Bipartisan legislation under consideration in the General Assembly would bypass the federal cap of $10,000 in state and local taxes that could be deducted on income tax returns.
Created as the Illinois Education Excellence Fund, the bill would offer a 90 percent credit for taxpayers who contribute towards a local government, county or school district’s charitable fund. The bill states that a “person or entity may donate to a charitable fund on behalf of specified property located in the local unit,” as the taxpayer is “entitled to a property tax credit equal to a percentage of the contribution amount, subject to certain annual caps.”
Introduced in the House by Rep. Johnathan Carroll, D-Buffalo Grove, in January, the bill passed 93-15 on April 18. The measure then went through the Senate, where it passed 54-1 on May 24. Currently, the bill is back in the House going through revisions.
Sen. Julie Morrison, D- Deerfield, was the Senate chief sponsor of the bill. On her website, she lauded the Senate for fighting back against federal tax protocol, which she believes handicaps state taxpayers. “Capping the SALT [state and local taxes] deduction punishes states like Illinois that have higher property tax burdens and above-average incomes,” she said.
Sen. Jim Oberweis, R-Sugar Grove, was the only senator who voted no on the bill. In a press release, he explained why he came to that decision, citing the importance of the federal cap in keeping corporations in the country. “This is very shortsighted legislation that was hard to vote against because everybody likes tax decreases,” he said. “But it is a very bad idea because the recent federal tax reduction measure was absolutely critical in keeping corporate headquarters in the United States instead of them moving to other countries.”The legislation follows a May 23 statement by the Internal Revenue Service (IRS), pledging to impose regulations on states who are working around the “deductibility of state and local tax payments for federal income tax purposes.” The statement serves as a warning to not only Illinois, but Connecticut, New York and New Jersey, states that have introduced similar tax measures in their state legislatures.
The SALT cap was included in last year’s $1.5 trillion tax cut plan by President Donald Trump. The cuts were criticized by states like Illinois that rely on SALT deductions. “For a state like Illinois, which contributes much more in federal taxes than we receive back in programs and services, this is an unfair tax policy that must be rectified,” Morrison said.
Oberweis predicts that if legislation proceeds, the IRS will react quickly. “There is no way the federal government is going to allow states to pull a fast one like that, to find a tricky way around the deduction limits,” he said. “Trying to get around the IRS is not a good idea. This is a ‘lose-lose’ situation. It is my hope that our state representatives will figure this out before voting on it.”
Alex Camp is a master’s degree graduate in Public Affairs Reporting from University of Illinois Springfield. He is currently a freelance journalist. Contact him at email@example.com.