Meeting leader Paulin: Proposes legislation for tax breaks for partnerships and campaigns for salt relief for individual residents
Sunday January 3, 2021 9:31 PM Last updated: Sunday January 3, 2021 9:31 PM Posted: Sunday January 3, 2021 9:31 PM Joanne Wallenstein Hits: 42
This in from MP Amy Paulin:
The 2017 Federal Tax Cuts and Employment Act (the Act) removed full state and local tax deductibility (SALT) and limited deductions to $ 10,000. This law disproportionately harms democratic states like New York, where state and local taxes for residents often exceed $ 10,000. To fight back, I’ve proposed laws that will provide partnerships and other transit companies with the full SALT vent. The proposal will be considered during the New York State legislature beginning this month.
Relief for partnerships
Currently, the SALT cap only applies to deductions paid by individuals, not companies. Since members or shareholders of partnerships tend to pay income tax individually rather than at the corporate level, they are subject to the SALT cap.
However, my proposed law would allow New York State partnerships and other transit companies to pay a tax to New York State for which they would receive a full federal withholding tax, with the tax payments offsetting the New York State partners’ incomes from these taxes Facility would be tax neutral for New York State, but would allow Partners to take the full SALT deduction, which would otherwise be capped at $ 10,000 if Partners paid their income taxes directly to New York State.
After the bill was passed in 2017, several states, including New Jersey and Connecticut, passed similar laws that allow pass-through businesses to pay corporate-level taxes and get a credit on their state income taxes to make up for it . On November 9, 2020, the IRS issued a notice stating that this regime would apply to tax payments made on or after November 9, 2020.
This is an opportunity not to be missed. Now that the IRS approves the tax structure for partnerships and transit companies, we should get my bill passed quickly and provide much-needed relief to New Yorkers, who are disproportionately affected by the SALT cap. The legislation will provide New Yorkers with common sense for tax year 2021 – free for New York State.
Help for individual residents
In 2018, I wrote and passed a law that allows deductions for contributions to charitable reserve funds to provide relief to residents who have just lost the SALT deduction. The law gave counties, local governments, and public school districts the ability to approve a property tax credit of up to 95% of the amount of a property owner’s monetary contribution to the reserve fund.
However, later in 2018, the IRS issued regulations denying that a taxpayer who contributed to a nonprofit reserve fund could receive a state or local tax credit. A subsequent IRS notice announced that companies would be entitled to a full deduction of their contributions, creating an arbitrary distinction between contributions from companies that remained fully deductible and contributions from individuals who were not.
In response to IRS regulations and conflicting positions on nonprofit reserve funds, I formed and led a coalition of New York counties, towns, villages, and school districts known as the Coalition for Charitable Contributions (3CD) submitted a letter to the Treasury Department and the IRS, testifying before the Treasury Department, demanding the withdrawal of the proposed regulations under the law that denied full deduction for donations made by individuals to the charitable fund.
Working with the Village of Scarsdale, a lawsuit was filed against the IRS in 2019, with the Village of Scarsdale acting as plaintiff, to repeal the IRS regulations as arbitrary and capricious and therefore invalid. I continued to lead the initiative, claiming that taxpayers should be eligible for the full charitable allowance for their donations to charitable reserve funds and similar vehicles. The lawsuit is still ongoing. Along with the 3CD, we hope the IRS will enact new regulations that are in line with applicable laws and internal IRS decisions, and we continue our challenge to the regulations in federal courts.
It is vital that we take all possible steps to minimize the impact on residents, many of whom are struggling financially due to the pandemic. Establishing nonprofit reserve funds to give individual residents a SALT deduction and granting a SALT deduction for partnerships and transit would give many New Yorkers tax breaks right now – at a time when they need it most.
