In a brief filed today with the state of Ohio’s Southern District Court, the National Taxpayers Union Foundation’s Taxpayer Defense Center argues that American Rescue Plan Act of 2021 (ARP) contains a provision that is so ambiguous that enforcement will be arbitrary. Joe Bishop-Henchman, the brief’s co-author, recently addressed the matter in a letter to Secretary Janet Yellen. The American Rescue Plan Act of 2021, signed by President Biden in March of this year, includes a section that forbids federal funds from being used “to either directly or indirectly offset a reduction in the net tax revenue.” If this provision is violated, the state will be forced to pay a fine “equal to the amount of funds used in violation.”
The brief argues that the language used in ARP is so nebulous that it can be read in a number of different ways as written:
The provision is capable of multiple meanings, such that an honest person (or state government) attempting to abide by its terms is necessarily guessing at its meaning. This has result in paralyzing state legislative action for fear of violating the provision, undermining ARPA’s purpose of action to provide pandemic relief. This chilling effect of the ARPA provision, coupled with the lack of legislative history and the limitations of any future Treasury guidance, means one of two things. Either the provision is so capable of multiple meanings that it is void for vagueness, or is an exercise of such great power by Congress as to deprive states of independent action on their tax policies for five years.
Unless the language is clarified, states might not be willing to take legislative action because it might violate this regulation and possibly force the state to pay a fine simply for trying to control its own tax policy. This would be antithetical to ARP’s purpose of providing relief to American taxpayers.
NTUF’s Vice President of Tax Policy and Litigation Joe Bishop-Henchman wrote to the defendant Secretary Janet Yellen about this specific provision. The Treasury Department released a statement on one part of the disputed clause, but it still has not addressed seven others that the letter requested clarification on.
To discuss the case and the NTUF amicus brief with Joe Bishop-Henchman, please contact Kevin Glass, NTUF Vice President of Communications, at 703-299-8670 or at kglass@ntu.org.