Albany

New York, along with New Jersey and Connecticut, has filed a federal lawsuit against the Trump Administration’s $10,000 limit on income tax deductions for expenses such as property taxes.

It’s the latest move in an ongoing backlash by Gov. Andrew Cuomo and governors of other Northeastern high-tax states against the new limit which was part of President Donald Trump’s 2017 income tax overhaul.

Limiting deductibility of property taxes has been criticized as a de facto tax increase for people who reside in Westchester and Rockland counties and on Long Island where property taxes for schools and municipalities can easily run above $10,000 annually. Previously, a good deal of those taxes would be deductible on federal income tax filings, which lessened their actual impact. Cuomo has described the change as an economic “dagger” aimed at New York and other high-tax Democratic led states by the Republican president and the GOP-led Congress which passed the changes.

To help offset the change's impact, New York set up a complex system in which people could donate to charities set up by local school districts or municipalities or a special state fund. The idea is that these donations, which could augment tax revenues, would be deductible. But the Internal Revenue Service has disallowed much of the deductibility for those donations.

Specifically, the suit, filed in U.S. Eastern District Court in New York City, claims that the tax change “represents a radical break with this historical precedent,” of tax deductibility.

The lawsuit comes a day after Senate Minority Leader Charles Schumer announced that a group of 10 Democratic senators, including his fellow New York senator Kirsten Gillibrand, are trying to overturn the IRS ruling on SALT deductions.

The IRS in June finalized the actual rules stemming from the 2017 tax change.

Salt suit by rkarlin on Scribd

Wednesday’s filing isn’t the first legal challenge to the changes. New York, New Jersey, Connecticut and Maryland in 2018 also went to court, contending the changes pose an unconstitutional infringement of the states’ ability to set their own tax policies.

In this case, they are fighting the limits on deductibility. Under the New York charity plan, people could get credits of up to 95 percent of their donations. But the IRS lowered that to 15 percent.

“The IRS regulations lack any basis in the law, upend decades of precedent without authorization from Congress, and target programs established by New York and other states to incentivize charitable contributions,” Cuomo said in a prepared statement.

“New York already sends $36 billion more to Washington than we get back every year. And thanks to the Republicans' SALT cap, New Yorkers are being used as ATMs, footing an additional $15 billion each year that will be redistributed to red states and corporations.”

rkarlin@timesunion.com • 518-454-5758 • @RickKarlinTU