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News Posted on August 27, 2018

N.Y. Times quotes Professor Shanske about feds' plan to scuttle states' tax work-arounds

Professor Darien Shanske commented for the New York Times about a Treasury Department proposal that would keep states from circumventing the new, $10,000 limit on state and local tax deductions.

The proposed rule would limit the kind of charitable contributions Americans can deduct on their federal taxes. The rule would “effectively exclude donations that are rewarded with state tax credits,” the Times reported.

The rule could affect work-around laws, involving charitable credits, that New York and New Jersey enacted in response to the new state and local deductions limit. It also would affect pre-existing programs in other states in which tax credits accompany donations to private and charter schools, universities, and housing-assistance programs.

Although some analysts expected the Trump administration’s proposal to make exceptions for pre-existing programs, it does not. The government has “taken the more principled approach,” Shanske told the Times, in targeting all programs, not just the new ones. But the government likely still will need to explain why it changed its approach to state tax credits now.

“I think states will have the grounds to challenge it,” Shanske said. “You need to explain why you’re turning practice on its head.”

Shanske also spoke to the San Francisco Chronicle about the government’s proposal, telling the Chronicle it might subject the Internal Revenue Service to political pressure from red states that want to be exempted.

Darien Shanske is a professor of law at UC Davis. His academic interests include taxation, particularly state and local taxation, local government law, public finance, and political theory, particularly jurisprudence.