Reply to Response to Motion, State of Ohio v. Yellen, No. 1:21-cv-00181 (S.D. Ohio), Doc. 30 (April 22, 2021)
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The State of Ohio's reply in support of its motion for a preliminary injunction in State of Ohio v. Janet Yellen, Secretary of the Treasury, et al., Case No. 1:21-cv-181-DRC, U.S. District Court for the Southern District of Ohio, Doc. 30, filed April 22, 2021, before District Judge Douglas R. Cole. The reply argues that the "Tax Mandate" in the American Rescue Plan Act of 2021, Pub. L. No. 117-2, §9901, is unconstitutional because it exceeds Congress's Spending Clause authority and violates the Tenth Amendment. It also argues that Ohio has standing, that the case is ripe, and that Ohio is entitled to an injunction. The conclusion asks the Court to enjoin enforcement of the Tax Mandate.
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
Cite this document
“Reply to Response to Motion, State of Ohio v. Yellen, No. 1:21-cv-00181 (S.D. Ohio), Doc. 30 (April 22, 2021).”
Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/reply-to-response-to-motion-state-of-ohio-v-yellen-no-1-21-cv-00181-s-43b37787fa/
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Case: 1:21-cv-00181-DRC Doc #: 30 Filed: 04/22/21 Page: 1 of 28 PAGEID #: 265
IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF OHIO
STATE OF OHIO, :
Plaintiff, :
: Case No. 1:21-cv-181-DRC
v.
:
JANET YELLEN, in her official : District Judge Douglas R. Cole
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. :
REPLY IN SUPPORT OF MOTION FOR A PRELIMINARY INJUNCTION
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TABLE OF CONTENTS
Page
TABLE OF CONTENTS ................................................................................................. i
TABLE OF AUTHORITIES .......................................................................................... ii
I. The Tax Mandate is unconstitutional. .......................................................... 1
A. The Tax Mandate exceeds Congress’s Spending Clause authority. ....... 5
B. The Tax Mandate violates the Tenth Amendment. .............................. 12
II. Ohio has standing and the case is ripe for review. .................................... 14
III. Ohio is entitled to an injunction. ................................................................ 19
CERTIFICATE OF SERVICE ..................................................................................... 22
i
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TABLE OF AUTHORITIES
Cases Page(s)
Aid for Women v. Foulston,
441 F.3d 1101 (10th Cir. 2006) .............................................................................. 17
Ariz. State Legis. v. Ariz. Indep. Redistricting Comm’n,
576 U.S. 787 (2015) .......................................................................................... 15, 18
Arlington Cent. Sch. Dist. Bd. of Ed. v. Murphy,
548 U.S. 291 (2006) .................................................................................................. 5
Babbitt v. UFW Nat’l Union,
442 U.S. 289 (1979) ................................................................................................ 17
Bennett v. Kentucky Department of Education,
470 U.S. 657 (1985) .................................................................................................. 7
Benning v. Georgia,
391 F.3d 1299 (11th Cir. 2004) ................................................................................ 6
City & Cnty. of S.F. v. Trump,
897 F.3d 1225 (9th Cir. 2018) ................................................................................ 15
City of Los Angeles v. Barr,
929 F.3d 1163 (9th Cir. 2019) .................................................................................. 6
Clinton v. City of N.Y.,
524 U.S. 417 (1998) ................................................................................................ 15
Coyle v. Smith,
221 U.S. 559 (1911) ................................................................................................ 13
Daunt v. Benson,
956 F.3d 396 (6th Cir. 2020) .................................................................................. 15
Davis v. Monroe Cnty. Bd. of Ed.,
526 U.S. 629 (1999) .................................................................................................. 6
Dep’t of Comm. v. New York,
139 S. Ct. 2551 (2019) ............................................................................................ 15
Detroit v. Sec’y of Comm.,
4 F.3d 1367 (6th Cir. 1993) .................................................................................... 15
ii
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Dows v. Chicago,
78 U.S. (11 Wall.) 108 (1871) ................................................................................. 20
Free Enter. Fund v. PCAOB,
561 U.S. 477 (2010) .................................................................................................. 1
Gordon v. Holder,
721 F.3d 638 (D.C. Cir. 2013) ................................................................................ 20
Gruver v. La. Bd. of Supervisors for the La. State Univ. Agric. & Mech.
Coll.,
959 F.3d 178 (5th Cir. 2020) .................................................................................... 9
Haight v. Thompson,
763 F.3d 554 (6th Cir. 2014) ................................................................................ 5, 6
Hill v. Snyder,
878 F.3d 193 (6th Cir. 2017) ............................................................................ 18, 19
Holder v. Humanitarian Law Project,
561 U.S. 1 (2010) ...................................................................................................... 2
Kenny v. Wilson,
885 F.3d 280 (4th Cir. 2018) .................................................................................. 17
Lac Vieux Desert Band of Lake Superior Chippewa Indians v. Mich.
Gaming Control Bd.,
172 F.3d 397 (6th Cir. 1999) .................................................................................. 15
Libertarian Party of Ohio v. Wilhem,
988 F.3d 274 (6th Cir. 2021) .................................................................................. 15
Marbury v. Madison,
1 Cranch 137 (1803) ................................................................................................. 6
Maryland v. King,
567 U.S. 1301 (2012) .............................................................................................. 20
Massachusetts v. EPA,
549 U.S. 497 (2007) ................................................................................................ 16
Massachusetts v. Mellon,
262 U.S. 447 (1923) .......................................................................................... 17, 18
Miami Valley Fair Hous. Ctr., Inc. v. Connor Grp.,
725 F.3d 571 (6th Cir. 2013) .................................................................................. 16
iii
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Michigan v. EPA,
576 U.S. 743 (2015) .................................................................................................. 6
Murphy v. NCAA,
138 S. Ct. 1461 (2018) .............................................................................................. 9
Nat’l Fed’n of Indep. Bus. v. Sebelius (“NFIB”),
567 U.S. 519 (2012) .........................................................................................passim
Ne. Fla. Chapter of Associated Gen. Contractors of Am. v. City of
Jacksonville,
508 U.S. 656 (1993) ................................................................................................ 14
New York v. United States,
505 U.S. 144 (1992) ................................................................................................ 13
Roberts v. Neace,
958 F.3d 409 (6th Cir. 2020) .................................................................................. 19
Sch. Dist. of City of Pontiac v. Sec’y of the U.S. Dep’t of Educ.,
584 F.3d 253 (6th Cir. 2009) (en banc) .................................................................. 15
Schooner Exch. v. McFaddon,
7 Cranch 116 (1812) ............................................................................................... 12
Setser v. United States,
566 U.S. 231 (2012) .................................................................................................. 4
South Dakota v. Dole,
483 U.S. 203 (1987) .................................................................................. 5, 6, 12, 14
Spokeo v. Robins,
136 S. Ct. 1540 (2016) ............................................................................................ 14
Thomas v. Union Carbide Agric. Prods. Co.,
473 U.S. 568 (1985) ................................................................................................ 19
United States v. Mitra,
405 F.3d 492 (7th Cir. 2005) .................................................................................... 4
Voisine v. United States,
136 S. Ct. 2272 (2016) .............................................................................................. 5
Statutes, Rules, and Constitutional Provisions
Ohio Const., art. II, §2 ................................................................................................. 20
iv
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American Rescue Plan Act of 2021, Pub. L. No. 117-2, §9901 ..................................... 1
Fed. R. Civ. P. 15 ......................................................................................................... 18
R.C. §5733.41 ............................................................................................................... 16
R.C. §5747.41 ............................................................................................................... 16
R.C. §5747.065 ............................................................................................................. 16
H.B. 262, 134th Gen. Assemb. (Ohio) ......................................................................... 17
Substitute H.B. 110, 134th Gen. Assemb. (Ohio) ....................................................... 16
Substitute S.B. 18, 134th Gen. Assemb. (Ohio, enrolled March 31,
2021)........................................................................................................................ 16
Other Authorities
Anthony J. Bellia, Jr. & Bradford R. Clark, The International Law
Origins of American Federalism, 120 Colum. L. Rev. 835 (2020) ........................ 12
The Federalist No. 32 (Hamilton, A.) (Cooke, ed., 1961) ........................................... 13
Hearing on CARES Act Quarterly Report, Sen. Banking, Hous. & Urb.
Affairs Comm. (Mar. 24, 2021)................................................................................. 3
Laura Davison, Treasury Clears States to Cut Taxes—But Not With
Stimulus, Bloomberg (Mar. 18, 2021) ...................................................................... 2
Letter from Secretary Yellen to State Attorneys General (Mar. 23,
2021).......................................................................................................................... 2
v
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Millions of Americans—Ohioans included—are suffering from the economic ef-
fects of COVID-19. Some lost their jobs. Others lost, or may soon lose, businesses
they spent years building. Congress responded by passing a relief bill that grants
States almost $200 billion—money the States can use to shore up their budgets and
to help their citizens in need. But the money comes with a catch. The “Tax Mandate”
says that States, by accepting this funding, agree to ambiguous limits on their sover-
eign power to tax. States that violate those limits are penalized.
The Tax Mandate is unconstitutional. This brief shows why, establishes Ohio’s
Article III standing (which is easier to understand in light of the merits), and demon-
strates why the Mandate must be enjoined.
I. The Tax Mandate is unconstitutional.
Congress often tests the limits of its constitutional authority. Thus, when a
law lacks “historical precedent,” that is a “telling indication of [a] severe constitu-
tional problem.” Free Enter. Fund v. PCAOB, 561 U.S. 477, 505 (2010) (quotation
omitted). The Tax Mandate lacks historical precedent: Congress, as far as Ohio can
tell, has never before used the Spending Clause to dictate state tax policy. That sug-
gests unconstitutionality. But to know for sure, one must analyze the Mandate doc-
trinally, which requires first figuring out what the Mandate means. Here is the text:
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.
American Rescue Plan Act of 2021, Pub. L. No. 117-2, §9901.
1
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Every tax cut, unless it increases tax revenue (by spurring growth, for exam-
ple), causes “a reduction” in “net tax revenue” relative to a world without the tax cut.
And because “[m]oney is fungible,” Holder v. Humanitarian Law Project, 561 U.S. 1,
37 (2010), every reduction in tax revenue is “indirectly offset” by revenue acquired
elsewhere. So the Mandate could be read as forbidding States that take Rescue Plan
funds from enacting any revenue-negative tax reductions.
Apparently recognizing that the Mandate is unconstitutional if it sweeps so
broadly, the Secretary has been trying since the Mandate’s enactment to offer nar-
rowing constructions. All to no avail. In mid-March, a Treasury spokesperson told
Bloomberg News that the Mandate penalizes only revenue reductions that States pay
for using federal funds. Laura Davison, Treasury Clears States to Cut Taxes—But
Not With Stimulus, Bloomberg (Mar. 18, 2021), https://tinyurl.com/NoClarity. But
what does that mean “in a world where money is fungible and tax cuts are not ‘paid
for’” in an easily traceable way? Br. of Amicus Chamber of Commerce, et al. (“Cham-
ber Br.”) at 18. The Secretary herself tried to clarify, writing to State Attorneys Gen-
eral that the Mandate “simply provides that funding received under the Act may not
be used to offset a reduction in net tax revenue resulting from certain changes in
State law.” Letter from Secretary Yellen to State Attorneys General (Mar. 23, 2021),
https://perma.cc/ZZX9-T4FN. But adding the word “simply” before paraphrasing the
Mandate’s ambiguous terms clarified nothing. Nor did the Secretary’s appearance in
Congress. She said, when asked what the Mandate prohibits: that is a “thorny ques-
tion[] to work through,” and “given the fungibility of money it’s a hard question to
2
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answer.” Hearing on CARES Act Quarterly Report, Sen. Banking, Hous. & Urb. Af-
fairs Comm. at 1:10:00–1:13:36 (Mar. 24, 2021), https://tinyurl.com/thornyQs.
Indeed it is, which is perhaps why the Secretary’s brief does not try to answer
it. The Secretary makes many unpersuasive assertions about what the Tax Mandate
does not mean. But she never says, even in general terms, what it does mean.
For example, the Secretary says that, under “the Act’s plain terms, a State is
free” to change its tax laws “as it believes appropriate, with no effect on the amount
of the federal grant, as long as the changes—taken together over the reporting pe-
riod—do not result in a reduction to the State’s net tax revenue.” Resp.17. That is a
convoluted way of saying nothing new. First, it offers no insight as to the difference
between “directly” and “indirectly” offsetting expenditure, which is the main source
of ambiguity. If a world-class economist like Secretary Yellen cannot explain what
an indirect offset is, that proves the phrase is hopelessly ambiguous. Moreover, what
constitutes a “reduction to the State’s net tax revenue”? Does one determine this by
asking whether the tax cut reduces revenue relative to a world with no tax cut? Or
does one compare net tax revenue from one period to the net tax revenue from a pre-
vious period? If the latter, how does one know whether the change in tax law (as
opposed to some other factor) caused the reduction? Does it matter whether tax rev-
enue would have been even lower without the tax cut? The Mandate provides no clue.
The Secretary addresses the ambiguity surrounding “indirectly” by reading the
word out of the statute. It is only an “adjective” that modifies a “noun,” she says, so
it carries no independent meaning. Resp.17–18. No interpretive principle says that
3
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adjectives modifying nouns lack meaning. (Regardless, “indirectly” is an adverb that
modifies a verb: “to … offset.”) There is, however, an “interpretive rule” requiring
courts to “give effect … to every clause and word” in a statute. Setser v. United States,
566 U.S. 231, 239 (2012) (quotation omitted). So “indirectly” must mean something.
The Secretary next suggests a narrowing construction that manages to solve
nothing while also increasing the Mandate’s ambiguity. The argument homes in on
the word “use” in the Mandate’s command not to “use the funds … to either directly
or indirectly offset a reduction in the net tax revenue.” This word, the Secretary says,
“connotes ‘volitional’ ‘active employment’ of federal funds.” Resp.17 (quoting Voisine
v. United States, 136 S. Ct. 2272, 2278–79 (2016)). Therefore, she suggests, States
violate the Mandate only when they intend their funds to offset revenue decreases.
This narrowing construction suffers from three fatal flaws. First, it provides
no clarity about the meaning of “indirectly offset.” Second, the narrowing interpre-
tation actually introduces more ambiguity: because legislators know that new fund-
ing in some sense “offsets” all revenue lost, there is no coherent distinction (or test
for distinguishing) between volitional and non-volitional indirect offsets. The inco-
herence is especially inescapable given the impracticality of deciphering what a
multi-member legislature “intended” its law to do. See United States v. Mitra, 405
F.3d 492, 495 (7th Cir. 2005). Finally, “use” does not imply what the Secretary sup-
poses. English speakers know what “use” means when coupled with “indirectly.” If
your (overly formal) neighbor says: “You may use my garden hose, but take care not
to directly or indirectly flood my basement,” he is saying not to put the hose in the
4
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basement and flood it (a direct flooding) or to use it in such a way that the basement
ends up flooded (an indirect flooding). The neighbor’s meaning is clear because the
word “use,” while it “conveys the idea that the thing used … has been made the user’s
instrument,” does not require that the user intend his use to bring about a particular
outcome. Voisine, 136 S. Ct. at 2279 (quotation omitted). States “use” funds—they
actively employ funds—when they spend or deposit them. Some uses “directly” offset
revenue loses; others do so “indirectly”; others offset nothing. Neither the Mandate
nor the Secretary provides any clue as to which uses fall into which categories.
The Secretary’s brief ends without offering any plausible interpretation of the
Tax Mandate. All we know for sure is that the Mandate requires States not to reduce
taxes in some (undefined) circumstances. This ambiguous commandeering of state
tax policy violates both the Spending Clause and the Tenth Amendment.
A. The Tax Mandate exceeds Congress’s Spending Clause authority.
1. Ambiguity. Ambiguous Spending Clause conditions are unconstitutional.
South Dakota v. Dole, 483 U.S. 203, 207 (1987). And the only thing clear from the
Secretary’s futile attempts at clarifying the Mandate is its terminal ambiguity.
The Secretary responds that, in Spending Clause legislation, the conditions
themselves need not be clear, as long as the legislation clearly imposes conditions.
Resp.22–23. But Supreme Court and Sixth Circuit precedents say otherwise. See
Arlington Cent. Sch. Dist. Bd. of Ed. v. Murphy, 548 U.S. 291, 300–01 (2006); Haight
v. Thompson, 763 F.3d 554, 569 (6th Cir. 2014) (per Sutton, J.). The Secretary herself
cites cases confirming that “conditions imposed by Congress must be unambiguous.”
5
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Benning v. Georgia, 391 F.3d 1299, 1305 (11th Cir. 2004) (cited at Resp.23). True,
Congress need not specifically identify every permissible and impermissible act. See
Davis v. Monroe Cnty. Bd. of Ed., 526 U.S. 629, 650 (1999). But the conditions in
Spending Clause legislation must be certain enough to give the States “clear notice”
of what they are agreeing to. Benning, 391 F.3d at 1306; Haight, 763 F.3d 569–70;
see also Br. of Amicus The Buckeye Inst.7–8.
The Secretary continues: even if the Mandate is ambiguous on its own, forth-
coming “agency guidance or regulations” specifying “the parameters of” the Mandate
may cure any ambiguity. Resp.21–22. No such regulations exist today, however.
And since the Secretary has yet to advance any interpretation (let alone a plausible
one) of the Mandate, it is hard to take seriously her claims of forthcoming clarity; any
clarifying regulations will entail a rewriting, not an interpretation, of the Tax Man-
date. (Implausible agency interpretations, even on topics about which agencies are
authorized to regulate, are invalid. See Michigan v. EPA, 576 U.S. 743, 751 (2015).)
Regardless, agencies may not cure, with a clarifying regulation, the unconsti-
tutional ambiguity of a statutory condition. This follows from our Constitution’s
structure. Congress can enact laws only pursuant to its enumerated powers. While
the Spending Clause empowers Congress to put conditions on federal funding, Con-
gress lacks any power to impose ambiguous conditions. Dole, 483 U.S. at 207. Thus,
ambiguous statutory conditions in Spending Clause legislation are “repugnant to the
constitution” and “void.” Marbury v. Madison, 1 Cranch 137, 177 (1803). Whatever
power agencies have to place their own conditions on funding, cf. City of Los Angeles
6
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v. Barr, 929 F.3d 1163, 1175 n.6 (9th Cir. 2019), they have no power to resuscitate
statutory conditions that Congress exceeded its authority by enacting. This addition-
ally follows from the purpose of the unambiguous-condition requirement: protecting
States from being surprised “with post-acceptance or retroactive conditions.” Nat’l
Fed’n of Indep. Bus. v. Sebelius (“NFIB”), 567 U.S. 519, 584 (2012) (op. of Roberts,
C.J.) (quotation omitted). Statutory conditions are prospectively binding. But agen-
cies can change their interpretations. Given the latitude that agencies would have to
reinterpret unconstitutionally ambiguous statutes, allowing them to “clarify” stat-
utes in this way would expose the States to a serious risk of post-acceptance surprises.
The Secretary finds no case giving agencies the power to resuscitate unconsti-
tutionally ambiguous statutory conditions. That includes Bennett v. Kentucky De-
partment of Education, 470 U.S. 657 (1985). Bennett never considered whether an
agency could cure impermissible ambiguity in a statutory condition. It did not have
to; in that case, the statute itself provided the “requisite clarity.” Id. at 666. Bennett
did say that, because the statutory program before it was an “ongoing, cooperative
program,” the State would be free to “seek clarification of the program requirements”
from the federal government. Id. at 669. But that quote is an aside during the Court’s
consideration of a different question: whether to apply the contra proferentem prin-
ciple when interpreting the conditions at issue. Id. Bennett did not hold that the
option to “seek clarification” from an agency cures an ambiguity problem.
2. Coercion. Although “Congress may use its spending power to create incen-
tives for States to act in accordance with federal policies,” it may not use “financial
7
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inducements to exert a ‘power akin to undue influence.’” NFIB, 567 U.S. at 577 (op.
of Roberts, C.J.). Congress crosses the line separating permissible encouragement
from impermissible dragooning when its inducements “leave[] the States with no real
option but to acquiesce” to Congress’s instructions. Id. at 582 (op. of Roberts, C.J.).
The Tax Mandate runs afoul of these principles. Ohio stands to receive $5.5 billion.
In the pandemic-caused economic crisis, Ohio cannot realistically turn that down.
The $5.5 billion can go a long way toward supporting the many Ohioans and Ohio
businesses that have endured untold economic hardship. It can also go a long way
toward shoring up state budgets and debts—budgets and debts that, if Ohio declines
the funding, Ohioans will have to cover by themselves. Ohioans’ taxes are helping
fund the Rescue Plan; they rightly demand their fair share of the benefits. And if
Ohio refuses to accept the funds to which Ohioans have contributed their fair share,
it will put both the State and its citizens at a competitive disadvantage on the road
to economic recovery. In these circumstances, Ohio has no choice but to accept.
The Secretary contends that the Mandate is per se non-coercive. “‘Congress
may attach appropriate conditions to federal taxing and spending programs to con-
serve its control over the use of federal funds.’” Resp.18 (quoting NFIB, 567 U.S. at
579 (op. of Roberts, C.J.)). From this, the Secretary infers that the “coercion analysis
is inapplicable” when “Congress merely restricts how States use newly appropriated
federal money.” Id. And that, she says, is all the Tax Mandate does.
Even if laws that “merely restrict[] how States use newly appropriated federal
money” are per se non-coercive, id.—a proposition the State disputes—the Tax
8
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Mandate is not that kind of law. The Secretary concedes that the coercion test applies
to “conditions” in Spending Clause legislation “that do not directly ‘govern the use of
the funds,’” but rather “attempt to ‘pressure the States to accept policy changes.’”
Gruver v. La. Bd. of Supervisors for the La. State Univ. Agric. & Mech. Coll., 959 F.3d
178, 183 (5th Cir. 2020) (alteration adopted) (quoting NFIB, 567 U.S. at 580 (op. of
Roberts, C.J.)). That is precisely what the Mandate does. It requires the States to
accept limits on the use of their own funds; the Mandate penalizes, for example, tax
rebates and credits. The Mandate’s conditions also pressure the States into taking a
particular approach toward their citizens’ money: if States decide to take less of their
citizens’ money by cutting taxes, they can be penalized. So the Mandate cannot be
fairly described as “merely” restricting the use of federal money as part of some fed-
eral program. Resp.18. Instead, the Mandate attempts to pressure the States into
adopting particular tax policies of their own. The law is therefore subject to the co-
ercion analysis. Gruver, 959 F.3d at 183; NFIB, 567 U.S. at 580 (op. of Roberts, C.J.).
True, the Tax Mandate is phrased to look like a regulation of the manner in
which federal funds may be spent. But it is not. The coercion test indisputably ap-
plies to Spending Clause laws that “pressur[e] the States to accept policy changes.”
Id. at 580 (op. of Roberts, C.J.). And the Tax Mandate does just that. Given the
fungibility of money, the Mandate’s penalization of indirect offsets attempts to pres-
sure the States into adopting a particular tax policy. As NFIB recognized, Congress
cannot evade the limits on its authority, including its Spending Clause authority,
with artful drafting. 567 U.S. at 582 (op. of Roberts, C.J.); see also Murphy v. NCAA,
9
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138 S. Ct. 1461, 1478 (2018). Holding otherwise would transform the Spending
Clause from a limit on Congress’s power into a limit on its word choice. To illustrate,
imagine two laws. The first gives States $1 billion that they can use to fund science
teachers in schools, as long as the States agree not to provide funding for armed
school-safety officers. The second gives States $1 billion for the same purpose, as long
as they agree not to use that money in a way that “indirectly offsets” expenditure on
armed school-safety officers. The laws are functionally identical. Because the coer-
cion test would apply to the first law, it must apply to the second law also. Similarly
here, Congress cannot evade the coercion analysis by phrasing its attempt at dictat-
ing state tax policy as a mere condition on the expenditure of federal funds.
The Secretary additionally argues that the Mandate is non-coercive because
the “States do not suffer any ‘penalty’ to preexisting funds if they decline to accept
Rescue Plan funds with their attendant conditions.” Resp.20. That is a non sequitur,
since “coercion” does not entail the deprivation of a preexisting privilege. That is true
in everyday life: a threat not to administer lifesaving medicine is just as coercive as
a threat to steal lifesaving medicine someone already has. And it is true in Spending
Clause legislation too, as this case shows. When Congress, in the middle of an un-
precedented economic downturn, offers to give the States billions of dollars that the
States and their citizens badly need, the States have no real choice but to accept the
funding and the conditions that come with it. The money at stake is comparable in
size to the offer found coercive in NFIB. Compare NFIB, 567 U.S. at 541–42 (op. of
Roberts, C.J.), with Compl. ¶¶25–35; accord Chamber Br.11–12. While the
10
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threatened withholding in NFIB included funds to which the States were entitled in
previous years, NFIB’s coercion principle is not limited to such cases. The Chief Jus-
tice expressly declined to “‘fix the outermost line’ where persuasion gives way to co-
ercion.’” 567 U.S. at 585 (quoting Steward Machine Co. v. Davis, 301 U.S. 548, 591
(1937)). The question is simply whether Congress has used its Spending Clause
power to “conscript state agencies into the national bureaucratic army.” Id. at 585
(alteration adopted and quotation omitted). When Congress conscripts States with
threats to withhold funds—newly available or not—it violates the Spending Clause.
Finally, the Court can make short shrift of the suggestion that the Mandate is
non-coercive because it requires States to pay back only the amount of funds used in
violation of the Mandate. Resp.20. The size of the penalty is relevant to deciding
what burdens the State was coerced into accepting, not whether the State was coerced
in the first place. Only the latter issue is relevant. As the Chief Justice explained in
NFIB: “the size of the new financial burden imposed on a State is irrelevant in ana-
lyzing whether the State has been coerced into accepting that burden. ‘Your money
or your life’ is a coercive proposition, whether you have a single dollar in your pocket
or $500.” 567 U.S. at 582 n.12. Thus, even if the State were forced to pay a mere
$1.00 fine for every violation, coercing it into accepting that limit on its sovereign
authority would be unconstitutional. If anything, the fact that the penalties for non-
compliance are not as draconian as they could be makes it even harder for a State to
reject the funds, and thus makes the law more coercive. In any event, the Mandate’s
penalties are potentially exorbitant. Indeed, they amount to a double-penalty: after
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losing revenue from a tax reduction, the State will lose an equal amount through
recoupment. And even if the penalty were small in monetary terms, every such pen-
alty would constitute a serious intrusion into the States’ constitutionally reserved
powers. That is a serious affront to the States’ sovereignty, and we turn to it now.
B. The Tax Mandate violates the Tenth Amendment.
Spending Clause conditions must be “appropriate,” and unconstitutional con-
ditions are not. NFIB, 567 U.S. at 579 (op. of Roberts, C.J.); accord Dole, 483 U.S. at
208. The Tax Mandate is inappropriate: Congress lacked the power to enact it, and
so the law violates the Tenth Amendment.
The Mandate unconstitutionally commandeers state taxing authority by coerc-
ing States into agreeing to be penalized if they fail to implement tax policy according
to Congress’s instructions. See PI Mot.13–15. And the Tax Mandate additionally
violates the Tenth Amendment by interfering with an issue—state taxation—at the
core of state sovereignty. When the States joined the Union, they retained the tradi-
tional features of sovereignty except to the extent they surrendered those features in
the Constitution itself. The Framers made that much clear by “employing the term
‘States’”—not “colonies” or “territories” or some other word less bound up with sover-
eignty—in the Constitution. Anthony J. Bellia, Jr. & Bradford R. Clark, The Inter-
national Law Origins of American Federalism, 120 Colum. L. Rev. 835, 935 (2020);
see also Schooner Exch. v. McFaddon, 7 Cranch 116, 137 (1812). And some matters
are so indispensable to a sovereign state that the federal government exceeds its
power by regulating them. See Chamber Br.8. For example, Congress lacks the
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power to regulate the location of a State’s capital. Coyle v. Smith, 221 U.S. 559, 565
(1911). If this case were about a Capital Mandate—if the Mandate prohibited using
the funds “to directly or indirectly offset the costs of hosting the seat of government
in a location other than the State’s largest city”—its constitutionality “would not be
for a moment entertained,” id.
The sovereign power to tax, however, is just as central to the concept of sover-
eignty as the power to locate a capital. The founding generation understood that
“individual States should possess an independent and uncontrolable authority to
raise their own revenues for the supply of their own wants.” The Federalist No. 32,
p.199 (Hamilton, A.) (Cooke, ed., 1961) (emphasis added). And they understood that,
“with the sole exception of duties on imports and exports,” the States would “retain
that authority in the most absolute and unqualified sense; and that an attempt on
the part of the national Government to abridge them in the exercise of it would be a
violent assumption of power unwarranted by any article or clause of its Constitution.”
Id. So, except in those few areas where the Constitution itself says otherwise, the
federal government lacks any authority to regulate state tax policy. State taxing
decisions are so central to state sovereignty that Congress’s attempts at pressuring
States into taxing their citizens—even through Spending Clause conditions—are “in-
consistent with the federal structure of our Government established by the Constitu-
tion.” New York v. United States, 505 U.S. 144, 177 (1992).
Indeed, the Tax Mandate is, on its face, designed to usurp the States’ sovereign
authority. Taxes and subsidies are flip sides of the same coin: what a State can do
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with one it can do with the other. Yet the Tax Mandate, while it forbids States from
reducing taxes, places no limits at all on their power to accomplish the same things
with subsidies. So while the Mandate would penalize Ohio for giving a $500 tax break
to everyone who pays at least $1,000 in taxes, it leaves the State free to give a $500
subsidy to the very same people. The only explanation for allowing one but not the
other is a desire to commandeer state taxing authority alone: Congress is not con-
cerned with safeguarding federal funds, but rather with pressuring States to adopt a
particular philosophy regarding the issue of taxation. A condition that serves no pur-
pose except to commandeer state taxing power intrudes on matters reserved to the
States, violating the Tenth Amendment. In fact, this gives rise to an additional
Spending Clause problem. “[C]onditions on federal grants” are unconstitutional if
they are “unrelated to the federal interest” the program is designed to promote. Dole,
483 U.S. at 207 (quotation omitted). Since the Tax Mandate’s conditions serve only
to regulate state tax policy, they lack any proper connection to a valid federal interest.
II. Ohio has standing and the case is ripe for review.
A. Standing. Plaintiffs have Article III standing if they suffer an injury in
fact, fairly traceable to the defendant’s conduct, that is likely to be redressed by a
favorable ruling. Spokeo v. Robins, 136 S. Ct. 1540, 1547 (2016). Everyone agrees
Ohio has shown traceability and redressability. The only question is whether Ohio
suffered an injury in fact. It did, many times over.
When a plaintiff can participate in a program only by subjecting itself to un-
constitutional terms, it suffers an injury in fact. See Ne. Fla. Chapter of Associated
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Gen. Contractors of Am. v. City of Jacksonville, 508 U.S. 656, 666 (1993); Clinton v.
City of N.Y., 524 U.S. 417, 433 n.22 (1998); Libertarian Party of Ohio v. Wilhem, 988
F.3d 274, 279 (6th Cir. 2021); Lac Vieux Desert Band of Lake Superior Chippewa In-
dians v. Mich. Gaming Control Bd., 172 F.3d 397, 407 (6th Cir. 1999). So it is here:
Ohio is injured by being allowed to obtain a federal benefit only by surrendering to
an invasion of its sovereign authority. That injury—the injury inherent in having to
choose between forgoing a benefit or accepting unconstitutional terms—is the same
one that creates standing in every unconstitutional-conditions case. See, e.g., Daunt
v. Benson, 956 F.3d 396, 417–18 (6th Cir. 2020). Here, the State must choose to be
injured by the “loss of federal funds,” Dep’t of Comm. v. New York, 139 S. Ct. 2551,
2565 (2019); accord Detroit v. Sec’y of Comm., 4 F.3d 1367, 1375 (6th Cir. 1993), or by
the wrongful invasion of its constitutional authority, Ariz. State Legis. v. Ariz. Indep.
Redistricting Comm’n, 576 U.S. 787, 800 (2015). Just like every Spending Clause
plaintiff made to choose between funding and sovereign authority, the State has
standing. See Sch. Dist. of City of Pontiac v. Sec’y of the U.S. Dep't of Educ., 584 F.3d
253, 261–62 (6th Cir. 2009) (en banc) (plurality); id. at 278 (Sutton, J., concurring in
the judgment); City & Cnty. of S.F. v. Trump, 897 F.3d 1225, 1235–36 (9th Cir. 2018).
The Mandate further injures Ohio “by interfering with the State’s orderly man-
agement of its fiscal affairs.” Compl. ¶12. Because of the Mandate, the State’s legis-
lative and executive officials will have to expend additional resources ensuring that
changes to state tax law comply with the Mandate (or that the expected penalty for
non-compliance is justified). See Chamber Br.14–19. The need to expend additional
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resources in determining whether a change in law will have this effect, and in later
challenging any recoupment efforts, qualifies as an Article III injury. See Miami Val-
ley Fair Hous. Ctr., Inc. v. Connor Grp., 725 F.3d 571, 576 (6th Cir. 2013).
Notwithstanding all this—and notwithstanding the “special solicitude” to
which States are “entitled” in the standing analysis, Massachusetts v. EPA, 549 U.S.
497, 520 (2007)—the Secretary denies that Ohio has suffered an injury. She does not
dispute that Ohio will be subject to the Tax Mandate. Instead, she argues that Ohio,
because it has not said “how it intends to use Rescue Plan funds,” may not be in
danger of violating the Mandate. Resp.8. This argument fails for two reasons.
First, Ohio has done more than enough to show that it faces sufficient danger
of being found to violate the Mandate. Ohio alleged that the Mandate “unconstitu-
tionally intrud[ed] on the State’s sovereign authority” and that the Mandate subjects
Ohio “to the risk that it may be made to return funding to the federal government.”
Compl. ¶12. While it did not identify precisely the planned and likely acts that will
implicate the Mandate, those acts are now a matter of public record. This Court can
take judicial notice, for example, of Ohio’s now-enacted S.B. 18. See Sub. S.B. 18,
134th Gen. Assemb. (Ohio, enrolled March 31, 2021), https://tinyurl.com/SubSB18.
The bill, among other things: lowers the tax rate applicable to certain investors in
qualifying pass-through entities, see §1 (amending R.C. §§5733.41, 5747.41); creates
a tax credit, id. (amending R.C. §5747.065(C)); exempts certain workers’ compensa-
tion dividends from the commercial-activity tax, id. §6; and allows for tax refunds, id.
§5. The General Assembly is considering other tax reductions right now. See Sub.
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H.B. 110, 134th Gen. Assemb. (Ohio), http://perma.cc/5YNQ-X5Z9; H.B. 262, 134th
Gen. Assemb. (Ohio), https://tinyurl.com/134HB262. All this gives the State stand-
ing. Parties have standing to challenge a law when there is a “realistic danger of
sustaining a direct injury as a result of the statute’s operation or enforcement.” Bab-
bitt v. UFW Nat’l Union, 442 U.S. 289, 298 (1979). The actual and proposed legisla-
tion creates that danger. The danger is heightened by the Secretary’s inability to say
what the Mandate prohibits. The Secretary faults Ohio for failing to say with cer-
tainty that particular laws will violate the Mandate, but Ohio cannot do that “pre-
cisely because” the Mandate is “so vague.” Kenny v. Wilson, 885 F.3d 280, 291 (4th
Cir. 2018); see also Aid for Women v. Foulston, 441 F.3d 1101, 1110 (10th Cir. 2006).
Second, even if Ohio had not yet enacted or considered any actual legislation,
it would still be injured by being made to accept unconstitutional terms in exchange
for benefits, and by having to expend additional resources in determining whether
and how to comply with the Mandate. See above 14–16; see also Chamber Br.14–20.
Those are all concrete injuries, not “abstract” allusions to “sovereignty.” Resp. 10
(quoting Massachusetts v. Mellon, 262 U.S. 447 (1923)). That distinguishes this case
from Mellon, which held that States cannot establish standing with “naked conten-
tion[s]” that Congress “usurped [their] reserved powers” by passing legislation be-
yond its enumerated powers. 262 U.S. at 483. Mellon involved Massachusetts’s chal-
lenge to a federal health program in which States, if they wanted, could participate.
Id. at 479. But Massachusetts did not participate, id., and it failed to identify any
way in which the legislation “actually invaded or threatened” its sovereign authority,
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id. at 485. Most significantly, the program did not “require the States … to yield”
their reserved rights—Massachusetts sought to challenge the law based simply on its
belief that Congress, by passing a law it lacked authority to enact, had unconstitu-
tionally legislated about matters left to the States. Id. at 482; see also accord Ariz.
State Leg., 576 U.S. at 802 n.10. Ohio’s case is triply distinguishable. First, the State
is subject to the conditions it wishes to challenge; it has no choice but to accept the
Rescue Plan funds, subjecting it to the Mandate. Second, and as a result, Ohio will
need to expend resources ensuring compliance (or deciding not to comply) with the
Mandate. That is a more concrete injury than anything faced by Massachusetts,
which was not subject to the challenged conditions, in Mellon. Finally, and most
importantly, Ohio is not claiming to be injured by Congress’s mere enactment of a
law it lacked authority to pass. Instead, Ohio is injured by being made to “yield” some
of its sovereign authority—its power over tax policy—as a condition for receiving ben-
efits that Ohio indisputably wants (and is being coerced) to accept.
A final note on standing: to the extent the Court thinks Ohio has failed to
allege some fact needed to establish jurisdiction, it should not dismiss this case with-
out giving Ohio a chance to amend its complaint, which it can do as of right if the
Secretary files a Rule 12(b)(1) motion. Fed. R. Civ. P. 15(a)(1)(B).
B. Ripeness. “A claim is ripe where it is ‘fit for judicial decision’ and where
‘withholding court consideration’ will cause hardship to the parties.” Hill v. Snyder,
878 F.3d 193, 213 (6th Cir. 2017) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 149
(1967)). Because Ohio’s “pre-enforcement facial constitutional challenge[]” presents
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“‘purely legal’ issues that ‘will not be clarified by further factual development,’” it is
necessarily fit for judicial decision. Id. at 213–14 (quoting Thomas v. Union Carbide
Agric. Prods. Co., 473 U.S. 568, 581 (1985)). And for all the reasons just discussed, a
delay will harm Ohio by complicating its efforts to plan its fiscal affairs. See also
Chamber Br.14–20. Forcing Ohio to make tax policy “without knowing” what laws
the Mandate prohibits “would impose a palpable and considerable hardship.”
Thomas, 473 U.S. at 581. The Secretary, in suggesting that the State wait to sue
until it faces a recoupment proceeding, Resp.12, ignores these harms.
III. Ohio is entitled to an injunction.
Ohio’s likelihood of success on the merits makes it “unnecessary to dwell on
the remaining three factors” in the preliminary-injunction analysis. Roberts v. Neace,
958 F.3d 409, 416 (6th Cir. 2020) (per curiam). The Secretary says that principle
applies “only for certain types of constitutional violations involving harms that are
inherently difficult to quantify or to compensate with money.” Resp.25. Even if that
is true, the unquantifiable injuries that Ohio is suffering, see above 14–16, all fit the
bill. Regardless, Ohio satisfies the remaining factors. See PI Mot.17–19.
The Secretary responds that Ohio needs no injunction because any money the
Treasury seizes through recoupment can be paid back later. But the “potential loss
of money,” Resp.26, is not the basis of Ohio’s challenge. Instead, Ohio will suffer the
unquantifiable injuries discussed above. See pp. 14–16. Ohio will continue suffering
those injuries for as long as the Tax Mandate remains in effect. The Secretary’s
gotcha argument—that Ohio told the Court it did not need a ruling by a specific date,
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Resp.24 (quoting Tr. of Prelim Pretrial Conf., ECF No. 15)—changes nothing. While
Ohio did not feel it appropriate to demand a ruling by a particular date (May 1 versus
May 7, for example), it does need a speedy ruling because it is suffering harm every
day it remains subject to the Mandate. Any “delay” in determining what the State
can and cannot do with its taxing authority “may derange the operations of govern-
ment, and thereby cause serious detriment to the public.” Dows v. Chicago, 78 U.S.
(11 Wall.) 108, 110 (1871). Regardless, as a matter of law, Ohio must complete a
budget by July 1, see Ohio Const., art. II, §2, and uncertainty about whether the Man-
date is constitutional (and so binding) will hinder that process.
The Secretary next argues that Ohio does not need an injunction when it can
simply defend itself in any future recoupment proceedings. Resp.25–26. This again
misunderstands the nature of Ohio’s injuries: Ohio is harmed now by unconstitu-
tional limits on its sovereign authority and improper interference with its fiscal man-
agement. A later repayment cannot cure those injuries.
Finally, while an injunction will inflict on the United States the “form of irrep-
arable injury” that a sovereign always suffers when it is barred from “effectuating
statutes enacted by representatives of its people,” Maryland v. King, 567 U.S. 1301,
1303 (2012) (Roberts, C.J., in chambers), that injury does not weigh against enjoining
an unconstitutional law. The “enforcement of an unconstitutional law is always con-
trary to the public interest.” Gordon v. Holder, 721 F.3d 638, 653 (D.C. Cir. 2013).
* * *
The Court should enjoin the Tax Mandate’s enforcement.
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Respectfully submitted,
DAVE YOST (0056290)
Ohio Attorney General
/s/ Benjamin M. Flowers
BENJAMIN M. FLOWERS* (0095284)
Solicitor General
*Trial Attorney
ZACHERY P. KELLER (0086930)
MAY DAVIS (pro hac vice)
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 April 22, 2021 a copy of the foregoing pleading was filed
electronically. 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.
/s/ Benjamin Flowers
BENJAMIN M. FLOWERS* (0095284)
Solicitor General
*Trial Attorney
22
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