Treasury dealt another blow in ARPA tax case

The Department of the Treasury has been handed another loss in its multi-state battle to uphold the American Rescue Plan's Offset Provision, the statute that bars states from using federal coronavirus funds directly or indirectly for tax cuts, after judges in the Eleventh Circuit declined to review its previous decision handed down in January.

That's the latest in the battle that has half the country contesting the statute, and this time, the plaintiffs are a 13-state coalition made up of West Virginia, Alabama, Arkansas, Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota and Utah. This case could continue if Treasury decides to bring it to the nation's highest court.

Andrew Harrer/Bloomberg

"The federal government may, if it wishes, appeal this decision to the U.S. Supreme Court," said Joseph Bishop-Henchman, executive vice president of the National Taxpayers Union Foundation. "As Judge Brasher noted, the federal government recently declined to appeal the Sixth Circuit decision to the Supreme Court."

But the eleven judge panel wasn't without its dissenters, as Judge Robin S. Rosenbaum issued a 53 page rebuke of the panel's interpretation, arguing that the panel views the matter within a "doomsday interpretation" of the statute that is "implausible."

Rosenbaum also said the use of the word "indirectly" is clear in meaning that Congress prohibits circumvention of the direct prohibition and that there is significance in that Congress wrote "net tax revenue" and not "expected net tax revenue." 

"The panel opinion looked up the dictionary definitions of three of the 80-plus words in the statutory provision, found that those definitions in isolation did not answer the question before the Court, and threw in the towel, proclaiming the provision unascertainable," Judge Rosenbaum wrote. "The panel opinion didn't consider the statutory context, the statutory purpose as derived from the text, the statutory structure, or statutory history."

For the rest of the country, states continue to win when the decision gets to the merits of the case and isn't rendered moot by rulings on standing to bring suit.

By their own actions, Treasury has only seemed interested in appealing the cases if there's a clear chance they can win, taxpayer advocates say, and when the opportunity arises for them to appeal to the Supreme Court, they don't.

"It's really hard to believe that the Supreme Court would give them a better chance than what they're getting in all the appeals courts," Bishop-Henchman said.