Just because something is shady doesn’t mean it is an end run. Frankly, I can’t see how anything you mentioned sounds like an end run to me. Sounds like you think everything you don’t like is an end run.
Yeah, I’m no expert of charitable organizations, but if something is run by the government then it sounds to me like it is by definition not a charity. In my brief perusal or form 1023, sounds like it has to be a corporation, LLC, trust, or an unincorporated association.
Can states establish and control such institutions?
You can’t have it both ways. Either all NPO’s that benefit states are attempts to collect state tax, or none are. But you’d rather treat CA’s plan differently.
A big problem with this idea is that it’s really property taxes that kill us in CA. The $10K maximum deduction isn’t so bad if it only applied to state income taxes. But does this “charitable deduction” scheme encompass property taxes, too? If it doesn’t, then it’s no use to me.
Getting a tax credit is the same thing as receiving something.
Bottom line is that they’re not actually contributing anything to any charity.
This is routinely done all the time. It’s a sham transaction, sort of like money laundering, where you give money to this guy and someone else pays you back. Finding this to be a non-contribution seems like an eminently reasonable position to me.
Beyond the above, the issue with Lois Lerner was that she was alleged to have treated conservative groups differently than other groups. That has nothing to do with what we’re discussing. I don’t think there’s ever been anything analogous to what’s being contemplated here, and this would be the first time the IRS would be taking a position on it.
In my state we pay our property taxes to the county, but income taxes to the state. Is California similar?
If so, I guess they might devise some reimbursement mechanism whereby the state pays counties that agreed to credit property owners for contributions to the California Excellence Fund in lieu of paying their property taxes, but that would make this thing seem even more transparently like a tax-avoidance scheme.
That means if you give money to state or local governments over and above what you’re required to by law, then that amount is treated as charitable donation. That doesn’t mean that your taxes are also a charitable donation. That part is not a charitable donation at all. In this case, you’re being forgiven that non-charitable donation in exchange for this payment to the charity.
What does that have to do with anything? I thought it was pretty clear, but let’s try a different approach.
So we’ve established:
[ul][li]It’s possible to give directly to a state or local government and be considered a deductible charitable contribution for federal purposes[/li][li]States can establish state tax credits for whatever behavior they want to incentivize, like installing solar panels, buying low emission vehicles, hiring people who live in redevelopment zones, donating to various scholarship funds, etc.[/ul][/li]Agree on those two points?
Let’s say the people of CA really really wanted to help the ACLU. The legislature pass a law and it is signed that says, for any donation to the ACLU, you will get a 1:1 state tax credit (can’t also deduct for state purposes). Assume no change to federal laws. First, do you think that would be permissible? Second, What do you think would happen at the state and federal level? 1. I absolutely think that would be legal and supportable at a state and federal level. 2. I think the federal deduction would remain unhindered, and the state credit would be no problem.
Do you disagree with those?
What would be the substantive difference if the CA Excellence Fund was substituted for the ACLU?
We pay property taxes to the county. For many of us, property taxes >> state income taxes. CA is a pretty high tax state, but even here the tax rate does’t break though 10% until you’re making about $270K/year. But in Santa Clara County, where I live, the average home price is > $1M, and the property tax rate is 1%, plus may 0.2% more for other local crap, so figure about 1.2% for property taxes. Now, not everyone who owns a home bought one recently, and lots of people have much lower property tax rates, but unless we can charitably donate property taxes, this effort is not going to make much difference for quite a few folks who itemize.
If you don’t want to engage in a semantic argument, this is the wrong thread for you; for the only purpose of the debate is to decide whether “donation” is or is not the same as “state tax.”
Really? So if I illegally take a tax deduction, I’m not guilty of fraud, I’m guilty of theft?
[quite]This is routinely done all the time. It’s a sham transaction, sort of like money laundering, where you give money to this guy and someone else pays you back. Finding this to be a non-contribution seems like an eminently reasonable position to me.
[/quote]
I asked you for some low to back up your opinion, and you responded with more of your opinions about the law. I don’t care to hear your opinion repeated ad nauseum. I’m asking for the law that backs up your claim.
If you think there has “[n]ever been anything analogous to what’s being contemplated here” then you haven’t read this thread. There are half a dozen states that provide for full state tax credits for educational charities that were created for literally no other reason than to circumvent laws regarding state funding of religious schools.
Also, there’s the obvious fact that the IRS is going to be rather more circumspect about challenging a deduction taken by millions of people based on guidance from the State of California’s legal framework than they are about challenging a deduction taken by dozens of people based on guidance from Gooflequack Q. Soverignut’s opinion that Ohio was not properly admitted to the Union in 1803 (if only because the commissioner of the IRS, given modern political precident, may have visions of being on the wrong end of a Lois Lerner treatment once the Democrats take a house of Congress).
Can someone please provide a cite that California provides a 100% state income tax credit for donations to the ACLU? They very well may give you a deduction for that donation, but that’s a long way from a 100% credit. I’ve looked superficially and can’t find anything. I doubt it’s true. In fact, I very highly doubt it’s true for anything similar. Can anyone provide proof that there exists some state and some charity such that said state provides a 100% tax credit for a donation to said charity?
Reminder: A tax credit reduces the amount of tax you owe (or increases your refund, if refundable). A deduction reduces the amount of your taxable income. Since tax rates are not 100%, and state income tax rates not particularly high at all, a deduction is generally far weaker than a credit. The only kinds of things that you get 100% credit for are direct payments to the governmental body for which you are determining the amount of tax you owe, and is not made for any other purpose, or was intended for another purpose but you overpaid. For instance, if you make a lot of money and have more than one job in a year, you might have more than the statutory limit of Social Security taken out of your pay since one employer doesn’t know how much the other is paying you. You are given a refundable credit for the excess amount on your income taxes, even though the tax was withheld as a payroll tax. (Actually, it doesn’t matter if they know - they are required to withhold and match the FICA amount even if they know you’ll get back what they’re withholding for you.) Most credits are instead percentages of what you paid, and are used in instances where deductions would be less help to a taxpayer.
Again, my contention is that what California is suggesting is too direct a quid pro quo for which there is no precedent, because I highly doubt any state is that generous with their tax credits for charitable donations.
To respond to others about the fact that businesses are getting something out of their charitable donation if they get to deduct it: Again, tax rates are not 100%, and the business loses 100% of the money it donates and only receives a tax benefit of a fraction of it. If it wasn’t getting something else, it wouldn’t donate. Yet public corporations beholden to increase shareholder value still do it, presumably because they believe the publicity or goodwill will allow them to increase their profits by more than they are donating. No one is directly providing a benefit to the corporation on a quid pro quo basis like that which is baldly evident in California’s plan. That is what the IRS will look for when determining whether you received a benefit from your donation, and they certainly don’t care about any legal separation of the donee and reimburser, they only care whether you expect to get some easily measurable value in a direct quid pro quo. That is clearly the case here.
I agree there was some confusion on this point earlier in the thread, but there are indeed some tax credits for certain charitable contributions in certain states.
Ok, you also tend to get 100% credit for Foreign Taxes paid even though they weren’t paid the US government. But that requires either having a small amount of passive income, or thoroughly filling out form 1116 to prove that what you paid in taxes to the foreign government is less than what you would have paid to the US government if it wasn’t taxed by the foreign government. In many cases, people will not get 100% of their foreign taxes paid as a credit because the foreign tax rate was effectively higher than the US’s. And the entire reason the US does this is that it has tax treaties with effectively everyone that has the other country do the same thing (mutatis mutandis).
I don’t believe anyone said the specific first statement. It was as a for example.
As for the second. Several examples have been provided. Here’s another one, the first one Google popped up for me.
The relevant statement is: The [US Supreme] court ruled in a challenge to Arizona’s 14-year-old tuition-aid plan, under which taxpayers can receive a dollar-for-dollar credit of up to $500 (or $1,000 for married couples) on their state income-tax returns for donations to “school tuition organizations,” or STOs.
I can’t find anything that says that those donations are deductible in the computation of federal tax liability. See http://azcredits.org/ - One would think that when saying how they have no net cost to the donor, that they would go on to say that in addition they are deductible for federal tax purposes and thus save them more money than they spend. Do you really think that the IRS would be allowing people to shovel money somewhere at no cost to themselves with respect to state taxes and also get to deduct it for federal tax purposes?
The tax credit makes the deduction not deductible for federal tax purposes, because it is a direct quid pro quo.
No one in that article addressed the federal deductibility either. Amazing. Such a huge benefit to participating in a program, seeing as you make money if you do so, and yet people are not shouting it all over the place. Seems unlikely.