Rather than working to lower one of the nation's highest property tax burdens, some Illinois lawmakers want to sidestep the federal tax reform bill by allowing for donations to government.
One bill would create the Illinois Excellence Fund. It would allow taxpayers to donate and receive a tax credit for the exact amount. This shuffling of money back and forth would allow a taxpayer to deduct that amount on their federal taxes, effectively thwarting the $10,000 cap on state and local tax deductions put in place by the tax reform bill passed last month. The state treasurer can then use that money as he sees fit.
“[The SALT deduction cap] sort of came out of nowhere,” said state Rep. Jonathan Carroll, D-Northbrook. “This is trying to offer a solution to give tax relief to the middle class.”
The bill has a populist tone, appealing to the cries of high property taxes across the state. Nearly all of the current sponsors of the bill are likely to face a challenging re-election effort this November.
Carroll said he expects the Internal Revenue Service would object to such a law.
“They’re not likely to take it lying down,” he said.
The IRS classifies a charitable donation as “voluntary and is made without getting, or expecting to get, anything of equal value.”
Being a federal tax deduction as well, the state-bound donation would actually turn into a money maker. In addition to a 100 percent credit from the state, the donor would get up to 37 percent of that donation back in a federal write off.
The bill would also allow a county to set up a similar charity, which could cause different issues. Local taxes are devised in reverse compared to state and federal taxes. A taxing district sets percentages based on a target revenue number and then properties are taxed at that percentage of the assessed value of their homes.
State Rep. Steven Reick, R-Woodstock, said in an online post that the sponsors would tell counties that "they can set up a fund to accept donations to be used for undefined charitable purposes in exchange for a reduction or elimination of your property tax bill, which will either raise taxes on everybody else or destroy the budgets of every school district and taxing body in the County."