Jan 08, 2018
From KPMG TaxWatch
Already, states are starting to grapple with the state consequences of federal tax reform. Recently, lawmakers in two states, California and New York, announced proposals to address one of the key provisions in the federal tax reform bill that was signed by President Trump on December 23, 2017―the elimination of the uncapped SALT deduction. Going forward, for federal purposes, taxpayers can deduct up to $10,000 per year of state income or property taxes. This change has the greatest impact on residents of states with high personal income taxes and/or property taxes. In California, on January 3, 2018, Senators De Leon, Allen and Hill amended Senate Bill 227. If enacted, this bill would create a new credit for contributions to a newly-created California Excellence Fund. Specifically, taxpayers would get a dollar-for-dollar credit against California personal and corporate income taxes for these contributions, which presumably could be deducted for federal purposes as charitable contributions. There would be no state deduction for such payments. Funds in the California Excellence Fund would be subject to legislative appropriation and limited to use for public purposes.
Likewise on January 3, 2018, New York Governor Andrew Cuomo addressed tax reform in his state of the state address. Specifically, he announced his plan to propose legislation that would restructure New York’s tax regime to reduce reliance on personal income taxes by possibly adopting a statewide payroll tax. The Governor also mentioned that he believes the new federal tax law (eliminating the ability to fully deduct state and local taxes) may be unconstitutional and that he and several other governors were exploring the option of suing the federal government over capping the SALT deduction. Governor Cuomo said he also plans to work with municipal governments and elected officials to lower local property tax rates, noting that combined with “the federal SALT provision, it is an economic cancer.” Please stay tuned to TWIST as more states consider responses to federal tax reform.
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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.