Paul L. Caron

Wednesday, October 17, 2018

Grewal: The Proposed SALT Regulations May Be Doomed

Andy Grewal (Iowa), The Proposed SALT Regulations May Be Doomed, 103 Iowa L. Rev. Online ___  (2018):

The IRS recently followed through on its promise to address state strategies designed to avoid the new state & local tax deduction limits. Although programs adopted by blue states sparked the IRS’s interest, the proposed regulations address both blue and red state programs. This has, predictably, led to IRS criticism from all sides. But the IRS was right to step in here. Revenue and policy concerns easily justify administrative guidance on the state strategies.

Unfortunately, the proposed regulations suffer from some significant technical and conceptual flaws. Those flaws, if left unaddressed, may jeopardize the validity of any final regulations, especially as they apply to red state programs. This essay discusses the flaws in the proposed regulations and offers recommendations for improvement.

Scholarship, Tax | Permalink


Amazing that this paper doesn't seem to address IRSInfo. Letter 2018-0030, wherein the Service says that business taxpayers (incl. pass-thrus) still get to deduct these payments and are therefore unaffected by the proposed regs. Professor, you get an "I" for "Incomplete."

Posted by: Tuphat | Oct 17, 2018 9:08:40 AM


I immediately addressed the business deduction issue on September 7, via the Yale JREG blog:

My comments were also later covered on the TaxProf blog:

I hope you can revise my grade. Thank you.

Posted by: Andy Grewal | Oct 18, 2018 11:11:14 PM

The IRS is right and the article is wrong. To qualify as a donation, the donor must have donative intent. It is not necessary for there to be a purchase, or a strict quid pro quo, to defeat the implication of donative intent. It is reasonable to consider "donations" to private parties with the understanding that a 3rd party will, in exchange, provide some material benefit to the donor to lack donative intent. Yet, it is not a purchase since there was no binding requirement for the 3rd party to grant that benefit as a condition of the donation.

Posted by: brad | Oct 19, 2018 9:46:54 AM