” Stu Gibson, a tax litigator with law firm Schiff Hardin, said before the regulations were released. “State legislatures are being very creative in how they approach this.”
School Voucher Programs
Cuomo is also spearheading a lawsuit by four states to have the so-called SALT cap struck down. He’s said the state is “ready to fight if the IRS takes hasty and politically motivated action” against New York’s efforts to avoid the deduction cap.
New York, New Jersey, Connecticut and Maryland sued the Trump administration in July saying the new cap unfairly targets them. The states claim the tax law overturned more than 150 years of precedent. The state and local tax deduction is essential to prevent federal tax powers from interfering with constitutionally guaranteed state rights, according to the lawsuit. Legal experts have said the suit has little chance of success.
Treasury faced a complex task in creating regulations that block the new SALT workaround proposals while taking into account existing programs in states such as Georgia and Alabama that give donors credits for making contributions to hospitals and schools. More than 30 states have programs that give taxpayers breaks for charitable donations.
Under the Treasury proposal, school voucher programs will largely be unaffected because the donations aren’t made in lieu of tax payments and are considered legitimate charitable contributions. The government hasn’t sought to regulate those programs because they don’t affect how much tax revenue the IRS collects, a Treasury official said in a phone call with reporters.
‘We appreciate the value of state tax credit programs, particularly school choice initiatives,” Mnuchin said in the statement. “We believe the proposed rule will have no impact on federal tax benefits for donations to school choice programs for about 99 percent of taxpayers compared to prior law.”
This article was provided by Bloomberg News.