New York state, together with the states of New Jersey, Connecticut and Maryland, has brought suit in federal district court seeking to invalidate on constitutional grounds the $10,000 cap on state and local tax, or SALT, deductions enacted as part of the Federal Tax Cuts and Jobs Act of 2017.[1] This unusual action is the first direct attempt by states to invalidate the federal SALT deduction limitation. Based on the complaint and the very limited judicial precedent cited, the plaintiff states face considerable hurdles in pursuing this case.

Background -

Effective beginning in 2018, the federal legislation limits to $10,000 for individuals and married couples filing jointly the annual federal itemized deduction for the aggregate of state and local income, property and sales taxes. The legislation substantially increased the standard deduction, in the case of married individuals filing jointly, from $12,700 to $24,000.

Originally published in Law360 on August 20, 2018.