A new federal tax bill was signed into law on Dec. 22 that caps the allowable deduction for state and local income, sales and property taxes at $10,000 beginning in 2018. This means that any state and local taxes paid in excess of $10,000 can no longer be used as deductions to federal taxes beginning in 2018.
Gov. Andrew Cuomo subsequently signed an Executive Order designed to help New York taxpayers by allowing them to pre-pay their 2018 property taxes before Dec. 31, 2017. The idea behind the Order was that by allowing New Yorkers to pay property taxes early, they would potentially be permitted to claim the deduction before the new federal tax law goes into effect.
Unfortunately, the Order does not fully achieve this result, for several reasons. First, it remains unclear whether the federal government will allow deductions for property taxes that are paid early under a State’s Executive Order. In addition, while the Order may, in some cases, allow residents to prepay their 2018 municipal (e.g., town, county or city) taxes, there is no legal or practical mechanism for prepayment of school taxes by the Dec. 31 deadline.
Unlike municipalities which operate on a calendar year (January 1 – December 31), school taxes are calculated based on a July 1-June 30 fiscal year. School districts, including Menands, have no mechanism to issue tax warrants in December for budgets that have yet to be finalized or put before the voters for approval (as required by law) in May. In addition, the Order does not authorize school districts to adopt estimated or partial tax warrants for the 2018-2019 school year or issue tax bills corresponding to those warrants. Nor does it address the prepayment of school taxes or change the statutory process by which taxes are levied by schools.
Consequently, the District does not have the authority or ability to accept pre-payment of property taxes before the Dec. 31 deadline.