5 ms·

This would be a quid pro quo contribution, already prohibited by the IRS. It's hard to see this "charitable conversion" nonsense as anything other than (potenti

This would be a quid pro quo contribution, already prohibited by the IRS. It's hard to see this "charitable conversion" nonsense as anything other than (potentially criminal) tax evasion. https://www.irs.gov/charities-non-profits/substantiating-charitable-contributions https://www.irs.gov/charities-non-profits/substantiating-cha...

lr4444lr 8y ago
It also threatens to disqualify a significant portion of income toward the filer's social security eligibility credits.
JumpCrisscross 8y ago
That's an oversimplification. "A quid pro quo contribution is a payment made to a charity by a donor partly as a contribution and partly for goods or services provided to the donor by the charity" [1]. In this case, the charity isn't providing the quid pro quo, the local government is. States are already allowed to let one deduct charitable contributions from state taxes however they like. And visiting a park one donates to isn't considered quid pro quo. These cases will be complicated and interesting. [1] https://www.irs.gov/charities-non-profits/substantiating-charitable-contributions https://www.irs.gov/charities-non-profits/substantiating-cha...
- lr4444lr 8y ago
  I don't think you're understanding how this is being constructed: the money wouldn't be going to the government (i.e. directly to the department of finance), precisely for the reason you're describing. That's why they're floating the idea of establishing charitable institutions under a kind of trusteeship in the municipalities as per the bylaws of what those shell entities will be. EDIT: Stated specifically, for NY: "The Budget establishes a charitable gift trust fund in the joint custody of the New York State Commissioner of Taxation and Finance and the State Comptroller." [0] https://www.budget.ny.gov/pubs/archive/fy19/enac/enacted-tax-reforms-summary.pdf https://www.budget.ny.gov/pubs/archive/fy19/enac/enacted-tax...
  - JumpCrisscross 8y ago
    > the money wouldn't be going to the government Hence my argument for the lack of a quid pro quo. The charity gets the quid; someone else provides the pro quo. How states and municipalities count their tax obligations could be argued to be local issues, from a Tenth Amendment perspective. (We just had a landmark anti-commandeering case get decided on by SCOTUS.) Here's a clearer quid pro quo: churches.
    - lotsofpulp 8y ago
      How is the charity and the government not the same entity?
      - JumpCrisscross 8y ago
        > How is the charity and the government not the same entity? Charities and municipal governments are legal fictions of the states. I do not know the specifics of how these charities are set up. I presume they are ownerless non-profits. (If not, the New Jersey legislature could simply create such an entity type.) Determining common control with municipalities will be tricky. That they are creatures of the states, and not the federal government, is what will make the lawsuits interesting. The most realistic pathway for the IRS would be to argue these charities do not qualify as such under federal tax law. How they will do this, within the confines of the 10th Amendment and a haphazardly-written tax code, without hitting other charities, will be delicate and complicated.
    - lr4444lr 8y ago
      Disclosure: I am not an accountant or tax lawyer. In the case of school districts, easily the largest line item of the SALT liability for New Yorkers, The quo would be educational services. Anyone who donates to one of these "charities" and then puts a child in the school system could be at serious risk for tax evasion. It doesn't matter legally if the "charity" is also floated by other revenue streams. It's about what the filer claims and what he receives. I am pretty sure the IRS has a history of formulas to apply for figuring out how much is rendered in services[0]. Per pupil expenditure would be a likely candidate. Perhaps those with no children in the system would be safe. The analogy with the church would be if they were giving your child a free or discounted on religious school admission as a contingency of how much money you donate. You can't write off donations like that[1] [0] https://www.irs.gov/pub/irs-pdf/f8283.pdf https://www.irs.gov/pub/irs-pdf/f8283.pdf [1] https://www.irs.gov/publications/p526#en_US_2017_publink1000229693 https://www.irs.gov/publications/p526#en_US_2017_publink1000... - "Contributions From Which You Benefit": .... "Tuition, or amounts you pay instead of tuition. You can't deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. You also can't deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a "donation."
- throwaway76543 8y ago
  All of this has been tried before with folks trying to funnel profits into charities. The IRS is going to say "no, we're considering these entities to be a single entity" and they may even say "and furthermore it's criminal tax evasion and you're all going to prison." This is a news article about a notice they've just issued indicating as much. The law is not a computer program. Being clever about definitions does not often have pleasant results. This approach is unlikely to work.
  - JumpCrisscross 8y ago
    > The IRS is going to say The IRS is powerful. But so are the states. If you think this is a simple case, you're mis-understanding it. Fully expect this to go to the Supreme Court.
  - toast0 8y ago
    The IRS previously said these types of programs were fine [1], although in a way intended not to set prescedent. There are a lot of other cases referenced in the memo, some of which probably did set some prescedents. State governments could easily set up targeted funds, if just dropping the money into the general fund is a non-starter. [1] https://www.irs.gov/pub/irs-prior/p526--2011.pdf https://www.irs.gov/pub/irs-prior/p526--2011.pdf

lr4444lr 8y ago

It also threatens to disqualify a significant portion of income toward the filer's social security eligibility credits.

JumpCrisscross 8y ago

That's an oversimplification. "A quid pro quo contribution is a payment made to a charity by a donor partly as a contribution and partly for goods or services provided to the donor by the charity" [1]. In this case, the charity isn't providing the quid pro quo, the local government is. States are already allowed to let one deduct charitable contributions from state taxes however they like. And visiting a park one donates to isn't considered quid pro quo. These cases will be complicated and interesting. [1] https://www.irs.gov/charities-non-profits/substantiating-charitable-contributions https://www.irs.gov/charities-non-profits/substantiating-cha...

lr4444lr 8y ago
I don't think you're understanding how this is being constructed: the money wouldn't be going to the government (i.e. directly to the department of finance), precisely for the reason you're describing. That's why they're floating the idea of establishing charitable institutions under a kind of trusteeship in the municipalities as per the bylaws of what those shell entities will be. EDIT: Stated specifically, for NY: "The Budget establishes a charitable gift trust fund in the joint custody of the New York State Commissioner of Taxation and Finance and the State Comptroller." [0] https://www.budget.ny.gov/pubs/archive/fy19/enac/enacted-tax-reforms-summary.pdf https://www.budget.ny.gov/pubs/archive/fy19/enac/enacted-tax...
- JumpCrisscross 8y ago
  > the money wouldn't be going to the government Hence my argument for the lack of a quid pro quo. The charity gets the quid; someone else provides the pro quo. How states and municipalities count their tax obligations could be argued to be local issues, from a Tenth Amendment perspective. (We just had a landmark anti-commandeering case get decided on by SCOTUS.) Here's a clearer quid pro quo: churches.
  - lotsofpulp 8y ago
    How is the charity and the government not the same entity?
    - JumpCrisscross 8y ago
      > How is the charity and the government not the same entity? Charities and municipal governments are legal fictions of the states. I do not know the specifics of how these charities are set up. I presume they are ownerless non-profits. (If not, the New Jersey legislature could simply create such an entity type.) Determining common control with municipalities will be tricky. That they are creatures of the states, and not the federal government, is what will make the lawsuits interesting. The most realistic pathway for the IRS would be to argue these charities do not qualify as such under federal tax law. How they will do this, within the confines of the 10th Amendment and a haphazardly-written tax code, without hitting other charities, will be delicate and complicated.
  - lr4444lr 8y ago
    Disclosure: I am not an accountant or tax lawyer. In the case of school districts, easily the largest line item of the SALT liability for New Yorkers, The quo would be educational services. Anyone who donates to one of these "charities" and then puts a child in the school system could be at serious risk for tax evasion. It doesn't matter legally if the "charity" is also floated by other revenue streams. It's about what the filer claims and what he receives. I am pretty sure the IRS has a history of formulas to apply for figuring out how much is rendered in services[0]. Per pupil expenditure would be a likely candidate. Perhaps those with no children in the system would be safe. The analogy with the church would be if they were giving your child a free or discounted on religious school admission as a contingency of how much money you donate. You can't write off donations like that[1] [0] https://www.irs.gov/pub/irs-pdf/f8283.pdf https://www.irs.gov/pub/irs-pdf/f8283.pdf [1] https://www.irs.gov/publications/p526#en_US_2017_publink1000229693 https://www.irs.gov/publications/p526#en_US_2017_publink1000... - "Contributions From Which You Benefit": .... "Tuition, or amounts you pay instead of tuition. You can't deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. You also can't deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a "donation."
throwaway76543 8y ago
All of this has been tried before with folks trying to funnel profits into charities. The IRS is going to say "no, we're considering these entities to be a single entity" and they may even say "and furthermore it's criminal tax evasion and you're all going to prison." This is a news article about a notice they've just issued indicating as much. The law is not a computer program. Being clever about definitions does not often have pleasant results. This approach is unlikely to work.
- JumpCrisscross 8y ago
  > The IRS is going to say The IRS is powerful. But so are the states. If you think this is a simple case, you're mis-understanding it. Fully expect this to go to the Supreme Court.
- toast0 8y ago
  The IRS previously said these types of programs were fine [1], although in a way intended not to set prescedent. There are a lot of other cases referenced in the memo, some of which probably did set some prescedents. State governments could easily set up targeted funds, if just dropping the money into the general fund is a non-starter. [1] https://www.irs.gov/pub/irs-prior/p526--2011.pdf https://www.irs.gov/pub/irs-prior/p526--2011.pdf