Custom taxonomy & post slug permalink

I was able to solve this by defining a rewrite rule:

function rewrite_rules($rules) {
  $newRules = array();
  $newRules['states/(.+)/(.+?)$'] = 'index.php?district=$matches[2]';
  return array_merge($newRules, $rules);
}
add_filter('rewrite_rules_array', __NAMESPACE__ . '\\rewrite_rules');