By Adam Michel
Lawmakers intended with the 2017 tax cuts not only to
promote economic growth, job creation, and allowing American families to keep
more of their hard-earned money, but also to make the federal tax code more neutral
toward state tax policy.
But state-based tax credit scholarship programs got
unintentionally caught up in the broader reform.
Now available to more than 270,000 students in 18 states, tax credit scholarship programs allow state taxpayers to receive a full or partial credit against their state tax obligations if they contribute to nonprofit organizations that grant scholarships to eligible children so they can attend a private school of their choice. They are an important and growing tool for expanding school choice.
Treasury just saved them from what could have been a
The new tax law placed a cap of $10,000 on the amount
taxpayers could deduct from their federal taxes for state and local taxes,
which advanced the bipartisan goal of treating similar taxpayers similarly, by
diminishing the previously unlimited subsidy for high taxes in states like
California and Connecticut.
To implement the cap as intended by Congress, the Treasury
Department released proposed regulations that disallowed use of new state
schemes set up to game the charitable deduction and circumvent the cap.
But legitimate state-based tax credit scholarship programs
were included in the rule, which means the ability to donate was limited for
of taxpayers who itemize but don’t max out their deductions for state and
local taxes. In some cases, the cost of donating would increase from zero to as
much as 37 percent of the donation amount.
In the final regulation and accompanying notice,
Treasury fixed the problem and re-established the federal tax system’s
neutrality toward state tax credit programs, as recommended by The Heritage
Foundation in a public comment.
The notice allows donors to scholarship programs to still
take the deduction for state and local …read more
From:: Daily Signal – Feed