Attorneys general from three Northeastern states impacted by the $10,000 cap on federal deductions for state and local taxes (SALT) have filed suit against the Internal Revenue Service (IRS).

The lawsuit, filed today in the U.S. District Court for the Southern District of New York, “challenges an IRS final rule that undermines state and local programs designed to promote charitable giving through the use of SALT credits.”

Plaintiffs include New York Attorney General Letitia James, New Jersey Attorney General Gurbir Grewal and Connecticut Attorney General William Tong. Named as defendants in the suit are IRS Commissioner Charles Rettig, Treasury Secretary Steven Mnuchin, the IRS and the Department of Treasury.

The Tax Cuts and Jobs Act (TCJA), enacted in late 2017 and effective in 2018, capped the federal deduction for state and local taxes at $10,000.

“More than 100 such programs exist in 33 states, incentivizing individuals to donate to causes ranging from natural resource preservation and aid for higher education to domestic violence shelters,” according to the lawsuit. “These diverse programs encourage charitable giving and citizen engagement, ensure the financial viability of philanthropic organizations, relieve the burdens on state and local governments, and promote a vibrant civil society.”

Plaintiffs described the IRS rule as “arbitrary,” a violation of the federal Administrative Procedures Act, and a “radical break” from historic precedent.