On Monday, New Jersey joined New York, Connecticut, and Maryland in bringing a lawsuit against the federal government seeking to invalidate the new $10,000 cap on the federal tax deduction for state and local taxes (SALT). As we have previously reported, the $10,000 cap on SALT deductions is expected to have a negative effect on local governments across the country, hitting New Jersey and states with similar property tax structures particularly hard.
The suit argues that the newly enacted cap “interferes with the States’ sovereign authority to make their own choices about whether and how much to invest in their own residents, businesses, infrastructure, and more…” which the States claim is a right protected under the U.S. Constitution. The States also highlight in their filings overt comments made by federal officials, which acknowledge that the changes to the tax law were made in order to influence certain states’ taxing policies.
This lawsuit is just one approach the State is taking in an effort to help mitigate and possibly avoid all together the negative impacts of the SALT deduction cap. Earlier this year, the state enacted legislation which would allow property owners to receive a credit against their property taxes for a portion of charitable contributions made to their municipal government.
The League will keep you updated on this case as it progresses through the court system.
Contact: Frank Marshall, Esq., League Staff Attorney, FMarshall@njslom.org, 609-695-3481, ext. 137.