Motion for Preliminary Injunction, State of Ohio v. Yellen, No. 1:21-cv-00181 (S.D. Ohio), Doc. 3 (March 17, 2021)
Summary
Combined Motion for a Preliminary Injunction and Memorandum in Support of the Motion in State of Ohio v. Janet Yellen, in her official capacity as Secretary of the Treasury, et al., Case No. 1:21-cv-181, filed 03/17/21. Ohio argues that the "Tax Mandate" in Section 9901 of the American Rescue Plan Act exceeds Congress's power under the Spending Clause, and moves under Federal Rule of Civil Procedure 65 to enjoin enforcement. Ohio requests a ruling by May 1, 2021. The introduction says Ohio is entitled to claim about $5.5 billion, and that the mandate bars use of the funds to "directly or indirectly" offset revenue loss from tax reductions. Benjamin M. Flowers signs as Solicitor General.
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“Motion for Preliminary Injunction, State of Ohio v. Yellen, No. 1:21-cv-00181 (S.D. Ohio), Doc. 3 (March 17, 2021).”
Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/motion-for-preliminary-injunction-state-of-ohio-v-yellen-no-1-21-cv-00-a7361a27af/
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Case: 1:21-cv-00181-DRC Doc #: 3 Filed: 03/17/21 Page: 1 of 27 PAGEID #: 24
IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF OHIO
STATE OF OHIO, :
Plaintiff, :
: Case No. 1:21-cv-181
v.
:
JANET YELLEN, in her official :
capacity as Secretary of the :
Treasury; RICHARD K. DELMAR, :
in his official capacity as acting :
inspector general of the Department :
of Treasury; and U.S. :
DEPARTMENT OF THE :
TREASURY, :
Defendants. :
COMBINED MOTION FOR A PRELIMINARY INJUNCTION AND
MEMORANDUM IN SUPPORT OF THE MOTION
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MOTION FOR A PRELIMINARY INJUNCTION
The “Tax Mandate” in the American Rescue Plan Act of 2021, see Pub. L. No.
117-2, §9901 (adding §602(c)(2)(A) to the Social Security Act (42 U.S.C. §801 et seq.)),
exceeds Congress’s power under the Spending Clause, see U.S. Const. art. I, §8, cl.1.
The Mandate is therefore unconstitutional. The State of Ohio moves under Federal
Rule of Civil Procedure 65 for an order preliminarily enjoining the defendants from
enforcing the Tax Mandate.
Ohio requests a ruling on this motion by May 1, 2021.
DAVE YOST
Ohio Attorney General
/s/ Benjamin M. Flowers
BENJAMIN M. FLOWERS* (0095284)
Solicitor General
*Counsel of Record
ZACHERY P. KELLER (0086930)
MAY DAVIS (PHV application pending)
Deputy Solicitors General
30 East Broad Street, 17th Floor
6l4-466-8980
benjamin.flowers@ohioattorneygeneral.gov
Counsel for the State of Ohio
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TABLE OF CONTENTS
Page
TABLE OF CONTENTS ................................................................................................. i
TABLE OF AUTHORITIES .......................................................................................... ii
INTRODUCTION .......................................................................................................... 1
STATEMENT OF FACTS ............................................................................................. 2
LEGAL STANDARD...................................................................................................... 5
ARGUMENT .................................................................................................................. 6
A. Ohio is likely to prevail here because Congress exceeded its power
under the Spending Clause, and violated the anticommandeering
doctrine, when it passed the Tax Mandate. ............................................ 6
B. Ohio will be irreparably harmed without an injunction. ...................... 17
C. Enjoining the Tax Mandate will not harm others, and will promote
the public interest. ................................................................................. 18
CONCLUSION............................................................................................................. 19
CERTIFICATE OF SERVICE ..................................................................................... 20
LOCAL RULE 65.1(B) CERTIFICATION .................................................................. 21
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TABLE OF AUTHORITIES
Cases Page(s)
Abbott v. Perez,
138 S. Ct. 2305 (2018) ............................................................................................ 18
ACLU v. McCreary Cnty.,
354 F.3d 438 (6th Cir. 2003) .................................................................................. 17
Alaska v. U.S. Dep’t of Transp.,
868 F.2d 441 (D.C. Cir. 1989) ................................................................................ 17
Amoco Prod. Co. v. Vill. of Gambell,
480 U.S. 531 (1987) .................................................................................................. 6
Barnes v. E-Systems,
501 U.S. 1301 (1991) .............................................................................................. 18
Bond v. United States,
572 U.S. 844 (2014) .................................................................................................. 6
Celebrezze v. U.S. Dep’t of Transp.,
766 F.2d 228 (6th Cir. 1985) .................................................................................. 17
City of Pontiac Retired Emps. Ass’n v. Schimmel,
751 F.3d 427 (6th Cir. 2014) (en banc) .................................................................... 5
Coal. to Defend Affirmative Action v. Granholm,
473 F.3d 237 (6th Cir. 2006) .................................................................................. 19
Wyo. ex rel. Crank v. United States,
539 F.3d 1236 (10th Cir. 2008) .............................................................................. 17
Elrod v. Burns,
427 U.S. 347 (1976) ................................................................................................ 17
Franchise Tax Bd. v. Hyatt,
139 S. Ct. 1485 (2019) ............................................................................................ 14
Georgia v. Pruitt,
326 F. Supp. 3d 1356 (S.D. Ga. 2018) .................................................................... 17
Gregory v. Ashcroft,
501 U.S. 452 (1991) .................................................................................................. 6
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Holder v. Humanitarian Law Project,
561 U.S. 1 (2010) .................................................................................................. 1, 5
Kansas v. United States,
249 F.3d 1213 (10th Cir. 2001) .............................................................................. 17
Maryland v. King,
133 S. Ct. 1 (2012) .................................................................................................. 18
McCulloch v. Maryland,
4 Wheat. 316 (1819) ................................................................................................ 14
Murphy v. NCAA,
138 S. Ct. 1461 (2018) .................................................................................... 7, 8, 15
Nat’l Fed’n of Indep. Bus. v. Sebelius,
567 U.S. 519 (2012) .........................................................................................passim
New York v. United States,
505 U.S. 144 (1992) .................................................................................... 2, 7, 9, 15
Obama for Am. v. Husted,
697 F.3d 423 (6th Cir. 2012) .................................................................................. 17
Printz v. United States,
521 U.S. 898 (1997) ................................................................................................ 15
Roberts v. Neace,
958 F.3d 409 (6th Cir. 2020) .................................................................................. 17
Saenz v. Roe,
526 U.S. 489 (1999) .................................................................................................. 6
South Dakota v. Dole,
483 U.S. 203 (1987) ................................................................................ 9, 11, 12, 16
South Dakota v. Dole,
791 F.2d 628 (8th Cir. 1986) .................................................................................. 11
Steward Mach. Co. v. Davis,
301 U.S. 548 (1937) ................................................................................ 2, 10, 11, 13
Texas v. United States,
809 F.3d 134 (5th Cir. 2015) .................................................................................. 17
United States v. Butler,
297 U.S. 1 (1936) .................................................................................................... 11
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Statutes and Constitutional Provisions
U.S. Const. amend. X ..................................................................................................... 6
U.S. Const. amend. XIV, §5 ........................................................................................... 7
U.S. Const. amend. XV, §2 ............................................................................................ 7
U.S. Const. art. I., §8 ................................................................................................. 2, 9
42 U.S.C. §1396 ............................................................................................................ 10
American Rescue Plan Act of 2021, Pub. L. No. 117-2, §9901 ............................passim
H.R. 1319, 117th Cong., 1st Sess., tit. V, §5001 (March 2, 2021) ................................ 4
Other Authorities
167 Cong. Rec. S1051 (daily ed. Mar. 4, 2021) ............................................................. 4
Andy Chow, Ohio Unemployment Fund Ends 2020 Borrowing $1.2B
from Feds, STATEHOUSE NEWS BUREAU (Dec. 31, 2020) .......................................... 3
Catherine Candisky, Medicaid caseloads soar, budget gap looms, THE
COLUMBUS DISPATCH (Nov. 7, 2020) ........................................................................ 3
Joseph Story, Commentaries on the Constitution (1833) ....................................... 8, 14
Kurt T. Lash, The Lost Original Meaning of the Ninth Amendment, 83
Tex. L. Rev. 331 (2004) ............................................................................................. 8
Lynn A. Baker, Conditional Federal Spending After Lopez, 95 Colum.
L. Rev. 1911 (1995) ................................................................................................... 8
Monthly Financial Report, Ohio Office of Budget and Management
(July 10, 2020) .......................................................................................................... 3
Monthly Financial Report, Ohio Office of Budget and Management
(March 10, 2021) ....................................................................................................... 2
Ohio Office of Budget and Management, Ohio Checkbook .......................................... 4
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INTRODUCTION
On March 11, 2021, President Biden signed the American Rescue Plan Act into
law. The Act offers the States billions of dollars. The State of Ohio is entitled to
claim about $5.5 billion—an amount equal to about 7.4 percent of the State’s total
expenditure in 2020. But if Ohio accepts that money, it will have to accept the con-
ditions that come with it.
This is a case about one of those conditions, which this brief calls the “Tax
Mandate.” The Tax Mandate appears in Section 9901 of the Act—it is the provision
that amends the Social Security Act to include a Section 602(c)(2)(A). See American
Rescue Plan Act of 2021, Pub. L. No. 117-2, §9901 (adding §602(c)(2)(A) to the Social
Security Act (42 U.S.C. §801 et seq.)). The Tax Mandate bars States that take money
under the Act from using that funding to “directly or indirectly” offset revenue loss
from tax reductions. Id. (emphasis added). But since “[m]oney is fungible,” Holder
v. Humanitarian Law Project, 561 U.S. 1, 37 (2010), any money that a State receives
through the Act will necessarily offset, either directly or indirectly, every tax reduc-
tion that the State might pursue. The Tax Mandate thus gives the States a choice:
they can have either the badly needed federal funds or their sovereign authority to
set state tax policy. But they cannot have both. In our current economic crisis, that
is no choice at all. It is a metaphorical “gun to the head.” Nat’l Fed’n of Indep. Bus.
v. Sebelius (“NFIB”), 567 U.S. 519, 581 (2012) (op. of Roberts, C.J.).
This coercive offer of federal funds violates the Constitution. The Spending
Clause empowers Congress to “provide for”—that is, to spend money in support of—
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the “general Welfare.” Art. I., §8. c.1. But while “Congress has substantial powers to
govern the Nation directly, including in areas of intimate concern to the States, the
Constitution has never been understood to confer upon Congress the ability to require
the States to govern according to Congress’ instructions.” New York v. United States,
505 U.S. 144, 162 (1992). And Congress may not circumvent that limitation by using
its spending power to “indirectly coerce[] a State to adopt a federal regulatory system
as its own.” NFIB, 567 U.S. at 578 (op. of Roberts, C.J.). That is precisely what the
Tax Mandate attempts to do: it seeks to “drive the state legislatures under the whip
of economic pressure into the enactment” of Congress’s preferred tax policies. Stew-
ard Mach. Co. v. Davis, 301 U.S. 548, 587 (1937).
Congress exceeded its constitutional authority when it passed the Tax Man-
date. The Court should enjoin the provision’s enforcement, at least in its application
to Ohio.
STATEMENT OF FACTS
When COVID-19 reached American shores, it began infecting our citizens. To
protect themselves and their loved ones, Americans took precautions, including stay-
ing home. By staying home, they reduced demand for goods and services in nearly
every economic sector. Reduced demand caused many businesses to close or limit
operations. That led to lost jobs and reduced hours. And as a result, the country last
year experienced its worst economic decline since World War II. See Monthly Finan-
cial Report at 2, Ohio Office of Budget and Management (March 10, 2021),
https://bit.ly/3eyW8UI.
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State budgets suffered accordingly: the immense reduction in commerce led to
an immense reduction in state revenues; at the same time, the immense spike in
joblessness increased the demand for government services. In Ohio, for example, tax
revenue for fiscal year 2020 fell $1.1 billion below estimate. And total non-federal
revenues finished the fiscal year $1.2 billion below estimate. See Monthly Financial
Report at 11, Ohio Office of Budget and Management (July 10, 2020),
https://bit.ly/3toNts4. Job loss and economic struggles simultaneously caused de-
mand for state assistance—unemployment benefits and Medicaid coverage, for exam-
ple—to soar. See Catherine Candisky, Medicaid caseloads soar, budget gap looms,
THE COLUMBUS DISPATCH 1B (Nov. 7, 2020); Andy Chow, Ohio Unemployment Fund
Ends 2020 Borrowing $1.2B from Feds, STATEHOUSE NEWS BUREAU (Dec. 31, 2020),
https://perma.cc/7AHR-NJES. Even the measures Ohio took to counteract the budget
crunch—hiring freezes, spending cuts, and more besides—helped only so much.
Because every State finds itself in a similar situation, Congress stepped in. It
enacted the American Rescue Plan Act, which, among other things, provides $195.3
billion in aid to the States and the District of Columbia. See American Rescue Plan
Act of 2021 §9901 (adding §602(b)(3)(A) to the Social Security Act (42 U.S.C. §801 et
seq.)). The funding will enable the States to adopt programs to spur growth and re-
newal in their local economies.
Ohio expects to receive $5.5 billion, calculated based on a formula that consid-
ers a State’s unemployed population from October through December of 2020. That
aid represents a sizeable portion of Ohio’s overall budget. Ohio’s expenditures in
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fiscal year 2020 totaled $74.6 billion, meaning the new federal funding equals 7.4
percent of the State’s total spending last year. See Ohio Office of Budget and Man-
agement, Ohio Checkbook, https://checkbook.ohio.gov/State/Budgets/default.aspx.
As is so often true, the legislation changed as it made its way through Con-
gress. When the House of Representatives passed the American Rescue Plan Act, the
bill allowed States to use funds to: “respond to or mitigate” the COVID-19 public
health emergency or its economic impacts; “cover costs incurred” as a result of
COVID-19; “replace revenue that was lost, delayed, or decreased” as a result of
COVID-19; and “address” the negative economic impacts of COVID-19. H.R. 1319,
117th Cong., 1st Sess., tit. V, §5001 (March 2, 2021). But when the bill reached the
Senate, the majority leader added an amendment that imposed an important limit
on the sovereign power of States that accept funding:
A State or territory shall not use the funds provided under this section
or transferred pursuant to section 603(c)(4) to either directly or indi-
rectly offset a reduction in the net tax revenue of such State or territory
resulting from a change in law, regulation, or administrative interpre-
tation 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.
See 167 Cong. Rec. S1051, S1112 (daily ed. Mar. 4, 2021) (emphasis added). That
amendment added the “Tax Mandate” at issue here. See American Rescue Plan Act
§9901 (adding §602(c)(2)(A) to the SSA). If a State violates this Tax Mandate, the
Secretary of the Treasury is empowered to recoup the lesser of: (1) the amount of the
applicable reduction to net tax revenue; or (2) the amount of funds the State received
from the Federal Government. See id. (adding §602(e) to the SSA). The statute does
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not entitle the States to any process before the money is reclaimed.
The Tax Mandate effectively bans state tax cuts or credits. The reason is sim-
ple: a State violates the Tax Mandate whenever it uses money received through the
Act to “offset,” even “indirectly,” “a reduction in net tax revenue.” American Rescue
Plan Act §9901 (adding §602(c)(2)(A) to the SSA). And because “[m]oney is fungible,”
Holder v. Humanitarian Law Project, 561 U.S. 1, 37 (2010), any money received
through the Act will “indirectly,” at least, “offset a reduction in the net tax revenue”
of a State that reduces the tax burdens on its citizens by law, regulation, or adminis-
trative interpretation. So every change in tax policy that leads to a decrease in tax
revenue violates the Tax Mandate.
Because Congress lacks constitutional authority to limit the States’ taxing
power in this manner, Ohio seeks a preliminary injunction of the Mandate’s enforce-
ment.
LEGAL STANDARD
Courts must balance “four factors … when considering a motion for prelimi-
nary injunction: (1) whether the movant has a strong likelihood of success on the
merits; (2) whether the movant would suffer irreparable injury without the injunc-
tion; (3) whether issuance of the injunction would cause substantial harm to others;
and (4) whether the public interest would be served by issuance of the injunction.”
City of Pontiac Retired Emps. Ass’n v. Schimmel, 751 F.3d 427, 430 (6th Cir. 2014)
(en banc) (per curiam) (internal quotation marks omitted). The standard for a per-
manent injunction is identical, except that the movant must show “actual success” on
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the merits instead of a likelihood of success on the merits. Amoco Prod. Co. v. Vill. of
Gambell, 480 U.S. 531, 546 n.12 (1987).
ARGUMENT
This Court should enjoin the Tax Mandate, at least in its application to Ohio.
A. Ohio is likely to prevail here because Congress exceeded its power
under the Spending Clause, and violated the anticommandeering
doctrine, when it passed the Tax Mandate.
Because Congress had no authority to enact the Tax Mandate, Ohio will likely
prevail in this challenge to the Mandate’s constitutionality.
1. “As every schoolchild learns, our Constitution establishes a system of dual
sovereignty between the States and the Federal Government.” Gregory v. Ashcroft,
501 U.S. 452, 457 (1991). The Framers, in other words, “split the atom of sover-
eignty.” Saenz v. Roe, 526 U.S. 489, 504 n.17 (1999) (quoting United States Term
Limits v. Thornton, 514 U.S. 779, 838 (1995) (Kennedy, J., concurring)). “It was the
genius of their idea that our citizens would have two political capacities, one state
and one federal, each protected from incursion by the other.” Id. (quotation omitted).
When the Framers split the atom, they left the States with the bigger slice.
The “Federal Government” has only those “limited powers” expressly conferred upon
it by the Constitution. Gregory, 501 U.S. at 457; accord Bond v. United States, 572
U.S. 844, 854 (2014). In sharp contrast, all powers “not delegated to the United States
by the Constitution, nor prohibited by it to the States, are reserved to the States re-
spectively, or to the people.” U.S. Const. amend. X. Thus, while the States retain
“numerous and indefinite” powers that they may exercise as they see fit, the federal
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government has only those “few and defined” powers laid out in the Constitution it-
self. The Federalist No. 45, p.313 (Madison, J.) (Cooke, ed., 1961)).
Congress’s few and defined powers do not include any general authority to is-
sue orders to, or to regulate, state governments. Murphy v. NCAA, 138 S. Ct. 1461,
1476 (2018). True, the Constitution empowers Congress to pass laws regulating state
affairs in a few discrete areas. The Civil War Amendments, for example, empower
Congress to regulate the States in connection with civil and voting rights. See U.S.
Const. amend. XIV, §5; amend. XV, §2. But those express grants of authority prove
the rule: except where the Constitution affirmatively empowers Congress to direct
state affairs, Congress lacks authority to do so. Accordingly, “the Constitution has
never been understood to confer upon Congress the ability to require the States to
govern according to Congress’s instructions.” New York v. United States, 505 U.S.
144, 162 (1992) (citing Coyle v. Smith, 221 U.S. 559, 565 (1911)).
The prohibition on Congress’s directly regulating state governance is often
called the “anticommandeering doctrine.” Murphy, 138 S. Ct .at 1475. The doctrine
serves several important values, two of which are especially relevant here. First, it
safeguards liberty. By protecting the Constitution’s diffusion of power between the
state and federal governments, the doctrine protects against the “tyranny and abuse”
that can arise from concentrated power. New York, 505 U.S. at 181 (quotation omit-
ted). Second, “the anticommandeering rule promotes political accountability.” Mur-
phy, 138 S. Ct. at 1477. When “a State imposes regulations only because it has been
commanded to do so by Congress,” voters are unable to accurately determine whom
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to credit or blame. Id. Prohibiting such commandeering aids citizens in holding the
right officials accountable.
The fact that Congress lacks the power to directly regulate the States informs
a proper interpretation of the powers it has: courts must not read Congress’s enu-
merated powers so broadly that they allow it to accomplish indirectly the sort of reg-
ulation of state affairs that it lacks the power to impose directly. “Otherwise, the two-
government system established by the Framers would give way to a system that vests
power in one central government.” Nat’l Fed’n of Indep. Bus. v. Sebelius (“NFIB”),
567 U.S. 519, 577 (2012) (op. of Roberts, C.J.); see also Lynn A. Baker, Conditional
Federal Spending After Lopez, 95 Colum. L. Rev. 1911, 1920 (1995). Indeed, the
founding generation insisted on the Ninth Amendment—which prohibits courts from
construing the Constitution’s enumeration of some rights “to deny or disparage others
retained by the people”—to guard against broad interpretations of Congress’s enu-
merated powers. See Kurt T. Lash, The Lost Original Meaning of the Ninth Amend-
ment, 83 Tex. L. Rev. 331, 395 (2004); cf. 3 Joseph Story, Commentaries on the Con-
stitution, §§1898–1900, p.751–53 (1833) (reprinted by Cosimo Classics 2020). Among
the “other” rights retained by the people was the right to local self-governance. Lash,
The Lost Original Meaning, 83 Tex. L. Rev. at 394. And so the Ninth Amendment—
in addition to the Tenth Amendment and the entire concept of a federal government
with limited and enumerated powers—prohibits interpreting Congress’s enumerated
powers in a way that permits Congress to exercise a power the Constitution withholds
from Congress. One such power is the power to direct the operation of state
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governments.
The principle that Congress’s enumerated powers ought not be construed so
broadly that they permit the direct regulation of States is of particular importance to
the Spending Clause. The Clause provides:
The Congress shall have Power To lay and collect Taxes, Duties, Im-
poses and Excises, to pay the Debts and provide for the common Defence
and general Welfare of the United States ….
U.S. Const. art. I., §8 c.1.
Exercising its power to “provide for the … general Welfare,” id., Congress may
grant federal funds to the States. Supreme Court precedent permits Congress to
“condition such a grant upon the States’ ‘taking certain actions that Congress could
not require them to take.’” NFIB, 567 U.S. at 576 (op. of Roberts, C.J.) (quotation
omitted). Those conditions “may influence a State’s legislative choices.” New York,
505 U.S. at 167. There comes a point, however, at which influence or encouragement
“‘turns into compulsion.’” South Dakota v. Dole, 483 U.S. 203, 211 (1987) (quoting
Steward Machine Co. v. Davis, 301 U.S. 548, 590 (1937)). That point comes when
Congress requires States to accede to conditions in order to receive funding so signif-
icant that States have no “legitimate choice” but to “accept.” NFIB, 567 U.S. at 578
(op. of Roberts, C.J.). When Congress enacts a law like that, “‘pressure turns into
compulsion,’ the legislation runs contrary to our system of federalism,” and the law
is unconstitutional. Id. at 577–78 (op. of Roberts, C.J.) (quoting Steward Machine,
301 U.S. at 590). Courts must deny effect to Spending Clause legislation that
“drive[s] the state legislatures under the whip of economic pressure into” doing “the
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bidding of the central government.” Steward Machine, 301 U.S. at 587.
The Supreme Court’s decision in NFIB illustrates these principles in action.
That case concerned the constitutionality of certain Medicaid-expansion provisions in
the Affordable Care Act. The provisions allowed the Secretary of Health and Human
Services to withhold Medicaid funds to States whose Medicaid plans did not “comply
with the Act’s requirements.” NFIB, 567 U.S. at 581 (op. of Roberts, C.J.); see 42
U.S.C. §1396c (2012). But the withholding of funds would have major effects on state
budgets: “Medicaid spending account[ed] for over 20 percent of the average State’s
total budget, with federal funds covering 50 to 83 percent of those costs.” NFIB, 567
U.S. at 581 (op. of Roberts, C.J.). Crunching those numbers, failure to abide by the
Act’s terms could cost a State 10 percent of its total budget. Id. The Court held, by a
7–2 vote, that the federally imposed conditions violated the Spending Clause: “The
threatened loss of over 10 percent of a State’s overall budget,” the Chief Justice ex-
plained, “is economic dragooning that leaves the States with no real option but to
acquiesce” to Congress’s demands. Id. at 582 (op. of Roberts, C.J., joined by Breyer
and Kagan, JJ.); accord id. at 681 (Scalia, Kennedy, Thomas, and Alito, JJ., dissent-
ing). The law’s provisions thus constituted not “mild encouragement,” but rather “a
gun to the head.” NFIB, 567 U.S. at 581 (op. of Roberts, C.J.). The Spending Clause
does not permit Congress to coerce States in that manner.
No doubt, the Supreme Court’s decisions leave Congress with significant lee-
way to exercise its taxing or spending powers in ways that encourage States to act.
One early case, for example, upheld a law that created a federal tax credit for
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employers who paid into state unemployment funds. Steward Machine, 301 U.S. at
575–76. While this perhaps gave States some incentive to create unemployment
funds, this mild encouragement left the States free to act according to their “unfet-
tered will.” Id. at 590. Similarly, in South Dakota v. Dole, the Court upheld a law
that denied States a “relatively small percentage” of certain highway funds if they
established “a minimum drinking age lower than 21.” 483 U.S. at 211. Since the
“federal funds at stake constituted less than half of one percent of” the challenger
State’s “budget at the time,” the bill stopped well short of coercing the State. NFIB,
567 U.S. at 581 (op. of Roberts, C.J.); see also South Dakota v. Dole, 791 F.2d 628, 630
(8th Cir. 1986)). The modest incentives in Dole and Steward Machine constituted
encouragement, not coercion.
In addition to being non-coercive, Spending Clause legislation must satisfy a
few other requirements to pass constitutional muster. First, as the Clause’s text
makes clear, “the exercise of the spending power must be in pursuit of ‘the general
welfare.’” Dole, 483 U.S. at 207. In other words, the spending power extends “only
to matters of national, as distinguished from local welfare.” United States v. Butler,
297 U.S. 1, 67 (1936). Second, “if Congress desires to condition the States’ receipt of
federal funds, it ‘must do so unambiguously …, enabling the States to exercise their
choice knowingly, cognizant of the consequences of their participation.’” Dole, 483
U.S. at 207 (quoting Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17,
(1981)) (alterations adopted). Finally, and perhaps most obviously, “other constitu-
tional provisions may provide an independent bar to the conditional grant of federal
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funds.” Dole, 483 U.S. at 208.
Combining all these principles, Congress can impose conditions on the States
through Spending Clause legislation only if it does so in a non-coercive fashion for
the promotion of the national welfare, and only if the conditions it imposes are un-
ambiguous and otherwise constitutional.
2. The Tax Mandate is unconstitutional. It is unconstitutionally coercive and
unconstitutionally ambiguous in violation of the Spending Clause. And it unconsti-
tutionally commandeers the States’ taxing authority in violation of the Tenth Amend-
ment.
Recall the facts. The American Rescue Plan Act provides Ohio $5.5 billion in
federal funds. That is a tremendous amount of money; it equals roughly 7.4 percent
of Ohio’s total expenditure in 2020. No State, in the current economic situation, can
turn down this “financial inducement.” NFIB, 567 U.S. at 580 (op. of Roberts, C.J.)
(quoting Dole, 483 U.S. at 211). So here, as in NFIB, the States have “no real option”
but to take the funds on offer. Id. at 582.
Those funds come with strings attached. Relevant here, every State that ac-
cepts funding agrees to abide by the Tax Mandate. The Tax Mandate forbids States
from using funds acquired through the Act “to either directly or indirectly offset a
reduction in the net tax revenue of such State … resulting from a change in law …
that reduces any tax … or delays imposition of any tax or tax increase.” American
Rescue Plan Act of 2021, Pub. L. No. 117-2, §9901 (adding §602(c)(2)(A) to the Social
Security Act (42 U.S.C. §801 et seq.)) (emphasis added). The Secretary of the
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Treasury can recoup funds she suspects were used in violation of the Tax Mandate.
Id. (adding §602(e) to the SSA). And that means the Secretary can make the States
pay back federal funding every time they reduce taxes. After all, given the fungibility
of money, any loss in revenue from a reduction in taxes will necessarily be “offset,”
either “directly or indirectly,” with funds collected by other means, including through
the Act. In other words, every reduction in taxes, unless it can be shown to generate
revenue, will violate the Tax Mandate. The Tax Mandate is thus tantamount to a
prohibition on tax reductions—any State bound by the Mandate will, if it lowers taxes
(by statute, regulation, or otherwise) and loses revenue, be subject to a penalty.
This scheme violates the Spending Clause, because the “financial inducement”
the Act offers “to the States … is much more than ‘relatively mild encouragement’” of
the sort the Spending Clause permits—instead, “it is a gun to the head.” NFIB, 567
U.S. at 580–81 (op. of Roberts, C.J.) (quotation omitted); accord Steward Machine,
301 U.S. at 587. The Act requires every State to choose between money it cannot
refuse and limits on its sovereign authority. In NFIB, the Court determined that the
Medicaid expansion coerced the States because it “threatened” to deny States funding
equal to “over 10 percent of” their “overall budget[s]” unless they agreed to expand
their Medicaid programs. 567 U.S. at 582. The Act is similarly coercive: Ohio will
be denied funding equal to 7.4 percent of its total expenditure in 2020—funding the
State badly needs in an economic crisis—unless it agrees to limits on its power to tax.
The unconstitutionality is particular stark here because the Act coerces States
into acquiescing in the commandeering of their taxing authority. In essence, States
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that abide by the Tax Mandate’s terms are conducting their tax policy at the behest
of the central government. That allows Congress to control indirectly what it cannot
control directly. And that violates the Tenth Amendment. “After independence, the
States considered themselves fully sovereign nations,” entitled “to all the rights and
powers of sovereign states.” Franchise Tax Bd. v. Hyatt, 139 S. Ct. 1485, 1493 (2019)
(quoting McIlvaine v. Coxe’s Lessee, 4 Cranch 209, 212 (1808)). The Constitution took
away some of those sovereign powers, but “the States retained” the “aspects of sover-
eignty” that were not “‘altered by the plan of the Convention or [by] certain constitu-
tional Amendments.’” Id. at 1494–95 (quoting Alden v. Maine, 527 U.S. 706, 713
(1999)). Among the most important of those retained “aspects of sovereignty” was the
power to tax. See McCulloch v. Maryland, 4 Wheat. 316, 429 (1819). Indeed, it was
such a critical component of sovereignty that, to secure the Constitution’s ratification,
the Federalists had to persuade their fellow citizens that the federal government’s
power to tax would exist “concurrent[ly]” with the States’ power to do the same. The
Federalist No. 32, p.201 (A. Hamilton) (Cooke, ed., 1961); see also 2 Story, Commen-
taries on the Constitution §§924 & 937, pp.390 & 410. By commandeering that
power—by effectively requiring the States to tax in the manner the federal govern-
ment would prefer—the Act undermines that assurance and thus rips at a critical
thread in the fabric of our constitutional order.
The Tax Mandate, in addition to violating the letter of the Constitution, runs
counter to the purposes of the anticommandeering doctrine. That is true for two rea-
sons.
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First, the Tax Mandate erodes the “structural protections of liberty” that the
Constitution in general, and the anticommandeering doctrine in particular, secure.
Printz v. United States, 521 U.S. 898, 921 (1997). The Constitution “divides power
among sovereigns and among branches of government.” New York, 505 at 187.
Wisely so: placing too much power in a single entity creates a “risk of tyranny and
abuse.” Id. at 181. The anticommandeering doctrine honors this diffusion of power;
it prevents Congress from covertly concentrating power by ordering the States to ex-
ercise their constitutional authority in a manner acceptable to Congress. The Tax
Mandate, by commandeering the States’ taxing authority, concentrates power in pre-
cisely the manner that the anticommandeering doctrine is designed to prevent.
Second, the Tax Mandate undermines “political accountability” by dictating to
the States how they may exercise their sovereign authority. Murphy, 138 S. Ct. at
1477. The effects of tax reductions on economic growth is a matter of vigorous disa-
greement. Yet the Tax Mandate allows Congress to quietly impose its preferred tax
policies without having to pay the full political price for doing so. If legislators or
executive officials in States subject to the Mandate decline to reduce taxes, it is likely
those “state officials who will bear the brunt of public disapproval”; the representa-
tives and senators “who devised the regulatory program may remain insulated from
the electoral ramifications of their decision.” New York, 505 U.S. at 169. When “re-
sponsibility is blurred” in this manner, voters are hindered in holding their repre-
sentatives to account. Murphy, 138 S. Ct. at 1477.
All of this establishes that the Tax Mandate is unconstitutionally coercive and
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effects an unconstitutional commandeering. It is worth adding that the Tax Mandate
is also unconstitutionally ambiguous. Again, Spending Clause legislation must artic-
ulate “unambiguously” the conditions it imposes on the States, enabling them to un-
derstand the consequences of accepting funds. Dole, 483 U.S. at 207 (quoting
Pennhurst, 451 U.S. at 17). The Tax Mandate is far from “unambiguous.” What
changes to tax policy that cause a decrease in net revenue are “indirectly” offset by
funds acquired through the Act? Unless the answer is “every change to tax policy,”
neither the English language nor economic theory provides an answer. And how does
one know whether a change to tax policy causes a net reduction in revenue? For
example, if revenue would have decreased even further but for a tax cut, would the
tax cut still violate the Mandate? The Tax Mandate does not answer these questions.
As a result, the conditions it imposes are too ambiguous to be upheld under the
Spending Clause.
*
Congress has significant leeway to impose conditions through Spending Clause
legislation. What it may not do is use its Spending Clause power to coerce the States
into constraining their own sovereign authority. While the line between strong en-
couragement (which is constitutional) and coercion (which is not) is not always bright,
the Tax Mandate falls clearly on the coercive side of the line: the States have no real
choice but to accept the Act’s funding and the conditions that come with it. The Tax
Mandate is therefore unconstitutional, and this Court should enjoin the defendants
from enforcing it.
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B. Ohio will be irreparably harmed without an injunction.
Courts presume irreparable harm in cases involving constitutional violations.
Roberts v. Neace, 958 F.3d 409, 416 (6th Cir. 2020) (per curiam); Obama for Am. v.
Husted, 697 F.3d 423, 436 (6th Cir. 2012); ACLU v. McCreary Cnty., 354 F.3d 438,
445 (6th Cir. 2003). A constitutional violation, “for even minimal periods of time,
unquestionably constitutes irreparable injury.” Elrod v. Burns, 427 U.S. 347, 373
(1976). Because the Tax Mandate is unconstitutional, it causes irreparable harm to
the parties it affects—namely, the States.
Even without that presumption, the Court would have to conclude that the Tax
Mandate causes irreparable harm. Why? Because the Mandate causes precisely the
same harm that occurs every time the federal government intrudes upon the “sover-
eign interests” of the States. Kansas v. United States, 249 F.3d 1213, 1227 (10th Cir.
2001); accord Texas v. United States, 809 F.3d 134, 157 (5th Cir. 2015); Georgia v.
Pruitt, 326 F. Supp. 3d 1356, 1367 (S.D. Ga. 2018). All States “have an interest, as
sovereigns, in exercising ‘the power to create and enforce a legal code.’” Alaska v.
U.S. Dep’t of Transp., 868 F.2d 441, 443 (D.C. Cir. 1989) (quoting Alfred L. Snapp &
Son, Inc. v. Puerto Rico, 458 U.S. 592, 601 (1982)). That is why the States have stand-
ing to challenge federal laws that purport to constrain that power. Celebrezze v. U.S.
Dep’t of Transp., 766 F.2d 228, 232–33 (6th Cir. 1985); see also Kansas, 249 F.3d at
1228; Texas, 809 F.3d at 157; Wyo. ex rel. Crank v. United States, 539 F.3d 1236, 1242
(10th Cir. 2008); Alaska, 868 F.2d at 443. And that is why the federal government
always causes a form of irreparable harm when it improperly interferes with a State’s
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freedom to govern itself. See Abbott v. Perez, 138 S. Ct. 2305, 2324 (2018); accord
Maryland v. King, 133 S. Ct. 1, 3 (2012) (Roberts, C.J., in chambers). The Tax Man-
date causes precisely that form of harm: it constrains the State’s taxing power, in-
terfering with its sovereignty and thus causing irreparable harm.
The Tax Mandate causes irreparable harm in a second way, too: by subjecting
Ohio to unknown penalties if it reduces taxes, the Mandate causes “an interfer-
ence with the State’s orderly management of its fiscal affairs.” Barnes v. E-Systems,
501 U.S. 1301, 1304 (1991) (Scalia, J., in chambers). That injury cannot be remedi-
ated later—there is no mechanism for holding the United States responsible for the
unquantifiable injuries Ohio will sustain if made to craft its tax policy in the Man-
date’s shadow.
C. Enjoining the Tax Mandate will not harm others, and will promote
the public interest.
Enjoining the Tax Mandate will not harm anyone. Ohio seeks to enjoin only
the Tax Mandate, which is the provision forbidding the States from using the Act’s
funds “to either 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.” Amer-
ican Rescue Plan Act, §9901 (adding §602(c)(2)(A) to the SSA). Enjoining that pro-
vision will not keep the United States from distributing the funds, nor will it interfere
with any entity’s expenditure of the funds. An injunction will enjoin a single provi-
sion that impermissibly infringes the States’ sovereign authority to set state taxes.
An injunction is in the public interest, too. The “public interest lies in a correct
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application of the” law, and “upon the will of the people … being effected in accordance
with [the] law.” Coal. to Defend Affirmative Action v. Granholm, 473 F.3d 237, 252
(6th Cir. 2006) (citing Congregation Lubavitch v. City of Cincinnati, 923 F.2d 458,
460 (6th Cir. 1991)). Enjoining the unconstitutional provision, and thus empowering
the Ohio General Assembly to do the People’s will, would thus promote the public
interest.
CONCLUSION
The Court should enjoin enforcement of the Tax Mandate.
Respectfully submitted,
DAVE YOST (0056290)
Ohio Attorney General
/s/ Benjamin M. Flowers
BENJAMIN M. FLOWERS* (0095284)
Solicitor General
*Trial Attorney
Solicitor General
*Counsel of Record
ZACHERY P. KELLER (0086930)
MAY DAVIS (PHV application pending)
Deputy Solicitors General
30 East Broad Street, 17th Floor
6l4-466-8980
614-466-5087; fax
benjamin.flowers@ohioattorneygeneral.gov
Counsel for the State of Ohio
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CERTIFICATE OF SERVICE
I hereby certify that on March 17, 2021, a copy of the foregoing was filed elec-
tronically. Notice of this filing will be sent to all parties for whom counsel has entered
an appearance by operation of the Court’s electronic filing system. Parties may access
this filing through the Court’s system. I further certify that a copy of the foregoing
pleading and the Notice of Electronic Filing has been served by ordinary U.S. mail
upon all parties for whom counsel has not yet entered an appearance electronically,
at the following addresses:
Vipal J. Patel Merrick Garland
United States Attorney for the Attorney General
Southern District of Ohio United States Department of Justice
U.S. Attorney’s Office 950 Pennsylvania Avenue, NW
303 Marconi Boulevard, Suite 200 Washington, DC 20530-0001
Columbus, OH 43215
Civil-Process Clerk Janet Yellen
Office of the United States Attorney Secretary of Treasury
for the Southern District of Ohio U.S. Department of Treasury
303 Marconi Boulevard, Suite 200 1500 Pennsylvania Ave. N.W.
Columbus, OH 43215 Washington, D.C. 20220
U.S. Department of Treasury Richard K. Delmar
1500 Pennsylvania Ave. N.W. Acting Inspector General
Washington, D.C. 20220 U.S. Department of Treasury
1500 Pennsylvania Ave. N.W.
Washington, D.C. 20220
/s/ Benjamin Flowers
BENJAMIN FLOWERS (0095284)
Solicitor General
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LOCAL RULE 65.1(B) CERTIFICATION
I hereby certify that on March 17, 2021, I served a copy of the complaint, this
motion, and all other filings in this case by email on the defendants’ attorney at the
following email address:
Matthew J. Horwitz
Civil Chief
United States Attorney for the
Southern District of Ohio
Matthew.Horwitz@usdoj.gov
/s/ Benjamin Flowers
BENJAMIN FLOWERS (0095284)
Solicitor General
21
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