State Of New York et al v. Mnuchin et al

Filing 53

REPLY MEMORANDUM OF LAW in Support re: 42 MOTION to Dismiss . MOTION to Dismiss for Lack of Jurisdiction ., 44 CROSS MOTION for Summary Judgment . and Opposition to Cross-Motion for SJ. Document filed by David J Kautter, Steven T. Mnuchin, United States Department of Treasury, United States Internal Revenue Service, United States Of America. (Barnea, Jean-David)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
STATE OF NEW YORK, STATE OF
CONNECTICUT, STATE OF MARYLAND, and
STATE OF NEW JERSEY,
Plaintiffs,
v.
18 Civ. 6427 (JPO)
STEVEN T. MNUCHIN, in his official capacity as
Secretary of the United States Department of
Treasury; the UNITED STATES DEPARTMENT OF
TREASURY; CHARLES P. RETTIG, in his official
capacity as Commissioner of the United States
Internal Revenue Service; the UNITED STATES
INTERNAL REVENUE SERVICE; and the UNITED
STATES OF AMERICA,
Defendants.

REPLY MEMORANDUM OF LAW IN FURTHER
SUPPORT OF THE GOVERNMENT’S MOTION TO
DISMISS AND IN OPPOSITION TO THE STATES’ CROSSMOTION FOR SUMMARY JUDGMENT

RICHARD E. ZUCKERMAN
Principal Deputy Assistant Attorney General
U.S. Department of Justice, Tax Division

GEOFFREY S. BERMAN
United States Attorney for the
Southern District of New York

EDWARD J. MURPHY
JORDAN A. KONIG
Trial Attorneys
P.O. Box 55, Ben Franklin Station
Washington, D.C. 20044
Tel.: [phone]-7917
Fax: [phone]
Email: [e-mail]
[e-mail]

JEAN-DAVID BARNEA
REBECCA S. TINIO
Assistant United States Attorneys
86 Chambers Street, 3rd Floor
New York, New York 10007
Tel.: [phone]
Fax: [phone]
E-mail: [e-mail]
[e-mail]

TABLE OF CONTENTS
PRELIMINARY STATEMENT .....................................................................................................1
ARGUMENT ...................................................................................................................................1
I. The States’ Complaint Should Be Dismissed Under Rule 12(b)(1) ....................................1
A. The States Lack Standing to Bring This Suit .................................................................2
B. The Anti-Injunction Act Bars the States’ Suit ...............................................................7
C. The States’ Complaint is Non-Justiciable ......................................................................8
II. The States’ Complaint Fails to State a Claim, and the States Are Not Entitled to
Summary Judgment ...........................................................................................................10
A. Federalism Principles Do Not Require an Unlimited SALT Deduction .....................10
B. The SALT Deduction Cap Does Not Impermissibly Coerce the States into
Altering Their Fiscal Policies ......................................................................................15
C. The SALT Deduction Cap Does Not Violate the States’ Equal Sovereignty ..............19
CONCLUSION ..............................................................................................................................22

TABLE OF AUTHORITIES
CASES

PAGE

Alfred L. Snapp & Son, Inc. v. Puerto Rico,
458 U.S. 592 (1982) .....................................................................................................................4
Burnet v. Coronado Oil,
285 U.S. 393 (1932) ...................................................................................................................13
Clapper v. Amnesty Int’l USA,
568 U.S. 398 (2013) .................................................................................................................2, 3
Collector v. Day,
78 U.S. 113 (1871) .....................................................................................................................13
Confederated Tribes & Bands of Yakama Indian Nation v. Alcohol & Tobacco Tax & Trade
Bureau, 843 F.3d 810 (9th Cir. 2016)......................................................................................7, 8
Dep’t of Nat. Res. & Envtl. Control v. FERC,
558 F.3d 575 (D.C. Cir. 2009) .....................................................................................................2
Dist. of Columbia v. Trump,
291 F. Supp. 3d 725 (D. Md. 2018) .............................................................................................6
Fernandez v. Wiener,
326 U.S. 340 (1945) ...................................................................................................................19
Florida v. Mellon,
273 U.S. 12 (1927) .....................................................................................................5, 11, 18, 19
Georgia v. Pennsylvania R.R. Co.,
324 U.S. 439 (1945) .....................................................................................................................6
Gilligan v. Morgan,
413 U.S. 1 (1973) .............................................................................................................9, 11, 16
Hawai’i v. Trump,
241 F. Supp. 3d 1119 (D. Haw. 2017) .....................................................................................2, 3
Indian Motocycle Co. v. United States,
283 U.S. 570 (1931) ...................................................................................................................13
J.W. Hampton, Jr., & Co. v. United States,
276 U.S. 394 (1928) ...................................................................................................................19
Johnson v. S. Pac. Co.,
196 U.S. 1 (1904) .......................................................................................................................21

ii

Judicial Watch, Inc. v. Rossotti,
317 F.3d 401 (4th Cir. 2003) .......................................................................................................7
Lujan v. Defenders of Wildlife,
504 U.S. 555 (1992) .....................................................................................................................2
Massachusetts v. EPA,
549 U.S. 497 (2007) .....................................................................................................................2
Murphy v. Nat’l Collegiate Athletic Ass’n,
138 S. Ct. 1461 (2018) ...............................................................................................................18
National Federation of Independent Business v. Sebelius,
567 U.S. 519 (2012) ........................................................................................................... passim
New Mexico v. Department of Interior,
854 F.3d 1207 (10th Cir. 2017) ...............................................................................................3, 4
Pollock v. Farmers’ Loan & Trust Co.,
157 U.S. 429 (1895) ...................................................................................................................13
RYO Machine, LLC v. Dep’t of Treasury,
696 F.3d 467 (6th Cir. 2012) ...................................................................................................7, 8
Shelby County v. Holder,
570 U.S. 529 (2013) ...............................................................................................................9, 21
Sonzinsky v. United States,
300 U.S. 506 (1937) ...................................................................................................................19
South Carolina v. Baker,
485 U.S. 505 (1988) ........................................................................................................... passim
South Carolina v. Regan,
465 U.S. 367 (1984) .....................................................................................................................7
Texas v. United States,
300 F. Supp. 3d 810 (N.D. Tex. 2018) ....................................................................................7, 8
Texas v. United States,
787 F.3d 733 (5th Cir. 2015) .......................................................................................................4
Texas v. United States,
809 F.3d 134 (5th Cir. 2015) .......................................................................................................4
Thomas v. Union Carbide Agr. Prods. Co.,
473 U.S. 568 (1985) .................................................................................................................3, 4
iii

United States v. Reitano,
862 F.2d 982 (2d Cir. 1988) ......................................................................................................21
Vullo v. Office of Comptroller of the Currency,
No. 17 Civ. 3574 (NRB), 2017 WL 6512245 (S.D.N.Y. Dec. 12, 2017) ....................................2
Wyoming v. Dep’t of Interior,
674 F.3d 1220 (10th Cir. 2012) ...............................................................................................5, 6
Wyoming v. Oklahoma,
502 U.S. 437 (1992) .................................................................................................................5, 6
CONSTITUTIONAL PROVISIONS, STATUTES, AND RULES
U.S. Const. art. I, § 8..................................................................................................................... 11
U.S. Const. amend. XVI ................................................................................................................11
2 U.S.C. § 644(b)(1)(E) ................................................................................................................ 16
Federal Rule of Civil Procedure 12(b)(1) ........................................................................................1
Federal Rule of Civil Procedure 12(b)(6) ......................................................................................10
Federal Rule of Civil Procedure 56 ...............................................................................................10
LEGISLATIVE MATERIALS
45 Cong. Rec. 1694-96 (Feb. 10, 1910) .........................................................................................14
Engrossed Amend. to H.R. 1, 115th Cong. (Dec. 20, 2017)..........................................................20
H. Con. Res. 71, 115th Cong. (2017).............................................................................................16
H.R. 1, 115th Cong. (Nov. 2, 2017)...............................................................................................20
Joint Comm. on Taxation, Estimated Budget Effects of the Conference Agreement for H.R. 1,
the “Tax Cuts and Jobs Act”, at 2 (Dec. 18, 2017), https://www.jct.gov/publications.html?
func=startdown&id=5053 ..........................................................................................................16
Sen. Amend. to H.R. 1, 115th Cong. (Nov. 16, 2017) ...................................................................20
SECONDARY SOURCES
Hughes Is Against Income Amendment, N.Y. Times, Jan. 6, 1910, at 2........................................14
Inst. on Taxation and Econ. Policy, The Final Trump-GOP Tax Bill: National & 50-State
Analysis (Dec. 2017), https://itep.org/wp-content/uploads/Trump-GOP-Final-BillReport.pdf .......................................................................................................................16, 17, 19
iv

Frank Sammartino, Tax Policy Center, How Would Repeal of the State and Local Tax
Deduction Affect Taxpayers Who Pay the AMT? (June 15, 2017), https://www.taxpolicy
center.org/sites/default/files/publication/142256/2001309-how-would-repeal-of-the-stateand-local-tax-deduction-affect-taxpayers-who-pay-the-amt.pdf ................................................13
Jared Walczak, Tax Foundation, How the State and Local Tax Deduction Interacts with the
AMT and Pease Limitation (Nov. 6, 2017), https://taxfoundation.org/state-and-local-taxdeduction-amt-pease/ .................................................................................................................13

v

PRELIMINARY STATEMENT
Defendants Steven T. Mnuchin, in his official capacity as the Secretary of the Treasury;
the United States Department of the Treasury; Charles P. Rettig, in his official capacity as
Commissioner of Internal Revenue; the Internal Revenue Service; and the United States of
America, by their attorney, Geoffrey S. Berman, United States Attorney for the Southern District
of New York (together, the “Government”), respectfully submit this reply memorandum of law
in further support of their motion to dismiss the complaint filed by the States of New York,
Connecticut, Maryland, and New Jersey, ECF No. 43 (“U.S. Br.”), and in opposition to the
States’ cross-motion for summary judgment, ECF No. 45 (“States Br.”). 1 For the reasons
explained herein and in the Government’s opening brief, the States’ complaint should be
dismissed and their motion for summary judgment should be denied.
ARGUMENT 2
The States’ Complaint Should Be Dismissed Under Rule 12(b)(1)
As explained in the Government’s opening brief, the States’ complaint should be
dismissed under Federal Rule of Civil Procedure 12(b)(1), because the States lack standing, the

1

This brief uses abbreviations and capitalized terms defined in the Government’s
opening brief. It cites the States’ Local Rule 56.1 Statement, ECF No. 46, as “States 56.1,” and
documents attached to the Declaration of Owen T. Conroy, ECF No. 47, as “Conroy Decl. Ex.
[number].” The documents cited in the Government’s opening brief and herein are reproduced
in the Conroy Declaration and/or available at the cited websites. The Government will provide
copies to the Court upon request.
2

The Government does not concede the accuracy or materiality of the statements set
forth in the States’ brief as “undisputed facts,” see States Br. at 2-4, as explained in more detail
in the Government’s accompanying response to the States’ Local Civil Rule 56.1 statement.
Many of the statements that the States present therein are not material to the relevant
constitutional analysis or are unsupported by admissible evidence, among other issues.

Anti-Injunction Act bars their claims, and their complaint is non-justiciable. See U.S. Br. at 818. The States’ opposition does not overcome these deficiencies.
A.

The States Lack Standing to Bring This Suit

First, as explained previously, see U.S. Br. at 9-14, the States lack standing to challenge
the SALT deduction cap in the 2017 Tax Act because they fail to allege a sufficiently concrete,
particularized, and imminent injury flowing from the cap’s enactment. See Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-61 (1992). The States reference the “special solicitude” the Supreme
Court afforded the state in Massachusetts v. EPA, 549 U.S. 497 (2007), 3 see States Br. at 6, but
any such solicitude “does not relieve a State plaintiff from its obligation to establish a concrete
injury,” Vullo v. Office of Comptroller of the Currency, No. 17 Civ. 3574 (NRB), 2017 WL
6512245, at *7 (S.D.N.Y. Dec. 12, 2017) (citing Del. Dep’t of Nat. Res. & Envtl. Control v.
FERC, 558 F.3d 575, 579 n.6 (D.C. Cir. 2009)). Indeed, the standing inquiry is “especially
rigorous when reaching the merits of the dispute would force [a court] to decide whether an
action taken by one of the other two branches of the Federal Government was unconstitutional.”
Clapper v. Amnesty Int’l USA, 568 U.S. 398, 408 (2013) (quotation marks and citation omitted).
The States claim that they have “three independent categories of sovereign or quasisovereign interests that suffer concrete harm and thus establish standing” in this case. 4 States Br.

3

The facts of Massachusetts v. EPA are far afield from this case. In Massachusetts, the
Court relied in its standing analysis on: (1) the fact that Congress had accorded a specific
procedural right to protect the state’s interest by challenging the agency action at issue, and (2)
Massachusetts’s direct and concrete interest in protecting its territory from harmful emissions.
549 U.S. at 518-20. There is no similar procedural right here, nor any nearly comparable asserted
sovereign or quasi-sovereign injury. As discussed below, the States’ own description of their
purported injury shows that it is highly attenuated, indirect, and speculative. See infra footnote
5.
4

The States do not assert proprietary standing, which has been the primary basis of state
standing in a number of recent cases, see, e.g., Hawai’i v. Trump, 241 F. Supp. 3d 1119, 1129

2

at 6. In fact, none of their asserted harms establishes an injury sufficient for standing. First, the
States claim that “[t]he new [SALT] cap puts pressure” on them by requiring them to make a
“forced choice” “between their current level of public investments and higher tax rates.” Id. 5
But this supposed “choice”—in reality, a policy question about how to set state-level priorities in
light of federal ones—bears no resemblance to the cases the States cite, in which courts found
that state plaintiffs were legally harmed by having to elect between two impermissible options.
For example, in New Mexico v. Department of Interior, 854 F.3d 1207, 1218 (10th Cir. 2017),
cited in States Br. at 6 n.4, a state challenged the legitimacy of a federal regulatory process, and
the court held that the state had standing because it would have to “choose between participating
in a process it considers unlawful and forgoing any benefit from that allegedly unlawful
process.” See also Thomas v. Union Carbide Agr. Prods. Co., 473 U.S. 568, 582 (1985)
(recognizing “the injury of being forced to choose between” participating in an unlawful agency
adjudication or forfeiting the right to participate). The States are not being forced into any

(D. Haw. 2017), and claim to disavow parens patriae standing, in which a state litigates the
personal claims of its citizens, see States Br. at 7 n.6 (disavowing parens patriae standing),
which, in any event, is generally prohibited when states sue the federal government. See U.S. Br.
at 10-11. They do, however, conflate their own sovereign interests with the personal interests of
their residents throughout their brief, an elision the Court should reject. See, e.g., id. at 22-23
(estimating the cost of the SALT deduction cap to the States’ taxpayer residents in discussing the
alleged harms that the Plaintiff States will face due to the cap).
5

The “forced choice” injury asserted by the States is speculative, indirect, and highly
attenuated. According to the States, the SALT deduction cap will make it more expensive for
their residents to own homes, which “could” reduce homeowners’ equity in their homes and their
payment of real estate transfer taxes to the States upon sale. States Br. at 23. Such losses, in
turn, “could” result in lost jobs, reducing the States’ income- and sales-tax collections. Id. By
reducing this tax revenue “and making state taxes more expensive,” the SALT deduction cap
supposedly would then “make it more difficult for the Plaintiff States to raise their own tax
revenue.” Id. at 24. This, finally, will purportedly impede their “ability to make public
investments and maintain current levels of public services.” Id. Despite the States’
characterization of this five-step chain as “direct,” id., these alleged injuries cannot be fairly
characterized as “certainly impending.” Clapper, 568 U.S. at 401.
3

comparable choice here. They need not participate in any federal process, and they may choose
to adjust their fiscal policies in any number of ways in light of the 2017 Tax Act, or not at all.
Moreover, the States do not explain the difference between this supposed injury and any
other scenario in which a state contemplates taking some action in response to a change in
federal law that affects its citizens. Without a “forced choice” injury to the States of the type
recognized in New Mexico v. Department of Interior or Thomas v. Union Carbide, they may not
simply manufacture one to evade the general prohibition against parens patriae suits by states
against the federal government. See supra footnote 4; see also Alfred L. Snapp & Son, Inc. v.
Puerto Rico, 458 U.S. 592, 610 n.16 (1982).
The States also rely on a single sentence in Texas v. United States, 787 F.3d 733 (5th Cir.
2015), discussing whether the state plaintiffs had standing to challenge a program offering
certain immigrants temporary relief from deportation. Id. at 748, cited in States Br. at 6. The
program required states to issue driver’s licenses to the program’s beneficiaries at the states’
expense and in violation of state law. Id. While the states could choose to defray this cost by
raising their license application fees, the Fifth Circuit noted that “being pressured to change state
law” to recoup these costs “constitutes an injury.” Id. at 749. The court’s analysis did not rest
primarily on such “pressure,” however, but on the actual financial cost of issuing the licenses.
Id. at 748. More importantly, the Fifth Circuit’s subsequent opinion in the same case “stress[ed]
that [its] decision is limited to these facts”; “the direct, substantial pressure directed at the states
and the fact that they have surrendered some of their control over immigration to the federal
government mean this case is sufficiently similar to Massachusetts v. EPA” to support standing,
“but pressure to change state law may not be enough—by itself—in other situations.” Texas v.
United States, 809 F.3d 134, 154-55 (5th Cir. 2015).

4

There is no similar direct, proprietary financial injury to (or pressure on) the States here,
nor any comparable surrender of control in a particular area of law. Rather, the alleged indirect
“pressure” in this case is similar to the pressure that the Supreme Court rejected as a basis for
state standing in Florida v. Mellon, 273 U.S. 12 (1927), in which the Court held that a change to
federal tax law, which the state plaintiff characterized as “a direct effort on the part of Congress
to coerce” it into changing its own tax laws, did not present a “tenable” ground “to invoke the
jurisdiction” of the Court. Id. at 16; see U.S. Br. at 12.
The States have no answer to Florida v. Mellon other than to dismiss it as “old,” and
claim that its holding has been limited by National Federation of Independent Business v.
Sebelius, 567 U.S. 519, 585 (2012) (“NFIB”), and other anti-commandeering cases. States Br. at
7-8. But NFIB (which did not address standing at all, see NFIB, 567 U.S. at 588) involved the
federal government’s imposition of a direct financial penalty on states for failing to participate in
a federal program. Here, there are no conditions or penalties imposed on the States. Compare
id. at 575-88. Nevertheless, the States invite the Court to expand and misapply NFIB to hold that
the alleged indirect effect of a nationally applicable cap on SALT deductions somehow creates
standing. The Court should reject this invitation. The States simply do not face the type of
“forced choice” that courts have found to constitute a sovereign injury.
The States’ second asserted injury is their supposed loss of “substantial tax revenue” as a
result of the SALT cap. States Br. at 8-9. This purported harm also bears no resemblance to the
cases on which the States rely. The States fail to identify any “loss of specific tax revenues”
comparable to the precisely enumerated lost severance taxes at issue in Wyoming v. Oklahoma,
502 U.S. 437, 445, 448 (1992), cited in States Br. at 8 nn.7, 9. The States vaguely claim they
will lose “specific streams of tax revenue in the form of lost sales taxes, real estate transfer taxes,

5

and certain property taxes,” States Br. at 9 (emphasis added), but this is insufficiently particular.
See Wyoming v. Dep’t of Interior, 674 F.3d 1220, 1234 (10th Cir. 2012) (rejecting state’s claim
that it had standing because “a specific source of revenue, sales tax, is reduced” by challenged
regulations) (emphasis added). Courts have recognized standing in this type of circumstance
only where there is “a direct injury in the form of a loss of specific tax revenues.” Id. (emphasis
in the original); see also, e.g., Dist. of Columbia v. Trump, 291 F. Supp. 3d 725, 739-40 (D. Md.
2018) (“[a] decline in general tax revenues is not enough” to show a direct injury for standing
purposes). The States identify no such loss of specific tax revenue here. Moreover, the injury in
Wyoming v. Oklahoma (the loss of tax revenue from sales of Wyoming coal due to an Oklahoma
law decreasing that state’s purchase of Wyoming coal) was far more direct than the indirect,
attenuated injury that the States claim in this case, see supra footnote 5. The States’ failure to
identify a direct injury to specific tax revenues in this case raises the question of whether, under
their theory, they would have standing to challenge any federal tax increase that generally
reduced their citizens’ spending power and, conceivably, their own tax revenues.
The States’ third and final asserted injury is premised on their argument that “Congress
expressly targeted” them “for unequal treatment” in enacting the SALT cap. States Br. at 9.
This is indistinguishable from their “equal sovereignty” argument, which is addressed below, see
infra Part II.C. The SALT deduction cap does not treat any states unequally. Id. Indeed, it does
not regulate states at all. Instead, it applies to all similarly situated American taxpayers. The
States’ cited case is inapposite, as it concerned parens patriae and proprietary (rather than
sovereign) standing. See Ga. v. Pa. R.R. Co., 324 U.S. 439, 445 (1945). In addition, because the
Georgia case involved antitrust claims by a state against private companies, it explicitly

6

“involved no question of distribution of powers between the State and the national government,”
distinguishing it from, for example, Florida v. Mellon. Id.
Thus, none of the States’ asserted injuries is sufficient to establish their standing to
challenge the SALT deduction cap.
B.

The Anti-Injunction Act Bars the States’ Suit

The States’ next argument, that the AIA does not bar their complaint, rests entirely on a
narrow exception to the statute recognized by the Supreme Court in South Carolina v. Regan,
465 U.S. 367 (1984). See States Br. at 10-12. 6 In Regan, the Court permitted South Carolina to
challenge a federal tax law that limited the exemption for interest on state-issued bonds to
exclude unregistered bearer bonds, because there was no reason why any individual taxpayer
would have the incentive to challenge the law. See 465 U.S. at 380. As this could have meant
that the challenged law would never be reviewed, the Supreme Court recognized a narrow
exception to the AIA. See id. at 380-81. Subsequent decisions in the courts of appeals have
confirmed that this exception is indeed narrow. See Confederated Tribes & Bands of Yakama
Indian Nation v. Alcohol & Tobacco Tax & Trade Bureau, 843 F.3d 810, 815 (9th Cir. 2016);
RYO Machine, LLC v. Dep’t of Treasury, 696 F.3d 467, 472 (6th Cir. 2012); Judicial Watch, Inc.
v. Rossotti, 317 F.3d 401, 408 n.3 (4th Cir. 2003).
The Regan holding does not apply in a case like this, where there is no mismatch between
the party most affected by the law and the party with an incentive or ability to sue to challenge it.
6

The States also suggest, incorrectly, that the AIA does not apply to states, see States Br.
at 10 n.12, though the statute clearly does apply to states, see U.S. Br. at 14-15 (citing Texas v.
United States, 300 F. Supp. 3d 810, 835 (N.D. Tex. 2018), and Regan, 465 U.S. at 373-81); see
also Confederated Tribes & Bands of Yakama Indian Nation v. Alcohol & Tobacco Tax & Trade
Bureau, 843 F.3d 810, 813 (9th Cir. 2016) (concluding that Indian tribes are “persons” for
purposes of the AIA largely on the basis that “it is consistent with courts’ treatment of other
sovereign entities,” including states, “as ‘persons’ for various provisions of the Internal Revenue
Code”).
7

The States allege that some taxpayers’ federal tax liability will increase as a result of the 2017
Tax Act, see, e.g., Compl. ¶¶ 90, but do not explain why such taxpayers are statutorily limited or
otherwise disincentivized from challenging the Act. Without such a showing, the States cannot
overcome the AIA. This case is thus like Yakama Indian Nation, 843 F.3d at 815, in which the
Ninth Circuit concluded that the Regan exception to the AIA did not permit an Indian tribe to
challenge a tobacco excise tax, as the affected taxpayers and tobacco companies had sufficient
incentives to sue on their own account. See also RYO Machine, 696 F.3d at 472 (finding a
“contrast” with Regan where there was “much more than a mere possibility” of taxpayer refund
suits challenging the provision at issue); cf. Texas v. United States, 300 F. Supp. 3d 810, 836
(N.D. Tex. 2018) (concluding Regan exception applied where federal statute afforded only
private party experiencing no economic harm the right to challenge regulation at issue, which
imposed direct costs on the state). Here, taxpayers have a sufficient economic incentive to
challenge the new cap on the SALT deduction, should they choose to do so, and the AIA bars the
States’ suit.
C.

The States’ Complaint is Non-Justiciable

Finally, the States fail to show that their disagreement with Congress’s tax policy choices
is justiciable under any cognizable legal standard. See U.S. Br. at 17-18. The States attempt to
redefine the scope and import of the relief they seek, claiming that the Court need not fashion a
generally applicable test for assessing any imaginable SALT deduction limit in order to
determine that this particular limit is unconstitutional. States Br. at 14. But this argument still
raises the question of what type of analysis the Court should undertake to assess whether the
current cap is constitutionally infirm. Because the States do not argue that all limitations on the

8

SALT deduction are necessarily unconstitutional, their position requires some legal test or
standard to determine whether this particular limitation is improper.
If the States’ quarrel is with the cap’s dollar value, they must articulate a constitutionally
based rule and explain why the Court should conclude that a $10,000 limit—but presumably not
all possible limits—runs afoul of it. If the States fault the “direct” nature of the limitation, they
must persuade the Court of the constitutional significance of dollar limitations on the deduction
as opposed to other types of limits, such as those based on taxpayers’ overall income or other
deductions taken (e.g., the alternative minimum tax (“AMT”) or the Pease limitation), even when
their effect is functionally similar and they have previously survived constitutional scrutiny. See
U.S. Br. at 27. But the States have offered no neutral standards or criteria for the Court to apply,
nor have they identified any constitutional provisions or doctrines that set forth such standards or
criteria.
The States’ identification of what they claim are “similar” cases in which courts have
decided constitutional questions only demonstrates why this case is non-justiciable. See States
Br. at 13. Each of the cited cases concerned a much starker question of whether a certain
governmental act was constitutional: South Carolina v. Baker, 485 U.S. 505, 507-08 (1988),
concerned whether Congress could tax interest income from state bonds; NFIB, 567 U.S. at 57588, whether Congress could exercise its conditional spending power to make states’ receipt of all
federal Medicaid funds contingent on their participation in the expanded program; and Shelby
County v. Holder, 570 U.S. 529, 534-36 (2013), whether the Government could continue to
enforce provisions of the Voting Rights Act. Here, by contrast, the States do not contend that
legislation that has the effect of limiting SALT deductions is per se unconstitutional (nor could
they plausibly do so because many such provisions have been previously enacted, which they do

9

not challenge). Rather, they quibble with the dollar limit of the cap (while implicitly allowing
that other dollar limits might pass muster), and with the fact that the cap accomplishes directly
what had previously been achieved indirectly. This is an argument over granular legislative
choices, not constitutional standards; it is classically political, and not suited for judicial
intervention. Cf. Gilligan v. Morgan, 413 U.S. 1, 10 (1973) (“It would be difficult to think of a
clearer example of the type of governmental action that was intended by the Constitution to be
left to the political branches directly responsible—as the Judicial Branch is not—to the electoral
process”).
The States’ Complaint Fails to State a Claim, and the States Are Not Entitled to
Summary Judgment
Even assuming jurisdiction, the States’ complaint should be dismissed under Federal
Rule of Civil Procedure 12(b)(6). The States have, in large part, disavowed their reliance on
specific constitutional provisions (principally the Sixteenth Amendment), but argue nonetheless
that ill-defined principles of federalism and state dignity require Congress to maintain a SALT
deduction that is “substantial” enough to satisfy their policy preferences. E.g., States Br. at 18.
These arguments are meritless, and the States’ claims should be dismissed. Nor are the States
entitled to summary judgment pursuant to Federal Rule of Civil Procedure 56. The Government
does not concede the accuracy or materiality of the assertions and characterizations on which the
States rely in support of their motion, see supra footnote 2, 7 but even taking their assertions at
face value, they do not establish that the SALT deduction cap is unconstitutional.
A.

Federalism Principles Do Not Require an Unlimited SALT Deduction

In contrast to their complaint, the States’ motion papers abandon their contention that the
Sixteenth Amendment is the basis for their principal constitutional claim, and now premise their

7

The States do not argue that discovery is needed in this case. See States Br. at 2-3.
10

claim on unwritten federalism principles. Compare States Br. at 17-18 (“[T]he Plaintiff States
are not arguing that the Sixteenth Amendment itself established the constitutional significance of
the SALT deduction. Rather, the source of the constitutional claim here is the States’ original
and sovereign ‘power of taxation,’ which predates the Founding and was incorporated into our
constitutional structure.”), with Compl. ¶ 133 (“In imposing a $10,000 cap on the deductibility of
state and local taxes, Congress has exceeded its powers under the Sixteenth Amendment.”). This
new argument fares no better than their original one. See U.S. Br. at 19-25. No such federalism
principle has ever been recognized as a ground to invalidate a tax law. Furthermore, the
federalism doctrine that was part of the debate surrounding the ratification of the Sixteenth
Amendment was abandoned by the Supreme Court nearly eighty years ago.
The States do not identify any recognized constitutional federalism doctrine that requires
an unlimited SALT deduction so as to “avoid undue interference with [their] ability to raise their
own revenue from traditional sources.” States Br. at 18. (Nor do they credibly explain why a
capped SALT deduction unduly interferes with their ability to raise revenue from “traditional
sources.”) There is no constitutional rule that requires Congress and the states to tax only
distinct assets or income, and specifically no constitutional reason why a given dollar of income
cannot be taxed both by a state and by the federal government, without any offsetting deductions.
The Constitution also does not require Congress to enact and maintain a tax deduction that
benefits residents of certain states disproportionately. The States cite no constitutional provision
giving rise to any relevant federalism principle, judicial opinions recognizing it, or historical
materials supporting its existence. See id. at 16-18. Nor do any such materials exist.
As discussed in the Government’s opening brief, Congress’s constitutional taxing power
is not limited in any way relevant to the SALT deduction. See U.S. Const. art. I, § 8; id. amend.

11

XVI; see also U.S. Br. at 20-21, 33-34. The States cite the history of federal taxation and the
discussions surrounding the ratification of the Sixteenth Amendment to suggest the existence of
a federalism-based limitation on Congress’s taxation power. See States Br. at 16-21. However,
Congress’s historical practice with regard to the deduction of state and local taxes from federally
taxable income actually demonstrates the absence of any applicable constitutional limitation. At
nearly no point in the past century has there been an absolute, unconstrained federal SALT
deduction; instead, this deduction has almost always been subject to various limitations, which
have increased over time, either by narrowing the types of state taxes eligible for the deduction
or by enacting provisions that restrict the deduction’s value for many taxpayers (i.e., the AMT
and the Pease limitation). See U.S. Br. at 5-6. 8 And regardless of the contours of the SALT
deduction over time, the Supreme Court has rejected the notion that Congress’s historical
practice with regard to the analogous state-bond tax exemption “manifest[ed] an intent to freeze
[it] into the Constitution.” Baker, 485 U.S. at 522 n.13.

8

While the States surprisingly claim that the pre-2018 AMT and Pease limitation did not
substantially limit the SALT deduction, see States Br. at 21 n.21, it is clear that they did do so.
See, e.g., Frank Sammartino, Tax Policy Center, How Would Repeal of the State and Local Tax
Deduction Affect Taxpayers Who Pay the AMT? at 1-2 (June 15, 2017), https://www.taxpolicy
center.org/sites/default/files/publication/142256/2001309-how-would-repeal-of-the-state-andlocal-tax-deduction-affect-taxpayers-who-pay-the-amt.pdf (“High-income households
disproportionately benefit from the SALT deduction because they are more likely to itemize and
pay more state and local taxes. . . . The AMT, however, limits or eliminates the benefit of the
SALT deduction for many high-income taxpayers. . . . State and local taxes are not deductible
under the AMT, and that is a major reason why taxpayers pay the alternative tax.”); Jared
Walczak, Tax Foundation, How the State and Local Tax Deduction Interacts with the AMT and
Pease Limitation (Nov. 6, 2017), https://taxfoundation.org/state-and-local-tax-deduction-amtpease/ (“The Pease limitation . . . reduces the value of a taxpayer’s itemized deductions by 3
percent for every dollar of taxable income above a certain threshold . . . . This reduction
continues until [it] has phased out 80 percent of the value of itemized deductions. . . . The Pease
limitation, therefore, can have the effect of limiting the value of the state and local tax
deduction.”) (emphasis in the original). The argument that the 2017 Tax Act is different from
these prior limitations for constitutional purposes because of the supposed intent of Congress is
addressed infra in Point II.C.
12

As for the ratification of the Sixteenth Amendment, the historical materials the States cite
include policy arguments for and against federal income taxation generally, but no recognition of
any constitutional doctrine requiring an unlimited SALT deduction or forbidding “interference
with the States’ ability to raise their own revenue from traditional sources.” States Br. at 18; see
also U.S. Brief at 21-25. Indeed, the only constitutional doctrine cited by the participants in the
ratification debate (at least in the materials cited by the States) was the doctrine of
“intergovernmental tax immunity,” which at the time precluded any state or federal tax on
income derived from a contract with another sovereign, such as federal taxation of the interest
from state-issued bonds. See Baker, 485 U.S. at 515-17 (discussing Pollock v. Farmers’ Loan &
Trust Co., 157 U.S. 429, 585-86 (1895)). This doctrine, however, is irrelevant to the SALT
deduction, and in any event, has been substantially narrowed by the Supreme Court in the
century since the Sixteenth Amendment’s ratification.
At the time, the Court had held that intergovernmental tax immunity precluded federal
taxation of not only interest from state bonds, but also, for example, salaries of state employees,
income from state leases, and earnings from sales to state agencies. See Baker, 485 U.S. at 517
(citing Collector v. Day, 78 U.S. 113 (1871), Burnet v. Coronado Oil, 285 U.S. 393 (1932), and
Indian Motocycle Co. v. United States, 283 U.S. 570 (1931)). (Similar prohibitions applied in
the other direction, with regard to state taxation of the proceeds of federal contracts and the like.
See id.) “This general rule was based on the rationale that any tax on income a party received
under a contract with the government was a tax on the contract and thus a tax ‘on’ the
government because it burdened the government’s power to enter into the contract.” Id. at 518.
Some participants in the debates surrounding the ratification of the Sixteenth Amendment
agreed with the contemporary intergovernmental tax immunity jurisprudence and even cited

13

particular Supreme Court decisions approvingly. Opponents of the Amendment were concerned
that its ratification would undermine the Court’s decisions in this regard. For example, New
York Governor Charles Evan Hughes was concerned that the broad language of the Sixteenth
Amendment might upset the Supreme Court decisions that had found income on state
instrumentalities not to be federally taxable. See, e.g., Hughes Is Against Income Amendment,
N.Y. Times, Jan. 6, 1910, at 2, Conroy Decl. Ex. 15 (citing Collector v. Day, and Pollock v.
Farmers’ Loan & Trust). On the other hand, supporters of the Amendment who also agreed with
the intergovernmental tax immunity jurisprudence, including Senator William Borah, argued that
ratification would not affect it because the sole effect of the Amendment would be to eliminate
the apportionment requirement for federal income taxation. See 45 Cong. Rec. 1694-96 (Feb.
10, 1910), Conroy Decl. Ex. 19; see also U.S. Br. at 23 n.6 (summarizing other sources).
Beginning in the late 1930’s, the Supreme Court began dismantling its broad
intergovernmental tax immunity jurisprudence, concluding that taxing income that a private
party derives from a government contract was constitutionally distinct from taxing the
government itself. See Baker, 485 U.S. at 520 (noting that “[t]he rationale underlying Pollock
and the general immunity for government contract income has been thoroughly repudiated by
modern intergovernmental immunity caselaw”). The Court held that Congress could tax state
employees’ salaries and income from state leases, and even upheld a state tax on a contractor
whose cost was directly passed on to a federal agency as part of the contract. See id. at 521-22.
By 1988, when it finally had the opportunity to consider, and uphold, federal taxation of the
interest on state bonds (as Congress had only decided to tax state-issued bearer bonds in 1982),
the Supreme Court reiterated that the expansive intergovernmental tax immunity doctrine was a
thing of the past. See id. at 522-27. All that remains of the immunity doctrine now is the rule

14

that the federal and state governments cannot tax each other directly, but can each tax private
parties with which the other sovereign does business, even if the ultimate financial burden falls
on the other sovereign. See id. at 523 & n.14.
This doctrine has no relevance to the constitutionality of the SALT deduction, either now
or a century ago. The States have not argued, nor could they, that a limitation on the deduction
individual taxpayers can claim against their federal tax liabilities constitutes an impermissible tax
on the states. And, again, they have failed to identify, or cite any authority recognizing, any
other federalism principle of which the SALT deduction cap supposedly runs afoul. There is
thus no federalism doctrine supporting the States’ position.
B.

The SALT Deduction Cap Does Not Impermissibly Coerce the States into
Altering Their Fiscal Policies

The States next argue that the 2017 Tax Act impermissibly coerces them into changing
their fiscal policies, while acknowledging that any such coercion is indirect. See States Br. at 2629. This argument rests on both a faulty basis of comparison for the Act and a misapprehension
of the applicable legal principle.
The States’ complaint—and their entire economic analysis of the impact of the 2017 Tax
Act—improperly compares the current law (in which the SALT deduction is limited) to a
scenario in which Congress enacted the Act exactly as it did, except left out the SALT deduction
cap. See States Br. at 22-23; States 56.1 ¶¶ 50-54 (which, per States Br. at 23 n.25, calculates
the “net increase in taxpayers’ tax liability caused by the inclusion of the new cap on the SALT
deduction in the 2017 Tax Act”); see also States Br. at 4 (“Taxpayers in the Plaintiff States must
pay hundreds of billions of dollars in additional federal income taxes because of the cap on the
SALT deduction, relative to what they would have paid if the 2017 Tax Act had been enacted
without the cap.” (emphasis added)). This comparison is at odds with the statute Congress

15

enacted. The SALT deduction cap is not a standalone feature of the 2017 Tax Act, but instead,
as the States acknowledge, one of its core “revenue-generating” provisions that partially offset
the cost of the statute’s tax cuts. 9 Compl. ¶ 97; see also Joint Comm. on Taxation, Estimated
Budget Effects of the Conference Agreement for H.R. 1, the “Tax Cuts and Jobs Act”, at 2 (Dec.
18, 2017), https://www.jct.gov/publications.html?func=startdown&id=5053 (Item D.1,
estimating the amount of revenue expected to be generated by the repeal of certain deductions,
principally the SALT deduction). 10
Thus, the proper comparison (if there is one) is between the 2017 Tax Act as enacted and
the state of the Internal Revenue Code beforehand, in which the SALT deduction was limited by
a broader AMT and the Pease limitation, overall tax rates were higher in many brackets, and the
standard deduction was lower. See U.S. Br. at 5-6. Using the appropriate benchmark, the overall
federal tax burden on the States’ residents is now lower than it was before the Act. See Inst. on
Taxation and Econ. Policy, The Final Trump-GOP Tax Bill: National & 50-State Analysis,
tbls.2-3 (Dec. 2017), https://itep.org/wp-content/uploads/Trump-GOP-Final-Bill-Report.pdf
(“ITEP Report”); cf. States Br. at 9 n.10 (obliquely acknowledging this by noting that “certain”
of their “residents will benefit from the 2017 Tax Act”). While some individual taxpayers in the

9

The States do not argue that the SALT deduction cap is severable from the rest of the
2017 Tax Act, particularly given its significant revenue-raising function. The Government does
not concede the severability of the cap, but the issue need not be addressed in resolving the
parties’ present motions.
10

Indeed, in order to enact the Act through the Senate’s so-called “reconciliation”
procedure, the statute could contribute no more than $1.5 trillion to the federal deficit over a
decade. See H. Con. Res. 71, 115th Cong. (2017); 2 U.S.C. § 644(b)(1)(E). Without the
hundreds of billions of dollars in revenue generated by capping the SALT (and other)
deductions, the 2017 Tax Act would have exceeded this limitation. See Joint Comm. on
Taxation, supra, at 8 (showing a net negative budgetary effect of the 2017 Tax Act totaling
$1.456 trillion over a decade). Consequently, the Act could not have been passed without the
SALT deduction limit absent other significant changes.
16

States will now pay more than they did previously, others will pay less, as would be expected
from any significant change in tax policy, but the overall effect of the Act is to lower federal
taxes, including for each plaintiff State’s population as a whole. See ITEP Report, tbls.2-3. The
States present no analysis of how this overall lower federal tax burden on their residents will
affect economic activity and state tax revenues, presumably because the result does not support
their argument here.
Even if the overall effect of the Act had been to raise federal taxes, however, this too
would be a legitimate exercise of congressional power; there is no constitutional one-way ratchet
requiring Congress only to decrease the federal tax burden, regardless of any secondary effects
on states or their residents. There is thus no basis for the States’ argument that the 2017 Tax Act,
and in particular its SALT deduction cap, creates impermissible “economic coercion” to decrease
state tax rates and reduce state-provided services by depriving them of revenue. See States Br. at
28.
In any event, any economic incentives in the Act are plainly “permissible persuasion”
rather than “impermissible coercion.” States Br. at 27 (quoting NFIB, 567 U.S. at 585)
(brackets, quotation marks omitted). In NFIB, 567 U.S. at 585, the Supreme Court held that
Congress could not condition states’ receipt of hundreds of billions of dollars in existing
Medicaid funds on their agreement to dramatically expand their Medicaid programs. The
Affordable Care Act provided that states that did not agree to expand their programs—for which
they would also have to commit billions of dollars of their own additional spending—would lose
out not only on federal dollars allocated to the expansion, but their entire federal Medicaid
allotment, potentially stripping millions of their residents of health insurance and depriving the
states of more than 10% of their revenues. See id. (“Nothing in our opinion precludes Congress

17

from offering funds under the Affordable Care Act to expand the availability of health care, and
requiring that States accepting such funds comply with the conditions on their use. What
Congress is not free to do is to penalize States that choose not to participate in that new program
by taking away their existing Medicaid funding.”). This stark set of facts, the Court held,
constituted coercion. See id.
On the other hand, the Supreme Court has held that Congress can permissibly withdraw
tax breaks for state-issued bearer bonds while retaining the exemption for registered bonds, even
if Congress’s goal was to incentivize states to alter their bond-issuing practices. See Baker, 485
U.S. at 511, 513-15. 11 And, several decades ago—while the broad intergovernmental tax
immunity doctrine was still alive and well—the Court upheld a federal estate tax that exempted
income subject to state estate taxes, though the provision undoubtedly benefited states with estate
taxes and incentivized others to enact such taxes. See Florida v. Mellon, 273 U.S. at 17. It is
thus permissible for Congress to provide tax-based incentives for states to alter their taxing and
revenue-raising practices, but it may not coerce states to participate in a federal program by
threatening to take away substantial preexisting federal funds (such as Medicaid funding).
As discussed above, the overall effect of the 2017 Tax Act is to lower federal taxes on the
States’ residents even though the federal tax burden on a minority of those residents will increase

11

The States incorrectly suggest that Baker is no longer good law, as it “was decided
before the Supreme Court’s more recent decisions,” which supposedly “re-invigorat[ed]
principles of federalism as a structural feature of the Constitution,” States Br. at 25. However,
the States fail to acknowledge that the Supreme Court cited Baker with approval in 2018 and
distinguished it from cases in which the Court found that the government had impermissibly
coerced states. See Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1478 (2018) (the
tax provision in Baker was constitutional because it “did not order the States to enact or maintain
any existing laws,” but instead “had the indirect effect of pressuring States to increase the rate
paid on their bearer bonds in order to make them competitive with other bonds paying taxable
interest”).
18

because of the SALT deduction limit. See ITEP Report, tbls.2-3. There is thus no basis for the
States’ claim of unconstitutional coercion.
C.

The SALT Deduction Cap Does Not Violate the States’ Equal Sovereignty

Finally, the SALT deduction cap does not violate the States’ equal sovereignty by
improperly targeting them for differentially adverse or coercive treatment. Contra States Br. at
29-36. The States concede that “the Constitution permits the burden of a federal tax to have
differential effects on taxpayers in different States.” Id. at 34; U.S. Br. at 33-34; see also, e.g.,
Fernandez v. Wiener, 326 U.S. 340, 359 (1945) (“[A] taxing statute does not fall short of the
prescribed uniformity because its operation and incidence may be affected by differences in state
laws.”). They claim, rather, that their sovereignty was violated because of public comments
made by (and supposed underlying improper motives of) federal officials and political
commentators about the cap or about SALT deductions in general. States Br. at 29-31. The
States claim that their cherry-picked remarks—none of which was made within legislative
proceedings leading to the enactment of the 2017 Tax Act—render the SALT cap
unconstitutional. Id.
As explained in the Government’s opening brief, comments like the ones collected by the
States are irrelevant to the constitutionality of the SALT deduction cap. See U.S. Br. at 34-38. It
is well-settled that when Congress exercises its taxing power, even if “the tax is burdensome or
tends to restrict or suppress the thing taxed . . . it is not within the province of courts to inquire
into the unexpressed purposes or motives which may have moved Congress to exercise a power
constitutionally conferred upon it.” Fernandez, 326 U.S. at 362; see also J.W. Hampton, Jr., &
Co. v. United States, 276 U.S. 394, 412 (1928) (“the existence of other motives in the selection
of the subjects of taxes cannot invalidate congressional action”); Sonzinsky v. United States, 300

19

U.S. 506, 513-14 (1937). The States admit that the inclusion of the SALT deduction cap in the
2017 Tax Act had a legitimate purpose: to raise revenue to offset the effects of tax cuts in the
Act. See Compl. ¶ 97; U.S. Br. at 7, 35. The States now argue that this concededly valid
purpose should be ignored in light of a supposed hidden, nefarious motive exposed by extralegislative comments. States Br. at 35 n.36. If the Court adopted this theory, then a handful of
non-legislative comments made about any statute could render it unconstitutional, regardless of
whatever legitimate purpose the provision otherwise serves. No precedent supports this extreme
conclusion. 12
Even if the Court considered the remarks gathered by the States, they are wholly
unpersuasive of the supposed improper motive harbored by the Congress that enacted the 2017
Tax Act. The Government’s opening brief addressed many of the quotations in the States’
complaint. See U.S. Br. at 35-38. The States add a few more in their motion, States Br. at 2931, 13 but these do not bolster their argument. As noted above, none of these quotations was
drawn from any legislative proceeding relating to the enactment of the SALT deduction cap, but
rather from media interviews and other non-government events. See id. 14
12

In addition, as also explained in the Government’s opening brief, public officials’
expression of their own views does not undercut the presumption that Congress acted in a proper
and lawful manner, nor can comments made by individuals who are not part of the Congress that
enacted the 2017 Tax Act be imputed to it. See U.S. Br. at 35-36.
13

The States ignore the Government’s explanation that their complaint seriously
mischaracterized statements by Senator Rob Portman, see U.S. Br. at 36-37, and continue to
misleadingly cite these remarks in their opposition brief, see States Br. at 30.
14

Moreover, most of the cited comments pre-date the ultimate provision at issue, and
refer instead to earlier versions of the legislation that would have more severely cut back the
SALT deduction or eliminated it entirely. See H.R. 1, 115th Cong. (Nov. 2, 2017) (proposing
the total elimination of deductions for state, local, and sales taxes paid, and capping property tax
deductions); Sen. Amend. to H.R. 1, 115th Cong. (Nov. 16, 2017) (eliminating deductions for all
state and local taxes, including property and state income taxes). The ultimate version of the
SALT deduction cap was finalized on December 15, 2017, and passed a few days later. See
Engrossed Amend. to H.R. 1, 115th Cong. (Dec. 20, 2017).
20

The States identify no case holding that comments about a statute made outside the
legislative process (or indeed by non-legislators) are relevant to an analysis of the statute’s
constitutionality. See U.S. Br. at 35-36. The few authorities the States cite, see States Br. at 36
(citing Johnson v. S. Pac. Co., 196 U.S. 1, 19-20 (1904), United States v. Reitano, 862 F.2d 982,
985 (2d Cir. 1988), and a law review article), concern the use of legislative history to interpret
ambiguous statutory language, which is not the issue here. The States also cite Shelby County,
570 U.S. at 544, for the proposition that unequal targeting of states violates their equal
sovereignty. States Br. at 29. That case is clearly inapposite, however, because the provision at
issue there applied explicitly only to particular states, so there was no question that Congress
deliberately intended to treat those states differently. Shelby County, 570 U.S. at 544. The
SALT deduction cap, in contrast, applies by its terms uniformly to taxpayers residing in each
state. The States further rely on NFIB to argue that a federal statute may be unconstitutional if it
is motivated by congressional intent to unduly influence states. States Br. at 35; NFIB, 567 U.S.
at 577. But in that case, as discussed above, Congress imposed a direct economic penalty
expressly designed to coerce all states to participate in an expanded federal Medicaid program.
567 U.S. at 580-85. That is in sharp contrast to the SALT deduction cap, which does not coerce
the States into any policy change or exert any comparable direct pressure on them.
Finally, much of the States’ purported “evidence” of targeted, differential harm is
questionable at best. They argue that the 2017 Tax Act was expressly “designed” to penalize
their taxpayers while rewarding those in other states, e.g., States Br. at 31, but marshal little
support for this conclusory point. As noted above, many of the States’ analyses compare what
their taxpayers will pay in federal income taxes under the current law “relative to what they
would have paid if the 2017 Tax Act had been enacted without the new cap,” id. at 31 n.32, but

21

this is an inappropriate comparison, given that Congress never gave any consideration to such a
law. This argument also disregards the Act’s other provisions that will reduce many of their
taxpayers’ overall tax liabilities. See U.S. Br. at 6-7. Finally, much of the States’ purported
supporting economic analysis is poorly explained as to its methodology, and is at least partly
based, on its face, on conjecture and speculation. See, e.g., Declaration of Scott Palladino, ECF
No. 1-2, ¶ 27 (concluding that more New York taxpayers will experience tax increases as a result
of the Act and expressing, without citing specific data, a “belie[f] [that] this [effect] is due
primarily to the SALT Deduction Cap”); cf. States Br. at 32 n.33 (the SALT cap “could result” in
certain losses in home equity values, and “could” result in a corresponding decrease in economic
activity). In sum, the States fall far short of demonstrating that the SALT deduction cap targeted
them in any way, much less in a constitutionally impermissible manner. 15
CONCLUSION
For the foregoing reasons and the reasons set forth in the Government’s opening brief,
the Court should dismiss the States’ complaint and deny their cross-motion for summary
judgment.

15

The States also incorrectly claim that the Government has continued to specifically
target them because the IRS proposed a regulation to clarify whether federal charitable
contribution deductions are available when taxpayers receive or expect to receive corresponding
state or local tax credits in exchange for those contributions. See States Br. at 33; U.S. Br. at 38
n.14. This proposed rulemaking is irrelevant for the reasons already set forth in the
Government’s opening brief. See U.S. Br. at 38 n.14. In any event, even if the proposed
rulemaking were somehow relevant to the constitutionality of the already-enacted SALT
deduction cap, the rulemaking is itself also neutrally applicable and would naturally apply to—
not target—taxpayers in any states and localities who receive tax credits in exchange for
contributions. Id.
22

Dated:

New York, New York
February 28, 2019
Respectfully submitted,

RICHARD E. ZUCKERMAN
Principal Deputy Assistant Attorney General
U.S. Department of Justice, Tax Division
By:

s/Edward J. Murphy
EDWARD J. MURPHY
JORDAN A. KONIG
Trial Attorneys
P.O. Box 55, Ben Franklin Station
Washington, D.C. 20044
Tel.: [phone]-7917
Fax: [phone]
Email: [e-mail]
[e-mail]

GEOFFREY S. BERMAN
United States Attorney for the
Southern District of New York
By:

23

s/Jean-David Barnea
JEAN-DAVID BARNEA
REBECCA S. TINIO
Assistant United States Attorneys
86 Chambers Street, Third Floor
New York, New York 10007
Tel.: [phone]
Fax: [phone]
Email: [e-mail]
[e-mail]