States take feds to court with ‘creative arguments’ over the SALT cap

High-tax states whose residents face the loss of a portion of their state and local income tax deduction due to the $10,000 cap imposed by the Tax Cuts and Jobs Act have reacted by denouncing the legislation, proposing ways to circumvent it, and now, bringing suit against the federal government.

The states of New York, Connecticut, Maryland, and New Jersey filed suit in the District Court for the Southern District of New York seeking declaratory and injunctive relief to invalidate the cap, noting that, “Congress has included a deduction for all or a significant portion of state and local taxes in every tax statute since the enactment of the first federal income tax in 1861.” The lawsuit names as defendants Stephen Mnuchin and David Kautter in their official capacities as secretary of the Treasury and acting commissioner of the Internal Revenue Service, and the United States of America.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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