The Town of Pelham, the Village of Pelham, the Village of Pelham Manor and the  Pelham School District are among the local governments suing the IRS and Treasury Secretary Mnuchin over regulations on contributions to charitable funds.

The lawsuit was filed on Wednesday (July 17) in the United States District Court for the Southern District of New York. It comes on the same day as the Attorneys General of Connecticut, New Jersey, and New York filed their own lawsuit challenging the same IRS/Treasury Department regulations.

It challenges regulations that were recently finalized by the Internal Revenue Service (IRS) and the Treasury Department that would deny a full charitable deduction for donations to the charitable funds for which states authorize tax credits, including both long-standing charitable funds and those created after the federal government severely limited the state and local tax deduction (SALT).

The case, Village of Scarsdale v. Internal Revenue Service at al., asserts that the IRS’s regulations “usurp the lawmaking function and purport to unilaterally impose the current administration’s political will in violation of clear statutory limits.” In doing so, the regulations would cause charitable reserve funds explicitly authorized under New York State law to “suffer irreparable harm.” This includes the charitable reserve funds established by the Village of Scarsdale and the Town of Rye after the SALT deduction was limited by the passage of the Federal Tax Cuts and Jobs Act of 2017 (TCJA). If successful, the lawsuit would reverse the IRS’s regulations.

Both Scarsdale and the Town of Rye are members of the Coalition for the Charitable Contribution Deduction (3CD), which consists of Nassau, Suffolk, and Westchester Counties, 17 municipalities, 17 school districts, and eight state and countywide professional and advocacy organizations.

Said New York State Assemblymember Amy Paulin, who took the lead role in developing New York’s charitable reserve fund legislation and coordinated the coalition: “Starting today, we will stand up for New Yorkers already reeling from the cap on the SALT deduction by making our case in court that these regulations are arbitrary, capricious, and invalid. The denial of charitable deductions for donations to charitable reserve funds disproportionately hits communities like mine. In trying to satisfy the whims of this administration without running afoul of powerful interests, the IRS regulations strayed far from the law that they were supposed to interpret. These regulations will cause real harm for villages like Scarsdale and taxpayers across the country struggling to remain in the communities they fell in love with and to send their children to the same nurturing, high-quality schools.”

Members of the Coalition for the Charitable Contribution Deduction (3CD)

Association of School Business Officials of New York

Association of Towns of the State of New York

Lower Hudson Education Coalition

New York Conference of Mayors

New York State Association of Counties

New York State Council of School Superintendents

New York State School Boards Association

Westchester Putnam School Boards Association

Nassau County

Suffolk County

Westchester County

City of New Rochelle

City of White Plains

City of Yonkers

Town of Bedford

Town of Lewisboro

Town of Mamaroneck

Town of New Castle

Town of North Salem

Town of Ossining

Town of Pelham

Town of Rye

Village of Ardsley

Village of Hastings-on-Hudson

Village of Pelham

Village of Pelham Manor

Village of Scarsdale

Village of Upper Brookville

Ardsley Union Free School District

Brewster Central School District

Briarcliff Manor Union Free School District

Byram Hills Central School District

City School District of New Rochelle

Dobbs Ferry Union Free School District

Eastchester Union Free School District

Edgemont Union Free School District

Hastings-on-Hudson Union Free School District

Katonah-Lewisboro School District

Ossining Union Free School District

Pelham Public Schools

Pleasantville Union Free School District

Pocantico Hills Central School District

Public Schools of the Tarrytowns

Scarsdale Union Free School District of the Towns of Scarsdale and Mamaroneck

White Plains City School District

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