SCHUMER REVEALS: TENS-OF-THOUSANDS OF LONG ISLANDERS HAVE PREPAID 2018 PROPERTY TAXES HOPING TO EASE PAIN OF NEW FED TAX LAW; BUT MANY UNSURE IF THEIR EFFORT WAS FOR NAUGHT; SENATOR DEMANDS IRS HONOR PRE-PAYMENTS & IMMEDIATELY ALLOW LI’ERS TO DEDUCT PREPAID TAXES THIS FILING SEASON
Long Islanders Are Now Beginning To Prepare For Filing Their Taxes & Senator Says They—And All New Yorkers—Should Be Allowed To Deduct Their 2018 Property Taxes Prepaid To State And Local Governments; New Tax Law Caps SALT Deduction At $10,000
From Hempstead To Oyster Bay To East Hampton & Brookhaven, LI’ers Have Done Everything Possible To Protect Their Wallets; Feds Should Allow 2017 Pre-payments To Count For 2018
Schumer To IRS: Allow LI’ers To Claim Their Full SALT Deduction
With tens-of-thousands of Long Islanders having pre-paid their 2018 State and Local Property Taxes, in an effort to ease the pain of the new federal tax law, U.S. Senator Charles E. Schumer today called on the Internal Revenue Service (IRS) to immediately grant Long Islanders and all New York residents, who paid their 2018 property taxes early, the ability to apply those taxes to their 2017 state and local tax deductions, even if their property taxes were not assessed. Schumer, the Senate Minority Leader said, this would allow these taxpayers to take a larger state and local deduction in 2017, before the harmful, new state and local tax deduction (SALT) cap takes effect.
“The just-passed tax bill hammers middle-class Long Islanders and any relief that can be provided – by the IRS or any other entity – must be provided,” said Senator Schumer. “That is why I am calling on the IRS to let New Yorkers who prepaid prior to January 1, 2018 to deduct their property taxes in tax year 2017. The IRS should follow the letter of the law and allow these prepayments to be counted in tax year 2017.”
Schumer continued: “It is not unusual for there to be long lines in malls and department stores right before Christmas. But, what is unusual are long lines at community town halls around New York State to prepay property taxes. In fact, it’s unprecedented. Instead of preparing for the holidays, New Yorkers were scrambling to write checks before a midnight deadline, when thousands and thousands of New Yorkers would no longer be able to deduct their property taxes in the federal taxes without facing the new cap.
Schumer is specifically calling on the IRS to follow the letter of the law, which was written without mention of deducting prepaid property taxes.
“Allowing the prepayment of property taxes would lessen the damage of the new cap on state and local tax deductions,” said Schumer. “The IRS ought to do the right thing here; it is common sense and fair – especially given how this bill unfairly targets states like New York and hard-working middle-class taxpayers.”
Schumer said tens-of-thousands of Long Islanders and other New Yorkers prepaid their property taxes for 2018 in the nine days after the tax bill was enacted and before the effective date of the state and local tax cap on January 1, 2018. Many New Yorkers prepaid their 2018 state and local property taxes with the belief that they could retain the ability to deduct these property taxes from their federal taxes before the new cap imposed on state and local tax deductions.
“I applaud Senator Schumer’s commitment to fighting for the taxpayers of New York. I stand with the Senator in support of the thousands of residents who stood in long lines to pre-pay this past December, and should be allowed to deduct those property taxes” said Nassau County Executive Laura Curran
“The Town of Hempstead is made up of hard-working middle class families who are just looking for a little bit of fairness from this devastating federal tax overhaul. The IRS should honor the over 43,000 residents in our Town who scrambled over the holidays, and through the final week of December, to prepay their taxes” said Hempstead Town Supervisor Laura Gillen.
“During the last week and a half of 2017 over 43,000 taxpayers flooded the Hempstead Town Receiver of Taxes Office to prepay their 2018 general property taxes in order to be able to deduct those payments on their 2017 income tax returns, prior to the effective date of the President’s new federal tax code,” said Hempstead Town Receiver of Taxes Don Clavin. “Many residents were understandably concerned whether the IRS would allow the deductions. After reaching out to Senator Charles Schumer’s Office for help, I knew that he would fight tirelessly, demanding that the IRS rule in favor of taxpayers. Thank you Senator Schumer for ‘going to bat’ again for New York’s taxpayers.”
For Long Island, Schumer released the following chart, showing estimates from local tax collectors of the local attempt to ease the burdens of the new tax law:
|
Number of Prepaid Tax Rolls on LI |
|
|
Township |
Prepaid between 12/22 – 12/31 |
|
Hempstead |
43,073 |
|
North Hempstead |
21,300 |
|
Oyster Bay |
21,000 |
|
Glen Cove |
597 |
|
Long Beach |
520 |
|
Babylon |
5,582 |
|
Smithtown |
5,535 |
|
Brookhaven |
25,000 |
|
East Hampton |
14,961 |
|
Shelter Island |
953 |
During the three week period as Republicans rushed through a partisan anti-middle class and anti-New York tax bill, Schumer loudly and staunchly opposed the first proposed elimination, and then cap, of the state and local tax deductions, also known as SALT. While the state and local deduction cap, Section 11042 of the legislation, explicitly prohibits 2018 state and local income taxes from being prepaid and deducted from federal income taxes in 2017, it does not include language on the prepayment and deduction of property taxes. This may be because this section of the partisan legislation was a last minute addition – hastily written behind closed doors.
Schumer warned that thousands of New Yorkers could face a tax hike from the cap on state and local deductions and pointed out the review of experts at firms like Price Waterhouse Cooper who say eliminating or reducing the state and local tax deduction would decrease home values in each of New York’s congressional districts, placing pressure on state and local governments to deliver cuts to education or their local fire and police departments.
Schumer’s letter to IRS Acting Commissioner David J. Kautter appears below:
Dear Acting Commissioner Kautter:
I write to urge the Internal Revenue Service’s (IRS) to revise its recent guidance [IR-2017-210] on December 27 suggesting that property taxes paid in the calendar year 2017 would not be deductible against federal income taxes in the year they were paid. Long Island and New York taxpayers are confused about this hastily written tax law and need clarity, consistent with the law, on provisions that may cause them to see a tax hike. The IRS should rescind their recent guidance, which is not supported by the law, and clarify that taxpayers are allowed to deduct their prepaid 2018 property taxes to state and local governments for tax year 2017.
As you know, Section 11042 of P.L. 115-97 imposed a cap on the deduction of state and local taxes for the first time in the history of our country. This provision was agreed to last minute in a secretive partisan conference agreement. It will cause many New Yorkers and taxpayers across the country to see a tax hike. In order to lessen the damage of this provision, thousands of New Yorkers prepaid their property taxes for 2018 in the nine days after the tax bill was enacted and before the effective date of the state and local tax cap on January 1, 2018. These New Yorkers --and tens-of-thousands of Long Islanders--prepaid their 2018 state and local property taxes with the understanding that they could deduct these property taxes from their federal taxes in 2017, before the new cap was imposed on state and local tax deductions.
Many state and local government did not have time in these nine days, which fell in the middle of a holiday break for many, to react to this new law and accept prepaid property taxes. However, certain states governor’s, including New York’s, moved with haste to issue executive orders authorizing local governments to accept prepayments. These efforts were made with a fair interpretation of the new law which has been challenged by the IRS’s recent guidance.
The legislative text does not support the IRS’s December 27 guidance suggesting that property taxes paid in the calendar year 2017 would not be deductible against federal income taxes in the year they were paid. While Section 11042 explicitly prohibits 2018 state and local income taxes from being prepaid and deducted from federal income taxes in 2017, it does not include language on the prepayment and deduction of property taxes. 26 U.S.C. 164(a) outlines that state and local personal property taxes that were “paid or accrued” shall be allowed as a deduction for the taxable year. The new tax law does not change this. The exclusion of property taxes may or may not have been intentional given the secretive and rushed process that this legislation underwent to become law. Nevertheless, the legislative text does not prohibit the deduction of prepaid 2018 state and local property taxes accrued in 2017.
Again, I urge IRS to rescind their recent guidance, which is not supported by the law, and clarify that taxpayers are allowed to deduct their prepaid 2018 property taxes to state and local governments in 2017, independent of whether they were assessed in 2017.
Sincerely,
Charles E. Schumer
United States Senator
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