SIMS

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

SHERRY L. SIMS and MARCIA BROWN, Civil Action No.: 21-1120

Plaintiffs,

v.

OPINION & ORDER

UNITED STATES OF AMERICA, et al.,

Defendants.

CECCHI, District Judge.

Before the Court is the motionof the United States of America, Secretary of the Treasury,

Department of the Treasury, Commissioner of Internal Revenue, and Internal Revenue Service

(“Defendants”) to dismiss (ECF No. 33; see also ECF No. 33-1 (“Br.”)) the second amended

complaint of plaintiffs Sherry L. Sims and Marcia Brown (“Plaintiffs”). ECF No. 24 (“SAC”).

Plaintiffs opposed the motion and filed a cross motion for summary judgment. ECF No. 36

(“Opp.”); ECF No. 42. Defendants replied on their motion to dismiss and opposed the cross

motion. ECF No. 57. Plaintiffs then repliedon their crossmotion. ECF No. 60. Having reviewed

the papers and determining that this matter can be resolved entirely on the motion to dismiss,1 the

Court will address that motion only. The Court decides this matter without oral argument pursuant

to Federal Rule of Civil Procedure 78. For the reasons set forth below, Defendants’ motion to

dismiss is granted.

I. BACKGROUND

1 Given the competing motions with differing standards of review, the Court directed the parties

to advise the Court as to whether the motions should be addressed at the same time or in sequence.

ECF No. 69. Defendants contend that deciding their motion to dismiss first would be most

efficient, as the motion for summary judgment would be mooted if the Court is inclined to grant

the motion to dismiss. ECF No. 70. Plaintiffs do not oppose proceeding with the motion to dismiss

first. ECF No. 71.

Plaintiffsbring this action to challengethe constitutionality ofa limitimposed by Congress

on the federalincometaxdeductionfor state and local taxes (the “SALT Deduction”). SAC ¶ 67.

These claims largely mirror those rejected by the Second Circuit in a similar constitutional

challenge. See New York v. Yellen, 15 F.4th 569 (2d Cir. 2021), cert. denied, 142 S. Ct. 1669 (Apr.

18, 2022).

A. History of the Federal Income Tax and SALT Deduction

Article I of the U.S. Constitution provides Congress with the power to “lay and collect

Taxes, Duties, Imposts and Excises.” U.S. Const. art. I, § 8, cl. 1. The federal government,

however, did not enact the first federal income tax until 1861. Yellen, 15 F.4th at 572 (citation

omitted). With this law, Congress provided that “in estimating [taxable] income, all national, state,

or local taxes assessed upon the property, from which the income is derived, shall be first

deducted.” State of New York v. Mnuchin, 408 F. Supp. 3d 399, 403 (S.D.N.Y. 2019) (alteration

in original) (citation omitted). This provision—the SALT Deduction—remained largely

unchanged for the next decade even as Congress amended theincome tax code multiple timesuntil

the income tax lapsed in 1872. Id. (citations omitted).

In 1894, Congress reinstated federal income taxes and with it, the SALT Deduction.

Yellen, 15 F.4th at 573 (citation omitted). One year later, however, the Supreme Court declared

that the 1894 tax law violated Article I, Section 9 of the Constitution, which provided that “no . . .

direct[] Tax shall be laid, unless in Proportion to the Census,” because the federal income tax was

a “direct” tax that was not apportioned according to the states’ relative populations. Id. (citing

Pollock v. Farmers’ Loan & Tr. Co., 158 U.S. 601, 637 (1895) and U.S. Const. art. I, § 9, cl. 4).

In the wake of this decision, Congress proposed a constitutional amendment to eliminate

the apportionment requirement for direct taxes, including taxes on income. Mnuchin, 408 F. Supp.

3d at 404. The Sixteenth Amendment, ratified in 1913, provides Congress withthe power to “lay

and collect taxes on incomes, from whatever source derived, without apportionment among the

several States.” U.S. Const. amend. XVI. Shortly thereafter, Congress reimplemented the federal

income tax, which included the SALT Deduction. Yellen. 15 F.4th at 573 (citation omitted). From

1913 to the present, some form of the SALT Deduction “has been a mainstay of the federal Tax

Code.” Mnuchin, 408 F. Supp. 3d at 404.

Despite its durability, Congress has repeatedly altered the SALT Deduction. Yellen, 15

F.4th at 573. In 1944, Congress introduced the standardized deduction, which meant that the

SALT Deduction was relevant only to those who chose to itemize their tax deductions. Mnuchin,

408 F. Supp. 3d. at 404 (citation omitted). In 1964, Congress specifically “enumerated the types

of [state and local] taxes that were deductible and disallowed a deduction for any other state and

local taxes,” departing from the previous rule that “all state and local taxes were deductible unless

specifically disallowed.” Id. at 404–05 (quoting Gladriel Shobe, Disaggregating the State and

Local Tax Deduction, 35 Va. Tax Rev. 327, 338 (2016)). In 1986, Congress implemented an

alternative minimum tax schemewhich, if applicable, would preclude use of the SALT Deduction.

Yellen, 15 F.4th at 573–74 (citation omitted). Along with this change, Congress prevented

taxpayers from deducting state and local sales taxes. Id. at 574. In 1990, Congress passed the

“Pease limitation,” which required taxpayerswith adjusted gross incomes above certain thresholds

to reduce the totals claimed in itemized deductions, including any SALT Deductions, by as much

as eighty percent. Id.(citation omitted). And in 2004, Congress reinstatedthe deduction for sales

taxes but made taxpayers choose between deducting sales or income taxes, which led to fewer

taxpayers deducting state and local income taxes. Id. (citation omitted).

Then, in 2017, Congress passed the Tax Cuts and Jobs Act (the “2017 Tax Act”). Pub.

L. No. 115-97, 131 Stat. 2054; see also SAC ¶¶ 1–2. As relevant to this matter, section 11042 of

the 2017 Tax Act limited the SALT Deduction to “$10,000 ($5,000 in the case of a married

individual filing a separate return).” 2017 Tax Act § 11,042, 131 Stat. at 2085–86 (codified at 26

U.S.C. § 164(b)(6)) (the “SALT Deduction Cap” or “Cap”). Plaintiffs bring this action to

challenge the constitutionality of the SALT Deduction Cap.

B. The Complaint

In addition to describing the history of the SALT Deduction, the SAC asserts that the SALT

Deduction Cap was intended to coerce high-tax states into changing their fiscal policies. SAC ¶¶

29, 53–54. Plaintiffs cite statements made by various Congressmen and Executive officials

suggesting that the Cap would impose a greater burden on high-tax states. Id. ¶¶ 31, 39, 42.

Plaintiffs further allege that the SALT Deduction Cap did harm high-tax states. In particular, they

assert that states such as Illinois, New Jersey, and New York have experienced population declines

that are directly attributable to this enactment. Id. ¶¶ 59–62.

Plaintiffs raise ten counts in the SAC, alleging that the SALT Deduction Cap is

unconstitutional on various grounds. The first nine counts assert violations of the (1) Tenth

Amendment; (2) Privileges and Immunities Clause of Article IV; (3) Ninth Amendment; (4) Full

Faith and Credit Clause of Article IV and Preamble to the Constitution; (5) “Reciprocal Immunity

Doctrine”; (6) Republican Guarantee Clause of Article IV; (7) constitutional principles of

federalism; and (8) and (9) Sixteenth Amendment. Id. ¶¶ 71–166. In Count Ten, Plaintiffs seek

a declaratory judgment that the SALT Deduction Cap is unconstitutional and request a tax refund

for the 2018 and 2019 tax years. Id. ¶ 167–70. Defendants now move to dismiss all counts for

failure to state a claim.2 ECF No. 33.

II. LEGAL STANDARD

To survive dismissal under Federal Rule of Civil Procedure 12(b)(6), “a complaint must

contain sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.’” Ashcroft

v. Iqbal, 556 U.S. 662, 678 (2009) (citations omitted). A claim is facially plausible when supported

by “factual content that allows the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Id. A complaint that contains “a formulaic recitation of the

elements of a cause of action” supported by mere conclusory statements or offers “‘naked

assertion[s]’ devoid of ‘further factual enhancement’” will not suffice. Id. (citation omitted). In

evaluating the sufficiency of a complaint, the court accepts all factual allegations as true, draws all

reasonable inferences in favor of the non-moving party, and disregards legal conclusions. Phillips

v. Cnty. of Allegheny, 515 F.3d 224, 231–34 (3d Cir. 2008).

III. DISCUSSION

A. Tenth Amendment and Federalism Claims (Counts One and Seven)

In Count One, Plaintiffs assert that the SALT Deduction Cap violates the Tenth

Amendment, SAC¶¶71–96, which provides that “[t]he powers not delegated to the United States

by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to

the people.” U.S. Const. amend. X. In Count Seven, Plaintiffs allege that the Cap violates

constitutional principles of federalism. SAC ¶¶ 147–53. The Court will consider these Counts in

tandem, asthe Supreme Court has instructed that arguments raised under the “Tenth Amendment”

2 Defendants also move to dismiss Counts Four and Six as to the 2018 refund claim, but not the

2019 refund claim, for lack of jurisdiction. Br. at 8–11.

“encompass any implied constitutional limitation on Congress’ authority to regulate state

activities, whether grounded in the Tenth Amendment itself or in principles of federalism derived

generally from the Constitution.” See South Carolina v. Baker, 485 U.S. 505, 511 n.5 (1988); see

also City of Phila. v. Sessions, 280 F. Supp. 3d 579, 647 (E.D. Pa. 2017) (“[T]he Tenth Amendment

embodies the principle of Federalism that pervades the Constitution. Thus, courts frequently cite

to the Tenth Amendment as a placeholder for Federalism concerns.”).

i. Congress Has the Power to Tax Income and Define Deductions

Where a power is delegated to Congress, the Tenth Amendment expressly disclaims the

reservation of that power to the states. New York v. United States, 505 U.S. 144, 156 (1992). The

Constitution grants Congress the power to impose taxes, including direct income taxes. U.S.

Const. art. I, § 8, cl. 1 & amend. XVI; see also G.M. Leasing Corp. v. United States, 429 U.S. 338,

354 (1977) (noting that the taxation power “is a specifically enunciated power of the Federal

Government”). Moreover, “Congress has unquestioned power to condition, limit, or deny

deductions from gross income.” Alpenglow Botanicals, LLC v. United States, 894 F.3d 1187, 1200

(10th Cir. 2018) (citation omitted); see also INDOPCO, Inc. v. C.I.R., 503 U.S. 79, 84 (1992)

(recognizing that an “income tax deduction is a matter of legislative grace” (citation omitted)).

Thus, Congress acted within its delegated taxing authority when limiting the SALT Deduction.

ii. Plaintiffs’ Arguments in Defense of this Claim Lack Merit

Plaintiffs’ arguments that the SALT Deduction Cap violates the Tenth Amendment or

principles of federalism lack merit. First, they contend that “States’ sovereign power of taxation

cannot be abridged or suspended in whole or in part by the use of federal power to tax.” SAC ¶

76. Plaintiffs argue that federal legislation cannot “hinder or limit” the states’ sovereign right to

tax its citizens, but do not explain how a cap on a deduction available to individual taxpayers

interferes with the states’ own taxing powers. Opp. at 4–7. Nothing about the Cap limits the

states’ abilities to pursue any particular tax policy. See Yellen, 15 F.4th at 582–83 (finding

unpersuasive the plaintiff-states’ argument that the SALT Deduction Cap “unconstitutionally

infringes on state sovereignty” by “coerc[ing] them to abandon their preferred fiscal policies”).

Second, Plaintiffs assert that the Tenth Amendment “reserves to the States the taxing

powers that existed prior to the adoption of the Constitution.” See SAC ¶ 75. They contend that

the “States had full rights to levy taxes under the Articles of Confederation that preceded our

Constitution.” Id. ¶ 77; see also Opp. at 11. Plaintiffs add that the states have a “sovereign[] right

to have priority” and “primacy” with respect to taxes because the states’ right to tax came first and

predated the Constitution. Opp. at 11. The Constitution, however, “greatly changed” the

allocation of taxing powers that existed under the Articles of Confederation. Lane Cnty. v. State

of Oregon, 74 U.S. 71, 77 (1868). Whereas under the Articles the states maintained the “whole

power of direct and indirect taxation of persons and property,” the Constitution “gave the power

to tax, both directly and indirectly, to the [federal] government.” Id. at 76–77. Thus, the Tenth

Amendment did not reserve to the states the taxing power existing prior to the Constitution, as the

Constitution affirmatively allocated these powers to the federal government. Id.at 77 (noting that

the power to tax was given to the federal government, subject to only limited exceptions, “without

any express reservation”).

Third, Plaintiffs assert that “SALT revenues” were not taxed as part of the earliest income

taxes and that Congress maintained the SALT Deduction from the passage of the first income tax

under the Sixteenth Amendment in 1913 through 2017. SAC ¶¶ 85–91; see also Opp. at 13. But

Congress has repeatedly altered the SALT Deduction since the passage of the Sixteenth

Amendment, and this legislative history shows that Congress has not “view[ed] its authority to

limit the SALT deduction as subject to any relevant constitutional constraints.” Yellen, 15 F.4th

at 581–82. Moreover, Plaintiffs’ citation to statements by various members of congress, see SAC

¶¶ 22–24, 26–27, does not undermine this point. Yellen, 15 F.4th at 581–82 (noting that such

statements “have over time been drowned out by the overall statutory history of the deduction,”

which does not reflect that Congress believed thatthe deduction was required by the Constitution).

Therefore, history does not show that the SALT Deduction is constitutionally compelled by

principles of federalism.

Fourth, Plaintiffs argue that the SALT Deduction Cap is an unconstitutional use of

Congress’s taxing power to impose a regulatory penalty. Opp. at 8–10. Congress may not use its

taxing power to “adopt[] the criteria of wrongdoing” and then impose a tax on those who do not

comply. See Bailey v. Drexel Furniture Co., 259 U.S. 29, 38 (1922) (striking down a “so-called

tax” that was primarily meant to deter child labor). But the SALT Deduction is not a tax. See

Yellen, 15 F.4th at 572 (describing the SALT Deduction as allowing “taxpayers to deduct from

their taxable income” (emphasis added)). Moreover, income tax deductions are not available by

right but instead are afforded to taxpayers only by the grace of Congress. INDOPCO, 503 U.S. at

84. Accordingly, the Cap cannot be a regulatory penalty.

Fifth, Plaintiffs allegethat the SALT Deduction Cap was meant “to make States lower their

taxes and the necessary public services they provide.” SAC ¶ 65. This appears to implicate the

anticommandeering doctrine, see Br. at 13–16, which instructs that “Congress may not simply

commandeer the legislative processes of the States by directly compelling them to enact and

enforce a federal regulatory program.” Murphy v. Nat’l Collegiate Athletic Ass’n, 584 U.S. 453,

472 (2018) (citation modified) (quoting New York, 505 U.S. at 161).

TheSALT DeductionCap does not violate this doctrine, as it does not directly compel the

states to do anything. See id. at 475 (recognizing that in Baker, a law altering the tax treatment of

state-issued bonds “did not order the States to enact or maintain any existing laws” and thus did

not directly compel the states to act). Instead, “it simply ha[s] the indirect effect of pressuring

States to” alter their tax policies. Id. For example, a state may opt to lower taxes so that their

residents do not pay in excess of the SALT Deduction Cap, thereby incentivizing resident

taxpayers to remain in the state. But nothing about the Cap compels any state to do anything at

all. See id. at 474 (holding that a federal statute that prohibited states from authorizing sports

gambling violated the anticommandeering doctrine because it “unequivocally dictate[d] what a

state legislature may and may not do”). Accordingly, the SALT Deduction Cap does not violate

the anticommandeering principle.

Sixth, Plaintiffs allege that the SALT Deduction Cap “is intended to interfere with many

States’ sovereign authority to determine their fiscal policies.” SAC ¶¶ 92–93. Congress may use

its taxing and spending powers to encourage the states to regulate in a particular way, including

by using financial incentives to influence states’ policy choices. Yellen, 15 F.4th at 582 (2d Cir.

2021) (citing New York, 505 U.S. at 166). Where this “pressure turns into compulsion,” however,

such action may infringe upon state sovereignty and violate principles of federalism by “indirectly

coerc[ing] a State to adopt a federal regulatory system as its own.” Nat’l Fed’n of Indep. Bus. v.

Sebelius, 567 U.S. 519, 577–78 (2012) (“NFIB”). But the Supreme Court has only found such

coercion once: NFIB. Yellen, 15 F.4th at 582. Under the Affordable Care Act, states that opted

out of the expansion of health care coverage under Medicaid stood to lose both newly appropriated

Medicaid funding as well as all of their existing federal Medicaid funding. NFIB, 567 U.S. at 581.

The Court recognized that this amounted to a potential 10 percent loss of a state’s budget, leaving

the state with “with no real option but to acquiesce in the Medicaid expansion.” Id. at 581–82.

The Court thus concluded that such a significant financial incentive was unconstitutionally

coercive. Id.

Turning to Plaintiffs’ claims here, they assert that “[e]xperts expect New Jersey and New

York real estate to lose value as a result” of the SALT Deduction Cap. SAC ¶ 56. They add that

several high-tax states did lose citizens to migration between the passage of the 2017 Tax Act and

2020 because citizens had an incentive to move to low-tax states. Id. ¶¶ 60–62, 65. But these

assertions do not show that state tax revenues will decrease so significantly that the SALT

Deduction Cap would “exert such undue pressure as to raise a genuine constitutional concern.”

Yellen, 15 F.4th at 583 (citing NFIB, 567 U.S. at 581). In fact, even in Yellen, where the court had

allegations of specific estimated tax revenue losses for the plaintiff-states as a result of the Cap,

the court found that the approximate “quantitative losses constitute[ed] such a small portion of a

State’s budget” so as to not amount to federal coercion. Id. (citing NFIB, 567 U.S. at 581).

Therefore, the SAC fails to show that the SALT Deduction Cap is unconstitutionally coercive. As

all of Plaintiffs’ arguments in defense of Counts One and Seven are unpersuasive, Defendants’

motion to dismiss these claims is granted.

B. Privileges and Immunities Clause of Article IV (Count Two)

In Count Two, Plaintiffs assert that the SALT Deduction Cap violates the Privileges and

Immunities Clause of Article IV because it discriminates against citizens of high-tax states. SAC

¶¶ 97–102. This provision states that “[t]he Citizens of each State shall be entitled to all Privileges

and Immunities of Citizens in the several States.” U.S. Const. art. IV, § 2, cl. 1.

The Privileges and Immunities Clause, however, is inapplicable to the challenged action.

This Clause was intended “to foster a national union by discouraging discrimination against

residents of another state on the basis of citizenship.” Yerger v. Mass. Turnpike Auth., 395 F.

App’x 878, 885 (3d Cir. 2010) (citation omitted); see alsoLutz v. City of York, Pa., 899 F.2d 255,

262 (3d Cir. 1990) (“[T]he purpose of the [Privileges and Immunities Clause] was simply ‘to insure

to a citizen of State A who ventures into State B the same privileges which the citizens of State B

enjoy.’” (quoting Toomer v. Witsell, 334 U.S. 385, 395 (1948))). It therefore imposes a limit on

state power, not federal power. Pollack v. Duff, 793 F.3d 34, 41 (D.C. Cir. 2015) (noting that the

Supreme Court “has [n]ever held [that] an action taken by any branch of the federal government

is subject to scrutiny under the Privileges and Immunities Clause of Article IV”); see also Laws.

for Fair Reciprocal Admission v. United States, No. 22-2399, 2023 WL 145530, at *9 (D.N.J. Jan.

10, 2023) (“The federal government is simply not subject to scrutiny under the Privileges and

Immunities Clause of Article IV.”). Plaintiffs challenge a federal action, and therefore, the

Privileges and Immunities Clause of Article IV does not apply.

Plaintiffs contend that the original intent of the Clause was actually to “protect against

federal action.” Opp. at 18–19, 25–27. Theframers’intent, however, was to remedy “the practice

of some States denying to outlanders the treatment that its citizens demanded for themselves.”

Austin v. New Hampshire, 420 U.S. 656, 660–61 (1975). Thus, contrary to Plaintiffs’ argument,

the intent of the Clause was to address discrimination by the states, not the federal government.

Plaintiffs additionally cite Barron v. City of Baltimore, 32 U.S. 243 (1833), to argue that

the Clause was intended to restrain federal action. Opp. at 17–18. They contend that Barron

stands for the proposition that constitutional clauses intended to limit state power specifically say

so, and that the absence of “no state shall” from a clause indicates that it applies to the federal

government. Id. at 17. Barron, however, merely held that the prohibitions in Article I, Section 10

expressly applied to the states because they affirmatively provided that “no state shall” take any

of the listed actions. 32 U.S. at 248–49. The Court did not hold that all of the Constitution’s

restrictions on state power categorically include the language “no state shall.” In fact, Barronalso

explains that the location of a clause within the Constitution is relevant to whether it appliesto the

state or federal governments. Id. at 248 (noting that certain prohibitions on state power are

“brought together in the same section”). And the location of the Privileges and Immunities Clause

cuts against Plaintiffs’ position:

If the Privileges and Immunities Clause applied to the federal government, then we

might expect to find it in Article I, § 9, alongside other limitations upon the powers

of the Congress to discriminate against residents of certain states, such as the Export

Taxation Clause and the Port Preference Clause; in any case, it would not be in

Article IV

Pollack, 793 F.3d at 44. Thus, Barron does not demonstrate that the Clause limits federal power.

Because the Privileges and Immunities Clause has no application to the challenged federal

action, the Court need not address Plaintiffs’ other arguments as to why the action violated the

Clause. Accordingly, Defendants’ motion to dismiss Count Two is granted.

C. Ninth Amendment (Count Three)

In Count Three, Plaintiffs assert that the SALT Deduction Cap violates the Ninth

Amendment by disparaging the rights of citizens to be free from arbitrary or discriminatory taxes

on phantom income3 and double taxation.4 SAC ¶¶ 103–113. The Ninth Amendment provides

that “[t]he enumeration in the Constitution, of certain rights, shall not be construed to deny or

3 “Phantom income” occurs when a “taxpayer receives taxable income but does not presently

receive cash or other tangible economic benefits.” Timothy M. Todd, Phantom Income and

Domestic Support Obligations, 67 Buff. L. Rev. 365, 376–77 (2019). It requires someone to “pay

taxes on something without receiving . . . any commensurate asset with which to pay those taxes.”

Id. at 377. For example, a partnership does not pay income taxes at the entity level. Id. Rather,

the net income of the partnership is allocated to each partner, who then report their allocated

income on their own tax returns and pay the taxes individually. Id. Although the partnership may

have a positive net income, and thus the partners report receiving a positive net income for tax

purposes, that does not necessarily mean that the partners actually received their allocated net

income in cash through a distribution. Id. Instead, the partnership may have reinvested that

income into the business. Id. at 377–78. In this situation, the partners are said to have received

“phantom income,” because while they must report on their individual taxes that they had positive

net income, they did not actually receive the cash distribution on which to pay the corresponding

income tax. Id. at 378.

Plaintiffs assert that “state taxes deducted and withheld from their income” by New Jersey and

“real estate taxes” paid to New Jersey constitute “phantom income” because the “Plaintiffs have

never received the benefit of that income.” SAC ¶ 69; see also id. ¶ 129 (“The income withheld

by operation of law by the State in which the taxpayer resides is income the taxpayer does not

physically receive, i.e., phantom income.”). Plaintiffs further argue that these taxes are phantom

income because the “taxpayer did not keep or possess [the sums] paid to the state” or the sums

were “never received [because they were] withheld.” Opp. at 2. There are two flaws in Plaintiffs’

argument. First, that Plaintiffs did not keep the sums paid to the state in taxes says nothing about

whether they received the corresponding assets on which they paid the taxes. By Plaintiffs’

definition, all state and local taxes would constitute phantom income just by virtue of an individual

having to pay the taxes at all. Second, that Plaintiffs had certain taxes withheld from paychecks

by the state does not mean that they never received the benefit of that income. Tax withholdings

allow an individual to pay the commensurate portion of income tax with every paycheck, rather

than paying all of one’s income tax one time a year. See Tax Withholding for Individuals,

https://www.irs.gov/individuals/employees/tax-withholding (last visited Apr. 13, 2026). But

unlike true “phantom income,” an individual whose taxes are withheld from a paycheck still

receives the income that is subject to taxation. Because Plaintiffs’ argument misconstrues the

nature of “phantom income,” their assertion that the SALT Deduction Cap leads to a tax on

phantom income lacks merit.

4Plaintiffs assert that “[d]ouble taxation exists when the taxpayer has paid taxes to the state where

he resides and then pays federal taxes on the same money he has already paid the state.” Opp. at

15. According to Plaintiffs, Congress not providing an unlimited SALT Deduction constitutes

double taxation and is unconstitutional. Id. at 27–28. The cases Plaintiffs cite to support this

position, however, involve challenges to state (not federal) taxes based on the interstate commerce

clause. See Comptroller of the Treasury of Md. v. Wynne, 575 U.S. 542 (2015); Complete Auto

Transit v. Brady, 430 U.S. 274 (1977); Cent. Greyhound Lines, Inc., of N.Y. v. Mealey, 334 U.S.

disparage others retained by the people.” U.S. Const. amend. IX. But this amendment “does not

independently provide a source of individual constitutional rights.” Perry v. Lackawanna Cnty.

Children & Youth Servs., 345 F. App’x 723, 726 (3d Cir. 2009) (citations omitted). Rather than

providing any substantive rights, courts interpret the Ninth Amendment as a rule of construction.

Soder v. Chenot, No. 06-1522, 2007 WL 1098970, at *4 (M.D. Pa. Apr. 11, 2007) (citation

omitted); see also Cousar v. Morgan, No. 21-14517, 2021 WL 5918474, at *5 (D.N.J. Dec. 15,

2021) (“The Ninth Amendment is not a source of rights as such; it is simply a rule about how to

read the Constitution.” (citation omitted)). Any claim arising under the Ninth Amendment

accordingly fails as a matter of law. Fennimore v. Lower Twp., No. 09-2090, 2011 WL 1705599,

at *4 n.5 (D.N.J. May 4, 2011). Therefore, Defendants’ motion to dismiss Count Three is granted.

D. Full Faith and Credit Clause of ArticleIVand thePreamble (Count Four)

In Count Four,5 Plaintiffs assert that the SALT Deduction Cap violates the Full Faith and

Credit Clause of Article IV and the Preamble to the U.S. Constitution. SAC ¶ 114–122. The Full

653 (1948); Gwin, White & Prince v. Henneford, 305 U.S. 434 (1939); J.D. Adams Mfg. Co. v.

Storen, 304 U.S. 307 (1938); Armco Inc. v. Hadesty, 467 U.S. 638 (1984); Container Corp. of Am.

v. Franchise Tax Bd., 463 U.S. 159 (1983); Tyler Pipe Indus., Inc. v. Wash. State Dep’t of Revenue,

483 U.S. 232 (1987). These authorities do not support Plaintiffs’ assertion that subjecting an

individual to federal and state taxes on the same income constitutes “double taxation.” Plaintiffs

thus fail to provide any legal support for their double taxation argument.

5In addition to contending that Plaintiffs fail to state a claim here, Defendants argue that the Court

lacks jurisdiction to consider Count Four as to Plaintiffs’ 2018 tax refund claim (but nottheir2019

claim) based on the “variance doctrine.” Br. at 9–11. This doctrine bars a taxpayer from “raising

in a refund suit grounds for recovery which have not previously been set forth in its

[administrative] claim for a refund” before the Internal Revenue Service. Shadoan v. United

States, No. 12-2538, 2021 WL 5235112, at *5 (S.D. Ind. Nov. 8, 2021) (citation omitted)). Thus,

to the extent that Plaintiffs did not raise the constitutional provisions at issue in Count Four at the

administrative level in their 2018 refund claim, the Court lacks jurisdiction to consider those

arguments here. Nevertheless, because Defendants do not contend that the Court lacks jurisdiction

as to the 2019 refund claim, the Court must stillconsider whether Plaintiffs state a claim in Count

Four.

Faith and Credit Clause provides that “Full Faith and Credit shall be given in each State to the

public Acts, Records, and judicial Proceedings of every other State.” U.S. Const. art. IV, § 1. The

Preamble to the U.S. Constitution states that the Constitution’s purpose is to “form a more perfect

union” and to “promote the general welfare.”

The Full Faith and Credit Clause does not apply to federal action. Instead, it “require[s]

the judgments of the courts of one State to be given the same faith and credit in another State as

they have by law or usage in the courts of the State rendering them.” Morris v. Jones, 329 U.S.

545, 547 (1947); see also Franchise Tax Bd. of Cal. v. Hyatt, 587 U.S. 230, 245 (“The Court’s

Full Faith and Credit Clause precedents . . . demand that state-court judgments be accorded full

effect in other States and preclude States from ‘adopt[ing] any policy of hostility to the public

Acts’ of other States.” (alteration in original) (citation omitted)); Zahl v. Warhaftig, 655 F. App’x

66, 77 (3d Cir. 2016) (noting that the Clause and implementing statute requires that federal courts

“give ‘full faith and credit’ to the judgments of state courts”). Plaintiffs challenge a provision of

a federal law and thus the Full Faith and Credit Clause does not apply.

Plaintiffs’ reliance on the Preamble to the Constitution is similarly misplaced. The

Preamble does not provide any substantive rights but rather “describes the goals and aspirations

behind the text of the Constitution.” Tinsley v. Methodist Hosp. of Ind., Inc., 70 F.3d 1275, 1275

(7th Cir. 1995) (citing Jacobson v. Commonwealth of Mass., 197 U.S. 11, 22 (1905)). It thus

cannot form the basis of any claim and Defendants’ motion to dismiss Count Four is granted.

E. Intergovernmental Tax Immunity (Count Five)

In Count Five, Plaintiffs assert that the SALT Deduction Cap conflicts with the Reciprocal

Immunity Doctrine, also known as Intergovernmental Tax Immunity. SAC ¶¶ 123–40. This

doctrine provides that the “States can never tax the United States directly,”whether the “levy falls

on the United States itself, or on an agency or instrumentality so closely connected to the

Government that the two cannot realistically be viewed as separate entities.” Baker, 485 U.S. at

523 (citations omitted). And the “rule with respect to state tax immunity [from direct federal taxes]

is essentially the same,” with some exceptions. Id.

Congress’s altering of the SALT Deduction does not violate this doctrine. Even if the Cap

was considered to be a tax, it merely changes the amount of income that may be collected by the

federal government from individualtaxpayersand thus is not a direct tax on the states themselves.

See id. at 526–27 (holding that a federal law removing a tax exemption from state-issued bonds

did not violate Intergovernmental Tax Immunity because the tax was “imposed on and collected

from bondholders,” and not from the states). The SALT Deduction Cap therefore does not violate

Intergovernmental Tax Immunity and Defendants’ motion to dismiss Count Five is granted.

F. Republican Guarantee Clause of Article IV (Count Six)

In Count Six,6Plaintiffs assert that the SALT Deduction Cap conflicts with the Republican

Guarantee Clause. SAC ¶¶ 141–46. This provision, which states that “[t]he United States shall

guarantee to every State in this Union a Republican Form of Government,” U.S. Const. art. IV, §

4, does not provide the basis for a justiciable claim. See Rucho v. Common Cause, 588 U.S. 684,

718 (2019) (noting that the Supreme Court has concluded “several times” that the Republican

Guarantee Clause “does not provide the basis for a justiciable claim”). Accordingly, Defendants’

motion to dismiss Count Sixis granted.

G. Sixteenth AmendmentClaims (Counts Eight and Nine)

6As with Count Four, see supra n.5, Defendants argue that the Court lacks jurisdiction to consider

Count Six with respect to Plaintiffs’ claims for a tax refund for 2018 (but not 2019) based on the

“variance doctrine.” Br. at 9–11. Again, because Defendants do not raise this argument as to the

2019 refund claim, the Court must still consider whether Plaintiffs state a claim in Count Six.

In Counts Eight and Nine, Plaintiffs assert that the SALT Deduction Cap violates the

Sixteenth Amendment, which provides that “[t]he Congress shall have power to lay and collect

taxes on incomes, from whatever source derived, without apportionment among the several States,

and without regard to any census or enumeration.” U.S. Const. amend. XVI.

i. The Sixteenth Amendment Does Not Require a SALT Deduction

Nothing in the text of the Sixteenth Amendment expressly requires a SALT deduction (or

any deduction at all), nor does it limit Congress’s authority to revoke or limit the SALT deduction

once enacted. Yellen, 15 F.4th at 580; see also Alpenglow Botanicals, 894 F.3d at 1202

(“Congress’s choice to limit or deny deductions for [certain business] expenses . . . does not violate

the Sixteenth Amendment.”). Nevertheless, Plaintiffs allege that the “meaning and intent” of the

Sixteenth Amendment shows that the SALT Deduction Cap is unconstitutional. SAC ¶ 165. They

add that the “States ratified the 16th Amendment with the representations and understanding that

it would not expand the taxing power of the federal government” and that “State tax revenues

could not be federally taxed.” Id. ¶¶ 163–64.

The Constitution originally provided that “[n]o . . . direct[] Tax shall be laid, unless in

Proportion to the Census.” U.S. Const. art. I, § 9, cl. 4. The Supreme Court had interpreted “direct”

taxes to include income taxes. See Bowers v. Kerbaugh-Empire Co., 271 U.S. 170, 174 (1926)

(citing Pollock, 158 U.S. at 618 (1895)). The Sixteenth Amendment then eliminated the

requirement that such “direct taxes” be subject to apportionment relative to the states’ populations.

Bowers v. Kerbaugh-Empire Co., 271 U.S. 170, 174 (1926) (citations omitted). Indeed, “it was

not the purpose or effect of that amendment to bring any new subject within the taxing power,” as

“Congress already had power to tax all incomes.” Id. Thus, Plaintiffs’ assertion that the states

ratified the amendment with the understanding that it would not expand federal taxing power is to

no avail as no such expansion occurred. Accordingly, the Sixteenth Amendment does not

implicitly require the SALT Deduction.

ii. History Does Not Show that the SALT Deduction is Constitutionally

Required

In the Sixteenth Amendment Counts and elsewhere, Plaintiffs assert that the history

surrounding the SALT Deduction shows that it is constitutionally required. See, e.g., SAC ¶ 157

(“In imposing an unprecedented $5,000 per person limitation on the deductibility of SALT

revenue, Congress has exceeded its powers under the 16th Amendment.”); id. ¶ 28 (“Congress has

never before limited the amount of the exemption from federal taxation and the deduction of SALT

revenues to a specific dollar cap of such taxes . . . .”). As an initial matter, “[l]egislative novelty

is not necessarily fatal; there is a first time for everything.” NFIB, 567 U.S. at 549. In Baker, for

example, the Supreme Court upheld a change to the tax code even where Congress had not altered

the relevant provision since enacting the first federal income tax statute. 485 U.S. at 523, 527.

More important, however, and contrary to Plaintiffs’ assertion, Congress has repeatedly

altered the availability and scope of the SALT Deduction. Yellen, 15 F.4th at 573 (“[A]mendments

to the Tax Code have over time also made the deduction more difficult or less attractive for

taxpayers to claim.”). For example, in 1964, Congress amended the SALT Deduction directly by

providing that only certain specific state and local taxes were deductible. Id. (citation omitted).

Congress made additional changes in 1986 by prohibiting certain high-income taxpayers from

claiming the SALT Deduction and then again in 1990 by reducing the amount of the SALT

Deduction available to taxpayers exceeding certain adjusted gross income thresholds. Id. at 573–

74 (citations omitted). Thus, rather than supporting Plaintiffs’ position, the history of the SALT

Deduction suggests that “Congress did not view its authority to limit the SALT deduction as

subject to any relevant constitutional constraints.”7 Yellen, 15 F.4th at 581–82.

iii. The SALT Deduction Cap Does Not Violate the Sixteenth Amendment or the

Uniformity ClauseBy Having a Non-Uniform Effect on the States

Count Nine also asserts that the SALT Deduction Cap exceeds the scope of the Sixteenth

Amendment because the Amendment “did not authorize unequal taxation of citizens based on the

state of residence.” SAC at 24. In addition to invoking the Sixteenth Amendment, this Count

appears to also rely on the Uniformity Clause of Article I, which provides that taxes “shall be

uniform throughout the United States.”8 U.S. Const. art. I, § 8, cl. 1.

Plaintiffs’ argument that a tax with non-uniform effects on taxpayers from different states

violates either constitutional provision lacks merit. All that the Constitution “requires is that the

law shall be uniform in the sense that by its provisions the rule of liability shall be alike in all parts

of the United States.” Florida v. Mellon, 273 U.S. 12, 17 (1927). It does not require “Congress

to devise a tax that falls equally or proportionatelyon each state.” United States v. Ptasynski, 462

U.S. 74, 82 (1983). Rather, a “tax is uniform when it operates with the same force and effect in

7 Beyond the legislative history, Courts have also upheld constitutional challenges to changes to

the SALT Deduction, including on Sixteenth Amendment grounds. See Campbell v. United States,

No. 00-4746, 2001 WL 1262934, at *3–4 (S.D.N.Y. Oct. 22, 2001) (finding that the 1980

amendment did not violate Article I, Section 8, the Tenth Amendment, or the Sixteenth

Amendments), aff’d, 45 F. App’x 50 (2d Cir. 2002); Okin v. C.I.R., 808 F.2d 1338, 1342 (9th Cir.

1987) (rejecting a due process challenge to the 1986 amendment to the SALT Deduction and

collecting cases that did the same).

8 Although Plaintiffs state that a claim under the Uniformity Clause “is not pled separately as a

cause of action herein,” Opp. at 47, they cite to case law concerning this Clause and invoke this

Clause to support their argument that the SALT Deduction Cap “creates uniformity problems.”

Id. at 49; see also id.at 51 (“Many clauses of the fabric of the Constitution are designed to ensure

that federal taxes . . . are applied equal to all states and their citizens.” (citing U.S. Const. art. I, §

8, cl. 1)). Accordingly, the Court will address this argument by reference to both the Sixteenth

Amendment and the Uniformity Clause.

every place where the subject of it is found.” Id. (quoting Head Money Cases, 112 U.S. 580, 594

(1884)). The SALT Deduction Cap meets this requirement,asacitizen of any state may claim the

deduction subject to the same Cap. See Campbell, 2001 WL 1262934, at *4 (finding that an earlier

amendment to the SALT Deduction applied equally to citizens of all states “as it limit[ed] itemized

deductions that all taxpayers above a specific adjusted gross income can take”). And the “outsized

effect of the SALT deduction cap on the [Plaintiffs] arises only because [they] previously

benefitted most from the SALT deduction, not because the cap applies to some States but not

others.” Yellen, 15 F.4th at 584. Thus, the SALT Deduction Cap does not unconstitutionally treat

taxpayers of the various states differently.

Finally, Plaintiffs’ reliance on statements by certain members of Congress and the

Executive branch suggesting that the SALT Deduction Cap was enacted to intentionally punish

certain states does not save their claim. See, e.g., SAC ¶¶ 45–53. Courts “generally presume that

government officials act in good faith.” Cnty. of Butler v. Governor of Pa., 8 F.4th 226, 230 (3d

Cir. 2021). And “‘cherry-picked’ statements” from individual legislators “cannot be deemed to

reflect the views of other legislators, much less of a majority of those who enacted the statute.”

OFC Comm Baseball v. Markell, 579 F.3d 293, 302 n.5 (3d Cir. 2009) (citation omitted). In any

event, a handful of quotes do not change the fact that the SALT Deduction Cap complies with the

Supreme Court’s requirements for tax uniformity. Therefore, Defendants’ motion to dismiss

Counts Eight and Nine is granted.

H. Declaratory Relief/Tax Refund (Count Ten)

In Count Ten, Plaintiffs request a judgment declaring the SALT Deduction Cap

unconstitutional. SAC ¶¶ 167–70. As no substantive claims remain in this action, the declaratory

judgment claim will be dismissed. See Bonilla v. City of Allentown, 359 F. Supp. 3d 281, 305

(E.D. Pa. 2019), as amended (Apr. 19, 2019).

IV. CONCLUSION

Accordingly, for the reasons stated above, IT IS on this 28th day of May, 2026;

ORDERED that Defendants’ motion to dismiss (ECF No. 33) is GRANTED; and it is

further

ORDERED that Plaintiffs’ SAC (ECF No. 24) is DISMISSED WITHOUT

PREJUDICE; and it is further

ORDERED that Plaintiffs shall have thirty (30) days from entry of this Opinion and Order

to submit a further amended complaint that addresses the deficiencies identified in this Opinion

and Order. Insofar as Plaintiffs submit a further amended complaint, they shall also provide a

form of the amended complaint that indicates in what respect it differs from the current complaint,

by bracketing or striking through materials to be deleted and underlining materials to be added.

See L. Civ. R. 15(a)(2); and it is further

ORDERED that Plaintiffs’ cross motion for summary judgment (ECF No. 42) is DENIED

AS MOOT; and it is further

ORDERED that the Clerk’s Office is directed to mark this case as CLOSED.

SO ORDERED.

s/ Claire C. Cecchi

CLAIRE C. CECCHI, U.S.D.J.