Coalition Targets ‘Double Dipping’ in Proposed SALT Cap Regs

NPRM Comment: Treatment of Payments to Charitable Entities in Return for Consideration

January 31, 2020

Internal Revenue Service
Department of the Treasury
1111 Constitution Avenue, NW
Washington D.C. 20024

Attention: Mon L. Lam

The Council of the Great City Schools, the coalition of the nation's largest central school districts, provides the following comments on the proposed IRS rulemaking issued in the Federal Register on December 17, 2019.

The Council reiterates our comments supporting the 2018 State and Local Tax Credit proposed rules that prevented individuals from exploiting a previous tax loophole that allowed a state tax credit for contributing to a private school voucher program in addition to receiving a federal charitable tax deduction for the same contribution. The Council opposes this new proposed rule that would create a similar tax loophole in which a “pass-through” business entity could claim a business expense deduction for a similar contribution to a private school voucher program and also pass through the state tax credit to the individual business owners to reduce their personal tax liability — a comparable “double dipping” tax benefit that the June 16, 2019 IRS final regulation prohibited.

The Council's October 1, 2018 comment on proposed IRS REG–112176–18 expressly recommended the prohibition of pass-through entities from “receiving disproportionate state and federal tax benefits for analogous charitable contributions that have been banned for individual taxpayers under the proposed rule”. The Council, therefore, strongly objects to allowing a subset of taxpayers — pass-through business owners — to circumvent the $10,000 SALT tax deduction limitation through this type of tax avoidance scheme.

The Council appreciates the June 16, 2019 IRS regulation that closed the state private school tax credit loophole and encourages IRS not to open a similar loophole for pass-through business owners in proposed 20 CFR 1.162–15(a).

Sincerely,

Jeff Simering
Director of Legislative Services
Council of the Great City Schools
Washington, DC