06.25.18

STANDING WITH WESTCHESTER RESIDENTS, SCHUMER URGES IRS TO STAND DOWN ON THEIR ATTEMPT TO CHALLENGE NEW YORK STATE’S NEW TAX LAW THAT WILL SAVE HOMEOWNERS THOUSANDS OF DOLLARS IN FEDERAL TAXES; SENATOR SAYS TAX PLAN UNFAIRLY TARGETS WESTCHESTER AND LOWER HUDSON VALLEY HOMEOWNERS WHO HAVE HIGHEST PROPERTY TAXES IN THE NATION

New NYS Law Allows For Westchester, Rockland And HV Residents To Receive Tax Credits for Charitable Donations to the State, Which Can Be Deducted Against Federal Taxes; This Will Help Ease The Tax Hike Caused by The New Tax Law’s $10,000 State and Local Deduction Cap 

Schumer Urges IRS To Stand Down And Cease Attempts To Impede Westchester and HV Homeowners Ability To Replace Valuable Deductions Lost In Tax Bill 

Schumer To IRS: Rule In Favor Of New York State Law 

Standing with Westchester County homeowners, and amidst rising local anxiety, U.S. Senate Minority Leader Charles E. Schumer today called on the Internal Revenue Service (IRS) to fairly treat a new New York State law that will help lower New Yorker’s taxes. Schumer called on the IRS to support NYS’ law, which enables cash-strapped New Yorkers to ease the tax burden caused by the Republican tax bill which capped State and Local Tax (SALT) deductions at $10,000. New York States’ new tax law enabling residents to receive tax credits for charitable donations to New York State charitable funds to help lower state and federal taxes. Schumer highlighted, the IRS’ recent Notice 2018-54, announcing an intention to initiate federal rulemaking on the federal deductibility of charitable donations made to newly create New York State-operated charitable funds. Schumer called the attempts to challenge New York’s new tax lawshortsighted, and a potential infringement of states’ rights. 

“Put simply, the feds are going out of their way to raise taxes on hardworking middle-class homeowners in Westchester and Rockland Counties,” said Senator Schumer. “First, it was the far right pushing a tax bill which was crafted to raise taxes on many middle-class families while lining the pockets of the ultra-wealthy. Then, New Yorkers had to deal with the IRS undermining taxpayers from prepaying taxes prior to January 1, 2018 to avoid steep tax increases. Now, the IRS is at it again, and is now attempting to undermine a New York law that lowers taxes for thousands of Hudson Valley residents. It couldn’t be more apparent the IRS is targeting middle-class homeowners in New York.”

Schumer explained New York State’s new tax law provides a charitable tax credit of 85 percent for donations to state funds that will go towards vital healthcare and public education programs. According to Schumer, these donations can be treated as a charitable deduction under the federal tax code. New York State also authorized municipalities within New York to set up similar tax credit programs — all in an attempt to ease the burden of the newly imposed tax bill which would cap key State and Local tax deductions at $10,000. Schumer said the new law could benefit Westchester homeowners who, have the highest property taxes in the nation.

Schumer said, the new federal tax law, P.L 115-97, significantly raised taxes on many New Yorkers and diminished tax incentives for most taxpayers to contribute to charitable causes. The tax law’s cap on federal state and local tax deductions raised taxes on residents in communities like Westchester and Rockland Counties, and across New York State, who were already net-contributors to the federal government. Schumer said after New York residents were unfairly targeted for additional federal revenues, New York established programs to incentivize giving to state-operated charitable funds and mitigate the effects of the new tax increases.  

Schumer added, “Let’s call this plan what it is — an attempt by the feds to undermine a state’s ability to provide tax relief to residents unfairly targeted by the Republican tax bill. 32 states already provide tax incentives to donate to state charitable funds. The IRS has never weighed in on these state’s tax incentives, but the IRS is attempting to change the rules and hit hard-working Westchester families right between the eyes by potentially blocking New York’s new tax law. That is why I am calling on the IRS to stand down from attempts to undermine New York’s new law that provides Westchester and Rockland residents, the top two taxes counties in the country, with much needed tax relief from the tax bill’s most unfair and harmful laws.”

According to Schumer, like the new federal tax law, the IRS’ recent notice unfairly target New Yorkers in areas like Westchester and Rockland. Schumer said the donations, made to these new state-operated charitable funds should be fairly treated by the IRS as charitable donations, with no reduction in their value. Any attempts to undermine the value of donations made to New York State’s new charitable funds through the federal tax code would be yet another gut-punch to Westchester homeowners and diverge from years of precedent. 

Schumer was joined by Mike Oates, President and CEO of the Hudson Valley Economic Development Corporation, and homeowners, Jean Marie Healy and her husband, Robert Bewick.

“The federal tax bill’s State and Local Tax Deduction (SALT) $10,000 cap will have a huge and damaging impact on both families and businesses in the Hudson Valley and hinder our ability to attract and retain high skilled employees. This puts us at a competitive disadvantage when competing against other states for talent. We appreciate Senator Schumer calling attention to this important economic development issue,” said Mike Oates, President and CEO of the Hudson Valley Economic Development Corporation.

Similar state charitable tax credits exist in 32 states and have long been found by the IRS to be admissible. Schumer said it is vital that the IRS issue unbiased guidance — making it clear that donations, made by Westchester residents, to New York State’s charitable funds will be treated like charitable contributions to other state-operated charitable funds. Schumer said the IRS should reverse its plan and stop targeting states like New York directly or indirectly, Schumer vowed to hold to IRS accountable, and urged them to implement the new tax law as written.

A copy of Schumer’s letter appears below:

Dear Acting Commissioner Kautter:

I write to express my concerns with the Internal Revenue Service’s (IRS) Notice 2018-54, which announces an intention to initiate federal rulemaking on the federal deductibility of charitable donations made to newly created state-operated charitable funds.  Any attempts by the IRS to alter the federal tax treatment of charitable contributions where the donation entitles the donee to a state or local tax credit would upend years of precedent, infringing on the rights of states and municipalities to provide local tax benefits for charitable contributions. 

The new federal tax law, P.L 115-97, significantly raised taxes on many New Yorkers and diminished tax incentives for many to contribute to charitable causes. The cap on federal state and local tax deductions raised taxes on residents of states like New York, who were already net-contributors to federal coffers. After their residents were targeted for additional federal revenues, New York, and other states established programs to incentivize giving to state-operated charitable funds and mitigate the effects of the new tax increases.  

As you know, New York State’s new tax law provides a charitable tax credit for donations to state funds that will go towards healthcare and public education programs. These donations can be treated as a charitable deduction under the federal tax code. New York State also authorized municipalities within New York to set up similar tax credit programs. 

Unfortunately, the IRS’s recent notice appears to be an attempt to target state tax credit programs, like New York’s, developed after the new tax law. The donations to these new state-operated charitable funds should be fairly treated by the IRS as charitable donations, with no reduction in their value due to the states’ tax credits. Any attempts to undermine the value of donations made to New York State’s new charitable funds through the federal tax code would diverge from years of precedent. Similar state charitable tax incentives exist in 32 states and have long been found by the IRS to be admissible. In an IRS Chief Counsel Advisory memo published in 2011, the IRS cited various case law to support the conclusion that any state or local tax benefit received by the donor should not be considered income or “a thing of value.”  The memo finds that a state or local tax credit should be treated just like the federal charitable deduction - as a reduction in tax liability. 

The IRS must carefully consider the potential political implications of targeting the states, like New York, that have implemented laws after the federal tax law went into effect, all of which are controlled by Democratic administrations. The IRS has left alone the 32 states that have existing charitable tax programs. Our federal tax laws must be applied fairly and equitably, without regard to political party. 

I urge the IRS to issue unbiased guidance — making it clear that donations to New York State’s charitable funds will be treated like charitable contributions to other state-operated charitable funds. The IRS should implement the new tax law as written and as historically interpreted by the agency.

Sincerely,

Charles E. Schumer

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