U.S. Supreme Court Will Not Hear Arguments on SALT Cap Deduction


On Monday, April 18, 2022, the U.S. Supreme Court decided against hearing a case brought by New York, Connecticut, Maryland, and New Jersey that challenged the state and local tax (SALT) cap on federal deductions. The SALT cap was a major component of the Tax Cuts and Jobs Act of 2017. The SALT cap limited the state and local tax deduction on federal taxes to $10,000. The impact has been substantial in many high tax states that impose state and local taxes on income and real property (e.g. California, New York, etc.). The court ultimately refused to reconsider the state's argument on the constitutionality of the SALT cap limit. A lower court ruled in October that the SALT cap limit was within Congress’s authority and that it is not uncommon for the impact of federal laws to vary from state to state and location to location.

The court’s decision is certainly a setback for Democratic states with high state and local taxes. Gov. Kathy Hochul of New York called on Democrats to address the SALT cap, but the issue is highly politicized with many legislators arguing the cap is largely beneficial to wealthy taxpayers. The SALT cap issue has led many states to create workarounds allowing pass-through entities to take an unlimited SALT deduction at the entity level. This workaround is expected to continue given the court’s decision on Monday.

If you have questions on the court’s decision or other SALT matters, please contact HBK’s SALT Advisory Group at hbksalt@hbkcpa.com.

About the Author(s)
Matt Dodge is a member of the HBK State and Local Tax (SALT) practice with a focus on sales/use tax. Matt has vast experience in the construction, oil & gas, manufacturing, retail, service provider and transportation industries. He can be reached at 724-934-5300, or by email at mdodge@hbkcpa.com.
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.