SOUTH ORANGE, NJ – State officials filed a federal lawsuit against the IRS and the U.S. Treasury Department seeking to repeal a new tax law that would stop state residents from obtaining full charitable deductions when they get tax credits for donating to local governmental entities.
New York and Connecticut also joined the lawsuit, which New Jersey Gov. Phil Murphy and Attorney General Gurbir Grewal announced during a press conference on Wednesday at the South Orange Fire Department. The lawsuit was filed in in the Southern District of New York on Wednesday.
The governor's office said the $10,000 state and local taxes (SALT) cap, which the federal government started in 2017, will harm taxpayers in New Jersey, New York and Connecticut.
"This is not a fight we asked for, but it is one we are proud to wage - on behalf of our taxpayers and the countless others in our fellow states who are realizing now that they are financial collateral damage to the Trump Administration's rank politicization of the tax code," said Murphy in a press release.
"We are committed to fighting Washington to end this unfair and unconstitutional tax on New Jersey' taxpayers," Murphy said.
Local leaders have also joined in the fight to repeal the new tax law.
"We fully support this lawsuit," said South Orange Village President Sheena Collum. "Any steps the administration takes to restore the SALT deduction, we fully support.
South Orange officials have reached out to the New Jersey Legislature and its congressional representatives about the issue.
The lawsuit challenges an IRS rule that undermines state and local programs that promote charitable giving through state and local tax credits. Many states have developed programs that offer tax credits to taxpayers that donate to qualifying institutions.
More than 100 of these state and local programs exist in 33 states, according to the lawsuit. Under these programs, individuals may donate to causes including aid for higher education to domestic violence shelters.
"Our residents already pay more to the federal government than we get in return," said Grewal. "That is why I remain committed to standing up for New Jersey taxpayers in the face of this onslaught coming out of Washington."