Spending Clause Conditions and the Coronavirus State Fiscal Recovery Fund [April 2, 2021] [open pdf - 670KB]
From the Document: "The American Rescue Plan Act of 2021 [hyperlink] (ARPA) tasks the Department of the Treasury (Treasury) with disbursing to states more than $190 billion appropriated for the Coronavirus State Fiscal Recovery Fund [hyperlink] ('CSFRF'). States may use CSFRF dollars to cover a wide range [hyperlink] of costs incurred by December 31, 2024. States must certify [hyperlink] that they will comply with statutory conditions on the use of CSFRF funds. States that violate a condition must [hyperlink] repay Treasury 'an amount equal to the amount of funds used' in the violation. [...] One condition has attracted legal controversy. ARPA prohibits [hyperlink] 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. [...] For states participating in the CSFRF program, this tax condition applies during a 'covered period' that began [hyperlink] 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. [...] 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."
CRS Legal Sidebar, LSB10588
Congressional Research Service: https://crsreports.congress.gov/