Senate Democrats are attempting to nullify the recently finalized Treasury and IRS rules prohibiting state workarounds to the new federal $10,000 limit on state and local tax (SALT) deductions.
Senate Minority Leader Chuck Schumer, D-N.Y., led the introduction on July 16 of S.J. Res. 50 under the Congressional Review Act to “restore states’ ability to work around the harmful caps, and allow homeowners to again fully retain their SALT deduction.”
Shortly after the SALT deduction cap was enacted under the sweeping 2017 tax law, New York and New Jersey passed laws allowing taxpayers to recharacterize most state and local taxes as a charitable contribution to a specific fund that would then qualify for a federal tax deduction and state tax credit.
The senators note that while the Treasury Department blocked states’ workarounds for individuals, Treasury in September 2018 issued guidance that allowed businesses to continue to benefit from these same workarounds.
Schumer said Thursday in a media conference that Senate Democrats would attempt to overturn the rule through the Congressional Review Act, which gives Congress 60 legislative days for both chambers to repeal the rule. The IRS issued the final rules in mid-June. They will be effective Aug. 12.