The Edgemont Board of Education passed a resolution Oct. 9 supporting State Assemblywoman Amy Paulin’s coalition to challenge the IRS ruling against Gov. Andrew Cuomo’s workaround on the new federal tax law.
“The Board of Education of the Edgemont Union Free School District believes the proposed regulations issued by the IRS on August 23, 2018 are unfair and inequitable,” the resolution reads. “The Board of Education … shall seek to collaborate with other like-minded local governments, school districts or organizations to express these concerns publicly and to advocate for fair regulations and equitable and principled interpretation of federal tax law that recognizes and rewards the value of contributions in support of public education, no matter whether the contributor is an individual or a business, or whether the charitable entity is public or private.”
At a meeting on Oct. 1, the Scarsdale School Board passed their own version of a resolution supporting Paulin’s efforts. Paulin has been meeting with school board members and municipal officials in the last two months to discuss a coalition she is forming. The coalition, comprised of school district and municipality boards, plans to first gather as much information about the IRS ruling and then decide how to combat that ruling.
Paulin is working with Chicago-based Baker and McKenzie and New York-based Proskauer in an attempt to challenge the ruling through litigation. Paulin also developed a sample resolution that boards of education municipalities could adopt to show their support for the coalition. The Edgemont School Board chose to forego using Paulin’s proposed resolution, and instead, to develop their own version.
In April, Cuomo signed into law a workaround for the new federal tax law which sets a limit of $10,000 for state and local tax deductions.
In Cuomo’s workaround, municipalities and school districts could set up charitable donation funds to which residents could donate and receive a tax credit of up to 85 percent of their property tax bill.
The plan was to have the resident deduct that gift as a charitable donation on their federal tax returns, thereby gaining a benefit similar to the previously uncapped property tax deduction on their federal taxes.
However, the IRS issued proposed regulations in August that said if taxpayers received an 85 percent tax credit in exchange for a charitable donation, it was not in fact a charitable donation.
Edgemont, unlike Scarsdale schools and the Scarsdale Village Board, did not set up a charitable gift fund in line with Cuomo’s legislation. At the time, board president Jon Faust said the board wanted to wait as there had already been indications that the IRS would challenge the legislation and there might be financial repercussions for entities that decided to set up the fund.
Scarsdale Village was able to successfully set up and utilize its fund because the village collects taxes before the end of August and, if the IRS regulations were to become official policy, any funds collected before Aug. 28 would not fall under the regulations.
Village Manager Steve Pappalardo said the town board would have to consider, due to the IRS ruling, if they will continue offering the charitable fund option in 2019.
Scarsdale schools was planning to set up their own fund, but, after the IRS ruling was made public, the board and administration decided to halt the charitable gift fund process. The Greenburgh Town Board, like the Edgemont School Board, halted any movement toward setting up a fund after a spring work session proved there were still too many questions — such as who would be liable should the IRS officially rule against the workaround.
Greenburgh Town Supervisor Paul Feiner told the Inquirer he invited Paulin to meet with the town board to further explain the coalition and potential litigation.
Although Edgemont was hesitant to set up a fund, school board member Monica Sganga said that did not mean the board doesn’t want to join the fight against the IRS ruling.
“We do believe the concept of trying to preserve the deductions of our taxpayers,” Sganga said. “Ultimately this is our lending our voice to everyone else’s and telling the IRS, ‘We don’t think you’re really being fair and we really want you to look at this a little closer.’”