Details

Written by: Laura Halligan

Published: 29 August 2018

Created: 29 August 2018

Last Updated: 30 August 2018

Hits: 5073

Due to the U.S. Treasury’s recent efforts to block New York and other “blue states’” SALT workaround strategies, the Scarsdale Board of Education voted unanimously Wednesday to rescind the charitable education fund and related resolutions that promised to provide some tax relief to residents.

Last Thursday, the Treasury issued proposed regulations limiting the rights of taxpayers to claim charitable deductions for contributions when they expect to receive state or local tax credits in return. According to Daniel Petigrow, counsel for the Scarsdale School District, “These regulations and the department’s substantive analysis in support of those regulations… clarify that property tax credits received in exchange for contributions are a quid pro quo.” He continued, “(They) have ramifications for the actions taken by the board of education… when it established a charitable education fund for the purpose of receiving contributions from taxpayers in return for a credit towards their school tax liability.”

In other words, creating the charitable donation fund in order to provide residents with tax relief will not be permitted, since the primary purpose of contributing to the fund is to gain a credit, rather than making a donation without any expectation of a reward.

“In its proposed regulations, the Treasury Department cited long-settled Supreme Court precedent that the presumption underlying a charitable deduction is that the contribution is made without any expectation… of a corresponding benefit…” said Petigrow. When taking this into account, tax credit for donations to the charitable education fund likely would be denied or reduced significantly.

A Short HistoryAttorney Daniel Petigrow
As Scarsdale residents know, in December 2017, the state/local property tax credit was capped at $10,000 as part of the federal Tax Cuts and Jobs Act. In April of this year, in an effort to circumvent the cap, New York State authorized local governments to establish charitable giving/education funds and provide real property tax credits to taxpayers in exchange for their contribution, of up to 95 percent. In May, the New York State Department of Taxation and Finance clarified the state’s position on these funds and issued official documentation to be used in both acknowledging the contributions and claiming related tax credits.

However, in late May, the IRS issued a notice stating that it was skeptical of the state’s legislative efforts to work around the tax cap, and it would issue regulations to address these efforts. Regardless, on July 10, shortly after Scarsdale Village established a charitable contributions fund, the board 1) created a charitable education fund effective September 1 (the earliest date school taxes may be collected, by NYS law); 2) authorized real property tax credits of up to 95 percent in exchange for contributions to the fund; and 3) established an inter-municipal agreement with Scarsdale Village, designating the village treasurer as administrator of the fund for property owners within Scarsdale Village. (The school district treasurer would administer the fund for affected property owners in Mamaroneck.)

The Upshot
“When you adopted these resolutions… you stated that you could make no representations about the ability of residents to deduct the full 95 percent of the amount of payments to the fund as charitable contributions, “ stated Petigrow. “We believe that the Treasury Department’s proposed regulations, as well as the analysis for issuing them, have eroded the board’s basis for making no representations about their deductibility. Therefore, we believe it’s clear that you need to reconsider your prior action in creating the fund.”

Of particular concern to Pettigrew was that the New York State contribution acknowledgement form includes “a statement in which the official responsible for administering the fund and issuing the credit represent(s) that no goods or services were provided in exchange for the donation.” He went on, “In its analysis, the Treasury Department identified… what is a good and service, and the regulation states that it includes cash, property, services, benefits and privileges.” Since the tax credit can be considered a benefit, Petigrow said it would be a “material misrepresentation for the school-designated agent to complete the donor acknowledgement form, and could expose the board of education to liability.”

After Pettigrew’s presentation, Scarsdale Board of Education President Scott Silberfein solicited comments from those in attendance. Board Member Alison Singer began by asking why the first $10,000 (a homeowner may deduct) isn’t subject to the “goods and services” rule. “It seems that any deduction would violate the quid pro quo law?” Petigrow responded, “The $10,000 (limit) is a different part of the provision of the federal tax code… One section (of the code) has to do with charitable contribution… and for that section, the Treasury Department has said there cannot be a quid pro quo... A different provision (applies to) the state and local (property tax) deduction you get on your tax form.”

Board Member William Natbony followed, “If a taxpayer donates $5,000 to a not-for-profit organization as a charitable deduction with the intent of taking that $5,000 and recording it as a deduction, and getting a charitable deduction on their tax return, in essence, this is the same benefit…. I don’t see the consistency that I’m looking for…” Petigrow replied, “When you write a check for your (school) tax… it forms the basis of the operating revenue that a school district needs… That’s different from someone who donates goods or services to the district… out of the goodness of the donor’s heart. They’re not getting any recognized benefit for it.”

What’s Next?
The Treasury Department’s proposal is not set yet; it will be subject to comments in the coming weeks and may be reviewed at a public hearing before being finalized. In addition, Scarsdale Schools Superintendent Thomas Hagerman reported that, “(New York State Assemblywoman) Amy Paulin has reached out to a couple of us; they’re trying to push on this issue by finding folks within the community who wish to join a larger lawsuit. They do have a firm, Baker McKenzie, the… largest law firm in the country, that has agreed to take this on as a case.” He continued, “So, there was a question about whether or not a suspension, rather than a full recommendation, might be possible. Or, if we keep either option open, even if we decide to revoke it today, whether or not we can pursue this at a later time, if it feels like there’s some traction in the lawsuit; we might have a different outcome.”

Silberfein followed up by saying, “If we choose, ultimately, to revoke it today, is there anything that would stop us from going through and establishing the charitable fund in the future?” Petigrow said, “The New York State legislation is still on the books… that hasn’t been challenged… So if you were to revoke the actions that you previously took and… there is different… guidance or court decisions that changed the calculus, then I do think the board could, in the future do that. But, based on the regulations issued, although not finalized… there’s too much legal exposure for the board to continue on charting that course now.” Natbony later asked about the feasibility of suspending a decision and keeping the fund open and Petigrow answered, “The idea behind resolutions is to have them take effect at a operative date. To have them sit out there in an ambiguous state is not in the interest of the board… I don’t think there’s a legal impediment; it’s more a practical one... Our recommendation is that you do rescind it. It is a clearer message that (states), based on what we know now, we’re not in a position to do (this).”

Natbony then stated, “You mention the risk of liability… We’ve already made the representation to those who are putting money into such a fund that we make no representation and take no position on whether it will be deductible or not. Essentially, saying to the taxpayer, it’s your risk; we’re doing this as an accommodation… to allow you to do it, not knowing what the ultimate result will be. How does that change and where is the increased risk for the board, especially given the fact that these are only proposed regulations at this point?” Petigrow replied, “The increased risk stems from the analysis of the Treasury Department in which they cited long-standing Supreme Court precedent and cited existing regulation that a credit in exchange for the donation would constitute a benefit… There are inherent risks in the board proceeding in light of the regulations that are proposed.”

Board Member Chris Morin followed, “I think this was a really important issue… Loss of deductibility (on school taxes) is over $50 million of impact to residents. So, I’m really happy we undertook this and took, literally, the most aggressive approach in the state in looking out for our taxpayers.” He went on, “I appreciate all your advice and I think we all knew where this was headed, but we wanted to take the best shot. Now we know there’s no trace of ambiguity left and I think we have to follow your advice.”

Pam Fuehrer, Scarsdale Board of Education Vice President, wrapped up by saying, “I think the risk of the material misrepresentation by this officer and the board, in giving (taxpayers) this form that notes no goods or services were provided in exchange… is a clear contradiction and I think that risk is the stop for me.”

Taking Petigrow’s commentary into account, the board then voted to rescind the fund, the inter-municipal agreement with the village, and the real property tax credit.

Details

Written by: Joanne Wallenstein

Published: 16 August 2018

Created: 16 August 2018

Last Updated: 16 August 2018

Hits: 6845

It seems that the debate about the replacement of Butler Field went on too long. Though the Scarsdale Board of Education approved a plan to replace the field at their July, 2018 meeting, unfortunately the field will have to close before the fall season. Dips in the field are too pronounced, the turf is beyond repair and rainfalls are causing conditions to degrade further.

The original schedule called for use of the field through November, and use of the track through January. Now there will be no use of Butler Field and track access will be suspended in October.

Fall teams will be without the practice and playing field and the district will be without the use of its only turf field. With field space already in high demand, this will undoubtedly strain both the district’s athletic program and fall recreational sports programs.

Here is a letter sent to the community from Assistant Superintendent Stuart Mattey and Director of Physical Education and Athletics Ray Pappalardi on August 16. Please share your thoughts on the field in the comments section below:

To the Scarsdale Community:

We are writing to provide an update on the upcoming closures of the Butler Field and Track, and how these closures will affect access to the facilities by community residents.

As you may know, Butler Field is 13 years old and has reached the end of its usable life. This spring season, it was necessary to increase grooming and repairs to Butler Field in order to keep the field usable. This, coupled with its upcoming renovation, has resulted in more intense monitoring of the field conditions, which has led to our having strong concerns regarding the safety and playability of Butler Field.

Our concerns about the condition of Butler Field are based on the following:

· At every five yard line, the field level changes.
· There are several locations on the field where the level changes more severely.
· Where the pre-construction borings were performed, the surface cannot be repaired completely; the turf is too old and worn.
· After each hard rain, more low spots appear, infill aggregates, and playing conditions continue to degrade.

As a result of these concerns, all fall season coaches have been made aware that Butler Field will be closed for all games and practices starting next week. We are working closely with the coaches to provide the best possible alternatives to Butler Field, including use of turf fields in other local schools.

Construction fencing on the inside perimeter of the track is scheduled to be put in place on Friday, August 24. There will still be access to the track until early October, when the entire area will be closed for the renovation. The track replacement may not be completed until well into the spring, or even later, depending on weather conditions.

It is expected that the Butler Field and track renovation will begin in early October with removal of the current turf field, followed by upgrades to the drainage system, installation of the new turf surfaces, and finally track replacement.

Sincerely,

Stuart Mattey
Assistant Superintendent for Business and Facilities

Ray Pappalardi
Director of Physical Education, Health and Athletics

Details

Written by: Joanne Wallenstein

Published: 08 August 2018

Created: 08 August 2018

Last Updated: 08 August 2018

Hits: 6446

Several people noted some drilling underway at Greenacres Elementary School around July 4 and asked us to follow up with the district for further information. Here is what we learned from Assistant Superintendent Stuart Mattey about the drilling and the progress of the renovation planned for Greenacres.

Here is what Mattey said:

“The drilling performed were soil borings of sub-surface soil conditions and to determine existing footing depths. The information garnered from these boring will be used by the structural engineer (foundation) and civil engineer (storm drainage/parking) to determine design requirements.

As far as the projects, plans are moving along well. As shared previously with the Board/community, we are focusing on the GA and security vestibule projects at the present with the goal of fall submission to SED for plan review and eventual approval in time for Summer 2019 construction. GA meetings were held throughout the Spring with teachers, department chairs and administration regarding space designs and concepts. Security Vestibule meetings have included the District's security consultants and district and building level administration and directors.

We will indeed be providing regular updates to the Board and community throughout the year to keep everyone abreast of where we are in this process.”

We followed up with questions about what the test results showed about the level of the water table and the composition of the site, but have not heard back.

Details

Written by: Joanne Wallenstein

Published: 10 July 2018

Created: 10 July 2018

Last Updated: 10 July 2018

Hits: 8951

If current trends hold, the Scarsdale School district may have the lowest enrollment in the last ten years when school opens in September. At the July 10 meeting of the Board of Education, Assistant Superintendent Drew Patrick delivered what he called, “unusual enrollment numbers,” and reported that as of now, the district is projected to be down by more than100 students from the 2017-18 school year, with 88 fewer students enrolled in kindergarten.

The demographer had projected that the district would have 324 students entering kindergarten in September, but as of today, only 236 have enrolled. The decreases are across all schools with the following declines in kindergarten enrollment projected:

Edgewood was projected to have 66 and now has 35
Fox Meadow, projected at 70, now stands at 49
Greenacres, projected at 49, now has 42
Heathcote projected at 61, now at 33
Quaker Ridge, projected at 78, now has 77

What’s responsible for the missing kindergartners? Patrick reported that he spoke to the directors of local nursery schools that offer programs for 5 year-olds whose parents decide not to enter them into kindergarten, though they are eligible. He said that there has been growth in this trend, sometimes called “Redshirting,” but that only accounts for 25-26 of the missing students.

These projections will mean that the district will only need 103 of the 106 classroom sections allowed for in the budget. Fortunately no teachers will be laid off, as a split in the 5th grade inclusion class at Greenacres will require an additional two teachers, and another teachers will be needed to cover a maternity leave.

Enrollment at the middle school is projected to up by 29 students, and decline by 7 students at the high school.

Patrick did say that typically another 40-45 students enroll during the summer, so these numbers may change radically by the time the district needs to make decisions in August.

We asked local realtor Heather Harrison from Compass for her interpretation of the enrollment dip and here is what she shared:

“I think the new tax law is the key to this market. Some buyers are more sensitive to property taxes this year and are wait and see. The Scarsdale gift fund tax credit is a start, but we don't know what the IRS will say. I'd like to see Scarsdale do even more...like a home buyer tax credit to help keep values strong.

The city real estate market is also not as strong this year. In years past, my city buyers would tell me they had to sell their apartment, but the market was so strong, they would get multiple offers quickly and it was as good as cash. One of my team members had a deal fall through this year where the buyer backed out because they couldn't sell their apartment.

A key sales figure from our MLS: in 2017, there were 142 sales that went to contract through June. This year, 133 deals have gone to contract, so down about 6%. But just as important, supply is higher. In July last year there were 154 homes on the market. This year we have 172, so that's about 11% more. You're seeing more empty nesters listing their homes this year and more new construction on the market.

I expect the numbers to improve this summer. Scarsdale deals in contact since the start of June are higher this year than they've been in years which is great news! In recent years, the spring market has been extending more and more into the summer. With more inventory, buyers have more choices and some are taking more time before they buy their Scarsdale dream home!”