New York City corporate tax returns have already been filed for the 2018 tax year and NYC unincorporated business tax (UBT) returns are due October 15th. But barely a week before the UBT filing due date, on October 8, 2019, NYC released its long-awaited guidance (https://www1.nyc.gov/assets/finance/downloads/pdf/fm/2018/fm-18-11.pdf) on the attribution of interest deductions for taxpayers whose interest expense deduction was limited under Section 163(j) of the Internal Revenue Code, enacted as part of the Tax Cuts & Jobs Act (TCJA). Under that provision, a taxpayer’s deduction for business interest expense is limited to 30% of adjusted taxable income except in certain circumstances. Any unused interest expense may be carried forward to the following tax year. Note that the NYC Finance Memorandum is numbered 18-11, suggesting that it was originally intended for release in late 2018.
More than three months after oral arguments were heard in the SALT cap lawsuit (State of New York, State of Connecticut, State of Maryland, and State of New Jersey v. United States Department of Treasury, The Internal Revenue Service and The United States of America, 18-cv-6427), Judge J. Paul Oetken of the U.S. District Court dismissed the suit on September 30, 2019. Judge Oetken ruled that the $10,000 SALT deduction cap under the Tax Cuts and Jobs Act was not unconstitutionally coercive, finding that the states had not plausibly alleged that the cap meaningfully constrains the states’ decision-making processes. Further, Judge Oetken rejected the federal government’s argument that the court did not have jurisdiction to hear the case, holding that the states’ allegation that they would suffer diminished real estate transfer tax revenues was sufficient to give them standing to challenge the cap. He also held that the Anti-Injunction Act did not bar the suit because the states had no alternate mechanism to challenge the cap's legality.
It appears we’ve reached the end of the line on our “Wynne” cases. On October 7, 2019, the Supreme Court of the United States declined to hear our appeals in Edelman v. Department of Taxation and Finance and Chamberlain v. Department of Taxation and Finance. In both cases, we argued that New York’s statutory residency taxing scheme, which subjected taxpayers who qualified as dual residents of New York and Connecticut to double taxation, was unconstitutional and in violation of the Commerce Clause. As we reported earlier this year, the New York State Court of Appeals previously declined to hear the taxpayers’ appeals in April 2019.