SALT Cap Rule Oversteps IRS Power, New York, Other States Argue

New York, New Jersey, and Connecticut brought their challenge to a Treasury rule that curbs their workarounds to the $10,000 cap on state and local tax deductions to a federal appeals court nearly six months after most of their claims were tossed.

The lawsuit’s outcome will shape the tax burdens of residents in states with SALT obligations that exceed the federal limit, as well as the revenue the federal government can expect to receive from those taxpayers. The challenged rule limits the amount of federal deductions a taxpayer can earn from donating to state-affiliated charities, limiting the effectiveness of those ...