Letter to Secretary Yellen on State and Local Fiscal Recovery Funds (March 17, 2021)

Summary

Letter dated March 17, 2021 on Congress of the United States letterhead to the Honorable Janet Yellen, Secretary of the Treasury, expressing concerns about Public Law No. 117-2, the American Rescue Plan Act of 2021, and specifically the Coronavirus State Fiscal Recovery and Coronavirus Local Fiscal Recovery Funds. The letter states concern about a provision that appears to impose restrictions on states that would "reduce net revenue" and says the provision may apply through December 31, 2024. It asks the Treasury Department for clarification on numbered questions, including whether state-level measures such as exempting the first $10,200 of unemployment insurance would violate the restriction. The signature block lists Members on the Committee on Oversight and Reform and the Committee on Ways and Means.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Congress of the United States
Washington, AC 20515

March 17, 2021

The Honorable Janet Yellen
Secretary of the Treasury

U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, DC 20220

Dear Secretary Yellen:

We are writing with serious concerns about Public Law No. 117-2 (the “American Rescue Plan
Act of 2021” or ARP), and specifically the Coronavirus State Fiscal Recovery and Coronavirus
Local Fiscal Recovery Funds. We are especially concerned about a provision inserted into the
Coronavirus State Fiscal Recovery Fund before it was signed by President Biden. Specifically,
the provision appears to impose coercive restrictions on states, prohibiting them from “directly or
indirectly” taking actions that would “reduce net revenue” if the states receive even a dime of
federal State Fiscal Recovery Funds. Furthermore, this prohibition likely tramples the Tenth
Amendment and may in fact be unconstitutional. In any case, this provision may apply for a
period that extends through December 31, 2024. We have heard from many stakeholders
concerned about the apparent breadth of this provision, which was included in ARP without the
benefit of committee hearings, a legislative markup, or any input from affected stakeholders.

We are also generally concerned about the ambiguity in the Coronavirus State Fiscal Recovery
and Coronavirus Local Fiscal Recovery Funds.

For these reasons, we believe clarification from the Treasury Department is urgently needed on
the following questions:

1. Ifastate provided its own economic impact payments to families in need through an
advance refundable state tax income tax credit, would this violate the restriction in ARP?

2. Ifa state followed federal tax law and exempted from gross income the first $10,200 of

unemployment insurance, would it violate the restriction in ARP?

If a state used funds to replenish its state unemployment insurance trust fund in order to

prevent automatic tax increases on Main Street businesses, would it violate the restriction

in ARP?

4. Ifastate created a new state-level earned income or child tax credit, would it violate the
restriction in ARP?

5. Ifa state decided to align with the federal tax treatment of PPP loan forgiveness by
excluding that amount from gross income, would it violate the restriction in ARP?

6. Ifastate provided a state-level deduction for contributions to charitable organizations,
would this violate the restriction in ARP?

7. Ifastate or local government that received ARP funding opted to provide property tax
abatements to low-income residents, would this violate the restriction in ARP?

o>)

PRINTED ON RECYCLED PAPER
10.

11.

i2.

If a state legislature determined that now is the wrong time to raise gasoline prices
consumers face at the pump, would a delay of a scheduled gas tax hike violate the
restriction in ARP?

Ifa state or locality provided a sales tax holiday in order to provide cash flow to help
local small businesses, would this violate the restriction in ARP?

Once a state economy rebounds from COVID-19, would enactment of temporary or
permanent tax relief in a future year trigger a financial penalty under ARP as long as any
ARP funding remains unspent?

Are townships and boroughs treated the same as cities and/or counties for the purposes of
determining whether a locality is eligible for and the amount of the allocation under the
State Fiscal Recovery Fund?

If a state declines payment from the State Fiscal Recovery Fund, what will the Treasury
Department do with the unclaimed funds?

We respectfully request that you please respond in writing no later than March 26, 2021.

Because many state legislatures are now in session and have relatively short periods in which to
make important fiscal decisions, we also request that Treasury promptly issue guidance on the
Coronavirus State and Local Fiscal Recovery Funds.

Thank you for your attention to this request.

Sincerely,

a Alto Osman Coman

Kevin Brady James Comer
Republican Leader Ranking Member
Committee on Ways and Means Committee on Oversight and Reform

rot Salar 7

Steve Scalise Jodey Arrington
Ranking Member Committee on Ways and Means
Select Subcommittee on the Coronavirus Crisis

bs, Bee CEB LE

Andy Biggs Vern Buchanan
Committee on Oversight and Reform Committee on Ways and Means
Michael Cloud
Committee on Oversight and Reform

“

Byron Donalds
Committee on Oversight and Reform

Pat Fallon
Committee on Oversight and Reform

Virginia Foxx
Committee on Oversight and Reform

VGA SYM

Bob Gibbs
Committee on Oversight and Reform

Non Mehr

Glenn Grothman
Committee on Oversight and Reform

(pti h lel

Yvette Herrell
Committee on Oversight and Reform

Andrew S. Clyde

Committee on Oversight and Reform

Ror Eaten

Ron Estes
Committee on Ways and Means

ony

Drew Ferguson
Committee on Ways and Means

Scott Franklin
Committee on Oversight and Reform

Cb wh

Paul A. Gosar, D.D.S.
Committee on Oversight and Reform

(tho Wo

Kevin Hern
Committee on Ways and Means

Cash

Jody Hice
Committee on Oversight and Reform
<2 Ge

Clay Hig ae
Committee on Oversight and Reform

Hard) b Mb

Fred Keller
Committee on Oversight and Reform

SD Wed

Darin LaHood
Committee on Ways and Means

Aas Moca

Nancy Mace
Committee on Oversight and Reform

Rope Viornee)

Ralph Norman
Committee on Oversight and Reform

“— —--~_—_————___

Tom Reed
Committee on Ways and Means

ny a

David Schweikert
Committee on Ways and Means

Sade

(Jum Jordan
Committee on Oversight and Reform

tee

Mike Kelly
Committee on Ways and Means

tH? Se

Jake LaTurner
Committee on Oversight and Reform

COALL ODO. Yrrdler
Carol D. Miller
Committee on Ways and Means

Devin Nunes
Committee on Ways and Means

Som Rese

Tom Rice
Committee on Ways and Means

Go ersmy

Pete Sessions
Committee on Oversight and Reform
Adrian Smith
Committee on Ways and Means

Lloyd Smucker
Committee on Ways and Means

Foon Wenstrup Re Aihony

Committee on Ways and Means

(loge

Jason Smith
Committee on Ways and Means

A, |
EN et VV J a UY S —
Jackie Walorski

Committee on Ways and Means

File and source

File

Letter-to-Secretary-Yellen-on-State-and-Local-Fiscal-Recovery-Funds-f640ddd7e6.pdf

Size

1,507,658 bytes

SHA-256

ed47947e5b762f6c0be85cab3bae914304e7d7fb124dd123a7946c1b04cf5735

Our copy

Letter-to-Secretary-Yellen-on-State-and-Local-Fiscal-Recovery-Funds-f640ddd7e6.pdf

Original

waysandmeans.house.gov