Charitable Gift Fund Tax Credit
August 29, 2018: Important Update
Please review the recent I.R.S. rulemaking, Contributions in Exchange for State or Local Tax Credits, and consult with your professional tax advisor regarding the deductibility of charitable contributions made pursuant to state and local tax credit programs. Additionally, the Scarsdale Union Free School District today rescinded its July 10, 2018, resolution establishing aCharitable Gift Reserve Fund. Therefore, no charitable gifts for school taxes can be accepted, nor can any associated credit claim be processed for property taxes.
What is the Charitable Gift Reserve Fund Tax Credit?
In response to the federal government’s recent tax code changes limiting future federal income tax deductibility of State and Local Taxes (SALT) to $10,000, the FY 2018-19 New York State Budget authorizes local governments and school districts to create a “Charitable Gift Reserve Fund” (Fund) to offer real property tax credits to incentivize contributions. Click here for a summary of NYS FY 2019 enacted budget tax reforms. Under the law, such Funds may receive unrestricted charitable contributions for the purposes of addressing education, health care and other charitable purposes. Contributions to the Fund may entitle taxpayers a deduction of up to 95% of those payments as a charitable donation write-off, rather than a property tax deduction, which would not be subject to the $10,000 limitation established for SALT. This is an optional program.
Accordingly, the Village of Scarsdale approved establishment of a Charitable Gift Reserve Fund in May 2018 and adopted a local law in June 2018 authorizing a Charitable Gift Reserve Fund Tax Credit pursuant to Real Property Tax Law Section 980-a.
Importantly, the Village’s creation of the fund neither constitutes a program endorsement nor implies taxpayer benefit. Taxpayers are strongly urged to consult with a tax professional to understand the benefits and drawbacks associated with program participation.
Which taxes appearing on my property tax bill are eligible?
Please review the recent I.R.S. rulemaking, Contributions in Exchange for State or Local Tax Credits, and consult with your professional tax advisor regarding the deductibility of charitable contributions made pursuant to state and local tax credit programs.
Only the Village, County, and School levies are eligible under New York State Law; however, IRS regulations may differ. Special District taxes including Sewer and Water Districts and Refuse Disposal Districts are examples of ineligible taxes. If in doubt about tax eligibility, please call the Village Treasurer’s Office at 914-722-1170 before determining the amount of your charitable gift, as amounts paid the Village as charitable contributions are not refundable.
Taxpayers are strongly urged to consult with a tax professional before remitting a charitable gift pursuant to the Charitable Gift Reserve Fund Tax Credit program. Amounts paid the Village as charitable contributions are not refundable.
Is this program voluntary?
Yes, this program is 100% voluntary.
What is the likelihood that my payment will be deductible for Federal Tax purposes?
There is no way to currently determine if it will be allowed as a deduction by the federal government. Taxpayers should be mindful that federal law controls the proper characterization for federal income tax purposes. The Treasury Department and the IRS have advised caution and have issued statements that indicate they intend to propose regulations addressing the federal tax treatment of programs like the charitable gift reserve fund adopted by New York State.
What is the downside/risk?
When a Federal deduction is disallowed, taxpayers are potentially subject to interest, penalties, and additional review. In addition, the residual 5% of the charitable contribution would not be returned or refunded if the deduction is disallowed after the payment is made to the Tax Receiver.
What if I pre-paid my property taxes in 2017?
Village taxes pre-paid in 2017 are not eligible for this new program. Review your tax bill for any unpaid balance(s) to determine whether program participation is advisable.
What if my mortgage company pays my property taxes or the mortgage company already paid my property taxes?
The process is more complicated and we are awaiting direction and guidance from New York State on how this will be addressed. Taxpayers should contact their mortgage company to make any payment or reimbursement arrangements. It may be possible that if your mortgage company already paid the taxes, the taxpayer could still make the charitable payment and request a refund. Please note that if this is allowed by your mortgage company, this would mean a double payment until a method is determined to have the bank pay the Fund directly.
Can I make a charitable contribution in an amount less than the full amount due for property taxes?
Yes, taxpayer may make a partial payment of their taxes through the Fund with the tax balance paid by separate check.
Can I earmark the municipal program area that my charitable contribution goes to?
How do I participate?
Consult with a tax professional tax to determine the advisability of your participation in this program. If the program is right for you, follow the steps below.
- Once your Village tax bill has been received in July 2018, visit scarsdale.com/gift to complete three fill-in forms:
- Complete all three forms and submit a hard copy of each in-person at the Village Treasurer’s Office at Village Hall, 1001 Post Road, during standard business hours (9am-5pm); payment in the form of a check(s) is required at time of submittal. You may provide the tax receiver with up to the full amount of your property taxes. If you choose to take advantage of the charitable contribution program, you will also pay an additional 5%. The Village of Scarsdale on-line Computation Form (above) will calculate this amount. Tax payments are due no later than August 1, 2018 by 5:00pm.
Taxpayers are strongly urged to consult with a tax professional before remitting a charitable gift pursuant to the Charitable Gift Reserve Fund Tax Credit program.
Amounts paid the Village as charitable contributions are not refundable, regardless of the income tax deductibility of such contributions. Program participants should be aware of media reports suggesting the Internal Revenue Service of federal government may take action to disallow income tax credit for charitable contributions made through this program.