IRS action on prepaid property taxes slammed as 'naked political payback' against N.J.

WASHINGTON -- New Jersey Rep. Bill Pascrell Jr. and other Democrats on Monday accused the Internal Revenue Service of "naked political payback" for refusing to allow taxpayers to deduct their entire prepaid 2018 property taxes and threatening to step up enforcement of those who try to claim the tax break.

In a letter to acting IRS Commissioner David Kautter, Pascrell, D-9th Dist., and the other Democrats on the House Ways and Means Committee said there was no legal justification for the IRS to decide that only 2018 property taxes paid in response to an assessment -- which would cover just the first half of 2018 in New Jersey -- were deductible.

"We view this as a clear case of bureaucratic overreach, and now, as a result, many of our constituents are losing a valuable deduction -- and consequently part of their hard-earned income," the lawmakers said.

The ruling was issued Dec. 28, almost at the end of the year, though Kautter said he would revisit the decision following a meeting last month with Reps. Leonard Lance, R-7th Dist, and Josh Gottheimer, D-5th Dist.

The IRS had no immediate comment.

New Jersey homeowners, who pay the nation's highest property taxes, rushed to prepay them once President Donald Trump signed a Republican tax bill that curbed the federal deduction for state and local income, property and sales taxes.

The measure disproportionately affected residents of New Jersey and other Democratic-leaning high-tax states, most of which already pay billions of dollars more in taxes to the federal government than they receive in services.

The legislation has New Jersey lawmakers considering allowing localities to take charitable contributions, which are not capped, in lieu of property taxes.

The Democrats on the tax-writing panel said Treasury Secretary Steven Mnuchin indicated that the IRS would step up enforcement to ensure that taxpayers weren't trying to deduct extra prepaid property taxes.

"We are surprised and dismayed at this expression of IRS priorities, and we are angry to read of this naked political payback against taxpayers in blue states," the lawmakers wrote.

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