On December 31, 1970, Paul McCartney filed suit against Apple Corps, the Beatles’ partnership, and the rest of the Beatles to release himself from any legal obligations imposed on him as a member of the partnership and band. Inspired by these events, George Harrison released a song called “The Sue Me Sue You Blues” in 1973.
Several states, including New York, and Donald Trump have composed their own version of the “The Sue Me Sue You Blues” in the summer of 2019.
In July, New York, New Jersey, and Connecticut sued the Trump administration in the Southern District of New York. The suit challenges Internal Revenue Service regulations that prohibit certain workarounds to the cap on state and local tax deductions. Then, just days later, President Donald Trump sued New York and Congress over a New York law that allows congressional committees to obtain his state tax returns.
The States’ Lawsuit
A 2017 federal law imposed a $10,000 cap on state and local tax deductions much to the chagrin of taxpayers everywhere, but which governors of high tax states like New York and New Jersey claim disproportionately affects the residents of their states.
New York Gov. Andrew Cuomo, New Jersey Gov. Phil Murphy, both Democrats, have declared that Democratic states have been intentionally targeted by Republicans to pay for other parts of the legislation. Many states have tried to work around the cap and circumvent it.
“It was a complete and utter politicization of the tax code,” Murphy said. “New Jersey is not looking for special treatment for its taxpayers, we are just looking for equal treatment.”
Cuomo has announced a “nationwide campaign” to undo the so-called SALT cap and has traveled to Washington many times to lobby for change.
The lawsuit alleges that the IRS is making a “radical break with historical precedent” and seeks to enjoin the regulations. Further, while the IRS rule is arbitrary and outside of the agency’s statutory authority, the lawsuit argues it is also a violation of the federal Administrative Procedures Act, which governs the process used by federal agencies to develop, promulgate, and issue regulations.
New York, New Jersey, Connecticut, and Maryland first filed a lawsuit in 2018 challenging the cap which the Trump administration has tried to dismiss.
The Trump Lawsuit
Trump filed suit in the U.S. District Court for the District of Columbia alleging that New York’s TRUST Act violates the constitution and Trump’s First Amendment rights.
“The TRUST Act also grew out of a larger campaign in New York to uncover and expose the President’s private financial information in the hopes of damaging him politically,” the lawsuit claimed. “President Trump was thus forced to bring this lawsuit to safeguard his legal rights.”
The lawsuit is yet another ploy by Trump to block the release of his tax returns. On July 8, Cuomo signed a bill that allows three congressional committees request to copies of Trump’s state tax returns.
Because Trump and his business enterprises are based in New York, the state had the authority to enact a law to assist House Democrats seeking his tax returns.
“Tax secrecy is paramount — the exception being for bona fide investigative and law enforcement purposes,” Cuomo, a Democrat, said in a statement when he signed the law.
If you live in the New York or the Tri-State area and have any questions about any tax-related issues, especially those related to SALT deductions, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
