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Treasury Files Notice of Appeal in ARPA Suit 

Posted on Nov. 29, 2021

Treasury Department officials have filed a notice of appeal with the Sixth Circuit to overturn a district court ruling blocking it from enforcing against Kentucky and Tennessee a COVID-19 relief act provision that restricts states from using the act's aid to offset reductions in net tax revenue.

The Treasury Department, Treasury Secretary Janet Yellen, and acting Treasury Inspector General Richard K. Delmar filed a notice of appeal November 22 to challenge the district court’s decision in Kentucky v. Yellen.

Kentucky Attorney General Daniel Cameron (R) and Tennessee Attorney General Herbert Slatery III (R) filed suit in the U.S. District Court for the Eastern District of Kentucky earlier this year, arguing that a restriction in the American Rescue Plan Act of 2021 (P.L. 117-2) is “an unprecedented power grab by the federal government.”

At issue is a provision in section 9901 of the act that restricts the act's 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.” States that violate the provision are required to repay the funds.

In September Judge Gregory F. Van Tatenhove granted the states’ motion for summary judgment and permanently enjoined Yellen from enforcing the provision, finding that the states “have clearly suffered violations of their constitutional rights as a result of the tax mandate’s coercive nature.”

The case is one of six from states seeking to challenge the provision.

The appeal has been docketed as case number 21-6108.

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