ALBANY – Local governments, including the state’s biggest school districts, should create a path for homeowners to pre-pay their 2018 property taxes so they can grab deductible benefits before restrictions kick in under the new federal tax law.
That’s Gov. Andrew Cuomo's message after he issued Friday an executive order intended to make it easier for New Yorkers to pre-pay next year's property taxes prior to December 31. That would enable them to get a bigger federal deduction on their 2017 federal tax filings.
The idea has some obstacles. School districts, the largest collectors of the property tax in New York, are in no position – six months before their next budget even goes before voters – to collect tax pre-payments.
Taxpayers still will need to do some quick math to determine if making the advanced payments is a wise tax move for their individual cases. Moreover, they also would have to have the cash on hand to pay thousands of dollars they will owe on the unknown property tax levies.
Most homeowners with mortgages have escrow accounts from which their property taxes are paid on a monthly basis to their mortgage lender, and so amending those arrangements to pre-pay taxes sometime next week could prove a large challenge.
“This is what you can do now,’’ Cuomo said of taxpayers who could benefit from his plan.
Cuomo said his executive order temporarily suspends a law that prevents taxpayers from making partial payments on their next year’s income tax liabilities.
Some local government officials said the executive order was needed to permit them to allow taxpayers to make advanced tax payments.
Buffalo Mayor Byron Brown, who is also chairman of Cuomo’s state Democratic Party, said Friday evening that city residents who want to pre-pay an estimated all or part of their 2018 property tax bill can do so starting next Tuesday. He estimated perhaps 500 property owners might take advantage of the pre-payment option.
“It’s a complication, of course, but we are concerned with this new tax bill that this will be a way for people to still achieve full deductibility for payment of their taxes … at least for one year,’’ Brown said.
The mayor said tax rates have not yet been set, so people making payments next week could have an additional tax fee come due in 2018 after tax levels have been established.
Many towns in New York already permit residents to pay their county property tax bills in late December. That allows taxpayers to deduct those taxes, in the case of this year, on their 2017 federal income tax form.
Cuomo said the state’s Big Five school districts – including Buffalo – are further along in their budget process and so can comply with his pre-payment idea for taxpayers. The Buffalo school district does not, however, bill residents directly for property taxes.
Earlier his week, Erie County Executive Mark Poloncarz’s office noted that county taxes are not due until the tax rolls are completed and a lien is placed on properties on January 1. Poloncarz noted that tax collections can’t begin until sometime soon after January 1, 2018 – per state law and the Erie County Tax Act.
Cuomo’s initial statement regarding school districts set off a bit of a firestorm. With just four business days left in 2017, school officials Friday were scratching their heads wondering how they could comply with Cuomo’s plan. Officials noted tax warrants aren’t issued until after school budgets are approved – set for May next year – and that the mechanism for taking payments in advance are not in place.
Cuomo offered that districts should at least accept payments up to what New Yorkers paid a few months ago on their 2017 school property tax bill and then let them pay the balance after the 2018 school budgets are set.
“I don’t think logistically we’re set up to accept payments a year in advance,’’ said Michael Borges, executive director of the New York State Association of School Business Officials, whose statewide members include district officials who oversee property tax collections.
The Cuomo administration later in the day said the governor's idea was directed at other localities, such as towns as well as the Big Five school districts, and not the other 695 or so school districts across the state.
While legislators in the past criticized Cuomo’s use of executive orders that they say often supersede the authority of the Legislature, one top lawmaker was on board with Cuomo’s action on Friday. Senate Majority Leader John Flanagan, a Republican from Suffolk County, which is home to some of New York’s highest property taxes, was supportive of the Cuomo idea, saying he would “encourage anyone who can to take full advantage” of pre-paying their taxes by December 31.
“While legislative solutions are always preferable, the Speaker supports measures like this to give New Yorkers relief from the huge burdens this draconian tax bill places on our citizens,’’ said a spokesman for Assembly Speaker Carl Heastie.
But E.J. McMahon, research director at the Empire Center, a fiscal watchdog group, wondered how Cuomo’s idea could happen for people who pay their taxes via escrow accounts with their mortgage lenders.
“It’s no minor matter,’’ McMahon said.
Of Cuomo’s pre-payment suggestion, McMahon said the benefits would vary greatly among taxpayers.
“It’s not going to prevent something awful from happening to you. It’s a way to take advantage of the current tax code and it will give you the ability to game the tax code one last time,’’ added McMahon, who said the vast majority of upstate homeowners will be getting a tax cut under the new federal tax law.
“He’s treating this as an emergency because everyone is facing a calamity. Most of the people he’s talking about are going to have a tax savings next year,’’ McMahon said.
Cuomo and many state lawmakers have been critical of the new federal tax law that President Trump signed Friday because it restricts to $10,000 the deduction people can take on the annual amount they pay in state and local taxes. The new federal law explicitly prohibits taxpayers from making advance payments on their 2018 state income taxes during the final days of 2017. But the law left open the outlet for pre-payments on local property taxes.
Cuomo's action authorizes localities to issue tax warrants to local tax collectors no later than next Thursday, thereby allowing taxpayers to pre-pay all or a part of their 2018 property tax bill and get it postmarked by December 31.
Cuomo said he has also directed his fiscal aides to devise potential changes to the state’s tax code that will provide relief to those New Yorkers facing tax hikes under the new federal law. Most of those people are downstate making larger salaries and paying more in property taxes than upstate residents. Cuomo did not elaborate on his idea, but said it would be revealed when he proposes his 2018 state budget in mid-January.