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

August 7, 2018

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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.

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