Tax Notes logo

Judge Dismisses Missouri's Suit Over Restriction on Federal Funding 

Posted on May 12, 2021

A federal judge has dismissed Missouri’s case over a provision in the recently adopted federal COVID-19 relief act that restricts states from using the aid it provides to offset reductions in net tax revenue, on grounds that the state lacks standing and the challenge is not yet ripe.

U.S. District Judge Henry Edward Autrey dismissed Missouri’s motion seeking to block the provision’s enforcement in a May 11 opinion, memorandum, and order in Missouri v. Yellen.

Missouri Attorney General Eric Schmitt (R) filed a lawsuit March 29 with the U.S. District Court for the Eastern District of Missouri against the Department of the Treasury, Treasury Secretary Janet Yellen, and acting Treasury Inspector General Richard K. Delmar.

The suit was filed over a provision in section 9901 of the American Rescue Plan Act of 2021 (ARPA, P.L. 117-2) that restricts federal aid from being used by a state or territory to “either directly or indirectly offset a reduction in the net tax revenue of such state or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.”

Missouri is among several states that have filed lawsuits over the restriction.

Missouri sought to have the provision declared unconstitutional and severed from the act, and it filed a motion for preliminary injunction April 2 seeking to prevent Treasury from enforcing any interpretation of the provision “that is broader than prohibiting the deliberate and express use of the act’s relief funds to offset revenue losses from a specific tax cut.”

The judge determined that the court lacks jurisdiction to hear the case because Missouri “failed to establish Article III standing, and its claim is not ripe for adjudication.”

“The alleged harm to Missouri is too speculative, abstract, and remote to establish justiciability,” Autrey wrote.

Joseph Bishop-Henchman of the National Taxpayers Union Foundation, which filed an amicus brief April 23 in support of Missouri’s motion for preliminary injunction, told Tax Notes that there are good grounds for appeal.

“The judge ruled that he can't make a conclusion about whether the ARPA harms the states because he concluded that ARPA can’t harm states,” Bishop-Henchman said.

Schmitt could not be reached for comment by press time.

Copy RID