Second Circuit – SALT deduction: New York v. Yellen

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United States Court of Appeals for the Second Circuit

SALT deduction

Constitutionality

New York v. Yellen

19-3962-cv

Judges Sack, Chin, and Lohier

Background: The plaintiffs appealed from the grant of the defendants’ motions dismiss for failing to state a claim and denying the plaintiff’s motion for summary judgment. The state alleged that the $10,000 cap on the federal income tax deduction for money paid in state and local taxes, enacted as part of the 2017 Tax Cuts and Jobs Act violated the United States Constitution. The states argue that the state and local tax deduction is constitutionally mandated or that the cap violates the Tenth Amendment because it coerces them to abandon their preferred fiscal policies.

Ruling: The Second Circuit affirmed. The court held that Anti-Injunction Act did not bar review of the plaintiffs’ claims. Furthermore, the Second Circuit further held that Congress’s broad power to tax is limited only by restrictions expressed in or arising from the Constitution and the history of the SALT deduction does not support the argument that the SALT deduction is mandated by the Constitution.

Caroline A. Olsen, Mark F. Kohler, Steven M. Sullivan, and Jeremy Feigenbaum for the plaintiffs New York, Connecticut, Maryland, and New Jersey; Jean-David Barnea, of the assistant United States attorney, for the defendants-appellees.