New York Gov. Andrew Cuomo gives his 2018 State of the State address. Photo Credit: The Associate Press/Hans Pennink

Gov. Andrew Cuomo's plan to sue the federal government over the recently enacted tax bill on grounds that it violates constitutional principles would face significant challenges, legal experts say.

Last week, Cuomo, a Democrat, laid out a litigious agenda for the year arguing that the federal government was punishing blue states, such as New York, with it's recently passed tax overhaul legislation. During his annual address to the state Legislature, Cuomo said his administration believed that the GOP tax plan signed by President Donald Trump in December was “illegal” and that the state would “challenge it in court as unconstitutional.”

Law experts queried by the New York Law Journal doubted the likelihood of success of such a legal challenge, but on Monday the Cuomo administration's top counsel said the governor's office is considering ”a variety of legal claims” against the federal government in connection with the tax bill.

Darien Shanske, a University of California, Davis tax law professor, said Cuomo's plan to sue the federal government over the tax overhaul is “not particularly likely to succeed” in court, especially since the 16th Amendment of the U.S. Constitution, ratified in 1913, allows Congress to collect taxes on incomes.

“For the federalism claim, because the definition of income is broad and it's up to Congress to define it … Congress can make rational distinctions if it wants to,” Shanske said.

The tax plan Trump signed in December caps a deduction for state and local taxes at $10,000—the deduction was previously unlimited—which will increase the federal tax liability for many homeowners in high-tax states such as New York and New Jersey. The tax plan is “violative of states' rights and the principle of equal protection,” the Democratic governor alleged last week.

But if Congress wants to take away the deductibility of state and local taxes, “it's entitled to, because the arguments for doing so certainly survive the rational basis review,” Shanske said in an interview.

Thomas Brennan, a tax professor at Harvard Law School, said Cuomo's plan to sue the federal government over the tax plan would be “difficult.”

“My own thought is it would be a challenging thing to challenge this law on constitutionality, at least the SALT (state and local taxes) restriction,” Brennan said of the proposed Cuomo administration lawsuit. “I imagine the strategy would be to argue about an infringement on states' rights of some sort.”

Similar to Shanske's argument, Brennan also noted that deductions are “considered to be a matter of legislative grace” by Congress, and Congress is entitled to collect taxes on income under the 16th Amendment.

But on Monday, the Governor's top counsel, Alphonso David, said in a statement to the New York Law Journal that the administration is “exploring” several avenues to pursue a lawsuit .

“New York is exploring a variety of legal claims in response to the divisive federal SALT law. The elimination of the state and local tax deduction targets certain states and impinges on the ability of those states to provide the government chosen by their own citizens. The practical and intended impact of this law is to impose a disadvantage on 'blue' states, which are governed by Democratic governors, notwithstanding any purported 'legitimate' justification. Courts have historically conducted a 'searching and careful inquiry' and rejected government action in the past that inappropriately targets a class of people and this should be no different,” David said.

The office of New York Attorney General Eric Schneiderman said it is working with the Cuomo administration on a legal response.

In response to the federal tax bill, Cuomo signed an executive order late last month allowing New Yorkers to prepay their property taxes before Jan. 1, 2018. But the federal IRS issued an advisory on Dec. 28 that a “prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017, ” and that “ state or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.” The IRS ruling limits the number of taxpayers who could take advantage of prepaying 2018 taxes, a one-off fix in any case.

The Democratic governor also said last week that he would soon announce a “major shift” in the state tax code that could “restructure the current income and payroll tax system.” Details on his tax plan are slated to be released later this month. A proposed plan to impose a payroll tax on employers, which is still legally deductible on federal taxes, appears to have the approval of members of his own party.

Assembly Speaker Carl Heastie, who leads the Democratic-dominated Assembly, said last week that converting the state's income tax into a payroll tax “makes a lot of sense.”

“We're very encouraged by the payroll tax idea because then that would restore what Washington has taken from us,” said Heastie, D-Bronx. But talking to reporters Monday, Heastie tempered his remarks saying he's “in favor of investigating the payroll tax.” “I know it's going to have challenges,” the Bronx Democrat said.

Senate Majority Leader John Flanagan, a Republican from Long Island, said he didn't know the details of Cuomo's plan.

“My initial reaction is, we don't want to talk about anything that relates to raising taxes,” Flanagan said last week.

While suing the federal government over the tax bill seems feasible, Cuomo's plan to change the tax structure is “much more promising,” Shanske said.

“The state of New York is entitled to raise revenue, within constitutional bounds, the way it wants to, as long as it does not violate the federal Constitution,” Shanske said.

This story has been updated with comment from Gov. Andrew Cuomo's office and Assembly Speaker Carl Heastie received Monday afternoon.