Re: BOE Action Pursuant to NYS Charitable Fund Provisions

Dear Community Members:

As you may be aware, the Federal Tax Reform Act, signed into law December 2017, significantly reduced property owners' ability to use state and local taxes as itemized deductions on individual income tax returns. In response to the passage of the capping of State and Local Tax deductions (SALT), the 2018-19 New York State budget included a provision that allows municipalities and school districts the opportunity to establish charitable funds and thereafter authorize real property tax credits for taxpayers that contribute to the fund.

The Mamaroneck UFSD Board of Education and administration in consultation with District legal counsel invested significant time researching our ability to establish a charitable fund and offer taxpayers the opportunity to reduce tax liability by up to 95% of the donated amount. Based on two significant concerns, the District will not establish a charitable fund at this time.

First, in connection with charitable fund regulations, the New York State Department of Taxation and Finance released the required acknowledgement form with language at the bottom of the form declaring that, "no goods or services were provided in exchange for this donation." It is the opinion of District legal counsel that most likely, the Internal Revenue Service will take the position that a taxpayer has received a good or service in exchange for the donation by way of the real property tax credits and subsequent reduction in the taxpayer's real property tax liability. Based on New York State regulations, school districts and municipalities are not allowed to modify the form in any manner.

Second, the Internal Revenue Code governs the federal income tax treatment of contributions. In May 2018, the IRS issued Notice 2018-54 informing taxpayers that the Department of Treasury and the IRS intends to propose regulations addressing the federal income tax treatment of certain tax payments made by taxpayers for which taxpayers received credit against their state and local taxes. This same Notice made clear that the Internal Revenue Code and implementing regulations are informed by substance over form principles. To this end, it is the opinion of legal counsel that the IRS will not treat contributions to a charitable fund as charitable contributions for federal income tax purposes. Should the deductions be disallowed, penalties and interest could directly impact taxpayers.

Over the course of the next year, we will monitor the actions of the IRS and maintain communication with NYS elected officials to assess outcomes associated with charitable fund regulations. As such, in the coming months we will revisit the option of establishing a charitable fund and share additional information with the community.

Sincerely,

Mamaroneck UFSD Board of Education

Steve Warner, President

Paul Bulova, Vice President

Rina Beder
Ariana Cohen
Gladys Di Vito
Sam Orans
Sari Winter

Dr. Robert I. Shaps
Superintendent of Schools