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Connecticut, New Jersey and New York are suing the Trump administration over an IRS rule that weakens the states’ attempts to work around a cap on state and local tax deductions.
Attorneys general for the states filed the lawsuit Wednesday against the Treasury and IRS in federal court in New York.
The 2017 tax overhaul capped the deductions taxpayers can take on their federal returns for taxes paid at the state and local levels. That was a blow to taxpayers in states with high property taxes.
In response, states like Connecticut, New Jersey and New York changed their laws to allow taxpayers to donate to charitable funds in exchange for tax credits.
But a June IRS rule said taxpayers have to subtract the value of the credit from their charitable donations.
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A Treasury spokeswoman declined to comment.
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