SALT LAKE CITY — Salt Lake County Treasurer Wayne Cushing said Thursday his office may end up returning some $3 million in property tax prepayments collected from residents hoping for a break under a new federal tax plan.
That's because the IRS issued an advisory late Wednesday spelling out that property taxes that haven't been assessed before the end of the year can't be deducted on next year's tax returns.
"This is normally a slower time of the year, but it's been quite busy," Cushing said, with taxpayers lining up to prepay property taxes that aren't assessed until next year and not due until Nov. 30, 2018.
He said his office had accepted $3 million in prepayments on nearly 800 parcels when the advisory came out, money that can be refunded to taxpayers who ask, although that process could take a week or two.
Now, Cushing said, the treasurer's office has posted signs and recorded a telephone message that "basically says, ‘Pay at your own risk,’" even though prepayments are still being accepted.
It's a situation being played out around the state and around the country because the income tax changes backed by President Donald Trump and passed by Congress just before Christmas cap state and local tax deductions at $10,000.
Those changes apply to taxes filed in 2019, for income earned next year, so people worried about exceeding the cap have been looking for ways to take deductions on this year's income.
In Utah, it was the treasurer's office in Summit County that first spotted an increased interest in prepayments, soon after the $1.5 trillion tax bill won final approval on Dec. 20.
The county, home to the ski resort community of Park City, has "quite a few" property owners that are at or above the $10,000 cap, Summit County Deputy Treasurer Lynsi Stone said. "I think that's what started it."
Since then, treasurers in the state's 29 counties have been keeping in touch via email to figure out how to handle the requests, Iron County Treasurer Nicole Rosenberg said.
Rosenberg, the incoming president of the county treasurer's association, said even before the IRS advisory came out, the consensus was that county officials should be careful not to make any promises.
"It's all so new," she said. "I wish we had a little bit more time to understand it."
Some taxpayers have tried to get answers county officials just don't have, Rosenberg said.
"I had a guy really give me the what-for last night. I said, 'I'm not a tax accountant. We just collect and distribute your payments,'" she said, making it clear she couldn't provide any guarantee he'd be able to take a deduction for a prepayment.
Davis County Treasurer Mark Altom said interest in prepayments has dropped since the IRS advisory. He said his office has asked the county attorney about charging a "nominal fee of $5 or $10" for processing refunds.
"If it's justifiable, we may do that, from the perspective that it may not be fair to the other taxpayers to have to subsidize this process," Altom said. "It's not going to be a large fee."
Altom, who has served as treasurer since 1992, said he wasn't sure yet how much had been collected in prepayments as a result of the new law. But he said this is the biggest reaction to a tax change he's witnessed.
"I haven't seen this in the 25 years I've been here, to this impact," he said.
Utah House Speaker Greg Hughes, R-Draper, said the problems associated with the prepayments aren't bad ones to have.
"I would argue this is a good challenge to have as we see Congress reforming our tax code," Hughes said. "That was long overdue with Congress. They've done their work and now it's time for us to do our work."
For the state Legislature that begins meeting in late January, that means figuring out how to handle what the speaker said is expected to be between $75 million and $150 million in additional income tax collections because of the federal changes.
The three choices are, "spend it, reform it or cut it," Hughes said, predicting the House will settle on some combination of tax cuts, changes to Utah's tax code and additional spending.34 comments on this story
The speaker acknowledged there's pressure on the GOP-dominated Legislature to simply cut taxes, even though there are proposals for corporate tax reforms seen as benefiting economic development and ongoing education and other needs.
"We want to make sure we're not inadvertently hurting our taxpayers who are paying state taxes," he said. "So I'm sensitive to that. But I think we're going to look at the idea of spending it all, reforming the tax code as it is and cutting taxes."