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IRS to clarify rules on payments in lieu of state and local taxes

Source: journalofaccountancy.com - May 24, 2018

The IRS on Wednesday announced that it plans to issue regulations in response to state legislation intended to help taxpayers avoid the $10,000 limitation on the deduction for state and local taxes under Sec. 164 as amended by P.L. 115-97, known as the Tax Cuts and Jobs Act (Notice 2018-54). That limitation applies to individual taxpayers for tax years beginning after Dec. 31, 2017, and ending before Jan. 1, 2026.

This new or proposed legislation by states would purportedly allow taxpayers to make transfers to funds controlled by state or local governments, or other specified transferees, in exchange for credits against state or local taxes that the taxpayer is required to pay. These transfers are intended to allow taxpayers to treat these payments as deductible charitable contributions for federal income tax purposes.

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Category: General Business