School Superintendent Gives A+ to Proposed SALT Regs

September 13, 2018

Merrill Feldstein
Senior Counsel
Office of Associate Chief Counsel (Income Tax & Accounting)
Internal Revenue Services
75 Constitution Ave NW
Washington, DC 20016

Subject: Proposed IRS Regulations REG-112176-18

Dear Ms. Feldstein,

My name is Cindi McDonald and I am the superintendent of the Waukee Community School District which is located in Waukee, Iowa. I am writing today in support of the proposed IRS regulation on contributions in exchange for state or local tax credits. I write to offer comments in support of the proposed IRS regulation on contributions in exchange for state or local tax credits. Specifically, I write to commend the IRS for ending a tax shelter that allows taxpayers to turn a profit when they fund private schools through state tuition tax credit programs. The current loophole allows people and businesses to line their pockets with funds that were meant to further the public good. This comes at the expense of state and federal budgets and the funds do not find their way into any public school.

The profiteering facilitated by these tax credit vouchers is neither accidental nor incidental. Tax accountants, private schools, and others in many states with tuition tax credit programs have long marketed these programs as tools for exploiting the federal charitable deduction. In contrast, states like Florida, which has the nation's largest tuition tax credit program, specifically bar taxpayers from receiving state and federal tax cuts larger than their donations.

Twelve states are culpable for structuring their programs in a manner that allows wealthy Americans to financially benefit from their contributions to educational scholarship or voucher programs. Since they have not acted to shut down the shelter on their own, it is appropriate for the IRS to scale back or deny the federal charitable tax deduction in these cases where the donation is already reimbursed with a state tax credit. Doing so is essential to the integrity of the charitable deduction, which is meant to reward genuine philanthropy, not sophisticated tax planning.

Following the passage of “The Tax Cuts and Jobs Act,” Pub. L. No. 115-97, accountants' marketing of these programs as tax shelters has reached a fever pitch. States such as Alabama and Arizona saw dramatic upticks in usage of their programs in 2018, with federal tax avoidance described by at least one prominent lawyer as a “driving force” behind the surge in interest. The IRS was wise not to turn a blind eye to these programs when revising its treatment of donations benefiting from state or local tax credits. It is time for the IRS to shut this tax shelter down.

Thank you for your service and your commitment to providing both opportunities AND resources for ALL students. The kids are counting on us.

Sincerely,

Cindi McDonald, Superintendent
Waukee Community Schools