The Brown administration has what it calls a creative plan to provide an extra $200,000 to the Buffalo Public Schools in the upcoming city budget: form a charitable entity to accept money from those who would see their state and local tax – or SALT – deductions capped at $10,000 under the federal tax overhaul.
But the City Comptroller’s Office warns that the plan would not bring in much money because 95 percent of the contribution would go to pay the person's tax bill and because there are not enough Buffalonians with tax bills big enough to even benefit from the maneuver.
There also are questions about whether the plan – versions of which have also been implemented to help wealthy residents in other high-tax states – will pass muster with the IRS.
Meanwhile, some other local municipalities either were not interested or were awaiting state guidelines – issued last week — before deciding whether to try something similar.
Despite the comptroller's skepticism, the Brown administration is proceeding with plans for Buffalo's Charitable Gift Fund. Mayor Byron W. Brown said it will allow residents whose property taxes exceed the federal tax cap to pay their property taxes into the fund and receive a tax credit worth 95 percent of their payment, which they can deduct from their federal taxes.
The program attempts to preserve the SALT deduction homeowners have previously had and ensure that Buffalo is collecting the appropriate amount of property tax revenue, Brown said late last month when he presented his $513.6 million 2018–19 spending plan. The fund is made possible through a measure Gov. Andrew M. Cuomo signed last month to try to protect New Yorkers from the impact of the federal tax bill, and the state on Wednesday issued formal guidelines on how to set up such funds.
Brown said the city is ready to take advantage of the new provision that "preserves the state and local tax deductibility.”
“How that is done is, residents can make a charitable contribution to the municipality. If their state and local taxes exceed $10,000, they will get a credit – a tax deduction – for making that charitable contribution and that money will be applied to their (federal) taxes.”
The contribution to the fund can be a combination of property and income taxes, Brown added.
“It’s any combination of state and local taxes,” he said.
A contributor to the fund cannot earmark where they want their donation to go, but Brown has pledged that the first $200,000 will go to city schools.
But the Comptroller’s Office says that the tax contributions into the fund will not bring in significant revenue to the city. The increase in revenue would only be a 5 percent per contribution, while the other 95 percent would go to offset the person’s property tax bill.
And there’s a “very limited” number of individuals who would benefit from the Charitable Gift Fund, said Patrick J. Curry, a top aide to Comptroller Mark J.F. Schroeder, during a recent Common Council budget hearing.
The program “would only benefit people with half-million dollar homes, high property taxes and high income taxes, and there’s not a great deal of people who would qualify for that,” Curry said. “There’s a very limited amount of Buffalonians.”
On the average $100,000 house in Buffalo, the property taxes are about $2,000 or $2,500, Curry said. A $500,000 home would pay about $10,000 in property taxes, but there are not a lot of $500,000 homes in Buffalo, Curry said.
“The only new revenue would be any charitable donations from the business community,” Curry said.
Donna J. Estrich, the city’s commissioner of administration, finance policy and urban affairs, countered that the charitable fund is not just for taxes. It’s also for anyone who wants to donate to the city and get a tax credit for it, she said.
“So it’s not just for property owners,” she said.
The Brown administration expects to meet $200,000 goal and beyond based on its experience last December, when Buffalo gave people the option of early payment of 2017 taxes before the federal government’s new tax code went into effect in 2018.
About 300 people took advantage of the option, resulting in “well over” $1 million being collected between Christmas and New Year’s, the Brown administration said.
The people who paid their 2018 taxes before the end of last year would have owed more than $10,000 – the new SALT tax cap threshhold. So if they took advantage of the early payment option last December under the old tax laws, they are the base universe of people who know they are impacted by the new SALT limit and who will be incentivized to pay into the Charitable Gift Fund this year so they can receive a tax credit, which they can deduct from their federal taxes, according to the Brown administration.
The idea is that people will make charitable donations because the deductions will help keep them within the new SALT limit.
“The Charitable Gift Fund is based on real analysis,” Brown said. “We have a very clear basis on why we’re doing this and why we are confident that we will achieve this.”
Brown also will launch a campaign to encourage residents and businesses to made additional contributions to the fund.
“I am committed to building a campaign around this idea and using it as a real source of revenue that also benefits taxpayers because it gives them additional deductions,” Brown said.
A check of some other local municipalities shows they are not ready to make the same commitments as Buffalo regarding the Charitable Gift Fund.
The Town Clerk’s Office in Clarence is aware of the amendment to the state's General Municipal Law that makes the Charitable Gift Fund possible, but there have been no formal discussions about it yet, said Deputy Clerk Darcy A. Snyder.
Marguerite Greco, the Town of Tonawanda clerk, first heard about the Charitable Gift Fund at a February meeting of the New York State Town Clerks Association, but she said last week that she was waiting on the state guidelines issued Wednesday on how to set it up.
Hamburg Town Clerk Cathy Rybczynski said the fund was discussed recently at a town clerk’s conference, but she, too, was waiting on the state to provide more information.
The Village of Williamsville Board of Trustees has not discussed the Charitable Gift Fund, said Village Clerk Lynda Juul.
“Our tax amount is very small in comparison to town and county tax,” Juul said, so it is not something the village is looking into at this point.
The Buffalo Common Council has until Tuesday to vote on the budget for fiscal year 2018–19, which begins July 1.