NAEPC Webinars:

Wednesday, December 12, 2018 at 3:00pm - 4:00pm ET - Post-Mortem Estate Planning

Source: The Robert G. Alexander Webinar Series

IRead more

Information about this program will be posted soon.  

REGISTER HERE for the individual program.  To register for the 2018 series, please click HERE.

Issue 29 – July, 2018

Editor’s Note

The SALT Work-Around: Shaken Not Stirred

Susan P. Rounds, JD, CPA, LL.M. (taxation), AEP®, TEP

The Tax Cuts and Jobs Act (“TCJA”) imposes a $10,000 cap ($5,000 if married filing separately) on the amount of state and local sales, income, or property taxes , a/k/a “SALT”, taxpayers can deduct effective January 1, 2018.  In Round One of Taxpayers vs SALT Limits, tax advisors weighed pre-paying 2018 obligations in 2017 to get around the new cap.  This was foiled by final language treating 2017 payments for 2018 obligations as having been made in 2018.

WHY IT MATTERS:  Law Makers in High Tax States Are Gearing Up For Round Two.  Clients may ask about some of the resulting proposals.


  • Legislators in states such as CA, CT, IL, NY, and NJ foresee a decline in property values and/or an exodus of wealthy taxpayers and are working to create solutions dubbed “work-arounds”.
  • Of popular interest is the concept of establishing state and local trust funds to take contributions for the support of public services.  In exchange, taxpayer receives a state tax credit against SALT obligations.
  • The upshot is then using the amount of the state trust fund contribution as a federal charitable income tax deduction to “work-around” the SALT limit.


  • Despite heated resistance, the SALT limit is a central part of TCJA – a targeted policy decision poised to offset the inherent loss of federal income tax revenue built into other TCJA provisions.
  • Several states have threatened to challenge the SALT cap on constitutional grounds.


  • Work-arounds have been described in bleak terms including “an attempt to thwart the SALT limitation” and “a mere substitute for taxes that would have to be paid anyway.”
  • The IRS is doubling down, recently staking out its intention to propose regulations addressing the federal treatment of payments made in return for a state tax credit.
  • The regs will be based on federal authority to control the characterization of payments for federal income tax purposes as informed by substance-over-form principles.  The doctrine of substance over form maintains that the “substance” rather than the “form” of a transaction is what governs the tax consequences of a transaction.

Happy Reading!

 “Knowledge is weightless, a treasure you can carry easily” – Anonymous

Email me at with your comments and suggestions.

This information is provided for discussion purposes only and is not to be construed as providing legal, tax, investment or financial planning advice. Please consult all appropriate advisors prior to undertaking any of the strategies outlined in this article, many of which may involve complex legal, tax, investment and financial issues. This communication is not a Covered Opinion as defined by Circular 230 and is limited to the Federal tax issues addressed herein. Additional issues may exist that affect the Federal tax treatment of the transaction. The communication was not intended or written to be used, and cannot be used, or relied on, by the taxpayer, to avoid Federal tax penalties. MRG026830