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Treasury Defends Power to Curb States’ SALT Cap Workarounds

June 11, 2020, 10:25 PM

The Treasury Department told a federal district court that it had the authority to issue regulations aimed at stamping out state workarounds to the $10,000 deduction cap for state and local tax payments.

New York, New Jersey, and Connecticut are challenging 2019 Treasury regulations (T.D. 9864) that restricted efforts to help residents get around the SALT deduction cap, which Congress imposed in the 2017 tax law. The state workarounds involved tax credits that would offset a large portion of donations to state and local charitable funds, and that would then also qualify for federal charitable deductions.

The ...