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Senate ignores IRS warning, passes tax work-around bill

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Defying a warning from the Internal Revenue Service, the Illinois Senate has overwhelmingly approved a bill intended to give local taxpayers a workaround for new federal caps on state and local tax deductions. […]

The Senate action came yesterday afternoon when, by a 51-1 margin with one abstention, the Senate approved a bill sponsored by Sen. Julia Morrison, D-Deerfield, that allows taxpayers to substitute donations to charities benefiting state government, municipalities and school districts for regular Illinois income-tax and property-tax payments. Donors would receive a credit worth 90 percent of their donations, applied to their state or local tax liability.

The IRS earlier this week suggested that it will rule against such measures, which already are the law in Connecticut, New Jersey, New York and other high-tax states. The agency suggested that charitable donations are not supposed to reap a financial reward for the donor and said it will follow not state but federal law, which under the measure approved by President Donald Trump last year limits SALT deductions to $10,000 a year.

“Property tax relief is an important issue all around the state,” Morrison said in a phone interview. Any final IRS ruling “probably is not going to happen until the fall,” and may be challenged in court, she said. “I think it’s important for us to pass legislation that will help our residents.” […]

“How quickly, what’s in it, how it’s impacted by the IRS, all those things need to be considered,” [Steve Brown, spokesman for House Speaker Michael Madigan] said. Concurrence motions on House bills that were amended in the Senate and sent back will occur “next week.”

* Sen. Jim Oberweis was the lone “No” vote. From a press release…

The Internal Revenue Service has warned states looking to get around the deduction caps – New York, New Jersey, Connecticut and now Illinois – that they could face new regulations.

“There is no way the federal government is going to allow states to pull a fast one like that, to find a tricky way around the deduction limits,” Oberweis said. “Trying to get around the IRS is not a good idea. This is a ‘lose-lose’ situation.”

If somehow a court upheld the Illinois plan (unlikely), Oberweis said the federal government could come back and limit all deductions to $10,000, which would be bad news for charities, as charitable contributions could be negatively impacted.

In an accompanying video, Oberweis called the bill “fools gold” a “phony, tricky work-around” and “sham legislation.”

posted by Rich Miller
Friday, May 25, 18 @ 9:47 am

Comments

There’s no business like show business.

Comment by 47th Ward Friday, May 25, 18 @ 9:50 am
Oberweis is right to call it “fools gold”.

Plus it will decrease state income tax revenue at the time we need every penny.

Comment by RNUG Friday, May 25, 18 @ 9:55 am
The proponents of the progressive tax in Illinois are freaking out big time because the state and local deduction is going to act as a huge new tax on our citizens.

There will be exactly zero appetite for yet another massive tax increase on top of that one in terms of moving to a progressive tax.

Timing could not have been worse for JB as this will blow up his economic plans. The numbers will never work for him without a progressive tax.

Comment by Anon Friday, May 25, 18 @ 9:59 am
Everybody wants to go to heaven, nobody wants to die. Even if Oberweis is correct, where was he when his GOP buddies in Washington passed this abomination in the first place?

Comment by H. L. Mencken Friday, May 25, 18 @ 10:04 am
For the IRS to negate this workaround, it is going to have to audit everyone that files a Schedule A with charitable contributions and look for these so-called charitable contributions. I don’t see how the IRS could possibly do that if a number of states allow its citizens to make a “charitable contribution” to a school, etc. and have it count towards the citizen’s tax liability. The only way for the IRS to easily thwart the workaround without doing a bazillion audits would be as Sen. Oberweis suggested it might do: limit charitable contributions.

Comment by Nanker Phelge Friday, May 25, 18 @ 10:07 am
Why does this surprise anyone? This group of lawyers that probably finished last in their law school classes have a heckuva time even writing laws that are constitutional in the first place.

Comment by Jones Friday, May 25, 18 @ 10:11 am
It’s a win-win. Republicans can vote for a regressive tax break for the rich and upper middle class, Democrats feel like they’re sticking it to Trump. It’s very unlikely to succeed, but that’s no reason not to vote for it!

Comment by andyillini Friday, May 25, 18 @ 10:16 am
Jim Oberweis is normally a barometer: if he’s against something, it’s almost always a good idea.

In this particular case, he’s like the broken clock that’s still right twice a day.

Comment by thunderspirit Friday, May 25, 18 @ 10:25 am
State reps writing federal tax law. Need more or better civics classes.

Comment by lost in the weeds Friday, May 25, 18 @ 10:25 am
===where was he when his GOP buddies in Washington passed this abomination in the first place?===

I know. It’s like Oberweis never met Peter Roskam, doesn’t know how to get in touch with him and has no clue that Roskam played a big role in screwing over high tax states like Illinois.

That’s Peter Roskam, U.S. Representative from the 6th Congressional District. From his bio:

“He currently serves as the Ways & Means Tax Policy Chairman for the 115th Congress. From this key legislative perch, he is expected to play a leading role in the first major overhaul of the nation’s tax code in over three decades.”

I don’t think Roskam is getting all of the credit he deserves for this bill. Thanks to Roskam, and according to the liberal Wall Street Journal, “Deficits would total $9.5 trillion over the coming decade, or $2.3 trillion more than the White House estimates.”

https://www.wsj.com/articles/congressional-budget-offices-long-term-deficit-forecast-dwarfs-white-house-estimate-1527189631

Give credit where credit is due.

Comment by 47th Ward Friday, May 25, 18 @ 10:39 am
Maybe Illinois will agree to indemnify all taxpayers hit with penalties. Maybe the same genius Cullerton relies on for pension language wrote this bill for him

Comment by Sue Friday, May 25, 18 @ 10:44 am
===Give credit where credit is due.===

I should add that every single Republican member of the Illinois Congressional Delegation also voted for this unnecessary deficit busting monstrosity that also screws over Illinois taxpayers.

Elections have consequences. Vote accordingly.

Comment by 47th Ward Friday, May 25, 18 @ 10:48 am
Nationally, Democrats in large states could run on a platform of standing up to Republicans and their double taxation created by the elimination of the SALT exemptions.

That would bring in middle class voters in much larger numbers than some of their other causes.

Comment by A Jack Friday, May 25, 18 @ 10:49 am
== it is going to have to audit everyone that files a Schedule A with charitable contributions and look for these so-called charitable contributions. ==

It is specific enough to just be another computerized check to flag the questionable stuff and do previous year comparisons. Then a desk eyeball check. Won’t be hard to catch, especially since only a handful of states are trying it.

Comment by RNUG Friday, May 25, 18 @ 11:02 am
The problem with this bill is it allows Democrats to push the tax cut issue with the claims that they are really not beneficial to the taxpayers who pay taxes. You know, after all, all tax cuts on their face are evil and destructive, but progressive taxes are good and nourishing and thus, saintly.

There is a simple solution to individuals reducing their property taxes to bring them under the threshold of the new tax code revisions that reduce taxes that Democrats so revile.

All aggrieved taxpayers should immediately remove the toilets and plumbing in their homes to get a hefty reduction in their property taxes.

Problem solved. I’m sure the entire Democratic statewide slate will jump right on board with this simple proposal.

Comment by Louis G. Atsaves Friday, May 25, 18 @ 11:14 am
It must be getting lonely in the Rauner clubhouse, eh Louis? Just a handful of you left now, almost enough for a softball team.

Comment by 47th Ward Friday, May 25, 18 @ 11:50 am
==The proponents of the progressive tax in Illinois are freaking out big time because the state and local deduction is going to act as a huge new tax on our citizens.==

Wait, you’re saying that republicans who control Congress passed “a huge new tax on our citizens”? Well that can’t be right. I’ve been told repeatedly that Dems are the only ones who raise taxes, and that republicans are the really the responsible stewards of our economy. Maybe review those talking points with Louis and the rest of the gang? The Luckybot 6000 program already produces enough errors, you don’t want to overload the thing with more opposing data points. It already doesn’t recognize former Illinois governors with “R” after the name.

Comment by Lester Holt’s Mustache Friday, May 25, 18 @ 12:15 pm