Charitable Trust Fund Message
August 7, 2018
Dear Members of the Blind Brook Community:
I believe it is important to provide you with information about the “Tax Cuts and Jobs Act” that President Trump signed into law on December 22, 2017. This new law placed a limitation on the federal income tax deduction for state and local taxes, commonly referred to as SALT. Under the new federal law, itemized tax filers will now be limited to deductions up to $10,000 in state and local property and income taxes. Previously, there was no limitation placed on the SALT deduction. In order to possibly help mitigate the impact of the SALT deduction limitation, the 2018 New York State budget created the “Charitable Gifts Trust Fund.”
Last spring, New York State released information regarding the establishment and use of charitable funds by local governments and school districts. Since then, we have been working with our auditors and legal counsel to determine if the Blind Brook School District could establish such a “charitable fund” so that resident real property owners/taxpayers could maintain their tax deductions for the full amount of their 2018-2019 school taxes. Unfortunately, the initial hope that this might be a way to maintain tax benefits associated with paying NYS property taxes has faded.
We have been cautioned by the NYS Council of School Superintendents and NYS Association of School Business Officials that the legal framework proposed by the Governor and the Legislature is indeed on shaky ground with the Internal Revenue Service (IRS). Forthcoming IRS regulations appear likely to undermine efforts to preserve the tax deduction for school taxes paid beyond the $10,000 cap.. At this time, it is reasonable to believe that the IRS will not allow contributions made to a charitable fund established by a school board to be recognized as “charitable contributions” for federal income tax purposes. Moreover, we have been warned by our legal counsel that taxpayers who attempt to claim these deductions contrary to current and additional IRS guidance, may be subject to penalties for taking improper deductions. In addition, Blind Brook has been warned that the School District could potentially be held liable for authorizing participation in improper charitable contribution schemes.
Given the prevailing circumstances as well as guidance from the IRS and the NYS Department of Taxation and Finance, the Blind Brook School District will not be setting up a “charitable trust fund” unless and until the legal issues surrounding New York’s “Charitable Gifts Trust Fund” law have been resolved. Notwithstanding the independent actions of the Town of Rye and the Village of Rye Brook in establishing their own charitable trust funds, there will be no change to the upcoming school tax collection process managed by the Town of Rye on behalf of the Blind Brook School District.
We will continue to monitor the issue and the IRS guidelines when released, and revisit the matter when we know more.
Jonathan Ross, Ed.D.