California has a plan to skirt the GOP tax law. IRS veterans say it is likely doomed.

By Jeff Stein

Kevin de León (D), president pro tem of California’s state Senate, is backing legislation that aims to protect wealthier taxpayers from the higher federal tax bills they would face under changes signed in December by President Trump. (Rich Pedroncelli/AP)

California’s plan to shield residents from a tax hike under President Trump’s tax plan is likely to fail, said seven former high-ranking Internal Revenue Service and Treasury Department officials.

The proposal, passed by the state Senate last month, is seen as a test case for blue states trying to help their taxpayers avoid a giant increase under the GOP plan’s $10,000 cap on deductions of state and local property taxes.

The California measure would allow residents to make “charitable” contributions to a new state-run nonprofit group in exchange for a credit that would offset their state tax burden. Classifying the payments as charitable contributions rather than local taxes would help Californians avoid hitting the cap.

But it is unclear that the federal government will greenlight the plan, which also still has to win approval by the state’s Democratic governor and assembly.

Two former Treasury officials and five former IRS officials — including a former IRS commissioner, an attorney who served in the IRS chief counsel’s office, and a director of the IRS’s nonprofit division — have told The Washington Post that the agency could view the charitable contributions as an attempt to get around the Republican tax law, and issue guidance saying that it will view these payments as taxes subject to the cap. That could throw the issue to the courts.

Two former IRS trial attorneys working in the private sector in California gave similar judgments. (The California plan would give taxpayers a credit of 85 percent of the amount they contribute to the new state-run nonprofit organization.)

“I think the service will undoubtedly, almost …read more

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