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5 Oct 2019

SALT Deduction Cap Lives On Federal court dismisses states’ challenge. by Susan R. Lipp

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Post by MoneyRadio Staff

On Sept. 30, a federal district court dismissed a challenge by four states (New York, Connecticut, Maryland and Jersey) to the $10,000 cap on the federal state and local tax (SALT) deduction that was created by the Tax Cuts and Jobs Act. (New York et. al. v. Mnuchin, No.  18-CV-6427). The states alleged that the SALT cap “violates the federalism principles that undergird the U.S. Constitution.” They pointed out that the cap will result in a significant increase to federal tax bills of residents in their states and that it disproportionately affects the residents of high-tax states whose state and local taxes exceed the $10,000 cap. And, they alleged that Republican legislators and the Republican president intended this differential result to force states to provide a disincentive for these states to impose high tax rates.

Court Rejects Argument

Although it recognized that the states had standing to bring the lawsuit, the court ruled that the states didn’t prove that the SALT cap exceeds the broad tax power of Congress. The court also rejected the states’ argument that the SALT cap was designed to force targeted states to bring their tax policies in line with the preferences of the federal government.  It noted that Congress has the power to impose federal taxes without a limitless SALT deduction, and courts typically won’t look into “hidden motives” of Congress when exercising this power.

According to James Dougherty, a partner at Withers Worldwide, “This ruling was to be expected. While practitioners and states continue to find ways to minimize the impact of certain provisions of the 2017 reform, such as the SALT deduction limitation, a constitutional solution never appeared to be a viable solution. The SALT deduction was never entirely unfettered given that it was effectively limited by the alternative minimum tax, so the argument that it was unconstitutional to further limit the deduction was not persuasive.”

 

Appeal Being Considered

According to an article in the New York Times, New York Governor Andrew Cuomo is considering an appeal.

This article is suggested reading by Secured Financial Services, LLC and President and Chief Executive Officer of Secured Financial Solutions, LLC, Anil Vazirani. Please visit https://secured-financial-solutions.com/

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One of the benefits you can count on when working with one of our financial advisors is an outstanding personal relationship with an advisor. As a client, you will deal directly with a financial advisor who will take the time to understand your situation, objectives, estate planning, and retirement planning needs as well as your risk tolerance. We work directly with other advisors as well as CPAs, attorneys and trustees, to ensure that the investments we make will align with your estate plans, and that you are not faced with heavy tax burdens.

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This article is suggested reading by Secured Financial Services, LLC and President and Chief Executive Officer of Secured Financial Solutions, LLC, Anil Vazirani. Please visit https://secured-financial-solutions.com/

Retire and Stay Retired Safe! Smart! Secure!

Based in Scottsdale, Arizona, Secured Financial Solutions is one of the leading financial service firms in Arizona, catering to the financial planning needs of retirees and pre-retirees.

One of the benefits you can count on when working with one of our financial advisors is an outstanding personal relationship with an advisor. As a client, you will deal directly with a financial advisor who will take the time to understand your situation, objectives, estate planning, and retirement planning needs as well as your risk tolerance. We work directly with other advisors as well as CPAs, attorneys and trustees, to ensure that the investments we make will align with your estate plans and that you are not faced with heavy tax burdens.

You can expect Secured Financial Solutions to develop comprehensive solutions to your complex wealth management and estate planning needs. Our one-on-one approach helps you achieve your financial planning goals, including maximizing your estate, retirement planning, minimizing your tax obligation, and continuing your family legacy. Our investment advisors will work with your CPA, attorneys, and other trusted professionals to help you make intelligent choices that align with your financial and personal goals.