Districts now able to create charitable funds that would give donors a tax credit |
On Board Online • April 23, 2018
By Julie M. Marlette
Director of Governmental Relations
Following up on his commitment to counteract federal changes that limit the deductibility of state and local taxes on federal tax returns, Gov. Andrew Cuomo has worked with the state Legislature to allow the state and local governments, including school districts, to create charitable funds.
If a taxpayer makes a qualified charitable donation to a new state education fund, he or she will be eligible for an 85 percent state income tax credit. The proceeds from the state education fund may only be used for the "provision of elementary and secondary education of the children in the state."
Local school boards will also have discretion to create local charitable funds. For qualified donations to a local charitable fund, taxpayers could be eligible for a school property tax credit of up to 95 percent. The proceeds from the fund are to be used by the district for "public educational purposes." In addition, any monies contributed to, and spent from, the local fund will not affect a district's property tax cap calculation.
It remains to be seen whether the Internal Revenue Service will treat donations to such funds as deductible on federal income taxes. But that was clearly the intent.
Until 2018, federal taxpayers were able to deduct an unlimited amount of state and local taxes paid from their taxable income. In a landmark change, that federal deduction now is limited to $10,000 per return.
NYSSBA supported efforts by the state to address the potential negative impacts on school districts and property taxpayers caused by the new federal cap on state and local tax (SALT) deductions. It was important to NYSSBA that any new mechanism created by the state be optional and at the discretion of the district. These funds are structured in just such a way.
"Everyone wants to see how the IRS views these funds," said NYSSBA President Bill Miller. "It may be prudent for school districts to take a 'wait and see' approach before deciding whether or not the local education funds are in the best interest of the district and its community."