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1 1 (April 2, 2021)

handle is hein.crs/govecwq0001 and id is 1 raw text is: Congressional ______ *.Research Service Spending Clause Conditions and the Coronavirus State Fiscal Recovery Fund April 2, 2021 The American Rescue Plan Act of 2021 (ARPA) tasks the Department of the Treasury (Treasury) with disbursing to states more than $190 billion appropriated for the Coronavirus State Fiscal Recovery Fund (CSFRF). States may use CSFRF dollars to cover a wide range of costs incurred by December 31, 2024. States must certify that they will comply with statutory conditions on the use of CSFRF funds. States that violate a condition must repay Treasury an amount equal to the amount of funds used in the violation. Treasury may recover funds by reducing states' CSFRF payments, in the event Treasury decides to split payments to states, or (perhaps) through offsets applied to other federal funds owed to states. One condition has attracted legal controversy. ARPA prohibits states from using CSFRF funds to directly or indirectly offset a reduction in the net tax revenue of such State resulting from a change in law, regulation, or administrative interpretation that reduces any tax or delays the imposition of any tax or tax increase. The statute lists relevant changes to include a reduction in a rate, a rebate, a deduction, a credit, or otherwise. For states participating in the CSFRF program, this tax condition applies during a covered period that began on March 3, 2021, and ends on the last day of the fiscal year in which a state spends or returns all CSFRF funds or Treasury recovers improperly spent funds. States must periodically report to Treasury all modifications to their tax revenue sources. At least 25 States (the States or objecting States) contend that the tax condition exceeds Congress's authority under the U.S. Constitution's Spending Clause. Sixteen of these States have filed suit in federal district courts located in Alabama, Arizona, Missouri, and Ohio. Among other relief, these lawsuits ask the federal courts to declare the tax condition unconstitutional and enjoin its enforcement. The remaining nine States joined a March 16, 2021, letter to Treasury Secretary Janet Yellen. In general, States objecting to the tax condition argue, in part, that the condition is impermissibly coercive and ambiguous. This Sidebar examines both contentions and considers what might be next for the tax condition. Spending Clause Doctrine Arguments over the tax condition invoke key components of the constitutional design. The states are one half of the Constitution's dual sovereignty system. Under the Tenth Amendment, all legislative power Congressional Research Service https://crsreports.congress.gov LSB10588 CRS Legal Sidebar Prepared for Members and Committees of Congress

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