Behind the state law allowing Arizona to raise money and build a fence along the U.S.-Mexico border is a strong perception by politicians here that the federal government refuses to adequately secure the Southern border.
Now, it seems the feds will share, if indirectly, in the cost of building the fence.
“Why, I think it’s somewhat ironic, don’t you?” said Sen. Steve Smith,
R-Maricopa, who authored the law. Smith, like many illegal immigration hawks, perennially accuses the U.S. government of failing in its job to secure Arizona’s border with Mexico.
The website that was set up to receive border fence donations suggests the contributions may be tax-deductible.
Tax preparers told the Arizona Capitol Times they don’t see any reason why the donations wouldn’t be tax-deductible, and pointed to a provision of the Internal Revenue Code to back up the possibility.
Tax rules allow individuals to deduct contributions to charitable groups from their taxable income, and they count donations to a state or its political subdivisions as a charitable contribution.
There’s a qualifier: The contribution or gift must be made exclusively for public purposes.
For example, a donation to a city’s police department for a program to solicit information about crime from residents is tax-deductible. A check made out to Social Security trust funds also qualifies.
Now, it looks like donations to the border fence effort would also qualify as tax-deductible under federal tax rules, said Jack Wood, an enrolled agent based in Prescott. An enrolled agent is someone who is authorized to represent a taxpayer before the U.S. Internal Revenue Service.
“I would think that the border fence probably constitutes an exclusive public purpose,” said Wood, a former president of a statewide group of tax practitioners.
“If that’s a valid legal purpose of the state — which apparently it is since it has been enacted — I would think it would be allowable as a deduction,” he said.
Stefanie Campbell, also an enrolled agent, agreed.
Campbell said donations to the border fence are clearly going to the state of Arizona.
“And if you make a contribution to the state of Arizona, it is deductible,” she said.
Individual circumstances, of course, vary and whether a tax deduction would make a dent in lowering someone’s taxable income depends on many factors, including the size of a contribution.
Others who are familiar with the tax code also make another caveat: a contribution may not satisfy its exclusive public purpose requirement if the contributor received a direct benefit from the donation.
Explaining limitations in general terms, the IRS website says if someone expected to benefit economically or financially from a donation made to a qualifying organization, he or she may only deduct the amount that is more than the value of the benefit.
It’s also unclear if the border fence project is set up to receive non-cash donations like land.
Separate rules apply to property donations.
As a general rule, the amount of deductions for charitable groups is limited to
50 percent of a person’s gross adjusted income.
Whether the possibility of claiming a tax deduction would increase contributions to Arizona’s border fence project remains to be seen.
It fell on Smith, the law’s author, to highlight and at the same time downplay its potential.
The border website mentions the possibility, but Smith said he’s not 100 percent sure about it so he is cautious even as he’s raising the idea.
The website contains a declaration from the state comptroller saying donations to the state may be deductible, but it also advises folks to seek the counsel of tax experts.
Aware of the potential, Smith said he initially thought of setting up a nonprofit group to receive the donations, which would have more clearly allowed the contributions to be tax deductible.
But he dropped idea after it proved to be time-consuming.
“I have always been attracted to the idea of it being tax-deductible. The fact that it looks like it still is, I think, all the better” Smith said.
“(But) just because something is tax-deductible doesn’t mean that people will tax-deduct it,” he said.
So far, most of the donations are small sums of money and Smith said he doesn’t think people would be in a hurry to write them out as a deductible.
The border fence project netted more than $58,000 in donations in its first 24 hours.
The state law that authorizes Arizona to build and maintain a fence on its border with Mexico took effect this week. It also allows Gov. Jan Brewer to reach an agreement with other border states to build the fence.
It’s still a very small sum compared to what is needed to build the kind of fencing immigration hawks are clamoring for — concrete, unbroken if possible, and double-layered.
Critics said it’s a piecemeal approach to a complex problem needing a comprehensive solution. Others scoffed at the idea that enough private donations would be raised to cover what is needed to build a good fence.
But like most efforts by Arizona to confront illegal immigration, the border fence law is significant because of what it highlights — the recurring complaint that the federal government has failed to secure the Southern border.
The law doesn’t specify the type of fencing and it’s not clear exactly where it would be built, though the law says Arizona may do it on private, state or federal property if permitted.