I guess I never said in my initial question that the donation for which the tax credit is received also needs to be federally tax deductible, but seeing as that’s the entire point of what we’re talking about, I felt it didn’t need to be said.
Up until now you didn’t make any money. You could pay $100 as a state tax and get a $100 deduction from your federal income. Or you could give $100 to the STO get a $100 credit on your state taxes and get a federal deduction. In either case you had $100 less cash, $100 of your state tax was paid, and you had a $100 federal deduction.
Note that the “contribution” cannot be your own child’s tuition, maybe you were thinking that.
It is only with the current change in the tax law, that the second might be better than the first because you might not get the federal deduction for taxes paid but would for the contribution. That’s exactly what the whole fuss is about.
I looked up one of the funds established by Arizona. (I have no patience to look them all up.) Here is the website and a quote:
https://dvs.az.gov/mfrf
“Contributions are also deductible on your federal tax return (though not a dollar-for-dollar tax credit on the federal return; only the Arizona State return).”
Interesting. 2020 Arizona Tax Credit Limits and Links | Sensible Money comes out and says this as well. What limits you from being able to actually save money is that you’re limited in the amounts that you can give, and thus you can’t eliminate your entire payment to state income taxes in the general case (specific tax payers paying not a lot of tax may be able to). If one could, then one could deduct state (and local) sales tax, which is 5.6% in Arizona, instead of the zero state income tax. Sorry for not mentioning this aspect of why you’d be saving money before - it’s something that’s so obvious to me I don’t even realize I’m invoking it.
If I was the IRS, I’d still call bullshit on it, but it’s pretty meaningless since the likelihood of anyone actually gaining anything from it was pretty small. Now it definitely is turning into a real issue given the cap, since it will effect higher income people more than the lower income people who could take advantage of it before.
Over whether an action by Republicans was ‘shady’ or an ‘end run?’ Get serious.
So let me get this straight…your advice, then, is for those of us screwed over by the new tax law to just bend over for our Republican overlords and accept it? Not. Gonna. Happen.
If this doesn’t work, we’ll try something else. And then something else. Until we beat the Old Boys at their own game, or we get them ousted and the law repealed.
I must not have worded my example clearly. The ACLU was a hypothetical only. But there do in fact exist other vehicles that allow a taxpayer to make a donation and among other things be able to claim a tax credit of varying percentages, up to 100% of the donation depending on state and program.
I don’t think this SCOTUS opinion is directly on point. They weren’t presented with the question of whether or not the credit was legal or permissible. The question presented IIRC was whether the program violated the establishment clause. Yes the program was identified and continues to operate, but SCOTUS didn’t specifically give its blessing in this opinion.
To your second point, I think it would be the same question as for the proposed law. As I’ve noted earlier, it doesn’t make much difference under the current law, but under the new law, in which the distinction between charitable contributions and state taxes becomes significant, then you would have the exact same question in your hypothetical ACLU case.
It seems that you too think they’re the same case, but yet you’re assuming that the ACLU case is somehow more settled law than the proposed CA law would be. I don’t know why that might be.
No, you’re the one who hasn’t read this thread. I’ve addressed this point at some length, in discussing the VCF issue.
“Those of us?” Like, including me? No, I’m not suggesting surrender. I’m suggesting that gimmicks that are basically out of Ayn Rand’s playbook of turning over government to charitable organizations are going to backfire, in some way that we probably can’t foresee at the moment.
As for me, I’m going to vote in the next elections, and hope that in 2021 we can control Congress and the White House and enact a much, much better tax policy.
I tried to look through all of your posts in this thread, and I didn’t find a single one that had any kind of citation or quote from a source of any kind to back up your opinions. Just because you keep offering your unfounded thoughts doesn’t mean you have addressed my request for the law that backs up your views.
Can you answer the first section? I’m trying to establish a baseline of understanding and it’s helpful if we can determine what portions we agree on.
And yes, I do think if the hypothetical ACLU example were allowable, then the CA proposal would be as well because as I emphasized early in the thread, I don’t see a substantive difference between the two that would lead to different treatment.
The VCF issue is out there and relevant because it is specific to CA. It seems like you aren’t persuaded because you contend the impact is sufficiently small as to not be informative - even if the IRS would be opposed the result of their opposition would be so little that they wouldn’t raise the objection.
But the VCF isn’t the only program that has analogous characteristics as the CA proposal. As has been mentioned, there are several scholarship tax credit programs (16 states listed) that have similar fact patterns. Essentially they all in some form “allow[s] individuals or corporations to receive a tax credit from state taxes against donations made to non-profit organizations that grant private school scholarships.” I suppose you could respond similarly, that the IRS paid no mind because the impact was not meaningful for federal purposes. But again, there is no basis to support that contention.
The CA proposal is not a slam dunk by any means and there are probably numerous ways it could fail or get derailed. But there are clearly examples that have already been vetted to a degree that behave in similar ways. They’ve been cited, both based on federal and state law, court precedent, etc. So far I think the only opposition has been in the form of, ‘that doesn’t seem right’. Not arguing that - but there is no requirement that the law make sense.
You seem to be confused. I wasn’t addressing your claim for a law that backs up my views, and don’t intend to.
If you read my post more carefully, you’ll see I was addressing a different claim of yours.
What are you calling “the first section”? Where you ask “First, do you think that would be permissible?” I don’t see why not. But I don’t understand the context of that question, or what possible grounds you might think might make it impermissible.
Right. But what I don’t understand is why you’re citing a hypothetical ACLU example in support of your position on the proposed CA law, when there’s no more support for your position on the hypothetical ACLU case than on the proposed CA law.
Again, my position is:
[ol]
[li]the notion that contributions in exchange for (the same) benefits received elsewhere don’t count as contributions to the direct recipient but are looked at as a shell deal between you and the ultimate beneficiary is supportable and accepted in other contexts,[/li][li]regulators tend to adopt regulatory interpretations that support the general goals of the law and try to bar via regulation attempts to completely undermine it,[/li][li]the fact that regulators have not focused on this issue this in cases where the impact was not meaningful is not an indication of what they might do in a case where it is.[/li][/ol]
I gather that you’re skeptical of the third item. (Not sure of the other two.) In any event, do you have any cites of “federal and state law, court precedent, etc.” which contradict the above.
The bulleted section:
If you agree on those two points, then the state level issues are disposed of and only how the feds would react is left.
The federal and state law, court precedent, etc. is in reference to analogous similar programs, not as a response to your position. Federal law allows charitable donations to states and local governments. State laws have set up 1:1 tax credits for certain donations to non profit organizations. The courts have ruled that these tax credits are allowable at the state level, and SCOTUS has ruled that people opposed to the credits don’t have standing to object.
Because it isolates whether the point of contention is related to the state itself receiving the donation or not. Same fact pattern, with the recipient of the donation changed. This allows me to determine or rule out if this aspect is the point of disagreement. By your response, it seems like it isn’t. For others in the thread, it was.
[quote]
Again, my position is:
[ol]
[li]the notion that contributions in exchange for (the same) benefits received elsewhere don’t count as contributions to the direct recipient but are looked at as a shell deal between you and the ultimate beneficiary is supportable and accepted in other contexts,[/li][li]regulators tend to adopt regulatory interpretations that support the general goals of the law and try to bar via regulation attempts to completely undermine it,[/li][li]the fact that regulators have not focused on this issue this in cases where the impact was not meaningful is not an indication of what they might do in a case where it is.[/ol][/li][/quote]
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Do you have examples of where this construction is accepted in other contexts? My specific objection would be that in those other contexts, the credit or deduction itself is not considered part of the exchange in those contexts. If there is a quid pro quo, sure, exclusive of the deduction or credit. Do you have an example of where the deduction or credit itself is considered a benefit being exchanged?
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I agree with this. If the CA proposal were to pass, congress through its lawmaking power, and the IRS through its regulatory interpretation ability would have the ability to attempt to curtail or prevent it. Lawmaking would be a slamdunk. I am highly skeptical the IRS would be able to act on its own with the current laws on the books in a way to to prevent the CA proposal. Do you have any example of any current law that could be brought to bear that would be a roadblock?
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Like you’ve said, there is no evidence to support this reading of existing IRS motivations. It’s possible, but so is the idea that the IRS really did care, and after reading and becoming apprised of the SCOTUS decision that involved a similar program, and the other numerous states who have enacted other similar programs, evaluated the merits of the treatment and determined that they are totally awesome. I have no evidence to support that either.
I’m not been commenting on state issues here. I don’t know of any state issues involved, but am not saying anything about them one way or the other. (I believe this also addresses the next several points in your post.)
I’m not sure I understand precisely what you’re asking. Offhand I recall the issue coming up in money laundering, campaign contributions, and the like. But I’m not sure you disagree with this. If I make a deal with my landlord that instead of paying the rent, I would give this amount of money to his mother, have I effectively paid the rent? In cases where rent is deductible, can I deduct it?
I don’t know why you think they would need a “current law”. It’s a matter of interpretation. If the IRS says “we consider payments to this ‘charity’ to be effectively tax payments”, then under the recent tax reform bill those ‘charity’ payments will be capped at $10K. That’s how regulations work.
That’s not responsive to what I’m asking, nor is it consistent with your position #1. You said that contributions in exchange for benefits don’t count as contributions. My question is if you have an example of this, when the thing that is being exchanged is the deduction or credit itself? Because the Arizona example directly contradicts this. A contribution to the scholarship fund is made to the state and in return the individual receives a tax credit. The contribution is deductible at the federal level. This is a separate objection than your #3, which essentially says that no action was taken because they chose not to. In #1, you are saying that contributions have been disallowed in other contexts. So, cite?
Your contention is that if the CA Excellence Fund were to apply for and be granted non-profit 501(c)(X) status as a qualified organization, somehow the IRS would be able to construe those contributions as effectively tax payments? That seems far fetched. Can you walk me through under what basis would the IRS construe payments to a bona fide charity to be not a charitable contribution and instead be a tax payment? Would they just snap their fingers? What would they base that on?
When I said “in other contexts” I didn’t mean other tax contexts. I meant other contexts entirely.
It’s a very general question. If you owe $100 to Joe and Joe says “instead of giving it to me, give it to my friend Bob and your debt is forgiven”, does the law treat this (to the extent it may be relevant) as if you’re giving a present to Bob, or as if you’re paying your debt to Joe? I think the latter is correct, in some of the cases I’ve given and others, especially when it’s obvious that your intention is to skirt the law.
If that’s correct, then it makes no difference whether or not the charity qualifies as a charity, any more than it makes a difference if Bob is really Bob, because you’re not giving anything to the charity or to Bob.
That was Point #1, which again had nothing to do with taxes and contributions specifically.
Ok. Given this topic is regarding taxes and contributions, and there are several analogues in that context, I see no reason to examine less relevant examples as more persuasive than the ones that more closely fit the fact pattern.
OK.
FWIW, I did a bit of googling and came across other people making the same point, though. (emphasis added)
Point being that independent of the issue of whether the charity would qualify as a charity, there’s a separate question as to whether this type of “donation” is considered a donation to the charity or a form of tax payment.
As an update on this, Politico: Treasury blocks blue state efforts to get around cap on state, local tax deductions
So Trump and his cronies have ruled that the effort of states like California to do the exact same thing that red states like Georgia do is illegal. What is the detailed rule? That private Christian schools in red states should be protected but not blue-state tree-huggers? I guess they can do whatever they want since they appoint the IRS Director.
Hurricane, can you help us out here? What in particular allows the Georgian tax credit but not the Californian credit?
Or do you even acknowledge the connection? Re-reading ths thread I was bemused by the following:
And less than a half-hour later:
@ OldGuy — Re: your “I’m not sure how many times this can be explained.” I see you explained it at least 4 or 5 times. You could have explained it 7 times, I suppose, though that probably wouldn’t have helped. I sometimes use bold-face or enlarged fonts, but that doesn’t work either. Perhaps it will set your mind at ease to recall that truth just isn’t truth anymore.
How could tuition paid to a private Christian school be considered a state or local tax?
The issue here is what is clearly, obviously, and absolutely a state or local tax is being construed by those who admittedly are opposed to the new law as being a charitable contribution. Giving money as required by the government for government purposes is not charity.