Four States Sue Federal Government over State and Local Tax Deduction Cap

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Four States Sue Federal Government over State and Local Tax Deduction Cap

Posted by Kim Chen on July 26th, 2018

For tax years 2018–2025, a taxpayer’s itemized deduction for State and Local Taxes (SALT) is limited to $10,000 ($5,000 if married filing separately) per year. Recently, New York, Connecticut, Maryland, and New Jersey filed a complaint with the U.S. District Court for the Southern District of New York seeking declaratory and injunctive relief to invalidate the SALT deduction cap. The complaint argues that the cap violates the U.S. constitution by interfering with the States’ sovereign authority to decide whether and how much to invest in their residents, businesses, and infrastructure. In addition, the complaint claims that the new SALT deduction cap ”deliberately seeks to compel certain States to reduce their public spending.” This lawsuit follows the organization of a multistate coalition by New York, New Jersey, and Connecticut (Maryland joined later) to fight the new SALT deduction cap. State of New York, et al. , Civil Action No. 18-cv-6427 (DC NY 7/17/18).