When does the law take effect?
The law took effect when signed by the Governor in April 2018. Local governments and school districts are currently authorized to establish charitable funds.
Has the IRS indicated whether contributions to local charitable funds will be deductible for federal tax purposes?
On August 23, 2018, the IRS proposed regulations on charitable contributions and state and local tax credits. Under the proposed regulations, a taxpayer who contributes to local charitable funds must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive. As always, taxpayers should be advised to consult a qualified tax advisor regarding their personal situation.
Can local governments and school districts make changes to the Acknowledgment of Contribution and Credit Claim forms that the Department of Taxation and Finance has provided?
No, but local governments and school districts are free to produce ancillary informational materials.
If one unit of local government sets up a charitable fund, can contributions to those funds generate tax credits that can be applied against property taxes owed to other units of government? For example, if a town sets up a charitable fund, will contributions to that fund provide tax credits that can be applied against school, village, or county taxes?
Each school district and unit of local government must decide for itself whether to establish a charitable fund and whether to offer a tax credit for contributions to that fund. Those tax credits are specific to that locality and cannot be applied to taxes levied by other jurisdictions.
Can special districts such as fire districts set up a local charitable fund program under the statute?
No. The statute authorizes the governing boards of counties, cities (including New York City), towns, villages, and school districts to establish a charitable gifts reserve fund to receive unrestricted charitable monetary contributions.
Can a local government or school district create a new 501(c)(3) or designate an existing 501(c)(3) to receive contributions that qualify for tax credits?
No. The governing boards of counties, cities (including New York City), towns, villages, and school districts are authorized to establish a charitable gifts reserve fund to receive unrestricted charitable monetary contributions. This authority is granted in section 6-t of the General Municipal Law (counties and New York City), section 6-u of the General Municipal Law (all other cities, towns, and villages), and subdivision 44 of section 1604, subdivision 12-b of section 1709, and subdivision 54 of section 2590-h of the Education Law (school districts).
This is a fund of the government itself, and the monies in this fund are to be deposited and secured like other local government or school district funds, pursuant to section 10 of the General Municipal Law (see Guidance at page 3). Therefore, contributions received by this public governmental fund need to be received by the local government or school district itself, not a newly created or designated 501(c)(3).
Who will administer the local charitable funds and can administration be delegated?
The governing board of the local government or school district must designate a local official, such as the Chief Fiscal Officer or Finance Director, to serve as the fund’s administrator. The Administrator is authorized to appoint agents to act on the Administrator’s behalf for purposes of administering the charitable fund.
Can contributions be made in the form of real property?
No. Contributions must be monetary.
Can contributors direct that their contributions be used for specific purposes?
No. Contributions must be unrestricted for use by school districts and local governments for public educational and charitable purposes, respectively.
How should local governments and school districts account for the charitable gift reserve funds on their books?
The Office of the State Comptroller will establish appropriate account codes.
We are considering the creation of a single charitable fund to cover a number of local governments. Would this be permitted, and, if so, would this constitute as a shared services activity under the recently enacted County Wide Shared Services law that would qualify for state matching funds?
Local governments and school districts are required to establish their own individual charitable funds; a single fund for multiple local governments or school districts is not permitted. However, to the extent that net savings can be demonstrated by sharing services related to the fund (e.g., two towns sharing a fiscal officer that manages both towns’ finances, including the separate charitable funds), matching funds could be available, consistent with the other requirements of the County-Wide Shared Services Initiative. See the New York State Department State website for a full description of the County-Wide Shared Services Initiative.
How do taxpayers who make charitable contributions claim their property tax credits?
A taxpayer who wishes to claim a credit for contributions to a local charitable fund should present a completed credit claim form to the tax collector for that locality, together with a copy of the acknowledgement form for that donation.
Can a local government and school districts take measures to ensure that property tax credits are not fraudulently claimed?
Yes. Local governments and school districts can take steps to ensure that credit claims are legitimate by, for example, providing for information sharing between fund administrators and tax collectors.
The guidance states that donations must be received in the 12-month period prior to the last day prescribed by law that taxes may be paid without interest or penalties to be eligible for a tax credit in that year. What if taxes are paid in installments?
Taxpayers who have made donations in the 12-month period prior to the last day prescribed for paying the first tax installment without interest or penalties can claim a tax credit based on that donation. The credit will be applied to the first installment and any excess credit will be applied to the subsequent installments until the credit is exhausted.
Contributions made after the last day prescribed for paying the first tax installment without interest or penalties will not be able to claim a tax credit based on that donation until the following year.
Will tax collectors be able to certify tax warrants when many of their receipts have come in the form of credit claims?
For purposes of certifying the warrant, each credit should be treated as if the recipient of the credit had paid cash in the amount of the credit. The amount of taxes remaining to be collected for the corresponding county, city, town, village or school district should be reduced accordingly. To the extent the Real Property Tax Law normally requires property tax payments to be applied to satisfy the warrant in a specific order (e.g., first to town taxes and then any “residue” goes to the county; see § RPTL 904(2); see also Town Law §§ 35 and 37), the charitable credit statute would take precedence over that requirement. That is because it specifically states that “the owner or owners of real property shall be allowed a credit against the real property taxes of a participating municipal corporation that have been imposed upon such property” (RPTL § 980-a(1)(b).
How can a taxpayer who pays property taxes through an escrow account with his or her banks claim the credit to reduce property tax liability?
Taxpayers who make charitable contributions entitling them to real property tax credits but nonetheless pay their taxes in full (without taking into account the value of the credit) may present the acknowledgment form and the credit claim form to the local government/school district chief fiscal officer/chief financial officer or their designee to receive a refund of property taxes in the amount of the credit. This refund mechanism would be available to taxpayers who pay their taxes through an escrow account with a bank. The Department of Financial Services, in consultation with the Department of Taxation and Finance, will promulgate regulations related to mortgage escrow accounts.
If a taxpayer makes a large donation in one year, can the tax credit associated with that donation be used to offset multiple years of property taxes?
No. A donation must be received in the 12-month period prior to the last day prescribed by law that taxes may be paid without interest or penalties in order to be eligible for a tax credit in a given year.
Do tax collecting officers have to accept these tax credits as payment?
Yes. If a local government or school district has opted to provide a tax credit, the tax collecting officer that collects that local government’s or school district’s taxes must accept the credit as payment.