New York State is one of several states that have moved to let residents circumvent the new $10,000 federal cap on state and local tax (SALT) deductions. But the IRS issued a notice on Wednesday that challenges the states’ efforts.

The cap on SALT deductions would mean that property owners across the country could only write-off the first $10,000 they pay state and local taxes.  The cap would have little impact on the vast majority of residents in Chautauqua County, although it would have a significant impact on those taxpayers on the other  side of the state, who could decide to move to another state with lower taxes as a way to reduce their SALT contribution.

New York was first out of the gate, approving a measure in this year’s state budget that give wealthy taxpayers the option of making charitable contributions to not-for-profit, state-run funds financing education and healthcare. Taxpayers could get a state tax credit worth 85 percent of their contribution. And they could deduct 100 percent of their contribution on their federal return, since there is no cap on charitable deductions.

But the Treasury and IRS may rule against that strategy in proposed regulations that the agencies said they will issue “in the near future.”

NY Governor Andrew Cuomo

Governor Andrew Cuomo, who has described the SALT deduction cap as an “economic missile” launched by Republicans on Democratic states, made clear Wednesday afternoon the state won’t just roll over.

“The federal government passed a disastrous tax bill that put corporations over people and specifically targeted New York and other Democratic states with the elimination of full state and local tax deductibility,” Cuomo said in a released statement. “New York was the first to take action to protect our residents from this hostile assault and ensure New York families weren’t being used as a piggy bank to pay for tax cuts for big corporations.

“Now, the administration appears poised to attack again through new tax regulations, showing its true hostility to New Yorkers and middle-class taxpayers. It is particularly ironic that Donald Trump is in Long Island today while the IRS aims its sights on Long Island homeowners.

“Make no mistake: We have been and will continue to fight against this economic missile with every fiber of our being. The IRS should not be used as a political weapon, and I urge this administration to stop its partisan assault on New Yorkers and instead work with us to deliver real, lasting relief for hardworking families.”