Written Request (Application (23A502) to extend further the time from January 12, 2024 to February 9, 2024), Department of the Treasury v. West Virginia, No. 23A502 (U.S.) (December 28, 2023)
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An application, No. 23A502, in the Supreme Court of the United States, U.S. Department of the Treasury, et al., Applicants v. West Virginia, et al., for a further extension of time to file a petition for a writ of certiorari to the U.S. Court of Appeals for the Eleventh Circuit. The Solicitor General asks that the time be extended to and including February 9, 2024. The application states that on December 4, 2023, Justice Thomas extended the time to and including January 12, 2024. It describes the court of appeals' ruling on the offset provision of the American Rescue Plan Act of 2021 and states that the Solicitor General has not yet determined whether to file a petition. The signature block names Elizabeth B. Prelogar, Solicitor General.
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“Written Request (Application (23A502) to extend further the time from January 12, 2024 to February 9, 2024), Department of the Treasury v. West Virginia, No. 23A502 (U.S.) (December 28, 2023).”
Original at www.supremecourt.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/written-request-application-23a502-to-extend-further-the-time-from-jan-a4e82a5d12/
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IN THE SUPREME COURT OF THE UNITED STATES
_______________
No. 23A502
U.S. DEPARTMENT OF THE TREASURY,
ET AL., APPLICANTS
v.
WEST VIRGINIA, ET AL.
_______________
APPLICATION FOR A FURTHER EXTENSION OF TIME
WITHIN WHICH TO FILE A PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_______________
Pursuant to Rules 13.5 and 30.3 of the Rules of this Court,
the Solicitor General, on behalf of the U.S. Department of the
Treasury; the Secretary of the Treasury; and the Acting Inspector
General of the Treasury, respectfully requests a further extension
of time, to and including February 9, 2024, within which to file
a petition for a writ of certiorari to review the judgment of the
United States Court of Appeals for the Eleventh Circuit in this
case. The court of appeals entered its judgment on January 20,
2023, and denied a timely filed petition for rehearing en banc on
September 14, 2023. On December 4, 2023, Justice Thomas extended
the time within which to file a petition for a writ of certiorari
to and including January 12, 2024. The jurisdiction of this Court
2
would be invoked under 28 U.S.C. 1254(1). A copy of the opinion
of the court of appeals, which is reported at 59 F.4th 1124, and
the order denying rehearing, are attached. App., infra, 1a-42a,
43a-101a.
1. In the American Rescue Plan Act of 2021 (ARPA), Pub. L.
No. 117-2, Tit. IX, Subtit. M, 135 Stat. 223 (42 U.S.C. 802 et
seq.), Congress established a Coronavirus State Fiscal Recovery
Fund. 42 U.S.C. 802. The Fund provided nearly $200 billion in
new federal grants to help States and the District of Columbia
“mitigate the fiscal effects” of the COVID-19 pandemic. 42 U.S.C.
802(a)(1); see 42 U.S.C. 802(b)(3)(A).
Section 802(c) establishes parameters for States’ “Use of
funds.” 42 U.S.C. 802(c)(1) (emphasis omitted). Section 802(c)(1)
provides that a State may use fiscal recovery funds to cover
broadly defined categories of costs incurred through December 31,
2024, including costs related to the pandemic and certain
infrastructure investments. Ibid. As a corollary, in order to
reinforce the requirement that States use the funds for the general
purposes that Congress specified, Section 802(c)(2) establishes
two “restriction[s] on [the] use” of fiscal recovery funds. 42
U.S.C. 802(c)(2) (emphasis omitted). The restriction at issue
here, the offset provision, provides that:
A State or territory shall not use the funds provided under
this section * * * to either directly or indirectly offset
a reduction in the net tax revenue of such State or territory
resulting from a change in law, regulation, or administrative
interpretation during the covered period that reduces any tax
3
(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.
42 U.S.C. 802(c)(2)(A). If a State does not use its fiscal
recovery funds in conformity with the conditions in Section 802(c),
the Treasury Department may require the State to repay “an amount
equal to the amount of funds used in violation of” Section 802(c),
up to the total amount of fiscal recovery funds received by the
State. 42 U.S.C. 802(e).
Congress authorized the Treasury Department “to issue such
regulations as may be necessary or appropriate to carry out”
Section 802. 42 U.S.C. 802(f). In May 2021, the Treasury
Department published an interim final rule implementing Section
802, including the offset provision. Coronavirus State and Local
Fiscal Recovery Funds, 86 Fed. Reg. 26,786 (May 17, 2021); see id.
at 26,807-26,811, 26,823. In January 2022, the Treasury Department
issued a final rule, which implements the offset provision in
substantially the same manner as the interim final rule.
Coronavirus State and Local Fiscal Recovery Funds, 87 Fed. Reg.
4338 (Jan. 27, 2022); see id. at 4423-4429, 4452-4453. In brief,
the Act and regulations make clear that no recoupment of funds
will occur if a State cuts taxes but does not use fiscal recovery
funds to pay for the cuts.
2. After accepting their allotments of fiscal recovery
funds, thirteen States filed this suit, asserting that the offset
provision is an unlawful condition on the grant of funds they
4
accepted. App., infra, 6a. The U.S. District Court for the
Northern District of Alabama granted judgment to the plaintiff
States and permanently enjoined enforcement of the offset
provision against them. Id. at 104a. The court held that the
States had Article III standing, id. at 116a-123a, and that the
offset provision exceeded Congress’s power under the Spending
Clause because it was an “unconstitutionally ambiguous spending
condition,” id. at 151a; see id. at 136a-152a.
3. The court of appeals affirmed. App., infra, 1a-42a. As
an initial matter, the court held that the States’ suit was
justiciable. Id. at 11a-22a. It determined that the States’
alleged “inability to ascertain the condition imposed by the offset
provision has already infringed, and continues to infringe, on the
States’ sovereign prerogatives as parties to a contract with the
government.” Id. at 12a. And it further found that the States
“are subject to the threat of a recoupment action if they spend
funds contrary to the offset provision.” Ibid.
On the merits, the court of appeals held that the offset
provision violates the Spending Clause because it found that States
“cannot ascertain the condition [that the provision] imposes on
Rescue Plan funds.” App., infra, 22a. The court reasoned that
the requirement of clarity in Spending Clause conditions is more
than a “rule of construction to be used in as-applied challenges
-- it is a binding constitutional command.” Id. at 26a. The court
then determined that two aspects of the offset provision, in
5
conjunction, fail to satisfy “the constitutional imperative that
Congress’s funding conditions be ascertainable.” Id. at 30a; see
id. at 29a-34a. Specifically, the court stated that “the offset
provision does not provide a standard against which a state can
assess whether it will reduce or has reduced net tax revenue,” id.
at 30a, and that “Section 802 does not explain what constitutes an
‘indirect’ offset,” id. at 32a.
The court of appeals also viewed the provision’s supposed
“novelty and scope” as “compound[ing] these problems.” App.,
infra, 34a. And it found that the Treasury Department’s regulation
did not permissibly clarify the offset provision, even though it
acknowledged that the regulation was “robust and resolve[d] many
of the ambiguities about which the States complain.” Id. at 36a;
see id. at 35a-40a. In so doing, the court deemed interpretation
of the offset provision to be “a major question.” Id. at 37a.
4. The court of appeals denied the government’s petition
for rehearing en banc. App., infra, 45a. Judge Rosenbaum
dissented from the denial of en banc review. See id. at 49a-101a.
The dissent observed that “[t]he panel opinion didn’t consider the
statutory context, the statutory purpose as derived from the text,
the statutory structure, or the statutory history.” Id. at 50a.
And, the dissent continued, the panel then “used this demonstrably
implausible construction of the statutory provision at issue as
its sole basis for invoking the major questions doctrine,” while
6
“refus[ing] to even consider the Secretary’s duly promulgated
regulation.” Ibid.
5. The Solicitor General has not yet determined whether to
file a petition for a writ of certiorari in this case. The further
extension of time sought in this application is needed for
additional consultation with the Treasury Department regarding the
potential legal and practical ramifications of the court of
appeals’ decision. Among other things, the Treasury Department,
in conjunction with the Department of Justice, is further analyzing
the expenditure of ARPA funds and the practical effects of the
offset provision in the thirteen plaintiff States in this case.
This assessment, in the context of the program as a whole, is
particularly complex. A further extension of time is also needed,
if a petition is authorized, to permit its preparation and
printing.
Respectfully submitted.
ELIZABETH B. PRELOGAR
Solicitor General
Counsel of Record
DECEMBER 2023
APPENDIX
Court of appeals opinion.......................................1a
Court of appeals denial of en banc review.....................43a
District court opinion.......................................102a
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[PUBLISH]
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-10168
____________________
STATE OF WEST VIRGINIA, by and through Patrick Morrisey,
Attorney General of the State of West Virginia,
STATE OF ALABAMA, by and through Steve Marshall,
Attorney General of the State of Alabama,
STATE OF ARKANSAS, by and through Leslie Rutledge,
Attorney General for the State of Arkansas,
STATE OF ALASKA, by and through Treg R. Taylor,
Attorney General of the State of Alaska,
STATE OF FLORIDA, by and through Ashley Moody,
Attorney General for the State of Florida,
STATE OF IOWA,
STATE OF KANSAS, by and through Derek Schmidt,
Attorney General for the State of Kansas,
STATE OF MONTANA, by and through Austin Knudsen,
Attorney General of the State of Montana,
STATE OF NEW HAMPSHIRE,
(1a)
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2a
2 Opinion of the Court 22-10168
STATE OF OKLAHOMA, by and through Mike Hunter,
Attorney General of the State of Oklahoma,
STATE OF SOUTH CAROLINA, by and through Alan Wilson,
Attorney General of the State of South Carolina,
STATE OF SOUTH DAKOTA, by and through Jason R. Ravns-
borg,
Attorney General of the State of South Dakota,
STATE OF UTAH, by and through Sean Reyes,
Attorney General of the State of Utah,
Plaintiffs-Appellees,
versus
U.S. DEPARTMENT OF THE TREASURY,
SECRETARY, U.S. DEPARTMENT OF THE TREASURY,
ACTING INSPECTOR GENERAL OF THE
DEPARTMENT OF THE TREASURY,
Defendants-Appellants.
____________________
Appeal from the United States District Court
for the Northern District of Alabama
D.C. Docket No. 7:21-cv-00465-LSC
____________________
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3a
22-10168 Opinion of the Court 3
Before LUCK, BRASHER, and ED CARNES, Circuit Judges.
BRASHER, Circuit Judge:
The Constitution does not give the federal government au-
thority to require states to enact the laws or policies that Congress
prefers. But it does give Congress the power of the purse. The
Spending Clause of the U.S. Constitution grants Congress the
power to impose taxes and borrow money to “pay the Debts and
provide for the . . . general Welfare of the United States.” U.S.
Const. art. I, § 8, cl. 1. Although the federal government cannot
control state conduct directly, Congress often uses its power to tax
and spend as a work-around—offering federal funds in exchange
for states establishing preferred programs or enacting favored laws.
This appeal is about one of the limits of that authority. Thir-
teen states sued the Treasury Secretary and related officials to chal-
lenge a tax offset provision in the American Rescue Plan Act, a
coronavirus stimulus package passed by Congress in 2021. That off-
set provision prohibits states from using Rescue Plan funds “to ei-
ther directly or indirectly offset a reduction in [their] net tax reve-
nue” that results from a change in law that “reduces any tax.” 42
U.S.C. § 802(c)(2)(A). The States argued that this “tax mandate” ex-
ceeds Congress’s authority under the Constitution. The district
court agreed and permanently enjoined enforcement of the offset
provision. The Secretary appealed.
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4 Opinion of the Court 22-10168
We must decide two questions that the district court re-
solved in favor of the States. First, we must decide whether the
States’ challenge presents a justiciable controversy. Second, if any
of the States’ claims are justiciable, we must decide whether the
offset provision is unconstitutional. We believe the district court
answered both questions correctly. Specifically, we conclude that
the States’ challenge is justiciable and that the condition imposed
by the offset provision is not sufficiently ascertainable. Because we
conclude that this claim is both justiciable and successful, we do
not address the States’ other claims.
I.
The seeds of this controversy were sown when Congress
passed the American Rescue Plan Act of 2021, a $1.9 trillion stimu-
lus package aimed at mitigating the economic and public health ef-
fects caused by the coronavirus pandemic. Pub. L. No. 117-2, 135
Stat. 4. President Biden signed the bill into law on March 11, 2021.
The President described the legislation as a tool for “rebuilding the
backbone of this country and giving people in this Nation . . . a
fighting chance.” Remarks on Signing the American Rescue Plan
Act of 2021, 2021 Daily Comp. Pres. Doc. 220 (Mar. 11, 2021).
The Rescue Plan is a voluminous Act spanning hundreds of
pages. See Pub. L. No. 117-2, 135 Stat. 4. Central to this appeal, the
Act appropriated $195.3 billion to make payments to each of the
fifty states and the District of Columbia, 42 U.S.C. § 802(b)(3)(A),
which the states may use for four enumerated purposes: (1) “to
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22-10168 Opinion of the Court 5
respond to the public health emergency” caused by the coronavirus
pandemic or “its negative economic impacts”; (2) to support essen-
tial workers; (3) to provide “government services to the extent”
that the pandemic reduced states’ revenues; and (4) to invest in in-
frastructure, id. § 802(c)(1)(A)–(D).
But the Act contains some fine print––it imposes several ad-
ditional restrictions on the states as a condition of receiving funds.
Relevant here, states cannot “use [Rescue Plan] funds . . . to either
directly or indirectly offset a reduction in the[ir] net tax revenue”
resulting from a change in state law “during the covered period
that reduces any tax . . . or delays the imposition of any tax or tax
increase.” Id. § 802(c)(2)(A) (emphasis added). To receive the fed-
eral funds, a state must certify that it needs the payment to carry
out one of the Act’s four enumerated purposes and will comply
with this offset provision. Id. § 802(d)(1). States must also provide
a “detailed accounting of . . . all modifications to [their] . . . tax rev-
enue sources during the covered period.” Id. § 802(d)(2). The “cov-
ered period” began on March 3, 2021, and “ends on the last day of
the [state’s] fiscal year . . . in which all [Rescue Plan] funds . . . have
been” spent by the state or have been recovered by or returned to
the Treasury Secretary. Id. § 802(g)(1). The Secretary can recoup
any funds from the states used in violation of Section 802(c)’s offset
provision. Id. § 802(e). The Act provides that funds appropriated
for payments to the states will remain available through December
31, 2024. Id. § 802(a)(1).
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6 Opinion of the Court 22-10168
Some states signed on the dotted line. But on March 31,
2021, thirteen states 1 sued in the United States District Court for
the Northern District of Alabama, challenging Section 802(c)’s off-
set provision, or so-called “tax mandate.” The complaint averred
three claims: first, that Section 802(c)’s offset provision is an uncon-
stitutionally ambiguous and coercive condition under the Spending
Clause; second, that the offset provision violates the Tenth Amend-
ment’s anti-commandeering doctrine; third, that the harms alleged
in the first two counts entitle the States to declaratory relief under
28 U.S.C. § 2201.
Two weeks later, while their complaint remained pending,
the States sought to preliminarily enjoin the offset provision’s en-
forcement, arguing that they needed immediate relief before sub-
mitting the certification required by Section 802(d)(1). The district
court denied that motion. It concluded that the States had met the
three standing requirements––injury-in-fact, causation, and re-
dressability. It also found that the States sufficiently alleged a “cred-
ible threat” of enforcement in the form of a recoupment action.
West Virginia v. U.S. Dep’t of Treasury, No. 7:21-cv-00465-LSC,
2021 WL 2952863, at *7 (N.D. Ala. July 14, 2021). But the district
court determined that there was “virtually no likelihood” that the
1 The thirteen states were Alabama, Alaska, Arkansas, Florida, Iowa, Kansas,
Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, Utah,
and West Virginia. The States sued the Treasury Department, Treasury Sec-
retary, and Inspector General of the Treasury Department. We will refer to
the plaintiffs as the States and the defendants as the Secretary.
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22-10168 Opinion of the Court 7
Secretary would recoup any Rescue Plan funds before the ultimate
resolution of the case. Id. at *9. Because the States could not estab-
lish a likelihood of irreparable harm during the pendency of the
lawsuit, the district court did not issue a preliminary injunction.
On May 17, 2021, before the district court ruled on the
States’ motion for preliminary injunction, the Treasury Depart-
ment issued an interim final rule to clarify the Rescue Plan’s con-
tours and scope. See Coronavirus State and Local Fiscal Recovery
Funds, 86 Fed. Reg. 26786 (May 17, 2021). Recognizing that
“money is fungible,” the interim final rule creates a framework for
deciding whether a state has improperly offset a reduction in net
tax revenue with Rescue Plan funds. Id. at 26807–11. The rule
makes clear that “failure to comply with the [offset provision’s] re-
strictions on use . . . may result in recoupment of funds.” Id. at
26811 (footnote omitted). And the rule provides a detailed recoup-
ment procedure. Id. at 26811–12.
The rule sets the net tax revenue baseline for judging com-
pliance with the offset provision at “fiscal year 2019 tax revenue
adjusted for inflation.” Id. at 26808. It provides a four-part process
to “determin[e] whether, and the extent to which, Fiscal Recovery
Funds have been used to offset a reduction in net tax revenue” as
compared to the 2019 baseline. Id. at 26807. As part of this rubric,
recipient states must “identify and value the changes in law, regu-
lation, or interpretation that would result in a reduction in net tax
revenue.” Id. If one of these changes results in a reduction from the
2019 baseline as adjusted for inflation, then a state must “identify
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8a
8 Opinion of the Court 22-10168
sufficient funds from sources other than the Fiscal Recovery Funds
to offset the reduction in net tax revenue.” Id. (emphasis added).
Permissible funding sources to offset a reduction in net tax revenue
include “organic growth, increases in revenue (e.g., an increase in
a tax rate), and certain cuts in spending.” Id. But the rule prohibits
recipient states from offsetting reductions in net tax revenue by
cutting spending “in an area where” they had “spent Fiscal Recov-
ery Funds.” Id. at 26809.
Shortly thereafter, ten of the thirteen States 2 stipulated that
they had certified their compliance with the offset provision to the
Secretary, as required by Section 802(d), and had received Rescue
Plan funds. Moreover, all thirteen States enacted tax-related laws
(e.g., credits, exemptions, phaseouts, reductions) during the cov-
ered period.
The States moved for a permanent injunction and declara-
tory judgment. This time, the district court granted the States’ mo-
tion and awarded them a permanent injunction. Like before, the
district court concluded that the States had standing to sue. Turn-
ing to the merits, the district court reasoned that the offset provi-
sion was unconstitutionally ambiguous under the Spending
Clause. Noting that (1) “[m]oney is fungible” and (2) the Act did
not flesh out what “directly or indirectly” means, the district court
concluded that receiving any Rescue Plan money could potentially
2 The ten states were Alabama, Arkansas, Alaska, Florida, Iowa, Kansas, Mon-
tana, New Hampshire, Utah, and West Virginia.
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9a
22-10168 Opinion of the Court 9
constitute an indirect offset “in [a state’s] net tax revenue from a
change in state law or policy.” West Virginia v. U.S. Dep’t of Treas-
ury, 571 F. Supp. 3d 1229, 1250 (N.D. Ala. 2021). The Rescue Plan,
the district court observed, left states holding the bag, with “no
guidance on critical interpretive questions,” like how they can
avoid indirectly offsetting net tax revenue with recovery funds. Id.
at 1253. The Act is therefore inherently ambiguous, and that ambi-
guity may disincentivize the States in a way that unconstitutionally
infringes on state sovereignty.
Addressing the interim rule, the district court determined
that it did not cure the Act’s constitutional defects. The district
court explained that the Secretary appeared to concede that a fed-
eral rule cannot remedy a statute’s facial unconstitutionality. The
district court also believed that the rule was still too ambiguous on
certain points.
Finding that (1) the States “suffered an irreparable injury,”
(2) no adequate remedy at law could “compensate for that injury,”
(3) balancing the parties’ hardships favored the States, and (4) an
injunction would serve the public interest, the district court perma-
nently enjoined the Secretary from enforcing the offset provision.
Id. at 1255 (quotation omitted). The district court did not reach the
States’ coercion and anti-commandeering concerns. Nor did it en-
ter a declaratory judgment for the States because the permanent
injunction would fully rectify the harm.
The Secretary timely appealed. The Secretary also imple-
mented a final rule on January 27, 2022, which did not materially
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10 Opinion of the Court 22-10168
differ from the interim final rule. See Coronavirus State and Local
Fiscal Recovery Funds, 87 Fed. Reg. 4338 (Jan. 27, 2022).
II.
We will uphold a district court’s decision to enter a perma-
nent injunction unless we perceive an abuse of discretion. See Jones
v. Governor of Fla., 975 F.3d 1016, 1028 (11th Cir. 2020). We re-
view underlying legal conclusions and a challenged statute’s con-
stitutionality de novo, but factual findings for clear error. Id.; Frese-
nius Med. Care Holdings, Inc. v. Tucker, 704 F.3d 935, 939 (11th
Cir. 2013).
III.
The States argue that the offset provision is unconstitutional
for three independent reasons: first, the condition it imposes is not
ascertainable under the Spending Clause; second, it is coercive un-
der the Spending Clause; third, it violates the Tenth Amendment
by unlawfully commandeering the States. Conversely, the Secre-
tary contends that the suit is not justiciable and that, on the merits,
the offset provision violates neither the Spending Clause nor the
Tenth Amendment. Because we agree with the district court that
(1) the suit is justiciable and (2) the condition imposed by the offset
provision is not ascertainable, we do not address the States’ remain-
ing constitutional claims. We will start with the Secretary’s justici-
ability arguments and then address the merits of the States’ ascer-
tainability claim.
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22-10168 Opinion of the Court 11
A.
The Secretary contends that this case does not present a jus-
ticiable controversy and that the “posture of this suit is unprece-
dented.” Appellants’ Br. at 7. The Secretary makes two arguments
on this front. First, she argues that the States lack standing to chal-
lenge the offset provision because the Secretary has not initiated a
recoupment action against any of them. Thus, so the argument
goes, because our interpretation of the offset provision would oc-
cur in a hypothetical context, it would constitute an improper ex-
ercise of judicial authority under Article III of the Constitution. Sec-
ond, the Secretary’s argument suggests that the States’ challenge is
moot because the Secretary’s recent regulation makes it unlikely
that the offset provision will be enforced against the States. The
reasoning would be that, because the regulation adopts a limiting
construction of the offset provision, the States are unlikely to act in
a way that will result in a recoupment action going forward.
We address each of these arguments in turn. Although we
recognize these arguments carry some persuasive force, we con-
clude that the States have standing and that the Secretary’s regula-
tion does not moot their ascertainability challenge.
1.
We start with standing. We assess Article III standing at the
time the complaint is filed. See Trichell v. Midland Credit Mgmt.,
Inc., 964 F.3d 990, 1003 (11th Cir. 2020). “Standing doctrine func-
tions to ensure, among other things, that the scarce resources of
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12 Opinion of the Court 22-10168
the federal courts are devoted to those disputes in which the parties
have a concrete stake.” Friends of the Earth, Inc. v. Laidlaw Env't
Servs. (TOC), Inc., 528 U.S. 167, 191 (2000). Standing “in no way
depends on the merits” of the plaintiff’s claim. Warth v. Seldin, 422
U.S. 490, 500 (1975). Instead, the “irreducible constitutional mini-
mum of standing” requires three elements: (1) an “injury in fact”
that is “concrete and particularized” and “actual or imminent,” (2)
a “causal connection between the injury and the conduct com-
plained of,” and (3) redressability. Lujan v. Defs. of Wildlife, 504
U.S. 555, 560–61 (1992) (quotations omitted).
Starting with injury-in-fact, the States have two theories for
why they have suffered an actual and concrete harm. 3 First, the
States argue that their inability to ascertain the condition imposed
by the offset provision has already infringed, and continues to in-
fringe, on the States’ sovereign prerogatives as parties to a contract
with the federal government. Second, the States argue that they are
subject to the threat of a recoupment action if they spend funds
contrary to the offset provision. We agree that these theories es-
tablish that the States have suffered an injury-in-fact.
First, we conclude that the offset provision’s ambiguity has
injured, and continues to injure, the States’ sovereign interests. The
States are challenging a so-called “unconstitutional condition” that
was attached to federal funding. See Bourgeois v. Peters, 387 F.3d
1303, 1324 (11th Cir. 2004). Though not “all contract-law rules
3 The States also raise other grounds for injury-in-fact, which we do not reach.
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22-10168 Opinion of the Court 13
apply to Spending Clause legislation,” Barnes v. Gorman, 536 U.S.
181, 186 (2002), we can analogize the relationship between Con-
gress and the States in Spending Clause situations to that between
contracting parties. In essence, the States say that they were co-
erced into accepting an offer with an unascertainable condition,
they did accept the offer with the condition, and the terms of the
resulting contract are presently in force and effect. Indeed, the Sec-
retary concedes that the offset provision limits the ways in which
the States can spend funds.
This injury to state sovereignty is, to be sure, intangible. But
it is nonetheless concrete. States “are not normal litigants for the
purposes of invoking federal jurisdiction” and may suffer injuries
to their sovereignty that private parties do not. Massachusetts v.
EPA, 549 U.S. 497, 518 (2007). That the offset provision restricts the
ways in which states may reduce tax receipts or change tax rates
heightens its effect on state sovereignty. See McCulloch v. Mary-
land, 17 U.S. (4 Wheat.) 316, 428 (1819) (noting that the power to
tax “is essential to the very existence of government”).
Moreover, this injury has already occurred and is continu-
ing. The offset provision is in effect until the “last day of the [last]
fiscal year” in which a state spends the Act’s funds or returns them
to the Secretary. 42 U.S.C. § 802(g)(1). And, by the Act’s terms, the
funds are available until December 31, 2024. Id. § 802(a)(1). All the
States have now accepted the deal with its allegedly unconstitu-
tional condition, and that condition is a present and continuous in-
fringement on state sovereignty. Any state that “has failed to
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14 Opinion of the Court 22-10168
comply” with the offset provision is “required to repay to the Sec-
retary an amount equal to the amount of funds used in violation of
[the Act].” Id. § 802(e). To the extent the States seek a remedy to
this sovereign injury, this litigation is not a pre-enforcement chal-
lenge. Instead, the States seek to remedy an injury that has already
happened and that the States continue to experience.
We are not the first court of appeals to address this theory
of state standing to sue over the offset provision, and we find the
Ninth Circuit’s reasoning on this point particularly persuasive.
Analogizing to contract law, the Ninth Circuit reasoned that “[j]ust
as a contract can be challenged under state law for containing am-
biguous terms or being a product of duress, so too . . . the quasi-
contractual funding offer at issue here can be challenged by Ari-
zona at the outset for offering conditions that are unconstitution-
ally ambiguous or coercive.” Arizona v. Yellen, 34 F.4th 841, 853
(9th Cir. 2022). Because the injury to state sovereignty occurs when
a state must accept or reject an unascertainable funding offer, the
state does “not need to first violate a condition of an allegedly un-
constitutional contract to have standing to challenge it.” Id.; see
also Henry v. Att’y Gen., Ala., 45 F.4th 1272, 1288 (11th Cir. 2022).
Turning to the States’ second theory for an injury-in-fact, the
States say that they are injured by the threat of a recoupment pro-
ceeding. The States submitted evidence that they have enacted tax
cuts and related revenue laws that could reduce their net tax reve-
nue and trigger the offset provision, which the Secretary is
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committed to enforcing. This evidence, the States say, establishes
their standing for a pre-enforcement challenge to the offset provi-
sion.
We also agree that the States have an injury-in-fact under
this pre-enforcement theory. A plaintiff need not “expose himself
to liability” to have standing to challenge the enforcement of a law.
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 128–29 (2007).
Instead, in a pre-enforcement constitutional challenge, the injury-
in-fact requirement can be satisfied by establishing “a realistic dan-
ger of sustaining direct injury” from “the statute’s operation or en-
forcement.” Ga. Latino All. for Hum. Rts. v. Governor of Ga., 691
F.3d 1250, 1257 (11th Cir. 2012) (quotations omitted) (analyzing a
constitutional challenge to a state statute). A plaintiff must establish
“(1) that he has ‘an intention to engage in a course of conduct ar-
guably affected with a constitutional interest,’ (2) that his conduct
is ‘arguably proscribed,’ and (3) that he is subject to ‘a credible
threat of enforcement.’” Speech First, Inc. v. Cartwright, 32 F.4th
1110, 1119–20 (11th Cir. 2022) (quoting Susan B. Anthony List v.
Driehaus, 573 U.S. 149, 159, 162 (2014)).
We believe the States have met the test for a pre-enforce-
ment lawsuit. There is no question that the States intend to con-
tinue cutting taxes and modifying their overall revenue. All the
States enacted revenue-related laws dealing with, among other
things, tax credits, exemptions, phaseouts, and reductions after
March 3, 2021, the beginning of the Rescue Plan’s “covered pe-
riod.” Moreover, the States submitted a declaration by Alabama
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16 Opinion of the Court 22-10168
State Senator Albritton, who noted that state legislatures must en-
sure that expenditures do not exceed estimated revenues and re-
sources. This balancing exercise requires understanding how tax
receipts will affect overall revenue, and state legislators often pass
tax-related laws to assist with budget balancing and to benefit con-
stituents. There is also no dispute that the Secretary intends to en-
force the offset provision against the States if she thinks they have
violated it. The Secretary’s interim final rule underscores that re-
coupment actions are still on the table if States impermissibly offset
reductions in net tax revenue with Rescue Plan funds. Coronavirus
State and Local Fiscal Recovery Funds, 86 Fed. Reg. at 26808 (de-
scribing how the interim final rule “implements a process for re-
couping Fiscal Recovery Funds” used in violation of the Act).
The Secretary argues that the offset provision does not pro-
scribe the States’ conduct because “its text makes clear” that States
may cut taxes so long as they “pay” for a tax cut without using Res-
cue Plan funds. Appellants’ Reply Br. at 2. This argument—that the
offset provision is clear—goes to the merits of the States’ claims,
not their standing to raise them. When we assess standing, we
“‘must be careful not to decide the questions on the merits for or
against the plaintiff, and must therefore assume that on the merits
the plaintiffs would be successful in their claims.’” Culverhouse v.
Paulson & Co., 813 F.3d 991, 994 (11th Cir. 2016) (quoting City of
Waukesha v. EPA, 320 F.3d 228, 235 (D.C. Cir. 2003)).
Reviewing the text of the statute for standing purposes, we
believe the States have shown that the offset provision arguably
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proscribes their conduct. The offset provision prohibits states from
using federal funds to “either directly or indirectly offset a reduc-
tion in the[ir] net tax revenue” resulting from a change in state law
“during the covered period that reduces any tax . . . or delays the
imposition of any tax or tax increase.” 42 U.S.C. § 802(c)(2)(A).
Money is fungible. By prohibiting both direct and “indirect” offsets,
the provision arguably proscribes a state from accepting the money
if it enacts any tax cut. The only way for the States to achieve une-
quivocal compliance with the Act is to refrain from cutting taxes
during the covered period.
Having concluded that the States have suffered an injury-in-
fact, we turn to the second and third elements of standing. The Sec-
retary does not contest traceability and redressability, but we will
address them anyway given our obligation to ensure our jurisdic-
tion. See, e.g., Bischoff v. Osceola County, 222 F.3d 874, 877–78
(11th Cir. 2000); Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405,
410 (11th Cir. 1999). The States’ injury is “fairly . . . trace[able]” to
the challenged conduct, namely, the promulgation and enforce-
ment of the allegedly unconstitutional offset provision. Lujan, 504
U.S. at 560 (alteration in original). And this injury is plainly redress-
able. No one disputes that—absent court intervention—the States
are bound to comply with the offset provision and that the Secre-
tary intends to enforce it going forward. Like any other contracting
party bound to an objectionable provision in a contract, the States’
injury can be redressed by declaring that provision null and void.
This is a standard remedy when a single provision of a contract is
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18 Opinion of the Court 22-10168
contrary to public policy. See Restatement (Second) of Contracts §
178 & cmt. f (Am. L. Inst. 1981); id. § 183. And it redresses the
States’ injury by preventing the enforcement of the objectionable
provision. See Harrell v. The Fla. Bar, 608 F.3d 1241, 1257 (11th
Cir. 2010) (“As for the redressability prong, if the challenged rules
are stricken as unconstitutional, Harrell simply need not contend
with them any longer.”).
In short, the States argue that the agreement’s terms are not
“reasonably certain,” Restatement (Second) of Contracts § 33(1),
because no one knows what a “reduction in the net tax revenue”
and “indirectly offset” mean. They contend that Congress cannot
craft a deal that explains “only some of the strings attached.” Ap-
pellees’ Br. at 33. And they argue that, because of the offset provi-
sion’s ambiguity, they cannot determine at what point a breach will
occur. See Restatement (Second) of Contracts § 33(2). The States
request a judicial remedy so that they do not have to comply with
any aspect of the offset provision, which they contend is unenforce-
able in all respects. The States have standing to make these claims.
2.
We turn now to the Secretary’s related (and somewhat im-
plicit) argument that, even if the States had standing to file this suit
initially, it has become moot. “Mootness can occur due to a change
in circumstances, or . . . a change in the law.” Coral Springs St. Sys.,
Inc. v. City of Sunrise, 371 F.3d 1320, 1328 (11th Cir. 2004). The
Secretary says that she has disclaimed the broad reading of the
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22-10168 Opinion of the Court 19
offset provision that would stop the States from cutting taxes. Ac-
cordingly, the Secretary does not intend to enforce the provision
to recoup money based on tax cuts “as long as [the States] can pay
for the tax cuts using their own funds.” Appellants’ Reply Br. at 2.
The Secretary explains that she has formalized this reading of the
offset provision in a regulation.
We cannot say that the Secretary’s decision to disclaim a
broad reading of the offset provision moots the States’ ambiguity
challenge. There is no doubt that the Secretary’s narrow construc-
tion of the offset provision reduces its effect on state sovereignty.
But the justiciability question is not quantitative; “rather, the focus
is on the qualitative nature of the [plaintiff’s] injury, regardless of
how small the injury may be.” See Salcedo v. Hanna, 936 F.3d 1162,
1172 (11th Cir. 2019) (quotation omitted). Even if the Secretary
gives it a narrow reading, the offset provision continues to limit
how the States may use federal funds. To the extent the limitation
is unascertainable, it remains an unconstitutional condition on
those funds.
The Secretary cites the Eighth Circuit’s decision that states
do not have standing to challenge the constitutionality of the
“broad interpretation” of the offset provision. Missouri v. Yellen,
39 F.4th 1063, 1069–70 (8th Cir. 2022). But we think this case is dis-
tinguishable. In Missouri, unlike in this case, the state was “not
challenging the Offset Restriction as written, but rather a specific
potential interpretation of the provision.” Id. at 1069. The Secretary
disclaimed that interpretation of the provision, and the court
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20 Opinion of the Court 22-10168
reasoned that it could not “declare, in the abstract, what a statute
does not mean.” Id. at 1070. Here, on the other hand, the States are
challenging the offset provision’s ascertainability. They seek not a
judicial determination of what it means, but a judicial determina-
tion that it is too ambiguous to be enforced in any respect. Even if
we were to extend the Eighth Circuit’s reasoning on the standing
question to apply in the mootness context, the Secretary’s regula-
tion and litigating position do not moot that claim.
The Sixth Circuit has concluded that the Secretary’s em-
brace of a narrower construction, as represented by her regulation
and litigation position, mooted certain state challenges to the offset
provision. See Ohio v. Yellen, 53 F.4th 983, 990–92 (6th Cir. 2022);
Kentucky v. Yellen, 54 F.4th 325, 340–41 & n.11 (6th Cir. 2022). The
court explained that the Secretary had disclaimed enforcement of
the offset provision except in limited circumstances. Kentucky, 54
F.4th at 340–41. Addressing the states’ injuries, the court reasoned
that “because the States failed to provide evidence that they intend
to specifically violate the Rule (and provoke recoupment), and be-
cause Treasury established that there is no realistic prospect it will
enforce the States’ expansive interpretation of the Offset Provision,
we deem the imminent-recoupment and sovereign-authority the-
ories moot.” Id. at 341.
We disagree with this reasoning. A case is moot “only when
it is impossible for a court to grant any effectual relief whatever to
the prevailing party.” Knox v. Serv. Emps. Int’l Union, Loc. 1000,
567 U.S. 298, 307 (2012) (quotations omitted). Although the
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22-10168 Opinion of the Court 21
Secretary has adopted a narrow construction of the offset provi-
sion, she has not disclaimed an intent to enforce the provision. In-
stead, she has done the opposite, adopting a regulation that warns
the States that they must comply with a provision that they con-
tend is unconstitutional in all respects. We see no basis in mootness
doctrine to conclude that the Secretary’s willingness to provide a
lesser remedy (a narrower construction) to address the States’ con-
stitutional challenge moots the States’ request for a more substan-
tial remedy (facial invalidation). “Even with the Rules, the States
still need injunctive and declaratory relief to avoid Treasury’s en-
forcement of ARPA’s unconstitutionally vague conditions.” Ken-
tucky, 54 F.4th at 362 (Nalbandian, J., concurring in part and dis-
senting in part).
Our answer to the mootness question would be different if
the Secretary had disclaimed an intention to enforce the allegedly
unconstitutional provision at all. Indeed, “this Court has consist-
ently held that a challenge to a government policy that has been
unambiguously terminated will be moot in the absence of some
reasonable basis to believe that the policy will be reinstated if the
suit is terminated.” Troiano v. Supervisor of Elections in Palm
Beach Cnty., 382 F.3d 1276, 1285 (11th Cir. 2004). But an agency
cannot “cure” a standardless grant of authority by “adopting in its
discretion a limiting construction.” See Whitman v. Am. Trucking
Ass’ns, 531 U.S. 457, 472 (2001). Likewise, an executive agency’s
narrow construction cannot moot a plaintiff’s constitutional chal-
lenge when the very constitutional problem is that the statute
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22 Opinion of the Court 22-10168
provides too vague a standard. It is “the existence, not the imposi-
tion, of standardless requirements that causes” an injury. CAMP
Legal Def. Fund, Inc. v. City of Atlanta, 451 F.3d 1257, 1275 (11th
Cir. 2006); see also City of Lakewood v. Plain Dealer Publ’g Co.,
486 U.S. 750, 757, 772 (1988) (holding that a statute “placing unbri-
dled discretion in the hands of a government official or agency” is
unconstitutional). Despite the Secretary’s regulation and her litiga-
tion position adopting a narrow construction of the offset provi-
sion, the States have a continuing interest in challenging the valid-
ity of the offset provision, and the Secretary has a continuing inter-
est in defending its facial constitutionality.
Finally, as we have already explained, the States are not un-
differentiated members of the public seeking to enjoin the enforce-
ment of a law of general applicability. They are more like parties to
a contract, seeking to adjudicate its terms. That contract provides
funds until the end of 2024, and its obligations run until the “last
day of the [last] fiscal year” in which the funds are spent or re-
turned. 42 U.S.C. § 802(g)(1). We conclude that the States’ lawsuit
is not moot.
B.
We now turn to the merits of the States’ constitutional
claim. The States argue that the offset provision violates the Spend-
ing Clause because they cannot ascertain the condition it imposes
on Rescue Plan funds. We agree.
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The Spending Clause authorizes Congress to “lay and collect
Taxes, . . . to pay the Debts and provide for the common Defence
and general Welfare of the United States.” U.S. Const. art. I, § 8, cl.
1. This clause gives Congress a wide berth not only to tax and spend
but also to exert influence on the states by attaching strings to fed-
eral funding. See Nat’l Fed’n of Indep. Bus. v. Sebelius (NFIB), 567
U.S. 519, 576 (2012) (opinion of Roberts, C.J., joined by Breyer and
Kagan, JJ.). Congress may, within limits, compel states to “tak[e]
certain actions that [it] could not [otherwise] require them to take,”
and a state’s acceptance of the federal funds will generally consti-
tute consent to the conditions imposed by Congress. Coll. Sav.
Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S.
666, 686 (1999).
The Supreme Court’s leading authority on the limits of the
Spending Clause is Pennhurst State School and Hospital v. Halder-
man, 451 U.S. 1 (1981). There, the Supreme Court held that, by
virtue of the Spending Clause, Congress can amplify its enumer-
ated Article I powers and influence state regulatory policy by
“fix[ing] the terms on which it shall disburse federal money to the
States.” Id. at 17. In this sense, “legislation enacted pursuant to the
spending power” is a species of contract. Id. But the Court recog-
nized that this broad authority is not limitless, and Congress must
speak “unambiguously” and “with a clear voice” when it imposes
conditions on federal funds. Id. Specifically, Congress must speak
clearly enough for “the States to exercise their choice knowingly,
cognizant of the consequences of their participation.” Id. The
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24 Opinion of the Court 22-10168
Court explained that a state cannot knowingly accept a condition
if it “is unable to ascertain what is expected of it.” Id.
The Court elaborated on this ascertainability principle in
South Dakota v. Dole, 483 U.S. 203 (1987). In Dole, the Court iden-
tified five elements that conditional funding grants must satisfy to
pass constitutional muster under the Spending Clause: (1) the ex-
penditure must “advance the general welfare”; (2) any attached
condition must be “unambiguous[]”; (3) conditions must relate “to
the federal interest in particular national projects or programs”; (4)
conditions cannot violate another constitutional provision; and (5)
conditions cannot “be so coercive . . . [that] pressure turns into
compulsion.” See id. at 207–11 (quotations omitted). If the expendi-
ture or condition does not satisfy these elements, then it is uncon-
stitutional.
It is against this backdrop that we turn to the merits. The
Secretary makes three arguments for why the offset provision is a
proper exercise of Congress’s spending powers. First, the Secretary
contends that the ascertainability principle set out in Pennhurst––
and refined in Dole––is a rule of statutory construction, not a basis
for holding a congressional spending condition facially unconstitu-
tional. Second, the Secretary posits that the offset provision is clear
enough for the States to ascertain what is expected of them as a
condition of accepting funds. Third, the Secretary says that her rule
provided an ascertainable condition by resolving ambiguities in the
offset provision. We are not persuaded.
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1.
As an initial matter, the Secretary urges us to view
Pennhurst’s ascertainability principle and Dole’s “unambiguous”
requirement as rules of construction, not reasons to enjoin the en-
forcement of a spending condition. The Secretary argues that these
are merely “tool[s] of statutory interpretation” to be applied “in re-
solving concrete disputes.” Appellants’ Reply Br. at 5. We believe
our precedent compels a different result. But even if it did not, we
think Dole and basic contract principles independently demand
such a result.
We will start with our precedent. We addressed the ascer-
tainability requirement in Benning v. Georgia, which involved a
prisoner’s claim that the State of Georgia had infringed on his right
to practice his religion by denying him a kosher diet and not allow-
ing him to wear a yarmulke. See 391 F.3d 1299, 1303 (11th Cir.
2004). He alleged that such conduct violated section 3 of the Reli-
gious Land Use and Institutionalized Persons Act (RLUIPA), a fed-
eral statute that prohibited state prisons receiving federal funds
from burdening prisoners’ religious freedom. Id. RLUIPA “ap-
plie[d] strict scrutiny to government actions that substantially bur-
den[ed]” prisoners’ religious exercise and waived Georgia’s sover-
eign immunity in “suits filed by prisoners to enforce” the Act. Id.
at 1304–05.
Georgia defended the lawsuit on the grounds that section 3
of RLUIPA was unenforceable because it was facially
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26 Opinion of the Court 22-10168
unconstitutional. Id. at 1303. Specifically, Georgia argued that “the
standard of least restrictive means is too ambiguous to allow a state
an informed choice.” Id. at 1305. We disagreed. We explained that
Congress must spell out a condition “clearly enough for the states
to make an informed choice.” Id. at 1306. But we concluded that
condition was ascertainable because it (1) clearly caused “states [to]
incur an obligation when they accept[ed] federal funds” and (2) im-
posed strict scrutiny, a well understood means-end test, which was
“far from ambiguous.” Id. at 1306–07. Thus, Congress validly exer-
cised its spending power in enacting the statute, even if it did not
“specifically identify and proscribe in advance every conceivable
state action that would be improper.” Id. at 1306 (quotation omit-
ted). We held that “[i]t is sufficient for the text of RLUIPA to link
unambiguously its conditions to the receipt of federal funds and
define those conditions clearly enough for the states to make an
informed choice.” Id.
The Secretary’s rule-of-construction argument is incon-
sistent with Benning. To resolve that case, we followed a core tenet
from Dole––“conditions on the state receipt of federal funds must
be unambiguous.” Id. at 1305 (citing Dole) (emphasis added). And
we applied it to Georgia’s argument that section 3 of RLUIPA was
constitutionally invalid on its face, resolving that claim on its mer-
its. See id. at 1303–04, 1313. Benning therefore established the prop-
osition that the ascertainability principle is more than a precatory
rule of construction to be used in as-applied challenges—it is a bind-
ing constitutional command.
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We think Benning is dispositive, but even if it were not, we
would still reject the Secretary’s argument on this front. The Su-
preme Court’s precedents leave little doubt that the ascertainability
requirement is more than a rule of construction. In Dole, for exam-
ple, the Supreme Court expressly stated that a spending condition
must be “unambiguous[].” 483 U.S. at 207 (quotation omitted).
Likewise in Pennhurst, the Court said Congress must speak “un-
ambiguously” when it imposes conditions on federal funds. 451
U.S. at 17. Neither Pennhurst nor Dole suggests that this clarity el-
ement is hortatory.
Similarly, Dole’s treatment of coercion buttresses our belief
that unascertainability alone can render a spending restriction fa-
cially unconstitutional. Dole made clear that coercion will some-
times rise to unconstitutional compulsion, which can render a
spending restriction unenforceable. See 483 U.S. at 211. And the
Supreme Court has enjoined spending conditions that flunked this
coercion test. See NFIB, 567 U.S. at 579–81, 588 (opinion of Rob-
erts, C.J., joined by Breyer and Kagan, JJ.); id. at 681–89 (joint dis-
sent of Scalia, Kennedy, Thomas, and Alito, JJ.). A lack of coercion
is one of the five elements that a conditional funding grant must
satisfy to pass constitutional muster under the Spending Clause.
The Dole factors are not hierarchical; none of them, not even co-
ercion, is owed preferential treatment by the courts. All five factors
are equally important and equally required. It therefore cannot be
true that the presence of coercion suffices to invalidate a spending
condition, but a lack of clarity does not.
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28 Opinion of the Court 22-10168
Finally, we think principles of contract law are also illustra-
tive. Here, Congress, the offeror, has contracted with the States,
the offeree. It is hornbook contract law that an offeree cannot ac-
cept a bargain’s terms “so as to form a contract unless the terms . .
. are reasonably certain.” Restatement (Second) of Contracts §
33(1). “[R]easonably certain” terms “provide a basis for determin-
ing” whether a breach occurred and “for giving an appropriate
remedy.” Id. § 33(2). Moreover, the problem of indefiniteness is not
always a mere issue of construction in contract law; it may go to
the validity of the contract itself. See id. § 33 cmt. a (noting that
“determining whether a manifestation of intention is intended to
be understood as an offer” may require ensuring that the agree-
ment can “be[] given an exact meaning and that all the perfor-
mances to be rendered [are] certain”); 17A Am. Jur. 2d Contracts §
188 (2022) (“Definiteness as to material matters is of the very es-
sence of contract law, and impenetrable vagueness and uncertainty
will not do.”). An enforceable contract “must be sufficiently defi-
nite as to its essential or material terms,” including “subject matter,
quantity, and duration, so that the promises and performance to be
rendered by each party are reasonably certain.” 17A Am. Jur. 2d
Contracts § 188 (2022) (footnotes omitted).
Accordingly, our decision in Benning compels today’s hold-
ing that ascertainability is not merely a rule of construction, but a
stand-alone constitutional requirement. Even without this prece-
dent, however, we would hold that spending restrictions imposed
by Congress must be ascertainable to be enforceable. We therefore
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22-10168 Opinion of the Court 29
reject the Secretary’s argument that a spending condition may be
facially constitutional even if it is not ascertainable outside of an as-
applied challenge.
2.
We next decide whether the condition imposed by the offset
provision is ascertainable. The States argue that they do not know
what it means to use federal funds to “directly or indirectly offset a
reduction in the[ir] net tax revenue” caused by a tax cut. The Sec-
retary says that the offset provision provides sufficient clarity about
Congress’s conditions on recovery funds. Again, we disagree with
the Secretary.
A state’s knowledge that strings attach to federal funds is
necessary, but not sufficient, for the conditions to comport with
the Spending Clause. A state must also “clearly understand . . . the
obligations” of the deal and “cannot knowingly accept conditions
of which [it is] ‘unaware’ or which” it cannot ascertain. Arlington
Cent. Sch. Dist. Bd. of Educ. v. Murphy, 548 U.S. 291, 296 (2006)
(quoting Pennhurst, 451 U.S. at 17). When reviewing a spending
condition, “we must not be guided by a single sentence or member
of a sentence, but look to the provisions of the whole law.”
Pennhurst, 451 U.S. at 18 (quotations omitted). A law must “unam-
biguously” link “its conditions to the receipt of federal funds and
define those conditions clearly enough for the states to make an
informed choice.” Benning, 391 F.3d at 1306. Otherwise, state re-
cipients would not know what rules they must follow and “what
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30 Opinion of the Court 22-10168
sort of penalties might be on the table.” Kentucky, 54 F.4th at 348
(quoting Cummings v. Premier Rehab Keller, P.L.L.C., 142 S. Ct.
1562, 1570 (2022)).
Here, the Rescue Plan’s offset provision forbids states from
using recovery funds “to either directly or indirectly offset a reduc-
tion in [their] net tax revenue . . . resulting from a change in law,
regulation, or administrative interpretation . . . that reduces any
tax.” 42 U.S.C. § 802(c)(2)(A). Certain parts of this provision are
clear enough. For example, a “change in law” refers to any law
passed or amended during the covered period, which the Act de-
fines as the period between March 3, 2021, and “the last day of the
[state’s] fiscal year . . . in which all [Rescue Plan] funds . . . have
been” spent by the state or either recovered by or returned to the
Secretary. Id. § 802(g)(1). Likewise, the Act supplies examples of
what constitutes “reduc[ing] any tax”––rate reductions, rebates, de-
ductions, or credits. Id. § 802(c)(2)(A).
But there are three aspects of the Rescue Plan that give us
pause. We do not address whether any of these aspects would in-
dependently violate the Spending Clause. But, when combined, we
believe these three aspects of the Rescue Plan are inconsistent with
the constitutional imperative that Congress’s funding conditions
be ascertainable.
First and most importantly, the offset provision does not
provide a standard against which a state can assess whether it will
reduce or has reduced net tax revenue. The prohibition on any “re-
duction in the net tax revenue” presupposes a baseline against
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31a
22-10168 Opinion of the Court 31
which to measure a potential reduction. Reduced as compared to
what? The Rescue Plan does not offer a baseline. Although the Sec-
retary’s rule supplies a benchmark, the Rescue Plan itself does not
provide any way to determine whether net tax revenues have been
reduced.
This lack of a baseline affects whether a state policymaker
can understand and comply with the statute. Consider a hypothet-
ical state sales tax cut, for example. The state legislature predicts
that consumption will increase in the next fiscal year and enacts a
sales tax rate reduction based on its forecast that overall tax receipts
will stay the same even if the rate is lower. Suppose that the legis-
lature is correct––consumption increased so much that year-over-
year sales tax revenue stayed the same or grew despite the rate re-
duction. If the baseline is the total tax revenue—which grew or
stayed the same—then the legislature has not violated the Rescue
Plan. But if the baseline is what sales tax revenue would have been
absent the tax cut, the legislature would have effectuated a “reduc-
tion in the net tax revenue.” 42 U.S.C. § 802(c)(2)(A).
Citing Benning, the Secretary argues that the Rescue Plan
sufficiently makes clear that the States cannot use recovery funds
to finance tax cuts, even though it leaves open whether any partic-
ular tax cut may violate the provision. We disagree. In Benning, we
held that a standard like strict scrutiny is ascertainable even though
it could have difficult-to-predict applications in particular cases.
Benning, 391 F.3d at 1306–07. But the problem here is that the off-
set provision provides no standard at all. As we have explained,
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32 Opinion of the Court 22-10168
without a baseline, there is no way to assess whether a tax cut has
caused a “reduction in the net tax revenue.” 42 U.S.C. §
802(c)(2)(A). The problem is not just that the States cannot know
what the offset provision means as to a particular tax cut; it is that
the States cannot know what it means as to any tax cut. There is
no standard akin to strict scrutiny by which to assess the States’
compliance with the offset provision.
Second, the Rescue Plan’s prohibition against “either di-
rectly or indirectly offset[ting]” net tax reductions with recovery
funds exacerbates this ascertainability problem. Id.; see Kentucky,
54 F. 4th at 348–49. The Act does not define “directly or indirectly,”
so we must turn to the ordinary meaning of the words at issue. See
United States v. Silva, 443 F.3d 795, 797–98 (11th Cir. 2006). “Indi-
rect” means “not immediately resulting from an action or cause”
or “round-about.” Indirect, Oxford English Dictionary (online ed.
Dec. 2022). “Direct” denotes “[p]roceeding from antecedent to
consequent” and “undeviating in course.” Direct, Oxford English
Dictionary (online ed. Dec. 2022) An “offset” is “anything that
counterbalances, compensates, or makes up for something else.”
Offset, Oxford English Dictionary (online ed. Dec. 2022). We there-
fore agree with the States that the phrase “directly or indirectly off-
set” seems “extraordinarily expansive.” Appellees’ Br. at 26. Even
if we accept that everyone understands what constitutes a “direct”
offset, Section 802 does not explain what constitutes an “indirect”
offset.
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22-10168 Opinion of the Court 33
The Secretary’s illustrations of the difference between “di-
rect” and “indirect” offsets fail to clear this fog. The Secretary sug-
gests that she would consider a direct offset to have occurred if a
“State were simply to deposit [Rescue Plan funds] into its general
treasury in order to fill a revenue hole” created by a tax cut. Appel-
lants’ Br. at 13. Fair enough. But then the Secretary describes an
impermissible indirect offset as follows: a State reduces expendi-
tures by $2 billion to compensate for a tax cut of the same amount
and uses $2 billion in Rescue Plan funds “to pay for those expendi-
tures instead.” Id. Extrapolating from the second example, an indi-
rect offset could be boundless. Even a novice in accounting readily
grasps that balancing a budget requires offsetting revenue shortfalls
with other funds––or with expenditure cuts. Thus, because money
is fungible, the Secretary could always assert a plausible argument
that a state, after a tax cut, committed an unlawful indirect offset
of the attendant revenue shortfall.
Revisiting the Secretary’s second illustration, the “indirect”
language reasonably extends one more degree––rather than paying
for the expenditures at issue with Rescue Plan funds (one degree of
separation), a state could use those Rescue Plan funds as collateral
for a third-party loan, fund the expenditures with that loan, and re-
pay the loan with Rescue Plan money. Again, despite the two de-
grees of separation that would now exist between the recovery
funds and the offset, the Secretary could contend that an indirect
offset has still occurred. In this light, the Secretary can view any
Rescue Plan funds received by the States as “indirectly offset[ting]
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34 Opinion of the Court 22-10168
a reduction in the[ir] net tax revenue” from a change in state law.
42 U.S.C. § 802(c)(2)(A). We simply cannot pin down when an off-
set becomes attenuated enough to no longer be “indirect.”
The Secretary says that the “directly or indirectly” language
is mere statutory gloss to put the States on notice that they cannot
engage in fiscal chicanery. In this sense, the Secretary argues, Sec-
tion 802(c) would “mean the same thing” with or without that
phrase. Appellants’ Br. at 13. But we must “give effect to Congress’
express inclusions and exclusions, not disregard them.” Nat’l Ass’n
of Mfrs. v. Dep’t of Def., 138 S. Ct. 617, 631 (2018). Striving for that
clarity, we remain unable to surmount the linguistic hurdle before
us––because of the fungibility of money, Rescue Plan funds could
conceivably “indirectly offset” any reduction in net tax revenue
caused by a change in law. Thus, the States may cut taxes, but the
Rescue Plan leaves them guessing whether and how they can spend
Rescue Plan funds after the tax cut.
Third, we think the Rescue Plan’s novelty and scope com-
pound these problems. Though “[l]egislative novelty is not neces-
sarily fatal,” it raises a red flag. NFIB, 567 U.S. at 549 (opinion of
Roberts, C.J.). Indeed, “lack of historical precedent” often signals a
“severe constitutional problem.” Free Enter. Fund v. Pub. Co.
Acct. Oversight Bd., 561 U.S. 477, 505 (2010) (quotations omitted).
And we cannot ignore that Congress has aimed this novel re-
striction at each state’s entire budget and every single one of its
taxes. The States face billions of dollars in potential recoupment
actions and must ensure that every tax and tax rate comply with
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22-10168 Opinion of the Court 35
this condition. See, e.g., NFIB, 567 U.S. at 581 (opinion of Roberts,
C.J., joined by Breyer and Kagan, JJ.) (recognizing that the amount
of the budget affected by a spending restriction bears on our con-
stitutional analysis); Dole, 483 U.S. at 211–12 (holding that a con-
gressional condition on federal funds that was directed at a “rela-
tively small percentage” of a state’s federal highway funds did not
violate the Spending Clause). The Rescue Plan’s novelty and scope
make it even more important that Congress speak with a clear
voice.
Accordingly, we hold that the condition imposed by the Res-
cue Plan’s offset provision is not ascertainable and does not provide
“clear notice,” Kentucky, 54 F.4th at 352 (quoting Cummings, 142
S. Ct. at 1570), about how to comply with it, rendering it unconsti-
tutional.
3.
Having addressed justiciability and the merits, we turn now
to the Secretary’s last argument. The Secretary suggested at oral
argument that her rule salvages the offset provision, even if the text
of the statute is unconstitutionally unascertainable. Congress gave
the Secretary discretion “to issue such regulations as may be neces-
sary or appropriate to carry out [the Act].” 42 U.S.C. § 802(f). The
Secretary’s rule specifies a baseline for determining whether a “re-
duction in . . . net tax revenue,” 42 U.S.C. § 802(c)(2)(A), has oc-
curred. See 86 Fed. Reg. at 26808 (“The baseline will be calculated
as fiscal year 2019 (FY 2019) tax revenue indexed for inflation in
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36 Opinion of the Court 22-10168
each year of the covered period . . . .”). The rule also “establishes a
step-by-step process” for deciding whether a state has directly or
indirectly offset a net tax revenue reduction with recovery funds.
Id. at 26807. There is no doubt that the rule is robust and resolves
many of the ambiguities about which the States complain. But we
do not believe the rule defeats the States’ constitutional arguments.
As an initial matter, we are not confident that the Secretary
preserved this argument for our review. The district court ex-
pressly found that the Secretary “appear[ed] to concede that, as-
suming that the language of the Tax Mandate is itself unconstitu-
tionally ambiguous, the Final Rule cannot cure that ambiguity.”
West Virginia, 571 F. Supp. 3d at 1254. Likewise, on appeal, the
Secretary’s brief did not expressly argue that the rule could elimi-
nate a constitutional problem with the Act. On the other hand, the
Secretary relied extensively on her rulemaking power as a reason
to reject the States’ ambiguity challenge. For example, in the dis-
trict court, the Secretary argued as a matter of justiciability that the
regulation resolved the claims of the ten plaintiff States that had
accepted the funds after she promulgated the interim final rule.
Moreover, the States directly addressed this issue in their brief, ar-
guing that the Secretary’s rule could not cure the Act’s constitu-
tional infirmities.
Assuming that this argument was adequately raised, we can-
not agree that the rule eliminates the constitutional problem with
the Rescue Plan. This is so for two reasons.
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22-10168 Opinion of the Court 37
First, we agree with the Sixth Circuit that we cannot be con-
fident that Congress intended the agency to answer the questions
the Act left open. See Kentucky, 54 F.4th at 353–54. The offset pro-
vision undoubtedly implicates questions of deep economic and po-
litical significance and alters the traditional balance of federalism by
imposing a condition on a state’s entire budget process. See King v.
Burwell, 576 U.S. 473, 486 (2015); Gregory v. Ashcroft, 501 U.S.
452, 460–61 (1991). As we have explained, because money is fungi-
ble, one reasonable interpretation of the offset provision is that it
proscribes all tax cuts during the covered period. On that reading,
the Act affects the states’ sovereign authority to tax, see McCul-
loch, 17 U.S. (4 Wheat.) at 370, and “intrudes into an area that is
the particular domain of state law,” see Ala. Ass’n of Realtors v.
Dep’t of Health & Hum. Servs., 141 S. Ct. 2485, 2489 (2021). The
choice between that reading and a narrower one is a major ques-
tion, such that Congress had to speak in a “specific and detailed”
way if it intended to delegate the authority to answer that question.
FCC v. Fox Television Stations, Inc., 556 U.S. 502, 536 (2009) (Ken-
nedy, J., concurring in part and concurring in the judgment) (quo-
tation omitted).
But Section 802(f)—the delegation provision—says nothing
about the executive agency’s power to define the scope of the offset
provision. Instead, Congress used the same kind of catchall delega-
tion language in this Act that the Supreme Court held to be insuf-
ficient to delegate major questions in King. See 576 U.S. at 485–86.
There, the statute at issue was 26 U.S.C. § 36B, which concerned
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38 Opinion of the Court 22-10168
the availability of tax credits, see King, 576 U.S. at 485–486, and the
delegation provision of that statute permitted the Secretary to “pre-
scribe such regulations as may be necessary to carry out the provi-
sions of [Section 36B],” 26 U.S.C. § 36B(h). Here, the Rescue Plan
allows the Secretary to “issue such regulations as may be necessary
or appropriate to carry out [the Act].” 42 U.S.C. § 802(f). If the avail-
ability of a tax credit is a major question that cannot be delegated
by generic language, see King, 576 U.S. at 485–86, then the same is
true for the way the offset provision applies to the States’ budget
process.
Second, an agency cannot exercise legislative power or oth-
erwise “operate independently of the statute that authorized it.”
FEC v. Cruz, 142 S. Ct. 1638, 1649 (2022) (quotation omitted). The
Constitution gives Congress, not the executive branch, the power
to tax and spend through the exercise of its legislative power. It
follows therefore that Congress, not an executive agency, must ex-
ercise that power constitutionally. As the Fifth Circuit explained in
a similar case, “the ability to place conditions on federal grants ul-
timately comes from the Spending Clause, which empowers Con-
gress, not the Executive, to spend for the general welfare.” Tex.
Educ. Agency v. U.S. Dep’t of Educ., 992 F.3d 350, 362 (5th Cir.
2021). Allowing an executive agency to impose a condition that is
not otherwise ascertainable in the law Congress enacted “would be
inconsistent with the Constitution’s meticulous separation of pow-
ers.” See id. Therefore, the “needed clarity” under the Spending
Clause “must come directly from the statute.” Id. at 361.
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22-10168 Opinion of the Court 39
In this respect, our conclusion that the offset provision does
not impose an ascertainable condition is similar to a conclusion that
it provides no intelligible principle to guide an agency. Congress
can delegate power to an agency only if it “lay[s] down by legisla-
tive act an intelligible principle to which [the agency] . . . is directed
to conform.” J.W. Hampton, Jr., & Co. v. United States, 276 U.S.
394, 409 (1928). When Congress does not provide an intelligible
principle, an agency cannot cure the “unconstitutionally standard-
less delegation of power by declining to exercise some of that
power.” Whitman, 531 U.S. at 473. Instead, “[t]he very choice of
which portion of the power to exercise—that is to say, the prescrip-
tion of the standard that Congress had omitted—would itself be an
exercise of the forbidden legislative authority.” Id.
We think the ambiguity of the offset provision presents a
similar problem. Just as an agency cannot choose its own intelligi-
ble principle, it cannot provide the content that makes a funding
condition ascertainable. “There is an obvious difference between a
statute stating the conditions upon which moneys shall be ex-
pended and one effective only upon assumption of a contractual
obligation to submit to a regulation which otherwise could not be
enforced.” United States v. Butler, 297 U.S. 1, 73 (1936).
To be clear, we do not question an agency’s authority to fill
in gaps that may exist in a spending condition. The Supreme Court
has explained that, when a state accepts federal funds, the state nec-
essarily agrees “to comply with, and its liability is determined by,
the legal requirements in place when the grants were made.”
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40 Opinion of the Court 22-10168
Bennett v. Ky. Dep’t of Educ., 470 U.S. 656, 670 (1985). These “legal
requirements” include existing regulations. See id. But the problem
we confront here is not whether Congress left a gap that an agency
may fill; it is the lack of an ascertainable condition in the statute.
The Constitution does not allow the Secretary to “suppl[y] content
without which the Offset Provision literally could not function.”
Kentucky, 54 F.4th at 354. Even assuming an agency can resolve
some ambiguity in a funding condition, the condition itself must
still be ascertainable on the face of the statute.
C.
Because we hold that the condition imposed by the Rescue
Plan’s offset provision violates the Spending Clause for its lack of
ascertainability, we need not address the States’ coercion and
Tenth Amendment claims. But we must still decide whether the
district court abused its discretion in permanently enjoining en-
forcement of the offset provision.
After finding a statute unconstitutional, we must ask
whether “the legislature [would] have preferred what is left of its
statute to no statute at all.” Ayotte v. Planned Parenthood of N.
New England, 546 U.S. 320, 330 (2006). When striking unconstitu-
tional provisions, we must “refrain from invalidating more of the
statute than is necessary.” United States v. Booker, 543 U.S. 220,
258 (2005) (quotation omitted). And we must retain the sections
“that are (1) constitutionally valid, (2) capable of ‘functioning inde-
pendently,’ and (3) consistent with Congress’ basic objectives in
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22-10168 Opinion of the Court 41
enacting the statute.” Id. at 258–59 (quoting Alaska Airlines, Inc. v.
Brock, 480 U.S. 678, 684 (1987)) (citations omitted). Everyone
agrees that the offset provision is severable from the rest of the Act,
and we accept the parties’ concession on this point.
To obtain a permanent injunction, the moving party must
show that (1) it has suffered irreparable harm; (2) remedies at law
will not provide adequate compensation for the injury; (3) on bal-
ance, an equitable remedy is warranted; and (4) a permanent in-
junction will not disserve the public interest. Angel Flight of Ga.,
Inc. v. Angel Flight Am., Inc., 522 F.3d 1200, 1208 (11th Cir. 2008).
The district court can exercise “a range of choice” when deciding
whether to grant a permanent injunction, so long as it does not
misapply legal standards or rely on clearly erroneous facts. Broad-
cast Music, Inc. v. Evie’s Tavern Ellenton, Inc., 772 F.3d 1254, 1257
(11th Cir. 2014) (quotation omitted). Applying this standard, the
district court did not abuse its discretion in concluding that a per-
manent injunction is warranted.
First, the States have suffered irreparable harm. The Rescue
Plan’s offset provision has affected the States’ sovereign authority
to tax by binding them to a deal with ambiguous terms and placing
them on the hook for billions of dollars in potential recoupment
actions. Second, money damages cannot adequately compensate
the States because the federal government generally enjoys im-
munity from suit. See Dep’t of Army v. Blue Fox, Inc., 525 U.S. 255,
260 (1999). Third, the States’ inability to promulgate their own tax
policies—and the attendant financial consequences—outweigh any
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42 Opinion of the Court 22-10168
inconvenience to the Secretary from the district court’s injunction.
Fourth, the injunction serves the public interest. Enforcing the
Spending Clause’s limitations helps preserve state sovereignty and
the “two-government system established by the Framers.” NFIB,
567 U.S. at 577 (opinion of Roberts, C.J., joined by Breyer and Ka-
gan, JJ.). Allowing Congress to run roughshod over the States’ sov-
ereign rights would threaten dual sovereignty and would be a step
toward “vest[ing] power in one central government.” Id.
All four elements weigh in favor of granting a permanent
injunction. The district court did not misapply the law nor base its
determination on clearly erroneous facts. It did not abuse its discre-
tion. We also agree with the district court that the permanent in-
junction fully redresses the States’ harm in this case—declaratory
relief is unnecessary. We reiterate, however, that the permanent
injunction applies only to Section 802(c)(2)(A), which is severable
from the remaining provisions of the Act.
IV.
The district court is AFFIRMED.
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43a
In the
United States Court of Appeals
For the Eleventh Circuit
No. 22-10168
STATE OF WEST VIRGINIA, by and through Patrick Morrisey,
Attorney General of the State of West Virginia,
STATE OF ALABAMA, by and through Steve Marshall,
Attorney General of the State of Alabama,
STATE OF ARKANSAS, by and through Leslie Rutledge,
Attorney General for the State of Arkansas,
STATE OF ALASKA, by and through Treg R. Taylor,
Attorney General of the State of Alaska,
STATE OF FLORIDA, by and through Ashley Moody,
Attorney General for the State of Florida,
STATE OF IOWA,
STATE OF KANSAS, by and through Derek Schmidt,
Attorney General for the State of Kansas,
STATE OF MONTANA, by and through Austin Knudsen,
Attorney General of the State of Montana,
STATE OF NEW HAMPSHIRE,
USCA11 Case: 22-10168 Document: 110-1 Date Filed: 09/14/2023 Page: 2 of 59
44a
2 Order of the Court 22-10168
STATE OF OKLAHOMA, by and through Mike Hunter,
Attorney General of the State of Oklahoma,
STATE OF SOUTH CAROLINA, by and through Alan Wilson,
Attorney General of the State of South Carolina,
STATE OF SOUTH DAKOTA, by and through Jason R. Ravnsborg,
Attorney General of the State of South Dakota,
STATE OF UTAH, by and through Sean Reyes,
Attorney General of the State of Utah,
Plainti:ffs-Appellees,
versus
U.S. DEPARTMENT OF THE TREASURY,
SECRETARY, U.S. DEPARTMENT OF THE TREASURY,
ACTING INSPECTOR GENERAL OF THE
DEPARTMENT OF THE TREASURY,
Defendants-Appellants.
Appeal from the United States District Court
for the Northern District of Alabama
D.C. Docket No. 7:21-cv-00465-LSC
USCA11 Case: 22-10168 Document: 110-1 Date Filed: 09/14/2023 Page: 3 of 59
45a
22-10168 Order of the Court 3
Before WILLIAM PRYOR, Chief Judge, WILSON, JORDAN,
ROSENBAUM, NEWSOM, BRANCH, GRANT, LUCK, LAGOA, BRASHER,
and ABuou, Circuit Judges.
BY THE COURT:
A petition for rehearing having been filed and a member of
this Court in active service having requested a poll on whether this
appeal should be reheard by the Court sitting en bane, and a ma-
jority of the judges in active service on this Court having voted
against granting rehearing en bane, IT IS ORDERED that this ap-
peal will be not be reheard en bane.
Judge Jill Pryor recused herself and did not participate in the en banc poll.
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46a
22-10168 BRASHER, J., Concurring 1
BRASHER, Circuit Judge, concurring in the denial of rehearing en
bane:
This appeal is about Section 802( c) of the American Rescue
Plan Act. See American Rescue Plan Act of 2021, Pub. L. 117-2, 135
Stat. 4. The Rescue Plan appropriated over two hundred billion
dollars to the states to mitigate the economic and public health ef-
fects of the coronavirus pandemic. The Rescue Plan has some im-
portant provisos. Relevant here, states that accept relief funds can-
not "either directly or indirectly offset a reduction in the[ir] net tax
revenue" that occurs because of a tax cut. 42 U.S.C. § 802(c)(2)(A).
Thirteen states sought a declaratory judgment and an injunction to
prevent the Secretary of the Treasury from enforcing the offset
provision. The states argued that the offset provision violated the
Spending Clause and the Tenth Amendment's anti-commandeer-
ing doctrine, and the district court permanently enjoined the offset
provision's enforcement.
The Supreme Court has said that Congress can add a condi-
tion to states accepting federal funds only if it speaks "unambigu-
ously" and "with a clear voice" so that the States can "exercise their
choice knowingly, cognizant of the consequences of their partici-
pation." Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17
(1981). After a straightforward application of the Supreme Court's
Spending Clause jurisprudence and this Court's related precedent
in Benning v. Georgia, 391 F.3d 1299 (11th Cir. 2004), the panel held
that the tax offset provision was unconstitutionally unascertainable
under the Spending Clause, without addressing the states' coercion
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47a
2 BRASHER, J., Concurring 22-10168
and Tenth Amendment claims. West Virginia v. U.S. Dep't of Treas-
ury, 59 F.4th 1124, 1148 (11th Cir. 2023). The main problem, we
said, is that "the offset provision does not provide a standard
against which a state can assess whether it will reduce or has re-
duced net tax revenue .... Reduced as compared to what?" Id. at
1144. This problem is exacerbated by the fungibility of money and
the provision's expansive prohibition on even "indirectly" offset-
ting a tax cut with Rescue Plan funds. The panel also held that the
Secretary's interim final rule could not salvage the offset provi-
sion's constitutional defects. Id. at 1146-49. So we affirmed the de-
cision of the district court.
A majority of the active judges on this Court has determined
not to hear this case en bane. This result is hardly surprising. See
Fed. R. App. P. 35(a). The only other circuit court to have reached
the merits of this dispute, the Sixth Circuit, has agreed with the
panel opinion that the Rescue Plan's offset provision is "impermis-
sibly vague under the Spending Clause." Kentucky v. Yellen, 54 F.4th
325, 330 (6th Cir. 2022). And almost every district court to have
considered the issue has reached a similar conclusion. See Texas v.
Yellen, 597 F. Supp. 3d 1005, 1012-15, 1019 (N.D. Tex. 2022); Ohio
v. Yellen, 547 F. Supp. 3d 713, 740 (D. Ohio 2021). Although the gov-
ernment asked the Sixth Circuit to reconsider its decision, it did not
petition for review in the Supreme Court. So the issue seems to be
resolved.
Because the unconstitutionality of the offset provision
seems settled, I'll pretermit the usual back-and-forth with my
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48a
22-10168 BRASHER, J., Concurring 3
dissenting colleague. The panel issued its opinion in January, and it
is now September. My dissenting colleague has used some of that
time to write her own opinion, which was presumably complicated
by the government's failure to make the statutory-interpretation
arguments on which she relies. E.g., Oral Argument Trans. No. 22-
10168 at 9:46 (government conceding that "[t]he statute doesn't an-
swer how you calculate a reduction"). I'm not persuaded, but I
don't see a need to further delay the case to prepare my own point-
by-point rebuttal. So I'll let the panel opinion speak for itself.
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49a
22-10168 ROSENBAUM, J.' Dissenting 1
ROSENBAUM, Circuit Judge, dissenting from the denial of re-
hearing en bane:
A builder arrives on site to build a new three-bedroom
house. She carries with her a complete complement of all her tried
and trusty tools. But when she gets down to building, she and her
crew pull out only a flathead screwdriver and attempt to use that-
and only that-to build the house. Worse still, after a bit, she and
the crew decide to stop using even that tool, even though the plans
call for the use of more flathead screws. Instead of turning to her
other tools for the rest of the project, she simply declares, "It's im-
possible to build this house!" Then, she refuses to consult the
home-building expert of the company that designed the house and
instead firebombs the building site.
The panel opinion here engaged in the statutory-interpreta-
tion equivalent of what this builder did. The Supreme Court has
told us that "before concluding that a [statute] is genuinely ambig-
uous, a court must exhaust all the 'traditional tools' of construc-
tion." Kisor v. Wilkie, 139 S. Ct. 2400, 2415 (2019) (emphases
added). 1 Yet charged with construing part of the American Rescue
1 Kisor addresses the problem of ambiguity in agency regulations. But the
Court was clear that its approach to ambiguity in regulations was precisely the
same as its approach to ambiguity in statutes. See Kisor, 139 S. Ct. at 2415 (cit-
ing Chevron U.S.A. Inc. v. Nat'l Res. Def Council, Inc., 467 U.S. 837, 843, n .9
(1984), for the proposition that the Court has "adopt[ed] the same approach"
of exhausting all the "traditional tools" of construction for statutory interpre-
tation); see also Abramski v. United States, 573 U.S. 169, 179 (2014) (noting that
courts "must . .. interpret the relevant words [of a statutory provision] not in
a vacuum, but with reference to the statutory context, structure, history, and
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2 ROSENBAUM, J.' Dissenting 22-10168
Plan Act ("Rescue Plan") (in which Congress authorized participat-
ing states to receive billions of dollars in COVID-19-related finan-
cial relief), the panel opinion looked up the dictionary definitions
of three of the 80-plus words 2 in the statutory provision, found that
those definitions in isolation did not answer the question before the
Court, and threw in the towel, proclaiming the provision unascer-
tainable. The panel opinion didn't consider the statutory context,
the statutory purpose as derived from the text, the statutory struc-
ture, or the statutory history. And it didn't even bother to look up
all the significant words in the statutory text before declaring de-
feat. Nor did the panel opinion's strained finding of ambiguity
comport with common sense. In fact, it's demonstrably implausi-
ble.
Then, the panel opinion used this demonstrably implausible
construction of the statutory provision at issue as its sole basis for
invoking the major questions doctrine. As a result, the panel opin-
ion refused to even consider the Secretary's duly promulgated reg-
ulation. And it did this even though the Rescue Plan expressly en-
dowed the Secretary of the Treasury with the authority to promul-
gate rules as necessary under the governing statute.
purpose" of the law, "not to mention common sense." (cleaned up) (emphasis
added)) .
2And that doesn't include a word count of the statutorily defined phrase in the
provision, which, as I explain later, also requires statutory interpretation. See
42 U.S.C. § 802(g)(l).
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22-10168 ROSENBAUM, J.' Dissenting 3
These errors have extraordinary implications for the law and
our Circuit precedent. The first-declaring a statutory provision
unascertainable or ambiguous without emptying the statutory-in-
terpretation toolbox-directly contravenes what the Supreme
Court has told us about how we must conduct statutory interpre-
tation. It also introduces confusion and uncertainty into our statu-
tory-interpretation methodology. The second-wheeling out the
major-questions-doctrine big gun both to make sure an ascertaina-
ble statutory provision is really dead and to sideline the expert Con-
gress charged with administering the provision-effects an imper-
missible judicial snatch-and-grab of congressional power. Indeed,
the panel opinion's extension of the major questions doctrine up-
sets the separation of powers, effectively giving courts an unconsti-
tutional veto on Congress's policy decisions any time courts disa-
gree with Congress's legislation and the legislation authorizes the
expenditure of large amounts of money.
Even worse, these errors are unforced. Had the panel opin-
ion cracked the statutory-interpretation toolbox open and ex-
hausted all its tools, the panel opinion would have concluded that
the Rescue Plan provision at issue is ascertainable.
Yet even today, though Judge Brasher's opinion concurs sep-
arately in the denial of rehearing en bane, it offers no substantive
response to the errors I point out in the panel opinion he authored.
Instead, the Brasher Concurrence says simply that the
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4 ROSENBAUM, J.' Dissenting 22-10168
"government conced[ed] that '[t]he statute doesn't answer how you
calculate a reduction." 3 Cone. at 3. But that's no answer.
Of course, we greatly appreciate the parties' briefing and ar-
guments and closely consider them. But we have never let the par-
ties decide the case for us. To the contrary, we have always ex-
plained that "the Government cannot concede away the proper in-
terpretation of a statute." Bourdon v. U.S. Dep't of Homeland Sec.,
940 F.3d 537, 547 n.6 (11th Cir. 2019). 4 And that is especially the
3 The Brasher Concurrence also blames its failure to respond substantively on
the fact that "[t]he panel issued its opinion in January, and it is now Septem-
ber." Cone. at 2-3. And to be sure, speed in the issuance of opinions is im-
portant. But so is getting the answer right under the law. That's why the only
thing unusual about the amount of time the en bane process has taken here is
that it's been significantly shorter than usual. See, e.g., Laufer v. Arpan LLC, 65
F.4th 615 (11th Cir. Apr. 12, 2023) (en bane) (denying rehearing en bane re-
hearing on panel opinion issued on March 23 , 2022); Johnson v. NPAS Sols., LLC,
43 F.4th 1138 (11th Cir. Aug. 3, 2022) (en bane) (denying rehearing en bane on
panel opinion issued on Sept. 17, 2020); Otto v. City ofBoca Raton, 41 F.4th 1271
(11th Cir.July 20, 2022) (en bane) (denying rehearing en bane on panel opinion
issued on Nov. 20, 2020); United Statesv. Sec'y Fla. Agency for Health CareAdmin.,
21 F.4th 730 (11th Cir. Dec. 22, 2021) (en bane) (denying rehearing en bane on
panel opinion issued on Sept. 17, 2019). See also Robin S. Rosenbaum, Fore-
word, 77 U. Miami L. Rev. 885, 886-87 (2023) (noting that en bane is "[a]
lengthy process"). In any case, and most respectfully, the fact that "it is now
September" hardly seems like a good reason not to respond substantively.
4 See also United States v. Colston, ("Concessions oflaw ... are never binding on
[the court of appeals]."); Dana's R.R. Supply v. Att'y Gen., 807 F.3d 1235, 1255
(11th Cir. 2015) (Carnes, J., dissenting) (acknowledging that "[t]he interpreta-
tion of a statute is a question of law, ... and we are not obliged to accept a
party's concession on such questions" ); Rumsfeld v. F. for Acad. & Institutional
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22-10168 ROSENBAUM, J.' Dissenting 5
case when we're talking about invalidating a provision in a multi-
billion-dollar act of Congress. It's also another reason why en bane
rehearing is warranted here: so we can ask the parties about these
errors and benefit from the parties' thoughts on them.
In short, the panel opinion is profoundly wrong and will
have serious consequences for our jurisprudence. I respectfully dis-
sent from the denial of rehearing en bane.
I organize this opinion in three substantive parts. In Section
I, I explain the relevant statutory background and the question at
issue in this case. Section II shows that our statutory-interpretation
toolbox readily provides the answer to the question here. And in
Section III, I discuss why invocation of the major questions doc-
trine is inappropriate and how this case's extension of the doctrine
upsets the separation of powers.
I.
A. Statutory Background
By March 2021, roughly a year into the COVID-19 pan-
demic, the pandemic had wreaked havoc on American families,
companies, and the economy. To "mitigate the fiscal effects stem-
ming from the public health emergency with respect to [COVID-
19]," 42 U.S.C. § 802(a)(l), Congress enacted the American Rescue
Plan Act of 2021, Pub. L. No. 117-2, 135 Stat. 4. As part of the
Rts., Inc., 547 U.S. 47, 56 (2006) (stating that courts need not "accept an inter-
pretation of a statute simply because it is agreed to by the parties.").
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Rescue Plan, Congress allocated $219.8 billion to states, territories,
and tribal governments.
No state was required to accept Rescue Plan funds. But if a
state chose to do so, the money came with conditions: any state
receiving Rescue Plan funds had to use the federal money in ways
that the statute permitted and had to refrain from using the funds
in ways the law prohibited. See 42 U.S.C. § 802(c).
The Rescue Plan set forth five broad categories of permissi-
ble uses for the funds: (1) "to respond to the [COVID-19] public
health emergency ... or its negative economic impacts, including
assistance to households, small businesses, and nonprofits, or aid to
impacted industries such as tourism, travel, and hospitality," id.
§ 802(c)(l)(A); (2) "to respond to workers performing essential
work during the COVID-19 public health emergency by providing
premium pay to eligible workers of the State ... that are perform-
ing such essential work, or by providing grants to eligible employ-
ers that have eligible workers who perform essential work," id.
§ 802(c)(l)(B); (3) "for the provision of government services" up to
a certain amount, id.§ 802(c)(l)(C); (4) "to make necessary invest-
ments in water, sewer, or broadband infrastructure," id.
§ 802(c)(l)(D); and (5) "to provide emergency relief from natural
disasters or the negative economic impacts of natural disasters, in-
cluding temporary emergency housing, food assistance, :financial
assistance for lost wages, or other immediate needs," id.
§ 802(c)(l)(E). Unsurprisingly, given the Rescue Plan's express
statement of its purpose, each of these areas addressed a financial
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concern exacerbated by COVID-19. And none permitted a state to
use the money to fund state tax cuts.
In case any state missed that last point, the Rescue Plan ex-
plicitly made it in the section of the statute delineating prohibited
uses of Rescue Plan funds. As relevant here, the Rescue Plan di-
rected that no state could use Rescue Plan 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 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 to delay "the imposition of any tax or tax in-
crease." Id. § 802(c)(2)(A). This provision-section 802(c)(2)(A)-
is the one that is at the center of our case.
The Rescue Plan then emphasized the limited purpose of its
funds for COVID-19-related uses, not for states to fund their own
tax cuts. It required, "for a State ... to receive a payment ... , the
State shall provide the Secretary with a certification, signed by an
authorized officer of such State . .. , that such State ... requires
the payment ... to carry out the activities specified in subsection
(c) of this section and will use any payment under this section ... ,
in compliance with subsection (c) of this section." Id. § 802(d)(l).
And if any state violated these rules, the Rescue Plan required the
Secretary to recoup "an amount equal to the amount of funds used
in violation of [subsection (c)] ...." Id. § 802(e).
B. The Lawsuit
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Three weeks after the Rescue Plan became law, thirteen
states sued. They argued that section 802(c)(2)(A)-the prohibition
on using Rescue Plan money to fund state tax cuts-was unconsti-
tutional because it allegedly required the states to either give up
control of a "core function of their inherent sovereign powers"-
their taxing authority, namely, the power to lower taxes-or "forfeit
massive and much-needed aid that represent[ed] approximately
25% of Plaintiff States' annual general budgets." Pointing to the
language "directly or indirectly" in section 802(c)(2)(A), the States
asserted that the standard the Rescue Plan imposed for determin-
ing whether a use of funds violated the prohibition on tax cuts was
unascertainable. So, the States argued, the Secretary could seek to
recoup money for any tax cut whatsoever, regardless of whether
the State used Rescue Plan money to fund it. In short, the States
said that the law was impermissibly overbroad, impermissibly
vague, or both.
C. The Regulation
No long after the States sued, the Secretary promulgated a
regulation establishing a step-by-step process for determining
"whether, and the extent to which, [Rescue Plan] funds have been
used to offset a reduction in net tax revenue" under Section
802(c)(2)(A). 5 87 FED. REG. 4338-01, 4423 (Jan. 27, 2022). The rule
sets out a four-step process for determining whether a state's
5The interim rule was announced in May 2021 and was finalized in January
2022 with no material change. 87 FED. REG . 4338-01 (Jan. 27, 2022).
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expenditure of Rescue Plan money violates the tax-cut-funding
prohibition.
First, the state must identify and value all modifications of
law, regulation, or administrative interpretation that lower net tax
revenue, "as it would in the ordinary course of its budgeting pro-
cess." Id. "The sum of these values in the year for which the gov-
ernment is reporting is the amount that it needs to 'pay for' with
sources other than [Rescue Plan] funds .... " Id.
Second, the state must compare its net tax revenue recorded
for any given year after the fiscal year ending 2019 to the amount
of net tax revenue recorded for the fiscal year ending 2019. If the
later year's net tax revenue is greater than that for the fiscal year
ending 2019-adjusted annually for inflation-then the state has
complied with the prohibition. Id. The regulation also includes a
safe harbor: if the total decrease in net tax revenue is de minimis-
meaning less than one percentage point-then the state has also
complied. Id.
Third, if the amount of net tax revenue recorded is less than
for the fiscal year ending 2019 (and falls outside the safe harbor)-
adjusted annually for inflation-then the state must identify
sources of funds that offset the reduction, such as spending cuts or
tax increases. Id.
And fourth, recipient states must calculate "the value of rev-
enue reduction remaining ...-that is, how much of the tax
change has not been paid for." Id. So if a state's tax revenue goes
down in one area, but the state's spending goes down by the same
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10 ROSENBAUM, J.' Dissenting 22-10168
amount or the state increases taxes elsewhere to account for that
decrease, then the state has complied. Id. If a shortfall remains,
though, the formula isolates that shortfall in net tax revenue result-
ing from a tax cut or delayed tax increase that the state's non-Res-
cue Plan budget does not pay for. In other words, it identifies any
portion of Rescue Plan funds that the state received that it used to
cover a shortfall in net tax revenue caused by a tax cut or delayed
tax increase.
Besides promulgating this rule, the Secretary also responded
to some states' expressed concerns that predicting the effect that a
state's change in tax code would have on tax revenue was hard to
do. She pointed out that states already took this sort of infor-
mation into account in their existing fiscal and budgeting processes.
Id. at 4424 ("By incorporating existing budgeting processes and ca-
pabilities, states and territories will be able to assess and evaluate
the relationship of tax and budget decisions to uses of [Rescue
Plan] funds based on information they likely have or can readily
obtain. This approach ensures that recipient governments have the
information they need to understand the implications of their de-
cisions regarding the use of [Rescue Plan] funds[.]").
D. The Panel Opinion
The district court permanently enjoined the Secretary from
recouping Rescue Plan money that states spent funding tax cuts in
violation of the law. West Virginia v. U.S. Dep't of the Treasury, 59
F.4th 1124 (11th Cir. 2023). And the panel opinion affirmed.
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In reaching this conclusion, the panel opinion discussed the
dictionary definitions of three words in section 802(c)(2)(A)-the
Rescue Plan's prohibition on using Rescue Plan funds for state tax
cuts-and declared the provision unascertainable. After consider-
ing only these three dictionary definitions, the panel opinion said,
as relevant here, that the prohibition on funding tax cuts with Res-
cue Plan funds (1) didn't provide a standard by which to measure
whether tax revenue had increased or decreased, so states couldn't
know whether their actions violated the provision; and (2) didn't
define "direct or indirectly offset," and a broad definition of "indi-
rectly offset" could apply to anything. Id. at 1144-45. The panel
also opined that the Rescue Plan's "novelty and scope" com-
pounded these perceived problems. Id. at 1145- 46.
Having declared the Rescue Plan's prohibition on the use of
Rescue Plan money to fund state tax cuts unascertainable, the panel
opinion then refused to consider the merits of the Treasury regu-
lation to clear up any alleged ambiguity. Id. at 1146. To justify this
decision, the panel opinion incorrectly reasoned that the prohibi-
tion on using Rescue Plan money to fund state tax cuts could be
read to prohibit states from making any tax cuts whatsoever. Id. at
1147. And because any "choice" between that (implausible) inter-
pretation and a narrower one was a question for Congress, the
panel opinion concluded, the major questions doctrine came into
play. Id. at 1146- 47. As a result, the panel opinion removed the
Secretary's ability to weigh in on the provision with regulations. Id.
Continuing, the panel opinion said that Congress couldn't delegate
to the Executive the power to place conditions on grants because
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Congress, not the Executive, has the power of the purse, and a del-
egation of that nature would infringe on the separation of powers.
Id. at 1147-48. Ironically, though, as I explain below, the panel opin-
ion effectively allowed the Judiciary to act as a veto on Congress's
policy determination that Rescue Plan money was to be used for
addressing only pandemic-related expenses, not for funding state
tax cuts.
Further in line with a judicial rewrite of the statute, after de-
claring the tax-cut-prohibition provision invalid, the panel opinion
affirmed the district court's injunction of the prohibition but left
the rest of the Rescue Plan intact. Id. at 1149. In other words, the
panel opinion enabled states to accept and spend billions of dollars
in Rescue Plan money and freed them from their corresponding
and voluntarily accepted Rescue Plan obligation to spend those
funds to address only pandemic-exacerbated conditions, not to
fund state tax cuts.
II.
I first explain why the panel opinion was wrong to declare
the prohibition on using Rescue Plan money to fund state tax cuts
(section 802(c)(2)(A)) unascertainable. But because our statutory-
interpretation exercise arises in the context of a Spending Clause
challenge, I begin with a brief discussion of that constitutional pro-
vision.
Article I, Section 8, of the Constitution contains what is
known as the Spending Clause. That section gives Congress the
power to "lay and collect Taxes, Duties, Imposts, and Excises, to
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pay the Debts and provide for the common Defence and general
Welfare of the United States." U.S. CONST. art I,§ 8.
The Spending Clause endows Congress with "broad
power ... to set the terms on which it disburses federal funds."
Cummings v. Premier Rehab Keller, P.L.L.C., 142 S. Ct. 1562, 1568
(2022). In describing these powers, the Supreme Court has said that
when Congress enacts legislation under the Spending Clause, that
legislation "is much in the nature of a contract: in return for fed-
eral funds, the States agree to comply with federally imposed con-
ditions." Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17
(1981). But for spending-power legislation to be valid, it must allow
states to knowingly and voluntarily "accept[] the terms of the 'con-
tract."' Id.
That means, as relevant here, that a state must be able to
ascertain what conditions Congress has placed on the federal funds
it offers. Id. So "if Congress intends to impose a condition on the
grant of federal moneys, it must do so unambiguously" (meaning
ascertainably). Id.
That brings us to one of the reasons I write today: the issue
of ambiguity. In recent years, the Supreme Court has had a lot to
say about ambiguity (or lack of it) in the law. The bottom line is
this: "before concluding that a [statute] is genuinely ambiguous, a
court must exhaust all the 'traditional tools' of construction." Kisor,
139 S. Ct. at 2415 (emphases added). Those tools include examin-
ing the text, "statutory context, structure, history, and purpose" of
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14 ROSENBAUM, J.' Dissenting 22-10168
the law, "not to mention common sense." Abramski, 573 U.S. at 179
(cleaned up).
The Supreme Court has repeatedly reminded us that statu-
tory interpretation is not for quitters. In Kisor, the Court said that
"a court cannot wave the ambiguity flag just because it found the
[statute] impenetrable on first read." 139 S. Ct. at 2415. Indeed,
the Court has recognized that "hard interpretive conundrums, even
relating to complex [statutes], can often be solved." Id. at 2415. As
the Court has remarked, while "[d]i:fficult ambiguities in statutory
text will inevitably arise, ... [c]ourts should approach these inter-
pretive problems methodically, using traditional tools of statutory
interpretation, in order to confirm their assumptions about the
'common understanding' of words." Facebook, Inc. v. Duguid, 141 S.
Ct. 1163, 1170 n.5 (2021). Even if "discerning the only possible in-
terpretation" of a law "requires a taxing inquiry," that does not ren-
der the law ambiguous. Pauley v. BethEnergy Mines, Inc., 501 U.S. 680,
707 (1991) (Scalia, J., dissenting) (discussing a regulation). Rather,
"if a reviewing court employs all of the traditional tools of con-
struction, the court will almost always reach a conclusion about the
best interpretation of the law at issue." Wooden v. United States, 142
S. Ct. 1063, 1075 (2022) (Kavanaugh,]., concurring) (cleaned up).
The Supreme Court could not be clearer in commanding
courts that they must empty the statutory-interpretation toolbox
before concluding a statute is genuinely ambiguous. Yet the panel
opinion barely even cracked the toolbox's lid before slamming it
shut and locking it. As I've noted, the panel opinion looked at only
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three dictionary definitions for isolated words, gave up, and de-
clared the provision unascertainable. Had the panel opinion rolled
up its sleeves and exhausted the statutory-interpretation toolbox, it
could not have found the prohibition on using Rescue Plan money
to fund state tax cuts ambiguous.
As it turns out, Congress set forth an ascertainable standard
when it prohibited states that choose to accept Rescue Plan funds
from using those funds "to either directly or indirectly offset a re-
duction in the net tax revenue of such State ... resulting from a
change in law, regulation, or administrative interpretation during
the covered period that reduces any tax ... or delays the imposition
of any tax or tax increase." 42 U.S.C. § 802(c)(2)(A). At the risk of
ruining the ending, I disclose that standard up front: states may
not use Rescue Plan funds to ultimately pay for a reduction in the
state's net tax revenue (as compared to the state's net tax revenue
in the state's last full fiscal year before the United States declared
the COVID-19 emergency) caused by a tax cut or delayed tax im-
plementation. When we examine the text, "statutory context,
structure, history, and purpose" of the law, "not to mention com-
mon sense," Abramski, 573 U.S. at 179 (cleaned up), as the Supreme
Court has told us to do, they necessarily reveal this standard.
A. The Text
In statutory interpretation, of course, we always begin with
the text. Ross v. Blake, 578 U.S. 632, 638 (2016). The statute here
provides,
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16 ROSENBAUM, J.' Dissenting 22-10168
A State ... shall not use [Rescue Plan] funds ... to ei-
ther directly or indirectly offset a reduction in the net
tax revenue of such State ... resulting from a change
in law, regulation, or administrative interpretation
during the covered period that reduces any tax (by
providing for a reduction in a rate, a rebate, a deduc-
tion, a credit, or otherwise) or delays the imposition
of any tax or tax increase.
42 U.S.C. § 802(c)(2)(A).
The Rescue Plan defines some terms, one of which is rele-
vant to our interpretation of section 802(c)(2)(A): "covered pe-
riod." As the Rescue Plan explains, "covered period" refers to the
period that starts on March 3, 2021 (when the Rescue Plan was en-
acted), and "ends on the last day of the fiscal year of [the partici-
pating] State ... government in which all funds received by the
State ... from a payment made under this section ... have been
expended or returned to, or recovered by, the Secretary." 42 U.S.C.
§ 802(g)(l). This definition provides important information that
comes into focus once we look at other text in section 802(c)(2)(A).
So I discuss it more later. But for now, the important point is that
we must read this definition together with the rest of section
802(c)(2)(A)'s prohibition on using Rescue Plan money to fund
state tax cuts, since section 802(c)(2)(A) incorporates the definition
of "covered period" into its text.
As for the definitions of the rest of the words in section
802(c)(2)(A), we give terms their "ordinary public meaning" at the
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time the statute was adopted. Bostock v. Clayton Cnty., 140 S. Ct.
1741, 738-39 (2020). I consider the meaning of the words in the
order they arise in section 802(c)(2)(A).
The statute begins, "A state ... shall not." We've said that
"the verb 'shall' in a statute is a command." United States v. Peters,
783 F.3d 1361, 1364 (11th Cir. 2015). So "shall not" is a command
to not do something-that is, a prohibition. In this case, it's a pro-
hibition on the "use" of something. And since the next part of the
statute refers to only Rescue Plan funds ("A State ... shall not use
[Rescue Plan] funds"), the plain text of section 802(c)(2)(A) tells
states that it is a prohibition on only how they may spend Rescue
Plan funds, not on how they may spend money from any other
source. 6
Next up, we have the phrase "to either directly or indirectly
offset." To discern the meaning of this phrase, we consult diction-
aries in use when Congress enacted the Rescue Plan in 2021.
Thompson v. Regions Sec. Servs., Inc., 67 F.4th 1301, 1306 (11th Cir.
2023). No dictionaries appear to define the entire phrase. So we
turn to the meanings of the individual words in the phrase. United
States v. Dominguez, 997 F.3d 1121, 1124 (11th Cir. 2021).
6 In fact , section 802(c)(2)' s heading is "Further restriction on use of funds ,"
referring to Rescue Plan funds and underscoring the point that section
802(c)(2) is a limitation on how Rescue Plan funds may be spent. See United
States v. Bryant, 996 F.3d 1243, 1257 (11th Cir. 2021) ("Titles are permissible
indicators of meaning." (cleaned up)) .
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"Directly" means "[i]n a straightforward manner." Directly,
BLACK's LAW DICTIONARY (11th ed. 2019). "Indirectly" occupies the
rest of the field that "directly" doesn't cover: "deviating from a di-
rect line or course: not proceeding straight from one point to an-
other : proceeding obliquely or circuitously," "not straightforward
and open," and "not directly aimed at or achieved." Indirect,
MERRIAM-WEBSTER'S UNABRIDGED DICTIONARY (Sept. 12, 2023),
https: / / unabridged.merriam-webster.com/ unabridged/ indirect
[https: / /perma.cc/T7BK-4GTC]. As for "offset," according to
Black's Law Dictionary, that means "[s]omething (such as an amount
or claim) that balances or compensates for something else." Offset,
BLACK'S LAW DICTIONARY (11th ed. 2019).
So to "directly or indirectly offset" means to compensate, or
pay, for a loss with no intermediate steps, or to make up for that
loss with intermediate steps between the initial action and the re-
sult. And when we put this together with the prohibitory language
at the beginning of the provision, it's clear that Congress was in-
structing states that they could not use Rescue Plan funds di-
rectly-or circumvent the prohibition on the use of Rescue Plan
funds by using those funds indirectly-to effectively pay for some-
thing.
So what does the statute prohibit states from using Rescue
Plan funds to pay for? The rest of section (c)(2)(A) tells us: "a re-
duction in the net tax revenue of such State ... resulting from a
change in law, regulation, or administrative interpretation during
the covered period that reduces any tax (by providing for a
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reduction in a rate, a rebate, a deduction, a credit, or otherwise) or
delays the imposition of any tax or tax increase." That's a mouth-
ful, so let's break it down.
We all know what a "reduction" is, but in the interest of
completeness, here's a dictionary definition: "a decrease in size,
amount, extent, or number." Reduction, MERRIAM-WEBSTER'S
UNABRIDGED DICTIONARY (Sept. 12, 2023), https: / /una-
bridged.merriam-webster.com /unabridged/ reduction
[https: / /perma.cc/HT9R-9SFS]. Two things about the meaning
of "reduction" become important in our analysis. First, as the def-
inition indicates, "reduction" is inherently a comparative word. For
something to be a decrease, or smaller, we must compare it to
something else that is bigger. Second, and along the same lines,
something that doesn't already exist can't be reduced. So when we
speak of a "reduction," the thing we are comparing it to must al-
ready exist. The comparative nature of the word "reduction" is key
as we proceed further through the text.
In the meantime, though, we consider the phrase "net tax
revenue." Start with "tax revenue"-the "total income produced"
from taxes. Revenue, MERRIAM-WEBSTER'S UNABRIDGED
DICTIONARY (Sept. 12, 2023), https:/ /unabridged.merriam-web-
ster.com/unabridged/revenue [https:/ /perma.cc/NX3U-XAMK].
Then add the adjective "net." "Net" means "[t]he final
amount remaining after all other amounts have been taken away;
esp., an amount of money remaining after a sale, minus any deduc-
tions for expenses, commissions, and taxes." Net, BLACK'S LAW
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20 ROSENBAUM, J.' Dissenting 22-10168
DICTIONARY (11th ed. 2019). Taken together, "net tax revenue," fol-
lowed by "of such State," refers to the total tax income that a state
collects, minus any losses or expenses.
It's worth noting that "net" does a lot of work in this phrase.
It indicates that Congress was talking about the total tax revenue
after all accounting has been done. In other words, Congress was
not concerned with tracing specific Rescue Plan dollars through
their expenditure lives. Rather, Congress sought to ensure only
that, after all was said and done, none of the participating state's
total Rescue Plan allotment ultimately funded state tax cuts-what-
ever other detours the Rescue Plan funds may have taken along the
way. Indeed, had Congress wanted states to ensure that none of
the Rescue Plan funds touched a tax cut at all on their spending
journey, it could have eliminated the word "net" from the statute
and simply prohibited offsetting directly or indirectly any reduc-
tions in tax revenue. But Congress did not do that.
And there's something else important about the concept of
"net tax revenue." "Net tax revenue" is tangible and can be meas-
ured only after it is collected. In this way, "net tax revenue" is dif-
ferent from "expected net tax revenue," which is theoretical and
does not yet exist. No one would use the terms "expected net tax
revenue" and "net tax revenue" interchangeably: And Congress did
not refer to the state's "expected net tax revenue"; it said the state's
"net tax revenue." Congress could have used the term "expected
net tax revenue" if that's what it meant. But it didn't.
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That brings us back to the comparative nature of the word
"reduction." Again, a reduction can occur only relative to some-
thing that already exists. And because section 802(c)(2)(A) refers to
a "reduction in the net tax revenue," the baseline "net tax revenue"
against which any "reduction" must be compared must refer to a
participating state's net tax revenue from sometime before the
"covered period." After all, anything after the "covered period" be-
gan would not yet exist at the start of the "covered period," so we
couldn't have a "reduction" in comparison to it.
As for the "covered period," we know that began on March
3, 2021, and continues until the last day of the state's fiscal year in
which it spends or returns all Rescue Plan funds, or the Secretary
recovers those funds. 42 U.S.C. § 802(c)(2)(A). In other words, the
"covered period" extends to only that time during which Rescue
Plan funds are outstanding.
And because the definition of "covered period" speaks of
each state's fiscal year ("ends on the last day of the fiscal year of
such State"), we know Congress directed states to measure in terms
of their own fiscal years. So in sum, we know the baseline against
which a state's "net tax revenue" in its fiscal year during the "cov-
ered period" is measured must be the state's own fiscal year that
ended at a time before the "covered period" began.
Of course, another phrase modifies "net tax revenue of such
State": "resulting from a change in law, regulation, or administra-
tive interpretation during the covered period .... " Id.
§ 802(c)(2)(A). "Resulting from" means "[o]ccur[s] or follow[s] as
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22 ROSENBAUM, J.' Dissenting 22-10168
a consequence of something ...." Result from, OXFORD DICTIONARY
(Sept. 12, 2023), https:/ /premium.oxforddictionaries.com/ us/def-
inition/ american_english/result [https: / /perma.cc/DTS9-YEA5]
That means only that net tax revenue of the participating state that
comes because of "a change in law, regulation, or administrative
interpretation during the covered period."
The next clause-"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"- modifies "a
change in law ... during the covered period." This clause limits the
applicability of section 802(c)(2)(A)'s prohibition on the use of Res-
cue Plan funds so that it applies to only those changes in a law, a
regulation, or an administrative interpretation that reduce a tax or
the imposition of a previously determined tax.
When we put it all together, then, the text of section
802(c)(2)(A) tells us several things. First, Congress prohibited the
use of Rescue Plan funds and only Rescue Plan funds-not other
sources of state funding. Second, the prohibition extended to only
ultimately using those Rescue Plan funds to pay for state tax cuts
or delay the imposition of state taxes that resulted in a reduction to
net tax revenue, meaning that, when it comes to state tax cuts and
delayed tax implementation, Congress was unconcerned with the
individual routes expenditures of Rescue Plan allotments took, as
long as the end result was not an overall reduction in net tax reve-
nue caused by a state's tax cut or delayed implementation of a tax.
Third, we measure whether a reduction in net tax revenue has
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22-10168 ROSENBAUM, J.' Dissenting 23
occurred because of a tax cut or delayed tax implementation-that
is, our baseline-by reference to sometime before "the covered pe-
riod" began, meaning before March 3, 2021. Fourth, we know
from section 802(c)(2)(A) and the definition of "covered period"
that our unit of measurement is the net tax revenue of the partici-
pating state in its own fiscal year.
So the baseline against which section 802(c)(2)(A) prohibits
states from reducing their net tax revenue for a fiscal year in the
"covered period" is the state's net tax revenue for its own fiscal year
that ended sometime before March 3, 2021.
These observations about section 802(c)(2)(A)'s text alone
address most of the panel opinion's ascertainability concerns about
the statute.
Take the panel opinion's complaint that the prohibition on
using Rescue Plan money to fund state tax cuts (section
802(c)(Z)(A)) "does not provide a standard against which a state can
assess whether it will reduce or has reduced net tax revenue." West
Virginia, 59 F.4th at 1144. In elaborating on this concern, the panel
opinion gives an example. Id. It supposes that a state legislature
"predicts that consumption will increase in the next fiscal year and
enacts a sales tax rate reduction based on its forecast that overall
tax receipts will stay the same even if the rate is lower." Id. Under
the panel opinion's hypothetical, the state's prediction turns out to
be correct, so "year-over-year sales tax revenue stayed the same or
grew despite the rate reduction." Id. The panel opinion worries
that "if the baseline [against which we compare whether a
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24 ROSENBAUM, J.' Dissenting 22-10168
reduction in net tax revenue occurred] is what sales tax revenue
would have been absent the tax cut, the legislature would have effec-
tuated a 'reduction in the net tax revenue."' Id.
This concern is demonstrably invalid. We know for two rea-
sons that the baseline cannot be what the state predicted sales-tax
revenue would have been before it enacted its budget, which is
what the panel opinion's example suggests. First, the state's pre-
dicted sales-tax revenue would be a part of "expected net tax reve-
nue," meaning it would be a hypothetical number, not actual and
measurable "tax revenue." So in this scenario, the state's predicted
sales-tax revenue would not exist before the "covered period" be-
gan. And we know that doesn't fly under section 802(c)(2)(A)'s text.
Second, section 802(c)(Z)(A) speaks in terms of "net tax revenue,"
or total tax revenue after expenses; it does not require tax-by-tax ac-
counting, like the panel opinion's consideration of a cut to only the
rate of the "sales tax revenue" suggests. So a state could permissi-
bly cut the sales-tax rate-in fact, it could even eliminate it alto-
gether-as long as it paid for any cut with a source of funds other
than Rescue Plan money (or spending cuts or some combination
of the two). That's because the text tells us the baseline must be
the actual "net tax revenue" of a "fiscal year" that was complete
before the "covered period," meaning before March 3, 2021.
The panel opinion's protestation that "the phrase 'directly or
indirectly offset' seems 'extraordinarily expansive"' fares no better.
West Virginia, 59 F.4th at 1145. For starters, that's not our call to
make; it's Congress's. See Diamond v. Chakrabarty, 447 U.S. 303,315
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(1980) ("Broad general language is not necessarily ambiguous
when congressional objectives require broad terms."). And in any
case, the "directly or indirectly" text is not as broad as the panel
opinion paints it. The panel opinion complains that the phrase "di-
rectly or indirectly" would allow the Secretary to find a state in vi-
olation of section (c)(2)(A)'s prohibition any time it makes a tax cut,
regardless of whether the state ultimately pays for that tax cut with
Rescue Plan funds. See West Virginia, 59 F.4th at 1145. In fact, the
panel opinion boldly states that "one reasonable interpretation of
[section 802(c)(2)(A)J is that it proscribes all tax cuts during the cov-
ered period." Id. at 1147.
Not so. That interpretation of section 802(c)(2)(A) is any-
thing but "reasonable." The panel opinion stakes its doomsday in-
terpretation that all tax cuts could be prohibited on the fungibility
of money combined with the purported breadth of the phrase "in-
direct[] offset." Id. at 1145. Put them together, the argument goes,
and a state's use of any Rescue Plan funds could eventually be con-
nected downstream to any tax cut.
But the panel opinion has it backwards: the fungibility of
money is exactly what makes the panel opinion's proposed inter-
pretation implausible under the text. That's so for two reasons: the
statutory text plainly limits the prohibition to ( 1) the use of Rescue
Plan funds-and only Rescue Plan funds (not any and all sources
of state income)-to (2) pay at the end of the day for a shortfall in
only "net tax revenue"-not "any" tax revenue-that a tax cut or
delayed tax implementation causes.
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26 ROSENBAUM, J.' Dissenting 22-10168
By now, we know that "net tax revenue" means the total tax
revenue after accounting for all sources of income and all liabilities.
It is a recognition that money is fungible and all that matters is
whether a reduction in net tax revenue ultimately exists-that is, af-
ter all the calculations, in a year when a state has made a tax cut or
delayed a tax's implementation. In other words, section
802(c)(2)(A) isn't interested in and doesn't care about any stops dol-
lars may make along the way in a state's budget plan. All that mat-
ters is the bottom line: whether, after all the accounting is done, a
state that has made tax cuts has a shortfall in net tax revenue that
it's not possible to ultimately account for with sources of income
or spending cuts other than Rescue Plan funds.
Contrary to the panel opinion's conclusion, section
802(c)(2)(A) does not even arguably purport to prohibit states from
cutting taxes. If Congress sought to make Rescue Plan funds con-
tingent on the elimination of all tax cuts,7 Congress would have
used far simpler language. But Congress didn't do that.
To interpret "directly or indirectly" as encompassing more
than this-as including all tax cuts or spending increases anywhere
in the budget, regardless of whether Rescue Plan money ultimately
pays for them-is nonsensical. See Janus Cap. Grp., Inc. v. First Deriv-
ative Traders, 564 U.S. 135, 147 n.11 (2011) (rejecting, in the context
of SEC Rule l0b-5, that use of "indirectly" within the phrase "di-
rectly or indirectly" "broaden[s] the meaning of 'make"'). Indeed,
7 Because that's not what Congress did, I offer no comment on the constitu-
tionality or unconstitutionality of any such proposal.
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1t 1s contrary to the provision's plain text and renders section
802(c)(2)(A) meaningless. See Ysleta Del Sur Pueblo v. Texas, 142 S.
Ct. 1929, 1939 (2022) ("[W]e must normally seek to construe Con-
gress's work 'so that effect is given to all provisions, so that no part
will be inoperative or superfluous, void or insignificant."'(citation
omitted)).
The panel opinion also says the Rescue Plan's "novelty and
scope compound" the first and second purported problems it
raises. West Virginia, 59 F.4th at 1145. In the panel opinion's view,
"Congress has aimed [section 802(c)(2)(A)'s] novel restriction at
each state's entire budget and every single one of its taxes." Id.
I've already explained the flaws in the panel opinion's per-
ceived first and second purported problems. And the exposure of
those flaws shows why the panel opinion's complaint that section
802(c)(2)(A)'s restriction is "aimed ... at each state's entire budget
and every single one of its taxes" is just wrong.
Once again, the text of the prohibition on using Rescue Plan
money to fund state tax cuts, by its terms, precludes the use of only
Rescue Plan funds-not any other sources of income-to fund only
state tax cuts. So states may cut whatever taxes they please, as long
as they ultimately pay for those tax cuts using sources other than
Rescue Plan funds. It's just not an accurate or even fair representa-
tion to say, as the panel opinion does, that section 802(c)(2)(A) im-
poses restrictions on "each state's entire budget and every single one
of its taxes," id. Worse still, the panel opinion uses this incorrect
and unreasonable description of section 802(c)(Z)(A) as a
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28 ROSENBAUM, J.' Dissenting 22-10168
springboard to conclude later in the panel opinion that the major
questions doctrine precludes us from being able to consider the
Secretary's regulation to fill in any details. More on that later. For
now, it's enough to point out that the panel opinion's pronounce-
ments about the "novelty and scope" of the Rescue Plan are falla-
cious.
As for the meaning of section 802(c)(2)(A), the takeaway is
simply this: that provision, by its terms, precludes states from us-
ing Rescue Plan funds to pay ultimately for state tax cuts that result
during the "covered period" in a reduction in the state's net tax rev-
enue as compared to its net tax revenue for a fiscal year that ended
sometime before March 3, 2021.
The only question the text alone does not answer is which
pre-March 3, 2021, fiscal year serves as the baseline. But as I explain
below, our other tools readily provide the answer to that single re-
maining question.
B. The Rest of the Toolbox
The remaining tools in our statutory-interpretation toolbox
include consulting the context, structure, history, and purpose of
the provision, along with "common sense." Abramski, 573 U.S. at
179; see also Regions Bank v. Legal Outsource PA, 936 F.3d 1184, 1192
(11th Cir. 2019) ("'[A] judicial interpreter [should] consider the en-
tire text, in view of its structure and of the physical and logical re-
lation of its many parts,' when interpreting any particular part of
the text."). So when deciding whether the Rescue Plan's language
is plain, we must "read the words in their context and with a view
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to their place in the overall statutory scheme." King v. Burwell, 576
U.S. 473, 486 (2015) (internal quotation marks and citations omit-
ted); see also Eiden v. Nebraska, 143 S. Ct. 2355, 2378 (2023) (Barrett,
J., concurring) (citing A. Scalia, A MATTER OF INTERPRETATION 37
(1997) ("In textual interpretation, context is everything.")).
As the Court has explained, "[ t ]he plainness or ambiguity of
statutory language is determined [not only] by reference to the lan-
guage itself, [but also by] the specific context in which that language
is used, and the broader context of the statute as a whole." Robin-
son v. Shell Oil Co., 519 U.S. 337, 341, (1997). After all, "[t]o strip a
word from its context is to strip that word of its meaning." Eiden,
143 S. Ct. at 2378 (Barrett, J., concurring). And when we consider
context here, we can see that the baseline Congress imposed for
determining whether a state used Rescue Plan money to pay for tax
cuts after March 3, 2021, is the net tax revenue of the state's most
recent full fiscal year before the United States declared the COVID-
19 emergency We know this because at least two other parts of
the Rescue Plan Act, including its purpose as derived from its text,
and common sense tell us so.
Start with the Rescue Plan's purpose as derived from its text.
Section 802(a), entitled 'i\ppropriation," grants $219.8 billion to
"make payments ... to States ... to mitigate the fiscal effects stem-
ming from the public health emergency with respect to the Coro-
navirus Disease (COVID-19)." 42 U.S.C. § 802(a)(l). In this section,
Congress expressly announced the purpose of the Rescue Plan
money: "to mitigate the fiscal effects [on the States] stemming
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30 ROSENBAUM, J.' Dissenting 22-10168
from" the pandemic. As relevant here, "mitigate" means "[t]o
make less severe or intense; to make less harmful, unpleasant, or
seriously bad." Mitigate, BLACK'sLAWDICTIONARY (11th ed. 2019).
As for "fiscal," Black's Law Dictionary defines that as "l. [o Jf, relating
to, or involving financial matters <fiscal year>. 2. [ o Jf, relating to,
or involving public finances or taxation <the city's sound fiscal pol-
icy>." Fiscal, BLACK'S LAW DICTIONARY (11th ed. 2019). Plugging
these definitions into subsection (a) reveals Congress's intent to
help the states lessen or compensate for the negative effects of the
pandemic on the states' public finances.
So when we read section 802(c)(2)(A) in light of the Rescue
Plan's purpose, there's only one way to discern "the fiscal effects
[on the StatesJ stemming from the public health emergency" using
"net tax revenue" during a state's fiscal year as the comparative
unit. And that is to compare a state's net tax revenue during the
pandemic (the "covered period") to that state's net tax revenue for
the last full fiscal period before the United States declared the
COVID-19 emergency on January 31, 2020-that is, the state's fiscal
year 2019. That's so for two reasons.
First, as I've mentioned, we know from the statutory text
that the unit of measurement we're talking about is a state's fiscal
year because the definition of "covered period" says so. It would
be odd (to say the least) to measure the "covered period" by fiscal
years, a standard gauge for financial health, but net tax revenue by
a different stick. A period of less than a fiscal year would also tell
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us little, if anything, about the state's financial condition before the
pandemic hit.
Second, the best "net tax revenue" indicator of a state's fi-
nancial health before the pandemic hit is the state's "net tax reve-
nue" in the fiscal year that ended immediately before the pandemic
began. Given the Rescue Plan's stated purpose to mitigate the ef-
fects of the pandemic (not enrich the states), it would make no
sense to select some other pre-pandemic fiscal year. For the same
reason, it would be illogical to use a baseline of a state's 2020 fiscal
year, given that by the end of the states' fiscal years 2020, we were
well into the throes of the COVID-19 emergency. So the measure
of net tax revenue for a state's fiscal year 2020, as compared to a
state's net tax revenue for fiscal years during the "covered period,"
would not reveal the fiscal effects of the pandemic on the states that
Congress intended the Rescue Plan funds to mitigate.
And we construe statutes "in context, and with a modicum
of common sense." W. Virginia v. Env't Prot. Agency, 142 S. Ct. 2587,
2633 (2022) (Kagan, J., dissenting); see also United States v. Bryant,
996 F.3d 1243, 1252 (11th Cir. 2021). After all, "[c]ontext also in-
cludes common sense, which is another thing that 'goes without
saying."' Eiden, 143 S. Ct. at 2379 (Barrett, J, concurring). In fact,
we've described "the commonsense reading of the relevant statu-
tory text" as "the anchor for statutory interpretation." Bryant, 996
F.3d at 1252 (citation and quotation marks omitted).
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32 ROSENBAUM, J.' Dissenting 22-10168
Here, the only fiscal year consistent with the rest of the Res-
cue Plan's context, not to mention common sense, is each state's
fiscal year 2019.
To be sure, not all states' fiscal years are the same. 8 But that
doesn't matter to our analysis because Congress chose the state's
fiscal year as the unit of measure. And nothing prohibited Con-
gress from doing so. In any case, every state calculates its net tax
revenue each fiscal year. 9 So using as a baseline a number that
states already have at their disposal makes eminent sense.
But it's not just the Rescue Plan's purpose and our common
sense that compel the conclusion that Congress directed the use of
the states' fiscal year 2019 net tax revenue as the baseline in section
802(c)(2)(A). Rather, reading section 802(c)(2)(A) in the context of
the subsection in which it appears-subsection (c) "Require-
ments"-also independently shows that the baseline is the last full
fiscal year of the state before the United States declared the
COVID-19 emergency
8 Forty-six states begin their fiscal year on July 1; one starts April 1, one Sep-
tember 1, and one October 1. FY 2023 State Budget Status, NATIONAL
CONFERENCE OF STATE LEGISLATURES (Sept. 12, 2023),
https: / / www.ncsl.org / fiscal/ fy-2023-state-budget-status
[https:/ / perma .cc /JHV9-EHTF].
9Not only that, but Congress specifically accounted for the fact that "[u]nlike
the federal government, nearly every state is required to balance its budget"
when it wrote the Rescue Plan. H.R. REP. No . 117-7, at397 (2021) (The Com-
mittee on Oversight's Findings and Recommendations).
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Subsection (c) identifies the conditions by which the state
must abide if it accepts funds under the Rescue Plan. Indeed, sub-
section (c)(l) says as much: "Subject to paragraph (2), and except as
provided in paragraphs (3), (4), and (5), a State ... shall only use
the funds provided under a payment made under this section ... to
cover costs incurred by the State ... " in the five ways set out in the
statute. 42 U.S.C. § 802(c) (emphasis added).
A few things about subsection (c) stand out. First and fore-
most, subsection (c)(l) expressly "subject[s]" the list of authorized
uses of Rescue Plan funds it sets forth to the limitations in subsec-
tion 802(c)(2). Id. § 802(c)(l) ("Subject to paragraph (2), ... a
State ... shall only use the funds provided under a payment made
under this section .... "). So we must read subsection 802(c)(2)(A)
in conjunction with subsection (c)(l). That is, we must read sub-
sections (c)(l) and (c)(2) together, not each in isolation, as the panel
opinion considered subsection (c)(2).
When we do that, we can see that subsection 802(c)(l)(C)(i)
authorizes the spending of Rescue Plan funds to provide govern-
ment services equal to "the amount of the reduction in revenue of
such State ... due to the COVID-19 public health emergency rela-
tive to revenues collected in the most recent full fiscal year of the
State . .. prior to the emergency." Id. § 802(c)(l)(C)(i) (emphasis
added). In other words, this subsection expressly tells us the base-
line by which to measure "reduction in revenue ... due to the
COVID-19 public health emergency" And the measure it desig-
nates is "the most recent full fiscal year of the State ... prior to the
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34 ROSENBAUM, J.' Dissenting 22-10168
[COVID-19] emergency." This baseline, of course, makes perfect
sense for reasons I've already noted: (1) it is a number that is readily
accessible to each state; (2) it is a number that encompasses a regu-
lar financial interval that is large enough to provide a picture of a
state's finances; and (3) because of its proximity in time to the start
of the pandemic, it provides the best snapshot for determining how
the pandemic affected the state's finances.
So when we read subsections (c)(2)(A) and (c)(l) together, as
subsection (c)(l) commands us to do, subsection 802(c)(l) inde-
pendently reveals that the baseline that subsection (c)(2)(A) refers
to is the "most recent full fiscal year of the State ... prior to the
emergency." Id. After all, it would be strange to measure the effect
of the COVID-19 emergency on state finances using different state
fiscal years for purposes of authorizing distribution of Rescue Plan
monies and for purposes of prohibiting expenditures of Rescue
Plan monies. And it would be stranger still to do that in the same
general subsection, subsection 802(c). So the reference in subsec-
tion (c)(2) to "reduction in the net tax revenue of such State" nec-
essarily refers back to the "reduction in revenue of such
State ... due to the COVID-19 public health emergency relative to
revenues collected in the most recent full fiscal year of the
State ... prior to the emergency" in subsection (c)(l)(C)(i).
To be sure, another court (though not the panel opinion),
addressed this same issue and invoked what it described as the "typ-
ical presumption ... that when Congress omits specific language
in one provision that it includes in another, the omission implies a
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difference in meaning between the two provisions." Kentucky v.
Yellen, 54 F.4th 325, 351 n.18 (6th Cir. 2022). Relying solely on this
rule of construction, the Sixth Circuit concluded that the Rescue
Plan's failure to include the phrase "reduction in revenue of such
State ... due to the COVID-19 public health emergency relative to
revenues collected in the most recent full fiscal year of the
State ... prior to the emergency" in subsection (c)(2) when it in-
cluded it in subsection (c)(l)(C)(i) suggests that Congress intended
that the baseline in subsection (c)(2) must be different from that in
subsection (c)(l)(C)(i). Id. Most respectfully, I think that analysis is
simply not correct.
First, the Sixth Circuit made this statement in a footnote,
without conducting any other statutory analysis.
Second, the "typical presumption" that the Sixth Circuit in-
voked is not absolute. Indeed, any rule of construction "may be
overcome by the strength of differing principles that point in other
directions." A. Scalia & B. Garner, READING LAw: THE
lNTERPRETATTON OF LEGAL TEXTS 59 (2012).
Third, every other applicable principle requires the opposite
conclusion-and strongly so. For starters, "[t]he text must be con-
strued as a whole." Id. at 167. And as I've explained, reading sec-
tion (c)(l)(C)(i) in conjunction with section (c)(2)(A), as section
(c)(l) instructs us to do-and particularly in light of the Rescue
Plan's purpose and statutory scheme-leads to only one plausible
answer: section 802(c)(2)(A)'s baseline is each state's fiscal year
2019.
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36 ROSENBAUM, J.' Dissenting 22-10168
Not only that, but other key canons support the same an-
swer. In that department, "[a]n interpretation that validates out-
weighs one that invalidates." Id. at 66. Reading subsection
(c)(2)(A)'s baseline as the same as that set forth in subsection
(c)(l)(C)(i) validates rather than invalidates the tax-cut-funding pro-
hibition.
Relatedly, "[a] statute should be interpreted in a way that
avoids placing its constitutionality in doubt." Id. at 247. Indeed,
the Supreme Court has explained that "[n]o court ought, unless the
terms of an act rendered it unavoidable, to give a construction to it
which should involve a violation, however unintentional, of the
constitution." Nat'l Fed'n of In.dep. Bus. v. Sebelius, 567 U.S. 519, 562
(2012) (quoting Parsons v. Bedford, 28 U.S. 433, 448-49 (1830)).
"[E]very reasonable construction must be resorted to, in order to
save a statute from unconstitutionality." Id. at 563 (citing Hooper v.
Cal., 155 U.S. 648, 657 (1895)). For that reason, "if an otherwise
acceptable construction of a statute would raise serious constitu-
tional problems, and where an alternative interpretation of the
statute is 'fairly possible,' we are obligated to construe the statute
to avoid such problems." I.N.S. v. St. Cyr, 533 U.S. 289, 299-300
(2001) (quoting Crowell v. Benson, 285 U.S. 22, 62 (1932)) (internal
citation omitted).
We've also noted that "[p]roper respect for a co-ordinate
branch of the government requires the courts of the United States
to give effect to the presumption that Congress will pass no act not
within its constitutional power." Benning v. Georgia, 391 F.3d 1299,
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1303 (11th Cir. 2004) (citation and internal alteration omitted).
Here again, reading subsection (c)(2)(A)'s baseline as the same as
the state fiscal year set forth in subsection (c)(l)(C)(i) avoids placing
its constitutionality in doubt.
And the fourth reason the Sixth Circuit's analysis does not
stand up is the Rescue Plan's history-the remaining tool in our
statutory-interpretation toolbox. "[S]pecifically with respect to this
Act, rigorous application of [the presumption invoked by the Sixth
Circuit] does not seem a particularly useful guide to a fair construc-
tion of the statute." King, 576 U.S. at 491 (discussing the Affordable
Care Act). Like the Affordable Care Act, the Rescue Plan was the
product of reconciliation, "a complicated budgetary procedure ...
which limited opportunities for debate and amendment." Id. at
491-92; American Rescue Plan Act of 2021, Pub. L. No. 117-2, 135
Stat 4 (Mar. 11, 2021) ("Purpose"). Congress specifically relied on
reconciliation to act "expeditiously" and avoid having the bill "lan-
guish indefinitely in the Senate, putting the health and well-being
of millions of American families at risk." H.R. REP. No. 117-7, at
2 (2021).
As a result, the Rescue Plan "does not reflect the type of care
and deliberation that one might expect of such significant legisla-
tion." King, 576 U.S. at 492. But as the Supreme Court noted in
King, "we must do our best, bearing in mind the fundamental
canon of statutory construction that the words of a statute must
be read in their context and with a view to their place in the overall
statutory scheme." Id.; see also Clark v. Uebersee Finanz Korporation,
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38 ROSENBAUM, J.' Dissenting 22-10168
A.G., 332 U.S. 480, 488 (1947) (noting that when "[w]e are dealing
with hasty legislation which Congress did not stop to perfect as an
integrated whole[,] [o ]ur task is to give all of it ... the most har-
monious, comprehensive meaning possible").
When we employ all the tools in our statutory-interpreta-
tion toolbox, section 802(c)(2)(A) is not ambiguous, vague, or un-
ascertainable. Rather, the only fair reading of section 802(c)(2)(A)'s
prohibition on using Rescue Plan money to fund state tax cuts is
that it prohibits a participating state from using Rescue Plan funds
to ultimately pay for a reduction in net tax revenue stemming from
a tax cut or delayed imposition of a tax during the "covered period."
And the last fiscal year ending before the United States declared the
COVID-19 emergency on January 31, 2020, provides the baseline
against which a state must compare its net tax revenue during the
covered period.
That is certainly enough to satisfy Pennhurst and its prog-
eny's interpretation of the constitutional ascertainability require-
ment. There is no question that the condition on spending Rescue
Plan funds is "explicitly obvious" within the statute, and it provides
a participating state with "the freedom to tailor compliance accord-
ing to its particular ... interests and circumstances." Benning, 391
F.3d at 1307 (citations omitted). "Congress is not required to list
every factual instance in which a state will fail to comply with a
condition. Such specificity would prove too onerous, and perhaps,
impossible." Id. (citation omitted)); Bennett v. Kentucky Dep't of
Educ., 470 U.S. 656, 666 (1985) ("Pennhurst does not suggest that the
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Federal Government may recover misused federal funds only if
every improper expenditure has been specifically identified and
proscribed in advance." (emphasis in original)).
Thus, the panel opinion's failure to heed the Supreme
Court's mandate to exhaust the statutory-interpretation toolbox
before declaring a statutory provision ambiguous or unascertaina-
ble led the panel opinion to incorrectly declare section 802(c)(2)(A)
unascertainable. As a court, we should have corrected this error.
The panel opinion's refusal to consider anything but three diction-
ary definitions in isolation defies both Supreme Court and our stat-
utory-interpretation jurisprudence. And it also invalidates a per-
fectly constitutional choice that Congress lawfully made. We lack
the power to do that. But because the panel opinion does it anyway,
it violates the separation of powers by invading the province of the
legislature.
III.
Yet the panel opinion was just warming up. The real ac-
tion occurred next. In a usual Chevron analysis, when a statute
contains an ambiguity, we consider any regulations the Secretary
charged with administering the statute promulgated to construe
that ambiguity. Chevron, 467 U.S. at 842-43. But that's not what
happened here, even though the Secretary promulgated a rule im-
plementing section 802(c)(2)(A). Rather, the panel opinion relied
on its invalid construction of section 802(c)(2)(A) as its sole basis
for concluding that that provision raises a "major question" that
the Secretary cannot permissibly answer.
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As an initial note, when we give section 802(c)(2)(A) its only
plausible construction, we don't need to consider the Secretary's
regulation to answer the question presented here. As I've ex-
plained, our statutory-interpretation toolbox shows us that section
802(c)(2)(A) bears only one plausible interpretation: it prohibits a
participating state from using Rescue Plan funds to ultimately pay
for a reduction in net tax revenue as compared to the state's net tax
revenue in the last fiscal year ending before the United States de-
clared the COVID-19 emergency.
But that's what makes the panel opinion's invocation of the
major questions doctrine-an idea that some notable critics have
referred to as a "get-out-of-text-free card[]," Env't Prot. Agency, 142
S. Ct. at 2641 (Kagan, J., dissenting)-all the more troubling here.
I'm getting ahead of myself, though. To play the major-
questions-doctrine card, the panel opinion first laid down this in-
correct proposition: "[O]ne reasonable interpretation of [section
802(c)(2)(A)J is that it proscribes all tax cuts during the covered pe-
riod. On that reading, the [Rescue Plan] affects the states' sovereign
authority to tax, and intrudes into an area that is the particular do-
main of state law." West Virginia, 59 F.4th at 1147 (citations omit-
ted).
But we've already established that there is nothing "reason-
able" about an interpretation of section 802(c)(2)(A) that claims it
"proscribes all tax cuts during the covered period." See supra at 25.
As a reminder, that interpretation necessarily ignores the words
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"funds provided under this section" (meaning Rescue Plan funds)
and "net tax revenue" in section 802(c)(2)(A). See id.
Yet the panel opinion relied solely on this invalid interpreta-
tion of section 802(c)(2)(A) to justify its invocation of the major
questions doctrine. It said, "The choice between that [(erroneous)]
reading and a narrower one is a major question, such that Congress
had to speak in a 'specific and detailed' way if it intended to dele-
gate the authority to answer that question." West Virginia, 59 F.4th
at 1147.
That, of course, is just wrong. Congress didn't "intend[] to
delegate the authority to answer that question" because that ques-
tion is fictional. There is no "choice" that can be made between
the panel opinion's implausible "reading" of section 802(c)(2)(A)
that prohibits states from making any tax cuts and the so-called
"narrower one" that prohibits states from using Rescue Plan
money to fund only tax cuts or delayed tax implementations that
result in a reduction in "net tax revenue." As we all know by now,
the only plausible interpretation of section 802(c)(2)(A) is that it
doesn't prohibit all tax cuts; rather, it precludes states from using
Rescue Plan funds-and only Rescue Plan funds-to pay for short-
falls in "net tax revenue" caused by a tax reduction or a delayed tax
increase. Again, states are free to make any tax cuts they desire.
They just can't use Rescue Plan money to fund those tax cuts. In-
stead, states must pay for those tax cuts as they would have in the
absence of Rescue Plan money-that is, with other income sources
or spending cuts.
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42 ROSENBAUM, J.' Dissenting 22-10168
Once the false all-tax-cuts-prohibited card falls, so does any
basis for invoking the major questions doctrine. Because section
802(c)(2)(A) can plausibly bear only the narrower interpretation
this opinion explains, by definition, no choice between a broad and
narrow reading of the provision exists. And the whole major-ques-
tions-doctrine house of cards comes crashing down.
In other words, the panel opinion wrongly invoked the ma-
jor questions doctrine based on a faulty premise. After all, there's
no reason to ponder whether we can even consider the Secretary's
regulations when the statutory text provides only one plausible an-
swer to the only question presented. That's game over.
Or at least it should have been. Compounding its mistake,
though, the panel opinion then relied on its erroneous interpreta-
tion as the sole basis to extend the use of the major questions doc-
trine into previously uncharted territory. In this respect, the panel
opinion, citing King, said that "[i]f the availability of a tax credit is
a major question that cannot be delegated by generic lan-
guage, ... then the same is true for the way the offset provision ap-
plies to the States' budget process." Id. at 1147 (citing King, 576 U.S.
at 485-86). Even setting aside the faulty premise on which the
panel opinion incorrectly invoked the major questions doctrine,
the panel opinion's decision to extend the major questions doctrine
to the Secretary's regulations implementing section 802(c)(2)(A) is
wrong for at least four other reasons.
First, the Secretary's rule applying section 802(c)(2)(A) does
not come within the category of cases the Supreme Court
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identified as subject to the major questions doctrine when the
Court relied on that doctrine to invalidate the Internal Revenue Ser-
vice's rule implementing the Affordable Care Act's tax credit in
King. In King, the Supreme Court invoked the major questions doc-
trine after reasoning that "[t]he tax credits [at issue there] [we]re
among the [Affordable Care] Act's key reforms, involving billions
of dollars in spending each year and affecting the price of health
insurance for missions of people. Whether those credits [we ]re
available on Federal Exchanges [wa]s thus a question of deep 'eco-
nomic and political significance' that [wa]s central to th[e] [Afford-
able Care Act] statutory scheme .... " 576 U.S. at 485-86. On top
of that, the Supreme Court continued, "[i]t [wa]s especially un-
likely that Congress would have delegated [a key reform in the Af-
fordable Care Act] to the IRS, which has no expertise in crafting
health insurance policy of this sort." 576 U.S. at 486, 497.
Those circumstances just don't apply here. In King, the Af-
fordable Care Act provided no answer to whether tax credits were
available on Federal Exchanges-and any answer to that question
had significant economic and political effects. In other words, ex-
haustive review of the statutory provision at issue in King left the
Court with a major question. But here, the Rescue Plan itself an-
swers the questions this case poses-those are, whether section
802(c)(2)(A) puts states on notice as to whether they may make tax
cuts during the covered period if they receive Rescue Plan funds,
and if so, how will the federal government measure whether a state
that makes tax cuts during the "covered period" has used Rescue
Plan money to fund those tax cuts.
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44 ROSENBAUM, J.' Dissenting 22-10168
As we know, section 802(c)(2)(A) responds to those ques-
tions by recognizing that states may make tax cuts as long as they
don't pay for those tax cuts with Rescue Plan money and by estab-
lishing the state's own fiscal year 2019 net tax revenue as the base-
line against which net tax revenue in years when a state receives
Rescue Plan money and makes tax cuts is to be measured. And
unlike in King, there is no other open question that requires consid-
ering the regulations. Even the panel opinion fails to identify any
other question at issue in this case. It should go without saying that
if no question remains, there can be no major question to which
we may apply the major questions doctrine. For this reason alone,
the panel opinion's comparison of section 802(c)(2)(A) to the tax-
credit provision in the Affordable Care Act cannot be valid.
Besides that, unlike the healthcare insurance policy question
that the Affordable Care Act purported to delegate to the IRS to
answer by regulation, here, Congress's delegation falls well within
the Secretary's wheelhouse: the Secretary's regulation concerns
grants of Treasury funds that her own department wholly admin-
isters. And unlike the delegation resulting in the Affordable Care
Act tax-credit regulation, the Secretary's regulatory authority here
affects the same people or entities-in this case, states-as the stat-
ute does: those that have elected to participate in the Rescue Plan
program. In short, applying the major questions doctrine here is
not the same thing at all as applying it in King.
Second, the circumstances here don't resemble any other
cases in which the Supreme Court has relied on the major
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questions doctrine. In West Virginia v. Environmental Protection
Agency, the Court defined the thrust of the major questions doc-
trine as addressing the recurring problem of "agencies asserting
highly consequential power beyond what Congress could reasona-
bly be understood to have granted." 142 S. Ct. at 2609. In its anal-
ysis, the Court collected cases analyzing major questions, citing
some "common threads" in applications of the doctrine. Id. at
2607-09
The Court found delegation issues where an agency repur-
posed a statute to serve a new aim not articulated by Congress. See
e.g., FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 159-61
(2000) (rejecting the Food and Drug Administration's assertion that
its authority over "drugs" and "devices" included the power to reg-
ulate tobacco products); Gonzales v. Oregon, 546 U.S. 243,267 (2006)
(rejecting the Attorney General's assertion that the power to re-
voke a physician's registration to prescribe Schedule II drugs where
"inconsistent with the public interest" did not include the power to
revoke licenses for assisting suicide where legal under state law);
Nat'I Fed'n of Indep. Bus. v. OSHA, 142 S. Ct. 661, 665 (2022) (invali-
dating OSHA's vaccinate-or-test mandate because OSHA had
"never before adopted a broad public health regulation of this
kind").
Another category of major-questions cases involved agency
invocation of "extravagant statutory power over the national econ-
omy," affecting a broad swath of the economy not previously reg-
ulated by the agency. Util. Air Regul. Grp. v. Env't Prot. Agency, 573
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46 ROSENBAUM, J.' Dissenting 22-10168
U.S. 302,324 (2014) (declining to uphold the EPA's definition of "air
pollutant" where it would give EPA permitting authority over "a
significant portion of the American economy").
Finally, the Court cited cases in which agencies both repur-
posed a statute and regulated a broad swath of the economy previ-
ously untouched. See e.g., AlabamaAss'n of Realtors v. Dep't of Health
& Hum. Servs., 141 S. Ct. 2485, 2489 (2021) (rejecting the Center for
Disease Control's assertion that its power to prevent the spread of
communicable diseases included the power to impose a rent mor-
atorium); see also Eiden, 143 S. Ct. at 2373-75 (striking down the
Secretary of Education's student loan forgiveness measures where
the waivers and modifications would "fundamental[lyJrevis[ e]" the
federal student financial aid scheme, and the measures would cost
taxpayers hundreds of billions of dollars).
None of these threads are present here. The Secretary did
not repurpose the Rescue Plan. Rather, she implemented regula-
tions consistent with Congress's command under the provision
prohibiting use of Rescue Plan money to fund state tax cuts, and
she did so shortly after Congress enacted the Rescue Plan. Nor did
the Secretary rely on an old statute or authority to take unprece-
dented action affecting a large swath of the American economy not
previously regulated. To the contrary, the Secretary promulgated
the regulation mere months after the Rescue Plan was enacted, and
the regulation affects only the states that had voluntarily agreed to
take Rescue Plan money. Not only that, but the regulation pertains
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to only how states spend Rescue Plan money, not any other sources
of income the states may have.
Third, the panel opinion does not explain how this case is
otherwise so extraordinary as to require the application of the ma-
jor questions doctrine's termination of a statutory provision with
extreme prejudice. The panel opinion refers to the "novelty and
scope" of the Rescue Plan and says that section 802(c)(2)(A) "un-
doubtedly implicates questions of deep economic and political sig-
nificance and alters the traditional balance of federalism by impos-
ing a condition on a state's entire budget process." West Virginia,
59 F.4th at 1146.
But as rve just explained, section 802(c)(2)(A) leaves no ques-
tion this case asks unanswered. How does prohibiting states that
have voluntarily chosen to receive Rescue Plan funds from using
those funds to pay for state tax cuts raise "questions of deep eco-
nomic and political significance" that Congress did not already an-
swer when it enacted the Rescue Plan? And what are these "ques-
tions of deep economic and political significance"?
The panel opinion doesn't say. And it doesn't explain how
the Rescue Plan's limited prohibition on using Rescue Plan money
to fund state tax cuts "impos[es] a condition on a state's entire
budget process" that "alters the traditional balance of federalism."
After all, even states that choose to participate in the Rescue Plan
remain free to make any tax cuts they desire and to pay for those
tax cuts in their budget in any way they wish, as long as they don't
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48 ROSENBAUM, J.' Dissenting 22-10168
ultimately use federal Rescue Plan money to cover the cost of the
state tax cuts.
What's more, the purported "novelty and scope," standing
alone, of the Rescue Plan are the wrong focus in any major-ques-
tions analysis. Rather, though the major questions doctrine con-
cerns itself with cases involving questions of '"such magnitude and
consequence' on a matter of 'earnest and profound debate across
the country,"' the doctrine focuses on whether Congress itself has
clearly conveyed a policy decision directly through its legislation or
has clearly delegated any such decision to an agency (as opposed to
Congress's failure to directly make a decision in its legislation or to
clearly delegate a specific decision to an agency). Eiden, 143 S. Ct.
at 2374 (quoting Env't Prot. Agency, 142 S. Ct. at 2616, 2620). And
here, Congress did speak. As Section II of this opinion shows, it
spoke clearly in section 802(c)(2)(A), fully answering the questions
before us. So the major-questions doctrine's concern about ensur-
ing that Congress-and not an agency-makes significant deci-
sions does not arise here.
And fourth, section 802(c)(2)(A), which allows states to re-
ceive federal funding subject to a specified condition, is precisely
the type of legislation that the Supreme Court has repeatedly up-
held under the Spending Clause. See, e.g., Bennett, 470 U.S. at 659
(upholding a federal grant system that prohibited states from using
funds provided "merely to replace state and local expenditures");
Brock v. Pierce Cnty., 476 U.S. 253, 254 (1986) (upholding the Secre-
tary of Labor's right to recoup misspent funds granted under the
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Comprehensive Employment and Training Act); Bell v. New Jersey,
461 U.S. 773, 782 (1983) (holding that the Elementary and Second-
ary Education Act "contemplated that States misusing federal
funds would incur a debt to the Federal Government for the
amount misused"). There is nothing new or materially different
about section 802(c)(2)(A) of the Rescue Plan.
In short, the major questions doctrine has no application in
this case, and the panel opinion wrongly invoked it to invalidate
statutorily discernible congressional intent.
One final point: As I've mentioned, the only questions at
issue here are whether section 802(c)(2)(A) puts states on notice as
to whether they may make tax cuts during the covered period if
they receive Rescue Plan funds, and if so, how the federal govern-
ment will measure whether a state that makes tax cuts during the
"covered period" has used Rescue Plan money to fund those tax
cuts. Section II of this dissent shows that the answer to those ques-
tions is that states that receive Rescue Plan money may cut taxes,
but they can't use Rescue Plan money to pay for those tax cuts. And
we determine whether a state has violated this prohibition by com-
paring its net tax revenue during the given fiscal year of the covered
period to its net tax revenue during the state's fiscal year 2019. As
for the mechanics of implementing section 802(c)(2)(A)'s unambig-
uous prohibition, that question is not before us in this case because
no state claims that the Secretary violated section 802(c)(2)(A) in
enforcing that section's prohibition on spending Rescue Plan
money to fund state tax cuts during the covered period.
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50 ROSENBAUM, J.' Dissenting 22-10168
Still, though, 42 U.S.C. § 802(f) empowers the Secretary "to
issue such regulations as may be necessary or appropriate to carry
out [the Rescue Plan]." And any regulation that sets out the step-
by-step details of carrying out Congress's command in section 42
U.S.C. § 802(c)(2)(A) would fall into that category As it turns out,
that's precisely what the Secretary's regulation does, and under
Chevron, we owe it deference.
For starters, in the Rescue Plan, Congress expressly author-
ized the Secretary to "issue such regulations as may be necessary
or appropriate to carry out this section." 42 U.S.C. § 802(f). Not
only that, but the Secretary promulgated the regulation here
through notice and comment. 10 Specifically, the Secretary first is-
sued her regulation as an interim final rule, 86 FED. REG. 26786,
26807-11 (May 17, 2021), and then later, after responding to
10 To be sure, given the emergency situation, the Secretary relied on an expe-
dited procedure. See 86 FED. REG. 26786, 26818; see, e.g., In re Gateway Radiol-
ogy Consultants, P.A., 983 F.3d 1239, 1262 (11th Cir. 2020) (applying Chevron
deference to two interim final rules promulgated without regard to notice re-
quirements "due to the burgeoning economic crisis" caused by the pandemic);
Florida v. Dep't ofHealth & Hum. Servs., 19 F.4th 1271, 1289-90 (11th Cir. 2021)
(dispensing with the notice-and-comment requirement for a vaccine mandate
regulation because of "the ongoing pandemic"). As relevant here, the Admin-
istrative Procedure Act provides for an exception to the notice-and-comment
requirement "when the agency for good cause finds (and incorporates the find-
ing and a brief statement of reasons therefor in the rules issued) that notice
and public procedure thereon are impracticable, unnecessary, or contrary to
the public interest." 5 U.S.C. § 553(b)(3)(B). That happened here.
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comments, and with no material changes, she issued it as a final
rule, 87 FED. REG. 4338-01, 4423-29 (Jan. 27, 2022).
When an agency uses the notice-and-comment rulemaking
procedure, it is "a 'significant' sign that a rule merits Chevron defer-
ence." Mayo Found. for Med. Educ. & Rsch. v. United States, 562 U.S.
44, 57-58 (2011). Together with Congress's express statutory dele-
gation of rulemaking authority to the Secretary in the Rescue Plan,
this indicates that Congress "would have intended, and expected,
courts to treat [the regulation] as within ... its delegation to the
agency of 'gap-filling' authority." Long Island Care at Home, Ltd. v.
Coke, 551 U.S. 158, 173 (2007).
With the preliminary boxes checked, I consider the content
of the Secretary's regulation. And when we look at that, we see
that the only differences between the regulation and section
802(c)(2)(A) are (1) the Secretary's allowance for a safe harbor for
states with a de minimis (less than one percent) reduction to their
net tax revenue resulting from a tax cut or delayed tax implemen-
tation during the covered period, 87 FED. REG. 4338-01, 4427 (Jan.
27, 2022), and (2) the Secretary's allowance for recipients to report
"actual values" or "estimated values produced by a budget model"
for covered changes that reduce tax revenue, id. at 4426. Other-
wise, the Secretary's regulation merely reduces to a four-step pro-
cedure precisely what section 802(c)(2)(A) requires: mathemati-
cally determining whether a state has used Rescue Plan funds to
pay for a tax cut during the covered period, that resulted in a reduc-
tion to the state's net tax revenue during the covered period,
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52 ROSENBAUM, J.' Dissenting 22-10168
compared to the state's fiscal year 2019 net tax revenue. The regu-
lation's near identicality to section 802(c)(2)(A) certainly renders it
a permissible implementation of section 802(c)(2)(A).
nr.
The American Rescue Plan Act provided states with the op-
portunity to choose whether they wished to accept federal monies
to relieve COVID-related economic conditions in ways that the
Rescue Plan specified. As relevant here, the Rescue Plan demanded
one thing in return for those billions of dollars in aid: states could
not use Rescue Plan money to fund state tax cuts that resulted in a
reduction in net tax revenue as compared to the state's net tax rev-
enue from fiscal year 2019. By the terms of the Rescue Plan itself,
nothing in the Rescue Plan prevented the participating states from
making tax cuts; they just couldn't use Rescue Plan money to ulti-
mately fund those cuts. The Rescue Plan makes that condition per-
fectly ascertainable to anyone who conducts a thorough statutory
analysis employing all the statutory-interpretation tools in our
toolbox.
But the panel opinion quit its statutory analysis after consult-
ing only the dictionary definitions of three words in isolation from
the rest of section 802(c)(2)(A). That's no way to conduct statutory
analysis. And it's hard to imagine that this Court would stand for
such a slapdash analysis in any other case. Yet the Court gives the
panel opinion a pass even though it's clear the panel opinion's
methodology flunks Statutory Interpretation 101.
USCA11 Case: 22-10168 Document: 110-1 Date Filed: 09/14/2023 Page: 59 of 59
101a
22-10168 ROSENBAUM, J.' Dissenting 53
And here, that undeserved pass has real consequences. The
panel opinion's failure to comport with Supreme Court jurispru-
dence on statutory interpretation led the panel opinion to wrongly
invalidate section 802(c)(2)(A)'s ascertainable condition. Worse,
the panel opinion's demonstrably incorrect construction of section
802(c)(2)(A) to prohibit states participating in the Rescue Plan from
making any tax cuts whatsoever also served as the panel opinion's
sole justification for its inappropriate application and expansion of
the major questions doctrine. Ironically, even as the panel opinion
invalidated a perfectly valid congressional enactment, it invoked
the separation of powers to (incorrectly) justify its actions.
As a result, states may now spend Rescue Plan money to
fund state tax cuts that result in a reduction in net tax revenue, as
compared to the state's fiscal year 2019 net tax revenue, in violation
of Congress's express command. I respectfully dissent from the
denial of rehearing en bane.
Case 7:21-cv-00465-LSC Document 82 Filed 11/15/21 Page 1 of 54 FILED
102a 2021 Nov-15 PM 04:32
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
WESTERN DIVISION
State of West Virginia, et al., )
)
Plaintiffs, )
)
vs. ) 7:21-cv-00465-LSC
)
United States Department of )
Treasury, et al., )
)
Defendants. )
)
MEMORANDUM OF OPINION
I. Introduction
On March 31, 2021, Plaintiffs West Virginia, Alabama, Arkansas, Alaska,
Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina,
South Dakota, and Utah (hereinafter, “the Plaintiff States”) brought this action
against the United States Department of the Treasury (“Treasury”), Treasury
Secretary Janet Yellen in her official capacity (“the Secretary”), and Treasury
Inspector General Richard Delmar in his official capacity (collectively, “the
Defendants”). The Plaintiff States seek to invalidate and enjoin a provision of the
American Rescue Plan Act of 2021 (“ARPA”), Pub. L. No. 117-2, § 9901, 135 Stat.
4 (2021) (codified at 42 U.S.C. §§ 802 et seq.).
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The ARPA is a $1.9 trillion economic stimulus bill that was passed by
Congress and signed into law by President Biden on March 11, 2021. It was enacted
to hasten the United States’ recovery from the economic impact of the COVID-19
pandemic and accompanying recession. The ARPA distributes roughly $195.3 billion
directly to the States for specified purposes. 42 U.S.C. § 802(b)(3)(A). However,
before a State can receive those funds, it must certify to the Secretary that it will
comply with multiple conditions that the ARPA imposes. Id. § 802(d)(1). The
Plaintiff States contend that one of those conditions—what this opinion will refer to
as the “Tax Mandate”—exceeds Congress’s power under the Spending Clause of
Article I, Section 8 of the U.S. Constitution because it is ambiguous, coercive, and
unrelated to the ARPA’s purpose. The Plaintiff States also claim that the Tax
Mandate violates the Tenth Amendment to the U.S. Constitution and the anti-
commandeering doctrine because it intrudes into their sovereignty by prohibiting
States from reducing taxes for the next three years. Their Complaint seeks a
declaration from this Court stating as much and an order permanently enjoining
enforcement of the Tax Mandate against them. (See doc. 1).
The Court has previously entered one opinion and order in this case, denying
the Plaintiff States’ motion for a preliminary injunction of the Tax Mandate during
the pendency of this litigation. This opinion considers three motions that are
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currently pending. The Wisconsin Legislature has moved to intervene as a plaintiff
in this lawsuit. (Doc. 58.) Additionally, the existing parties have filed warring
motions, the resolution of which will conclude this litigation: the Plaintiff States’
motion for a final judgment that would declare the Tax Mandate unconstitutional
and permanently enjoin its enforcement (doc. 75) and the Defendants’ motion to
dismiss the Plaintiff States’ Complaint for lack of subject matter jurisdiction and for
failure to state a claim upon which relief may be granted (doc. 76).
After providing background information on the ARPA, the Tax Mandate, and
events that occurred after its enactment, the Court will consider whether it continues
to have subject matter jurisdiction over this action, concluding that it does. The
Court will then explain why the Wisconsin Legislature is not entitled to intervene as
a plaintiff in this action. Finally, the Court will discuss why the Plaintiff States’
motion for a final judgment and permanent injunction is due to be granted and the
Defendants’ motion to dismiss is due to be denied. Accordingly, the Court will
permanently enjoin the Secretary from seeking enforcement of the Tax Mandate
against the Plaintiff States. 1
1
This lawsuit by thirteen Plaintiff States is one of six around the country with nearly identical
complaints. Four cases have already been decided with vastly different results. In two of the four,
district courts in Missouri and Arizona dismissed the complaints, finding that those States lack of
standing. See Arizona v. Yellen, 2021 WL 3089103, at *6 (D. Ariz. July 22, 2021), appeal filed, No.
21-16227 (9th Cir. July 26, 2021); Missouri v. Yellen, 2021 WL 1889867, at *5 (E.D. Mo. May 11,
2021), appeal filed, No. 21-2118 (8th Cir. May 18, 2021). In Ohio, however, a district court ruled
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II. Background
The COVID-19 pandemic has caused ongoing economic harm to individuals,
businesses, and state and local governments. To ease the financial strain, in March
2020, Congress provided $150 billion in direct assistance for state, local, and Tribal
governments under the Coronavirus Aid, Relief, and Economic Security Act
(“CARES Act”). See Pub. L. No. 116-137, § 5001, 134 Stat. 281, 501 (2020) (codified
at 42 U.S.C. § 801). However, economic distress continued. Accordingly, on March
11, 2021, the 117th Congress passed, and President Joseph Biden signed, the ARPA,
which appropriated approximately $1.9 trillion to provide relief to address the impact
of the COVID-19 pandemic. See 42 U.S.C. § 802 et seq. Out of the roughly $1.9
trillion that the ARPA allocates for pandemic relief, around $195.3 billion is tapped
for the States. Id. § 802(b)(3)(A). These funds represent an average of about 25% of
the thirteen Plaintiff States’ annual budgets. (Doc. 1 ¶¶ 45–57.) In Arkansas, for
instance, anticipated ARPA funding represents 29% of the State’s annual budget. (Id.
that Ohio had standing to sue and granted its motion for a permanent injunction solely on the
ground that the Tax Mandate is unconstitutionally ambiguous under the Spending Clause. See Ohio
v. Yellen, 2021 WL 2712220, at *22 (S.D. Ohio July 1, 2021), appeal filed, No. 21-3787 (6th Cir.
Sept. 3, 2021). Similarly, a district court in Kentucky ruled that Tennessee and Kentucky
possessed standing, but it granted their motion for a permanent injunction solely on a different
ground: that the Tax Mandate is unconstitutionally coercive under the Spending Clause. See
Kentucky v. Yellen, 2021 WL 4394249, at *9 (E.D. Ky. Sept. 24, 2021). A lawsuit brought by Texas,
Louisiana, and Mississippi challenging the Tax Mandate remains pending. See Texas, et al. v.
Yellen, No. 2:21-cv-00079-Z (N.D. Tex.).
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¶ 117.) For West Virginia and Arkansas, it represents over 25% (id. ¶ 47, 53); for
Alabama, over 21% (id. ¶ 50); and Kansas, over 20% (id. ¶ 56).
The federal funds come with certain strings attached. To qualify for the
funding, a State must “provide the Secretary with a certification, signed by an
authorized officer of such State . . . that such State . . . requires the payment . . . to
carry out the activities specified in subsection (c) . . . and will use any payment under
this section . . . in compliance with subsection (c).” 42 U.S.C. § 802(d)(1). The
Secretary is to “make the payment required for the State . . . not later than 60 days
after the date on which th[at] certification . . . is provided to the Secretary.” Id. §
802(b)(6)(A)(i).
As the above language suggests, the conditions are set forth in subsection (c).
In that section, Congress specified that States must use ARPA funds to respond to
the negative economic impacts of the COVID-19 pandemic in one of four specific
ways: (1) providing assistance to “households, small businesses, and nonprofits”
and “impacted industries such as tourism, travel, and hospitality”; (2) responding
“to workers performing essential work during the COVID-19 public health
emergency by providing premium pay to eligible workers”; (3) making up for
pandemic-related reductions in state government revenue; and (4) paying for
“necessary investments in water, sewer, or broadband infrastructure.” Id. §
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802(c)(1)(A-D). The States must use the funds by December 31, 2024. Id. §
802(c)(1).
The ARPA also contains two restrictions on the States’ use of the federal
funds. One limitation (not challenged here) provides that a State may not deposit
ARPA funds “into any pension fund.” Id. § 802(c)(2)(B). The other limitation (the
Tax Mandate) provides as follows:
(2) FURTHER RESTRICTION ON USE OF FUNDS. —
(A) IN GENERAL. — 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 indirectly offset a reduction in the net tax revenue
of such State or territory resulting from a change in law, regulation, or
administrative interpretation 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.
Id. § 802(c)(2)(A). The phrase “directly or indirectly offset” is not defined in the
ARPA. The ARPA requires any State that receives funds to “provid[e] a detailed
accounting” to the Secretary of “all modifications to the State’s . . . tax revenue
sources” for the covered period, as well as “such other information as the Secretary
may require for the administration of” the Tax Mandate. Id. § 802(d)(2). The
Secretary can recoup funds that she interprets were used in violation of the Tax
Mandate. Id. § 802(e)(1). The Tax Mandate’s “covered period” extends from
March 3, 2021, until all funds “have been expended or returned to, or recovered by,
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the Secretary.” Id. § 802(g)(1). The ARPA also authorizes the Secretary “to issue
such regulations as may be necessary or appropriate to carry out” the applicable
statutory provisions. Id. § 802(f).
On March 16, 2021, twenty-one State attorneys general wrote a letter to the
Secretary, seeking guidance as to the scope of the Tax Mandate. (Doc. 21–1 at 4.)
The letter listed several tax cuts proposed by legislatures in various States and asked
if those cuts would expose the States to ARPA recoupment. The letter included the
following concern:
The import of [the ARPA’s] prohibition against “offsetting”
reductions in state tax revenue is unclear, but potentially breathtaking.
This provision might have been intended merely to prohibit States from
expressly taking COVID-19 relief funds and rolling them directly into a
tax cut of a similar amount. But its prohibition on “indirectly”
offsetting reductions in tax revenue, combined with the list of
prohibited kinds of tax reductions (rate cuts, rebates, deductions,
credits, or “otherwise”), could also be read to prohibit tax cuts or relief
of any stripe, even if wholly unrelated to and independent of the
availability of relief funds. After all, money is fungible, and States must
balance their budgets. So, in a sense, any tax relief enacted by a state
legislature after the State has received relief funds could be viewed as
“using” those funds as an “offset” that allows the State to provide that
tax relief.
(Id. at 5.)
The Secretary responded on March 23, 2021, writing as follows:
Nothing in the Act prevents States from enacting a broad variety of tax
cuts. That is, the Act does not “deny States the ability to cut taxes in
any manner whatsoever.” It simply provides that funding received
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under the Act may not be used to offset a reduction in net tax revenue.
If states lower certain taxes but do not use funds under the Act to offset
those cuts—for example, by replacing the lost revenue through other
means—the [Tax Mandate] is not implicated.
(Id. at 12.) The Secretary’s letter did not respond to the States’ questions regarding
the specific tax modification proposals pending in the States.
On March 31, 2021, the Plaintiff States, believing the Tax Mandate to be
unconstitutional, sued for declaratory and injunctive relief in this Court. The
Plaintiff States alleged in their Complaint that they are or were actively considering
various forms of tax relief for individuals and small businesses, whether directly
related to state pandemic-relief efforts or through unrelated policy measures. (Doc.
1 ¶¶ 76–83.) They claim that the Tax Mandate has cast significant uncertainty over
these efforts as it is unclear whether States can pass any tax relief measures
throughout the covered period without running afoul of the Tax Mandate and thus
being forced to repay some or all of the federal funds to the Treasury. The Plaintiff
States’ Complaint alleges that the Federal Tax Mandate is unconstitutional for two
reasons: (1) it violates the Spending Clause of the U.S. Constitution by being
coercive, ambiguous, and unrelated to the ARPA’s purpose (Count 1); and (2) it
violates the Tenth Amendment to the U.S. Constitution in that it commandeers state
taxing authority (Count 2).
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On April 13, 2021, the Plaintiff States moved in this Court, pursuant to
Federal Rule of Civil Procedure 65, for an order preliminarily enjoining enforcement
of the Tax Mandate, while keeping the remainder of the ARPA intact, while this
lawsuit is pending. (Doc. 21.) The Defendants responded in opposition to the
motion, claiming that this Court does not have jurisdiction because the Plaintiff
States lack standing and their claims are not yet ripe, and that, on the merits, the
Plaintiff States failed to show that a preliminary injunction is warranted. (Doc. 54.)
The Plaintiff States, as well as numerous amici, replied in support of their motion.
(Docs. 59, 41, 42, 43, 44, and 48).
On May 13, 2021, while the motion for a preliminary injunction was still
pending, the Wisconsin Legislature moved to intervene as a Plaintiff in this lawsuit
pursuant to Federal Rule of Civil Procedure 24. (Doc. 58.) The Wisconsin
Legislature attached a Proposed Complaint in Intervention (doc. 58-1) and a
proposed motion to join in the Plaintiff States’ motion for a preliminary injunction
(doc. 58-2). The Plaintiff States consented to the Wisconsin Legislature’s request
(see doc. 58 at 2), but the Defendants opposed it (doc. 67).
On May 17, 2021, the Secretary published a 66-page Interim Final Rule
(hereinafter the “Final Rule”) in the Federal Register, which expounded on the
ARPA, including the Tax Mandate. See 86 Fed. Reg. 26786–824. Relevant here, the
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Final Rule states that “because money is fungible,” even ARPA funds “not explicitly
or directly used to cover the costs of changes that reduce net tax revenue . . . may be
used in a manner inconsistent with the statute by indirectly being used to substitute
for the State’s or territory’s funds that would otherwise have been needed to cover
the costs of the reduction.” Id. at 26807 (emphasis added).
The Final Rule creates a framework for identifying illegal offsets under the
Tax Mandate. First, every fiscal year during the covered period, States use their
ordinary budget-scoring process to “identify and value” anticipated legislative and
administrative actions that might reduce net tax revenue. Id. If there are such
reductions, the State must “pay for” them with sources other than ARPA funds. Id.
However, if the State’s covered changes are anticipated to decrease revenue by one
percent or less of the State’s 2019 inflation-adjusted revenue, the decreases are
deemed “de minimis” and will not be subject to recoupment. Id. at 26807–08. A
State also falls within a safe harbor from the Tax Mandate if its actual tax revenue
for a fiscal year exceeds its inflation-adjusted 2019 tax revenue. Id. at 26807, 26809.
If neither the de minimis exception nor the safe harbor applies, and the State’s actual
tax revenue in the reporting year is less than the State’s inflation-adjusted 2019 tax
revenue, the State will identify any sources of funds that have been used to
permissibly offset the total value of covered tax changes. Id. at 26807. These include
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any tax changes that increase tax revenue and any spending cuts in “areas” where
the State is not spending ARPA funds. Id. at 26808. The State then subtracts those
permissible offsets from the total value of revenue-reducing changes calculated in
the first step to determine what portion of the revenue-reducing changes has not
been paid for. Id. at 26807, 26809–10, 26823. The State is then potentially subject to
recoupment for that amount or the difference between the State’s actual tax revenue
and its inflation-adjusted 2019 tax revenue, whichever is greater. Id. If there are
amounts that could be subject to recoupment, the Treasury will provide notice to the
State and the State will have an opportunity to respond. Id. at 26808.
To determine which spending cuts are “covered,” the Treasury’s supervision
must extend beyond how States are spending ARPA funds to also cover how States
are spending State funds. Spending cuts in “areas” where States spent ARPA funds
are not “covered spending cuts” and thus cannot offset a decrease in revenue. Id. at
26810. Even a spending cut that a State thinks would qualify as covered in one year
may become an uncovered spending cut years later. The Treasury promises to
“monitor changes in spending throughout the covered period,” and if a spending
cut in one year is, years later, “replaced with [ARPA] Funds and used to indirectly
offset a reduction in net tax revenue resulting from a covered change, Treasury may
consider such change to be an evasion of the restrictions of the offset provision and
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seek recoupment of such amounts.” Id. Ultimately, “all relevant facts and
circumstances” are considered when the Treasury determines whether a State has
violated the Tax Mandate. Id.
On July 14, 2021, this Court denied the Plaintiff States’ motion for a
preliminary injunction. (Doc. 71; West Virginia v. U.S. Dep’t of Treasury, 2021 WL
2952863 (N.D. Ala. July 14, 2021)). With regard to the jurisdictional question, this
Court determined that the Plaintiff States alleged facts sufficient to establish
standing and that their claims are ripe because they properly alleged several different
injuries in fact: they were not offered a clear understanding of the deal that Congress
is offering because of the Tax Mandate’s ambiguity; their sovereignty was intruded
upon by having to choose between forgoing a benefit (federal funds) or accepting that
benefit on unconstitutional terms; and there is a credible threat of enforcement in
the form of a recoupment action. (Doc. 71 at 14–20.) This Court refrained from
deciding whether the Plaintiff States were likely to succeed on the merits of their
constitutional claims, instead concluding that preliminary injunctive relief was not
warranted because the Plaintiff States could not establish that a preliminary
injunction would remedy the irreparable injury they had already suffered or were
likely to suffer. This was so for several reasons. For one, recoupment of ARPA funds
is not an irreparable injury because this Court could return the funds to the Plaintiff
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States if the Secretary recouped them during the pendency of this lawsuit and this
Court ultimately invalidated the Tax Mandate. Additionally, preliminarily enjoining
the Secretary from recouping ARPA funds while this action is pending would not
have remedied the harm that the Plaintiff States claimed to suffer because they still
had to take into consideration, when deciding whether to accept ARPA funds, that
the funds would be subject to possible recoupment if this Court were to ultimately
issue a merits decision declining to invalidate the Tax Mandate. This Court noted
that the only difference in whether this Court granted or denied the motion for a
preliminary injunction was that, if the Court granted the motion, the Secretary could
not recoup funds from that point until the point that this Court decided the ultimate
issues in this case, and there was virtually no likelihood that the Secretary would
recoup ARPA funds from the Plaintiff States during that short—likely only months-
long—time frame.
Immediately after the Court denied the motion for a preliminary injunction,
the parties filed, and the Court granted, a joint motion for an expedited briefing
schedule relating to motions for final resolution of this case, acknowledging that this
dispute presents purely legal issues. On July 29, 2021, the Plaintiff States moved for
a final judgment, permanent injunction, and declaratory judgment. (Doc. 75.) In
support of their motion, the Plaintiff States provided a list of some of the revenue-
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related laws that each of the thirteen Plaintiff States has passed since the enactment
of the ARPA in March 2021. (Doc. 75-1.) The Plaintiff States also provided the
declaration of an Alabama State Senator, Greg Albritton. (Doc. 75-2.) The
Defendants responded in opposition to the Plaintiff States’ motion for a permanent
injunction and moved to dismiss the Plaintiff States’ Complaint pursuant to Federal
Rule of Civil Procedure 12(b)(1) and (6) for lack of subject matter jurisdiction and
failure to state a claim upon which relief may be granted. (Doc. 76.)
According to a joint stipulation of facts submitted by the parties, as of July 23,
2021, the following Plaintiff States have submitted to the Secretary signed
certifications under 42 U.S.C. § 802(d), agreeing to abide by the Tax Mandate, and
have received funds under the ARPA: Alabama, Arkansas, Alaska, Florida, Iowa,
Kansas, Montana, New Hampshire, Utah, and West Virginia. (Doc. 74.) Wisconsin
has done so as well, according to the Treasury in its response in opposition to the
Wisconsin Legislature’s motion to intervene. (Doc. 67 at 14.) As of August 12, 2021,
those ten Plaintiff States had received over $10.6 billion in federal funds through the
ARPA. The remaining Plaintiff States—Oklahoma, South Carolina, and South
Dakota—had not yet provided certifications to the Secretary as of August 2021.
With these factual developments in mind, the Court turns to the matters
before the Court.
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III. Discussion
A. Jurisdiction
Although the Court ruled that it has jurisdiction over this action in its earlier
opinion considering the Plaintiff States’ request for a preliminary injunction, see doc.
71 at 18–20, because the Defendants have moved to dismiss the Complaint pursuant
to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction
based upon the doctrines of standing, ripeness, and mootness, this Court will once
again consider its power to hear this case. See also RES-GA Cobblestone, LLC v. Blake
Const. & Dev., LLC, 718 F.3d 1308, 1313 (11th Cir. 2013) (“Federal courts operate
under a continuing obligation to inquire into the existence of subject matter
jurisdiction whenever it may be lacking.”).
Article III of the U.S. Constitution restricts federal courts to the resolution of
“Cases” and “Controversies.” U.S. Const. art. III, § 2. “Standing is a doctrine that
‘stems directly from Article III’s “case or controversy” requirement,’ and thus it
‘implicates [this Court’s] subject matter jurisdiction.’” Bochese v. Town of Ponce
Inlet, 405 F.3d 964, 974 (11th Cir. 2005) (quoting Nat’l Parks Conservation Ass’n v.
Norton, 324 F.3d 1229, 1242 (11th Cir. 2003)). Plaintiffs are required to “‘alleg[e]
such a personal stake in the outcome of the controversy’ as to . . . justify [the]
exercise of the court’s remedial powers on [their] behalf.” Simon v. E. Ky. Welfare
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Rights Org., 426 U.S. 26, 38 (1976) (quoting Warth v. Seldin, 422 U.S. 490, 498–99
(1975)). Further, “‘a plaintiff must demonstrate standing for each claim he seeks to
press’ and ‘for each form of relief’ that is sought.” Davis v. Fed. Election Comm’n,
554 U.S. 724, 734 (2008) (quoting DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352
(2006)). Standing is assessed under the facts as they existed when the complaint was
filed. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 606 n.4 (1992).
To show standing, a plaintiff must generally demonstrate that he suffered or
shall immediately suffer an injury in fact, that the injury was caused by the
defendant’s conduct, and that the injury is redressable by a favorable court decision.
See Fla. State Conf. of N.A.A.C.P. v. Browning, 522 F.3d 1153, 1159 (11th Cir. 2008).
An injury sufficient to satisfy Article III must be “concrete and particularized” and
“actual and imminent, not ‘conjectural or hypothetical.’” Lujan, 504 U.S. at 560
(quoting Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)).
The dispute between the parties as to standing centers on the question of
injury in fact. The Defendants assert that the Plaintiff States have not proved that
there is an imminent threat of enforcement of the Tax Mandate or that they have
suffered any other cognizable injury. 2 In contrast, the Plaintiff States contend that
2
Relatedly, the Defendants assert that the Plaintiff States’ claims are not ripe. The ripeness
inquiry requires a two-part determination of “(1) the fitness of the issues for judicial decision and
(2) the hardship to the parties of withholding court consideration.” Digital Props., Inc. v. City of
Plantation, 121 F.3d 586, 589 (11th Cir. 1997) (citing Abbott Lab. v. Gardner, 387 U.S. 136, 148–49
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they have suffered harm to their sovereign power to set tax policy since the date on
which the Tax Mandate became effective, whether or not they certify compliance
with the ARPA’s conditions or the Secretary ever initiates recoupment proceedings,
because the Tax Mandate does not define how States might use ARPA funds to
indirectly offset any net tax revenue reductions caused by a change in state law.
As this Court noted at the preliminary injunction stage, the Supreme Court
has likened Congress’s conditioning of federal money to a contract: “in return for
federal funds, the States agree to comply with federally imposed conditions.”
Pennhurst State Sch.& Hosp. v. Halderman, 451 U.S. 1, 17 (1981). Just as a contract
requires a knowing acceptance of the offer’s terms, conditioned federal money must
“enable the States to exercise their choice knowingly, cognizant of the consequences
of” their acceptance. Id. The Court in Pennhurst continued, “There can, of course,
be no knowing acceptance if a State is unaware of the conditions or is unable to
ascertain what is expected of it. Accordingly, if Congress intends to impose a
condition on the grant of federal moneys, it must do so unambiguously.” Id. (internal
citations and footnote omitted). Taking note of this Spending Clause jurisprudence,
(1967)). “Courts must resolve ‘whether there is sufficient injury to meet Article III’s requirement
of a case or controversy and, if so, whether the claim is sufficiently mature, and the issues
sufficiently defined and concrete, to permit effective decisionmaking by the court.’” Id. (quoting
Cheffer v. Reno, 55 F.3d 1517, 1524 (11th Cir. 1995)). For the same reasons that the Plaintiff States
have standing, as discussed below, their claims are ripe.
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this Court concluded that, because Congress is required to clearly state the terms
upon which it extends an offer of conditional funding to the States, the Plaintiff
States had established that they were entitled to clarity regarding the strings attached
when presented with an offer of conditional funding. This Court ruled that such
clarity is critical to a State’s ability to exercise its sovereign prerogative of deciding
whether to accept that offer. Thus, the Court found that the Plaintiff States had
shown that they suffered an injury in fact when they were presented with an
unconstitutionally ambiguous spending condition. Further, because there is no
question that the alleged injury in fact is fairly traceable to the Tax Mandate and can
be redressed by a court order invalidating the mandate, see Browning, 522 F.3d at
1159, the Court found that the Plaintiff States possessed standing.
The Defendants present various arguments seeking a different result now, but
none has merit. First, they contend that the original harm that the Plaintiff States
claimed in filing suit—the difficulty that the Tax Mandate’s ambiguity created for
them in deciding whether to accept ARPA funding—ended for ten of the thirteen
Plaintiff States when they made the decision to certify compliance with the ARPA,
binding them to its terms. According to the Defendants, accepting the deal moots
the injury as to those ten States.
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As an initial matter, standing is measured at the time the lawsuit is filed based
on the facts as they existed at that time. Lujan, 504 U.S. at 569 n.4. Thus, the Plaintiff
States do not relinquish their standing to sue due to subsequent events. However, if
events that occur subsequent to the filing of a lawsuit deprive the court of the ability
to give a plaintiff meaningful relief, then the case is moot and must be dismissed. See,
e.g., Hall v. Beals, 396 U.S. 45, 48 (1969) (per curiam). Granted, for ten of the
Plaintiff States, one type of harm that they incurred in contemplating whether to
accept an ambiguous deal has now been extinguished in that they have made that
decision. However, these ten States continue to suffer the closely related harm to
their sovereign authority to set their own tax policies. Indeed, the Supreme Court
has long recognized the States’ sovereign authority to tax as “indispensable” to the
States’ very “existence.” Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 199 (1824); see also
McCulloch v. Maryland, 17 U.S. 316, 428 (1819) (“[T]he power of taxing the people
and their property[] is essential to the very existence of government.”). The Plaintiff
States have sufficiently demonstrated that their legislatures do not have sufficient
information in considering tax changes to determine the impact such changes will
have on their ability to retain the federal grant money. As stated by Alabama State
Senator Albritton in his declaration submitted by the Plaintiff States, it is crucial that
State legislatures understand the financial effects of revenue laws that they pass to
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effectively craft state budgets, and the uncertainty surrounding the Tax Mandate has
caused at least one bill in the Alabama legislature to fail despite widespread approval
by legislators and constituents, due to fear that the Secretary could interpret the
reduction as triggering a right to recoupment. (Doc. 75-2.) Thus, the Plaintiff States
have shown that they are subject to continuous and ongoing harm even if no
recoupment action ever happens because of the harm that the Tax Mandate inflicts
on the legislative process. And they are experiencing these injuries now, making
them “actual or imminent, not conjectural or hypothetical,” Lujan, 504 U.S. at 560.
Accordingly, the fact that ten Plaintiff States have now accepted the deal certainly
does not moot this Court’s ability to give them meaningful relief by way of
invalidating the Tax Mandate.
The second challenge that the Defendants present to the Plaintiff States’
standing is to stress that the evidentiary showing required to establish standing is
greater at this stage of the litigation, where final relief is sought, than it was at the
preliminary injunction stage. The burden of proof in establishing standing does
increase “with the manner and degree of evidence required at the successive stages
of litigation.” Lujan, 504 U.S. at 561. The Defendants argue that at final judgment,
that means that the Plaintiff States must provide evidence to prevail. While that may
be correct, it does not impact the Court’s earlier legal conclusion that the Plaintiff
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States have already suffered and continue to suffer an injury in fact due to being
presented with an ambiguous deal. Moreover, the Plaintiff States have bolstered
their allegations with a list of revenue-related laws passed by the thirteen States since
the ARPA’s passing as well as a declaration by a State senator. (See docs. 75-1, 75-2.)
It is unclear, and the Defendants have not suggested, what additional evidence the
Plaintiff States could or would be able to present on this front.
Finally, the Defendants resist the conclusion that the Plaintiff States have met
the injury in fact element of the standing inquiry by emphasizing their arguments
about the substantive validity of the Tax Mandate. They argue that the plain text of
the Tax Mandate does not actually prohibit States from reducing their own taxes and
that the Tax Mandate is sufficiently clear under the Supreme Court’s Spending
Clause jurisprudence because all that is required is that a recipient of federal funds
know that a condition exists, not what it means. However, while standing “often turns
on the nature and source of the claim asserted,” it “in no way depends on the merits
of the plaintiff’s contention that particular conduct is illegal.” Warth, 422 U.S. at
500. Thus, whether the Plaintiff States have standing to bring this lawsuit is not
dependent on whether their constitutional claims ultimately succeed. 3
3
The Court pauses to note that the Supreme Court has articulated an alternative method for
a plaintiff to establish the injury in fact element of the standing inquiry when that plaintiff
challenges the constitutionality of a statute that has yet to be enforced against him or her. When a
plaintiff seeks to enjoin the future enforcement of a statute, “the injury-in-fact requirement”
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In sum, the Defendants have not shown that the Court’s earlier conclusion
that the Plaintiff States have suffered an injury in fact for standing purposes was
erroneous, and they have similarly not demonstrated that the matters at hand are
moot. The Court once again concludes that it has jurisdiction over this action.
B. The Wisconsin Legislature’s Motion to Intervene
The Wisconsin Legislature—not the State of Wisconsin—seeks to intervene
as a Plaintiff in this action by right, pursuant to Federal Rule of Civil Procedure 24(a),
or, if this Court does not grant intervention by right, it requests permissive
intervention under Rule 24(b)(1)(B). Each request will be addressed in turn.
1. Intervention as of Right and Standing
Under Rule 24(a)(2), a party may intervene as a matter of right if: (1) the
application to intervene is timely; (2) the applicant has an interest relating to the
property or transaction which is the subject of the action; (3) the applicant is so
situated that the disposition of the action, as a practical matter, may impede or impair
demands that the plaintiff “allege[] ‘an intention to engage in a course of conduct arguably affected
with a constitutional interest, but proscribed by a statute, and there exists a credible threat of
[enforcement] thereunder.’” Susan B. Anthony List v. Driehaus, 573 U.S. 149, 159 (2014) (quoting
Babbitt v. Farm Workers, 442 U.S. 289, 298 (1979)). The Court found at the preliminary injunction
stage of this litigation that the Plaintiff States had also established an injury in fact under this
alternative method. However, the Court now believes that this method of establishing an injury in
fact is not well suited to the facts of this case. The Plaintiff States need not prove pre-enforcement
standing because, as previously discussed, the Plaintiff States’ injury has already occurred. In other
words, whether they are injured is not dependent on whether the Secretary enforces the Tax
Mandate against them in the future.
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his ability to protect that interest; and (4) the applicant’s interest will not be
represented adequately by the existing parties to the suit. Sierra Club, Inc. v. Leavitt,
488 F.3d 904, 910 (11th Cir. 2007). Importantly, “[a]ny party, whether original or
intervening, that seeks relief from a federal court must have standing to pursue its
claims.” Dillard v. Chilton Cnty. Comm’n, 495 F.3d 1324, 1330 (11th Cir. 2007).
“[A]n intervenor of right must demonstrate Article III standing when it seeks
additional relief beyond that which the plaintiff requests.” Town of Chester v. Laroe
Ests., Inc., 137 S. Ct. 1645, 1651 (2017); see also Little Sisters of the Poor Saints Peter &
Paul Home v. Pennsylvania, 140 S. Ct. 2367, 2379 n.6 (2020) (“An intervenor of right
must independently demonstrate Article III standing if it pursues relief that is
broader than or different from the party invoking a court’s jurisdiction.”). This
requirement stems from the rule that “at least one plaintiff must have standing to
seek each form of relief requested in the complaint.” Laroe Ests., 137 S. Ct. at 1651.
Because the Wisconsin Legislature seeks relief not specifically sought by the
Plaintiff States—a Court order invalidating the Tax Mandate that applies to the State
of Wisconsin—the Wisconsin Legislature must establish its own standing aside from
the standing of the Plaintiff States. The Court will thus first address whether the
Wisconsin Legislature has standing to challenge the Tax Mandate before moving to
the elements of intervention as of right. See Steel Co. v. Citizens for a Better Env’t, 523
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U.S. 83, 94 (1998) (when a court lacks jurisdiction, it “cannot proceed at all in any
cause”).
The Wisconsin Legislature asserts that it seeks “to protect the interests of the
State of Wisconsin and its Legislature.” (Doc. 58 at 5.) It contends that a Wisconsin
statute authorizes it to represent the interests of the State of Wisconsin, which it
alleges is being harmed by the Tax Mandate for the same reasons that the Plaintiff
States have alleged. However, the Wisconsin Legislature cannot represent the
interests of the State of Wisconsin in this context. “[I]n the ordinary course, a
litigant must assert his or her own legal rights and interests, and cannot rest a claim
to relief on the legal rights or interests of third parties.” Hollingsworth v. Perry, 570
U.S. 693, 708 (2013) (quoting Powers v. Ohio, 499 U.S. 400, 410 (1991)). The
exception to this rule is that a party who lacks standing in their own right may
represent the State only if State law authorizes that party “to speak for the State in
federal court.” Id. at 710; see also Va. House of Delegates v. Bethune-Hill, 139 S. Ct.
1945, 1952 (2019). Wisconsin law provides:
The [Wisconsin] department of justice shall . . . appear for and
represent the state . . . and prosecute or defend in any court or before
any officer, any cause or matter, civil or criminal in which the state or
the people of this state may be interested. The joint committee on
legislative organization may intervene as permitted under § 803.09(2m)
at any time.
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Wis. Stat. § 165.25(1m). Thus, the proper entity to represent the interests of the
State of Wisconsin is the Wisconsin department of justice in all cases unless the
exception under § 803.09(2m) applies. That section states:
When a party to an action challenges in state or federal court the
constitutionality of a statute, facially or as applied, challenges a statute
as violating or preempted by federal law, or otherwise challenges the
construction or validity of a statute, as part of a claim or affirmative
defense, the assembly, the senate, and the legislature may intervene . . .
Id. § 803.09(2m). Under § 803.09(2m), the Wisconsin Legislature may intervene to
represent the State’s interests in court only to defend the validity of a Wisconsin law.
As the Wisconsin Supreme Court recently stated, “the statutory text [of §
803.09(2m)] unmistakably grants the Legislature an interest in defending the validity
of state law when challenged in court.” Democratic Nat’l Comm. v. Bostelmann, 949
N.W.2d 423, 426 (Wis. 2020) (emphasis added). See also Planned Parenthood of Wis.,
Inc. v. Kaul, 942 F.3d 793, 795 (7th Cir. 2019) (“The State of Wisconsin has chosen
to have an attorney general as its representative, but it also has recently provided a
mechanism by which its legislature . . . can intervene to defend the State’s interest
in the constitutionality of its statutes.”) (emphasis added); id. at 806 (“section
803.09(2m) reflects a sovereign policy judgment that the Attorney General is not the
State’s exclusive representative in court when state laws are challenged”) (Sykes, J.,
concurring) (emphasis added).
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That is not the case here. Here, the Wisconsin Legislature seeks to bring an
affirmative challenge to a federal statute. There is no question about the validity of
any Wisconsin statute at issue in this case. Thus, the default rule under § 165.25(1m)
applies, and the Wisconsin department of justice retains exclusive authority to
represent the State of Wisconsin.
The Wisconsin Legislature’s argument to the contrary is unavailing. It argues
that the Legislature can challenge the Tax Mandate because “a Spending Clause
penalty that is so coercive as to make the State’s passage of a contrary law prohibitive
is indistinguishable from a direct violation of state law . . . .” (Doc. 69 at 4.) Thus,
according to the Wisconsin Legislature, it is representing the State of Wisconsin’s
“interest in the validity of state laws” by challenging the Tax Mandate. See
Democratic Nat’l Comm., 949 N.W.2d at 424. The Court declines to interpret §
803.09(2m) in such a broad manner.
Because the Wisconsin Legislature cannot represent the interests of the State
of Wisconsin, it must show that it has or will suffer an injury in fact to itself as an
institution. Cf. Bethune-Hill, 139 S. Ct. at 1953 (requiring the Virginia House of
Representatives to establishing standing in its own right once it was determined that
it could not proceed as the State’s agent). The Court finds that the Legislature has
not established an injury in fact for several reasons. The Legislature asserts that the
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Tax Mandate “harms the sovereign dignity of the State of Wisconsin and its
Legislature” by being unconstitutionally vague and coercive. (Doc. 58 at 11–12
(emphasis added).) But the sovereign is the State, not its legislature. And the
ARPA’s funds are offered to the States, not to State legislatures. See 42 U.S.C. §
802(b)(3)(A) (“The Secretary shall reserve $195,300,000,000 of the amount
appropriated under subsection (a)(1) to make payments to each of the 50 States and
the District of Columbia.”). States decide whether to accept the money with strings
attached, not their legislatures, and if they accept, States must agree to refrain from
using the money in contravention of the Tax Mandate, not their legislatures. See id.
§ 802(c)(1) (“. . . a State . . . shall only use the funds provided . . .”) & (2) (“A State
. . . shall not use the funds provided under this section . . .”).
The distinction between the State and its legislature may seem minor
considering that, in practice, the legislatures certainly play a major role in setting
state fiscal policy. But, given the type of constitutional rights asserted in this case,
the difference between the two cannot be overstated. See Warth, 422 U.S. at 500
(standing turns on the “nature and source of the claim asserted”). As further
explained in the merits section of this opinion, the limits placed on Congress’s
Spending Clause power rest on concerns of federalism and the protection of our
nation’s dual system of governing. See Nat’l Fed’n of Indep. Bus. (“NFIB”) v.
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Sebelius, 567 U.S. 519, 577 (2012) (“Respecting th[e] limitation [on Congress’s
ability to secure States’ compliance with federal objectives by requiring States’
knowing and voluntary acceptance of the terms of a spending condition] is critical to
ensuring that Spending Clause legislation does not undermine the status of the States
as independent sovereigns in our federal system.”). It is the States’ unique
sovereignty that enables them to have certain rights as “offerees” of the “contracts”
Congress is authorized to extend to them pursuant to the Spending Clause. See, e.g.,
Pennhurst, 451 U.S. at 17. Thus, while a State, as the offeree of a Spending Clause
contract that is impermissibly ambiguous or coercive, can certainly claim an injury
to its sovereign interest in setting its own tax policies, it does not make sense to say
that a State legislature, which is not the offeree, can do the same. Given the
requirement that a plaintiff must have suffered a “particularized” injury, which
means that “the injury must affect the plaintiff in a personal and individual way,” see
Lujan, 560–61 n.1, it thus seems a stretch to say that a legislature can claim the same
type of harm—to its right to be offered an unambiguous condition of federal
money—that a State can.
The Supreme Court cases addressing the standing of legislative bodies, while
not directly on point, further support this Court’s conclusion that the Wisconsin
Legislature, as an institution, has not suffered an injury in fact by virtue of the Tax
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Mandate’s enactment. The Supreme Court addressed the standing of a state
legislature in Arizona State Legislature v. Arizona Independent Redistricting
Commission, 576 U.S. 787 (2015). Arizona voters adopted Proposition 106, which
amended the Arizona Constitution by removing the Arizona Legislature’s
redistricting authority and vesting it in an independent commission. Id. at 791. The
Arizona Legislature sued, alleging that Proposition 106 and the commission’s
redistricting activities deprived the Legislature of its constitutional authority over
redistricting, in violation of the Elections Clause of the U.S. Constitution. Id. at 792
(citing U.S. Const. art. I § 4, cl.1). The Supreme Court considered whether the
Arizona Legislature had alleged an injury that was sufficiently concrete to meet
Article III’s standing requirements. Id. at 799–800. The Court compared the
Legislature’s claims with the claims made in two earlier legislative standing cases,
Raines v. Byrd, 521 U.S. 811 (1997), and Coleman v. Miller, 307 U.S. 433 (1939). Id. at
801–04.
In Raines, the Supreme Court considered whether six members of Congress
had standing to challenge the constitutionality of the Line Item Veto Act after they
were outnumbered in their votes against it as a bill. 521 U.S. at 814. The Act gave the
President authority to cancel certain spending and tax benefit measures after signing
them into law. Id. The Court observed that the members of Congress did not assert
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a personal injury but instead claimed merely “a type of institutional injury (the
diminution of legislative power), which necessarily damages all Members of
Congress and both Houses of Congress equally.” Id. at 821. The nature of that injury
did not permit the members to claim a “personal stake” in the suit and the alleged
injury was not “sufficiently concrete” to establish Article III standing. Id. at 830.
On the other hand, in Coleman, the Supreme Court recognized the standing of
twenty Kansas state legislators who voted against a resolution that ultimately passed
only because the Lieutenant Governor cast a tie-breaking vote—a procedure that the
legislators argued was impermissible under Article V of the U.S. Constitution. 307
U.S. at 436. The Supreme Court stated in Raines that Coleman stands “at most . . .
for the proposition that legislators whose votes would have been sufficient to defeat
(or enact) a specific legislative Act have standing to sue if that legislative action goes
into effect (or does not go into effect), on the ground that their votes have been
completely nullified.” 521 U.S. at 823.
The Supreme Court in Arizona State Legislature concluded that its facts were
more like those in Coleman than in Raines. 576 U.S. at 803. Proposition 106 “would
‘completely nullif[y]’ any vote by the Arizona Legislature now or ‘in the future,’
purporting to adopt a redistricting plan.” Id. (quoting Raines, 521 U.S. at 823–24).
Accordingly, the Court concluded, there was a sufficiently concrete injury to the
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Arizona Legislature’s interest in redistricting that the Legislature had Article III
standing. Id.
From Arizona State Legislature, this Court derives the principle that a
legislative body may have standing as an institution so long as its claimed harm serves
to “completely nullify” its interest in taking some action that it is legally authorized
to take, “now or in the future.” See id. It is not enough that the legislature’s power
is diluted; it must be completely lost. Id. at 802–04. Here, the application of the Tax
Mandate does not nullify any actions that the Wisconsin Legislature would like to
take. It may affect them, but it does not render them meaningless. Thus, the
Wisconsin Legislature has at most alleged an “abstract dilution of institutional
legislative power,” rather than a cognizable institutional injury. See Raines, 521 U.S.
at 826. It therefore lacks standing.
If this Court were to hold differently, it would not find, in any event, that the
Wisconsin Legislature may intervene as a matter of right under Rule 24(a)(2).
Although the motion to intervene was timely, 4 the Wisconsin Legislature does not
4
To decide if a motion to intervene is timely the Court considers four factors: (1) the period
of time during which the intervenor knew of its interest in the suit before petitioning for
intervention; (2) any prejudice the resulting delay might cause the existing parties; (3) any
prejudice denial of intervention would cause the intervenor to suffer; and (4) “the existence of
unusual circumstances weighing for or against a determination of timeliness.” Comm’r, Ala. Dep’t
of Corr. v. Advance Local Media, LLC, 918 F.3d 1161, 1171 (11th Cir. 2019). The Wisconsin
Legislature moved to intervene approximately six weeks after the Plaintiff States filed their
Complaint and roughly one month after they filed their motion for a preliminary injunction. At the
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have a “direct, substantial, and legally protectable” interest in the subject matter of
this litigation. Georgia v. United States Army Corps of Eng’rs, 302 F.3d 1242, 1249
(11th Cir. 2002) (“Under Rule 24(a)(2), a party is entitled to intervention as a matter
of right if the party’s interest in the subject matter of the litigation is direct,
substantial and legally protectable.”). The Eleventh Circuit has held that a legally
protectable interest “is something more than an economic interest.” United States
v. South Fla. Water Mgmt. Dist., 922 F.2d 704, 710 (11th Cir. 1991) (quotation marks
and citation omitted). “What is required is that the interest be one which the
substantive law recognizes as belonging to or being owned by the applicant.” Id.
(quotation marks and citation omitted). Thus, a legally protectable interest is an
interest that derives from a legal right. The Wisconsin Legislature has no legally
protectable interest in invalidating the Tax Mandate on constitutional grounds
because it, unlike the States, has no sovereign right to set its own tax policy.
Nor can the Wisconsin Legislature establish that its interests, if any, would be
impaired by the disposition of this action. The Wisconsin Legislature may separately
litigate, should it be able to establish its standing using some other theory of harm,
time of the Legislature’s filing, this Court had “yet to take significant action.” Georgia, 302 F.3d
at 1259–60. Furthermore, the fact that the Legislature intended to raise the same claims as the
Plaintiff States, even joining in their existing briefing, indicates that intervention would not “delay
the proceedings.” Id. Additionally, because only seven months have passed since the Wisconsin
Legislature sought to intervene, the denial of intervention will not seriously prejudice the
Wisconsin Legislature’s ability to separately litigate.
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and the Eleventh Circuit has noted that the ability to separately litigate defeats the
impairment element. See Worlds v. Dep’t of Health & Rehab. Servs., State of Fla., 929
F.2d 591, 594 (11th Cir. 1991). Finally, this Court may “presume that a proposed
intervenor’s interest is adequately represented when an existing party pursues the
same ultimate objective as the party seeking intervention.” Fed. Sav. & Loan Ins.
Corp. v. Falls Chase Special Taxing Dist., 983 F.2d 211, 215 (11th Cir. 1993).
Accordingly, assuming it had standing, this Court would not have allowed the
Wisconsin Legislature to intervene as of right pursuant to Rule 24(a)(2).
2. Permissive Intervention
Although the absence of standing dooms the Wisconsin Legislature’s request
to intervene as of right, that does not necessarily command the same result for its
request to intervene permissibly under Rule 24(b). It appears to be an open question
among the federal courts whether a permissive intervenor is required to possess
standing. The Supreme Court’s holding in Laroe Estates is inapposite because it
considered only Rule 24(a) intervenors as of right. See 137 S. Ct. at 1651.5 Long before
Laroe Estates, the Eleventh Circuit held in Chiles v. Thornburgh that “a party seeking
to intervene need not demonstrate that he has standing in addition to meeting the
5
The Court does note, however, that extending the holding in Laroe Estates to Rule 24(b)
permissive intervention would make sense because, without standing, proposed intervenors could
bootstrap their way into ongoing federal litigation.
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requirements of Rule 24 as long as there exists a justiciable case or controversy
between the parties already in the lawsuit.” 865 F.2d 1197, 1213 (11th Cir. 1989).
This Court need not, however, take a position on the standing requirements
for permissive intervention because the Court exercises its broad discretion to deny
the Wisconsin Legislature’s request. Rule 24(b) provides for permissive intervention
when an applicant’s claim or defense and the main action have a question of law or
fact in common and the intervention will not unduly prejudice or delay the
adjudication of the rights of the original parties. Fed. R. Civ. P. 24(b); Georgia, 302
F.3d at 1249–50. However, even if a proposed intervenor satisfies the timeliness and
common interest requirements, the court may still deny permissive intervention.
Chiles, 865 F.2d at 1213 (citation omitted). Ultimately, the decision whether a party
should be allowed to permissively intervene is left to the district court’s “full
discretionary powers.” United States v. S. Fla. Water Mgmt. Dist., 922 F.2d 704, 712
(11th Cir. 1991).
Here, several factors counsel against permissive intervention. The Wisconsin
Legislature lacks Article III standing in its own right. It also seeks relief different from
the Plaintiff States in the form of an injunction of the Tax Mandate that applies to
the State of Wisconsin, of which the Legislature is not a legal representative in this
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action. Accordingly, in the exercise of its discretion, the Court declines to permit the
Wisconsin Legislature to permissively intervene under Rule 24(b).
C. Merits
Having concluded that it has jurisdiction and determined the proper parties to
this case, the Court turns to the merits of the Plaintiff States’ constitutional
challenge. The Plaintiff States claim both that Congress exceeded its authority under
the Spending Clause as well as violated the Tenth Amendment’s grant of power to
the States and the anti-commandeering doctrine when it enacted the Tax Mandate.
Because the Court concludes that the Plaintiff States are correct on the first front, it
need not address the second. See Ashwander v. Tenn. Valley Auth., 297 U.S. 288, 347
(1936) (“It is not the habit of the court to decide questions of a constitutional nature
unless absolutely necessary to a decision of the case.”) (quoting Burton v. United
States, 196 U.S. 283, 295 (1905)).
The U.S. Constitution empowers Congress to “lay and collect Taxes, Duties,
Imposts 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, cl. 1. “Put simply,
Congress may tax and spend.” NFIB, 567 U.S. at 537. “Incident to this power,
Congress may attach conditions on the receipt of federal funds, and has repeatedly
employed the power ‘to further broad policy objectives by conditioning receipt of
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federal moneys upon compliance by the recipient with federal statutory and
administrative directives.’” South Dakota v. Dole, 483 U.S. 203, 206 (1987) (quoting
Fullilove v. Klutznick, 448 U.S. 448, 474 (1980)).
However, Congress’s spending power is not unlimited. Dole, 483 U.S. at 207.
Although Congress can condition a State’s receipt of federal money, any such
condition must comply with several requirements. See id. at 207–08. First, the
condition must “be in pursuit of ‘the general welfare.’” Id. at 207 (quoting Helvering
v. Davis, 301 U.S. 619, 640–41 (1937)). Second, Congress must condition the States’
receipt of federal funds “unambiguously . . ., enabl[ing] the States to exercise their
choice [whether to accept federal funds] knowingly, cognizant of the consequences
of their participation.” Id. (quoting Pennhurst, 451 U.S. at 17). Third, the condition
must be reasonably related to a “federal interest in particular national projects or
programs.” Id. (quoting Massachusetts v. United States, 435 U.S. 444, 461 (1978)).
Fourth, no condition attached to receipt of federal funds may violate another
provision of the U.S. Constitution. Id. at 208. Finally, the Supreme Court has
“recognized that in some circumstances the financial inducement offered by
Congress might be so coercive as to pass the point at which ‘pressure turns into
compulsion.’” Id. at 211 (quoting Steward Mach. Co. v. Davis, 301 U.S. 548, 590
(1937)). If a federal condition induces a State to act “not of her unfettered will, but
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under the strain of a persuasion equivalent to undue influence,” then the condition
exceeds Congress’s Spending Clause authority. Steward Mach., 301 U.S. at 590.
Federalism is the root of these limitations that are placed on Congress’s ability
to “pay for” States’ compliance with federal policies or directives. See NFIB, 567
U.S. at 577. As the Supreme Court has recognized in its Spending Clause
jurisprudence, the Federal Government possesses only enumerated powers, while
the States and the people retain the remainder. Id. at 533. See also U.S. Const., Amdt.
10. Thus, while the Federal Government “must show that a constitutional grant of
power authorizes each of its actions . . . [t]he same does not apply to the States,
because the Constitution is not the source of their power.” NFIB, 567 U.S. at 535.
“The States thus can and do perform many of the vital functions of modern
government” through their police power, “even though the Constitution’s text does
not authorize any government to do so.” Id. at 536–37. State sovereignty both
ensures that “powers which ‘in the ordinary course of affairs, concern the lives,
liberties, and properties of the people’ [are] held by governments more local and
more accountable than a distant federal bureaucracy,” id. (quoting The Federalist
No. 45, at 293 (J. Madison)), and “serves as a check on the power of the Federal
Government [and] protects the liberty of the individual from arbitrary power.” Id.
(quoting Bond v. United States, 564 U.S. 211, 222 (2011)).
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The Plaintiff States claim that the Tax Mandate is inconsistent with nearly
every Spending Clause restriction espoused in Dole, supra. First, they contend that
the mandate is unconstitutionally coercive because the amount of ARPA funding
offered to the States is so large a percentage of their annual budgets that they have
no real choice but to accept the mandate’s restriction on their sovereign taxing
powers. Second, they claim that the mandate is unconstitutionally ambiguous
because it contains no explanation as to how the Treasury will determine whether a
State has—either directly or indirectly—offset its tax cuts with ARPA funds. Thus,
the Plaintiff States state that they are unable make an informed choice of whether to
accept or decline ARPA funds, and if they accept ARPA funds, whether to cut taxes
without putting those ARPA funds at risk of being recouped by the Treasury. Third,
they contend that the mandate is not reasonably related to the purpose that the
ARPA serves—to assist in the rebound from the COVID-19 pandemic’s economic
devastation—because prohibiting state tax reductions does not advance the goal of
providing economic relief to individuals and entities affected by the pandemic.
Finally, they claim that the mandate violates an independent constitutional
provision—the Tenth Amendment, which reserves power to the States. Because the
Court concludes that the Tax Mandate is an unconstitutionally ambiguous condition
on the States’ receipt of federal funds, see Dole, 483 U.S. at 207; Pennhurst, 451 U.S.
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at 17, it need not address the Plaintiff States’ other concerns. See Ashwander, 297
U.S. at 347.
Congress must “speak with a clear voice” “[i]f [it] intends to impose a
condition on the grant of federal moneys”—that is, “it must do so unambiguously.”
Pennhurst, 451 U.S. at 17. But how much clarity is required? On the one hand, the
Supreme Court has held that the State recipient must be able to “voluntarily and
knowingly accept[] the [condition’s] terms.” Id. And there can be no “knowing
acceptance if a State is unaware of the conditions or is unable to ascertain what is
expected of it.” Id. Put another way, the State recipient must be able to “clearly
understand . . . the obligations[.]”). Arlington Cent. Sch. Dist. Bd. of Educ. v. Murphy,
548 U.S. 291, 296 (2006). The Eleventh Circuit has similarly stated that Congress
must “define [the] conditions clearly enough for the states to make an informed
choice.” Benning v. Georgia, 391 F.3d 1299, 1306 (11th Cir. 2004) (citing Pennhurst,
451 U.S. at 25).
On the other hand, the Supreme Court has warned that Congress need not
“prospectively resolve every possible ambiguity concerning particular applications
of a [federal grant] program’s requirements.” Bennett v. Ky. Dep’t of Educ., 470 U.S.
656, 666–69 (1985). According to the Eleventh Circuit, “once Congress clearly
signals its intent to attach federal conditions to Spending Clause legislation, it need
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not specifically identify and proscribe in advance every conceivable state action that
would be improper.” Benning, 391 F.3d at 1306 (quoting Sandoval v. Hagan, 197 F.3d
484, 495 (11th Cir. 1999), overruled on other grounds, Alexander v. Sandoval, 532
U.S. 275 (2001)). Congress must only “make the existence of the condition itself—
in exchange for the receipt of federal funds—explicitly obvious.” Id. at 1307
(quotation omitted).
The Plaintiff States argue that the language of the Tax Mandate makes it
impossible for States to “make an informed choice,” see id. at 1306, about the costs
of receiving ARPA funds because it is impossible to know how to exercise taxing
authority without putting ARPA funds at risk. The Court agrees. The Tax Mandate
does not define what it means to “directly or indirectly” offset tax cuts with ARPA
funds. See 42 U.S.C. § 802(e). Yet Congress gave the Secretary authority to recoup
ARPA funds that the Treasury deems were used by a State as a “direct or indirect”
offset. See id. Money is fungible, see Holder v. Humanitarian Law Project, 561 U.S. 1,
37 (2010), meaning “of such a nature that one part or quantity may be replaced by
another equal part or quantity in paying a debt or settling an account” or “capable
of mutual substitution: interchangeable,” http://www.mirram-
webster.com/dictionary/fungible. Thus, any ARPA funds the Plaintiff States receive
could be viewed as indirectly offsetting any reduction in net tax revenue from a
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change in state law or policy. After all, a decrease in one part of a State’s revenue is
necessarily offset somehow to achieve a balanced budget. Thus, there is no way for
the Plaintiff States to “clearly understand the[ir] obligations” if they accept ARPA
funds. See Arlington Central, 548 U.S. at 296.
The Defendants disagree, arguing that once Congress has made explicitly
clear that a condition exists, nothing else is required of it. According to the
Defendants, Congress need not explain how States might tailor their compliance with
a condition because imposing such a burden on Congress would be too onerous.
Further, the Defendants contend that the major Supreme Court and Eleventh
Circuit Spending Clause cases support their position. Although the cases may appear
to do so at first glance, a careful reading reveals the opposite to be true.
Pennhurst, the origin of the Supreme Court’s Spending Clause unambiguity
requirement, concerned the Developmentally Disabled Assistance and Bill of Rights
Act, 42 U.S.C. § 6000 et seq., a federal statute that established a grant program where
the federal government provided money to participating States to aid them in
creating programs to care for and treat the developmentally disabled. 451 U.S. at 11.
The States were given the choice of complying with a variety of conditions set forth
in the Act or foregoing the benefits of federal funding. Id. The Act also included a
“bill of rights” provision specifying that mentally disabled citizens “have a right to
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appropriate treatment, services, and habilitation for such disabilities” to be provided
“in the setting that is least restrictive of the person’s personal liberty.” Id. at 13
(quoting 42 U.S.C. § 6010). A mentally disabled resident of a Pennsylvania mental
health treatment hospital brought suit on behalf of himself and other hospital
residents against the hospital, alleging that dangerous conditions denied residents
various constitutional and statutory rights, including those enumerated in the bill of
rights provision of the Act. Id. at 6–7.
The Supreme Court had to decide whether the bill of rights provision imposed
on participating States an obligation to provide certain kinds of treatment at their
own expense by virtue of receiving the federal funds. Id. at 10. The Supreme Court
held that it did not, stating that the bill of rights provision “represent[s] general
statements of federal policy, not newly created legal duties” and “in no way suggests
that the grant of federal funds is ‘conditioned’ on a State’s funding the rights
described therein.” Id. at 23. Several factors led the Court to so conclude, including
that the bill of rights provision lacked “conditional” language and that under the Act
and the implementing regulations, funds were incapable of being withheld from
States on the basis of failure to meet the standards in the bill of rights provision. Id.
The Court also noted that the amount of money Congress granted to Pennsylvania
was “woefully inadequate” to meet the “enormous financial burden of providing
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‘appropriate’ treatment in the ‘least restrictive’ setting” as stated in the bill of rights
provision. Id. at 24 (quoting 42 U.S.C. § 1610).
The Pennhurst Court further discussed Congress’s failure to clearly express
its intent to impose a condition in the bill of rights provision:
Our conclusion is also buttressed by the rule of statutory construction
established above, that Congress must express clearly its intent to
impose conditions on the grant of federal funds so that the States can
knowingly decide whether or not to accept those funds. That canon
applies with greatest force where, as here, a State’s potential obligations
under the Act are largely indeterminate. It is difficult to know what is
meant by providing “appropriate treatment” in the “least restrictive”
setting, and it is unlikely that a State would have accepted federal funds
had it known it would be bound to provide such treatment. The crucial
inquiry, however, is not whether a State would knowingly undertake
that obligation, but whether Congress spoke so clearly that we can fairly
say that the State could make an informed choice. In this case, Congress
fell well short of providing clear notice to the States that they, by
accepting funds under the Act, would indeed be obligated to comply
with § 6010.
Id. at 24–25.
The Defendants contend that Pennhurst is distinguishable from this case
because, in Pennhurst, the Supreme Court had to decide whether a condition existed
in the first place, but here, there is no question that the Tax Mandate exists as a
condition to States accepting ARPA funds. Indeed, in Pennhurst, the requirement
that Congress express unambiguously “its intent to impose conditions on the grant
of federal funds” was to keep Congress from “surprising participating States with
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post-acceptance or retroactive conditions.” NFIB, 567 U.S. at 584 (quoting
Pennhurst, 451 U.S. at 25). Yet merely because Pennhurst stands for the proposition
that Congress must clearly state its intent to impose a condition does not mean that
Congress need not also define the condition sufficiently so that States can know how
to comply with it. To the contrary, Pennhurst requires Congress to speak “so clearly
that . . . the State[s can] make an informed choice.” 451 U.S. at 25. Pennhurst does
not undermine the Plaintiff States’ position that the Tax Mandate does not meet that
standard.
The Defendants further contend that the Eleventh Circuit’s decision in
Benning v. Georgia forecloses the Plaintiff States’ claim that the Tax Mandate is
ambiguous. Benning concerned whether Congress violated the Spending Clause in
enacting section 3 of the Religious Land Use and Institutionalized Person’s Act
(“RLUIPA”), 42 U.S.C. § 2000cc-1, which requires state prisons that receive
federal funds to refrain from burdening the religious exercise of prisoners. 391 F.3d
1299, 1303 (11th Cir. 2004). A Georgia prison system inmate and self-proclaimed
“Torah observant Jew” sued Georgia and the Georgia Department of Corrections
alleging that they violated the RLUIPA by denying his requests for a kosher diet and
for permission to wear a yarmulke. Id. Georgia moved to dismiss the suit, arguing
among other things that section 3 of RLUIPA was an unconstitutional violation of
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Congress’s Spending Clause power. Id. Section 3 provides that government actions
that substantially burden the religious exercise of institutionalized persons must
satisfy the “strict scrutiny” standard: the action must be in “furtherance of a
compelling government interest” and must be “the least restrictive means of
furthering that compelling governmental interest.” Id. at 1304 (quoting 42 U.S.C. §
2000cc-1). Georgia argued that section 3 is ambiguous, contrary to Pennhurst, in four
ways, one of which was that Georgia could not know in any particular case whether
its actions satisfied the requirements of the strict scrutiny standard. Id. at 1305.
The Eleventh Circuit rejected Georgia’s argument, pointing out that the strict
scrutiny standard, which has “long applied to the states in disputes regarding the
free exercise of religion,” was “not new to Georgia or any state.” Id. at 1306 (citing
Midrash Sephardi, Inc. v. Town of Surfside, 366 F.3d 1214, 1236–37 (11th Cir. 2004)).
The court found that RLUIPA’s flexibility in giving States “wide latitude in applying
its provisions” does not make the statute “opaque.” Id. It stated, “once Congress
clearly signals its intent to attach federal conditions to Spending Clause legislation,
it need not specifically identify and proscribe in advance every conceivable state
action that would be improper.” Id. (quoting Sandoval, 197 F.3d at 495).
Although Georgia relied upon Pennhurst in supporting its argument that
section 3 of the RLUIPA is ambiguous, the Eleventh Circuit distinguished Pennhurst,
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stating, “The federal law in Pennhurst was unclear as to whether the states incurred
any obligations at all by accepting federal funds, but RLUIPA is clear that states incur
an obligation when they accept federal funds, even if the method for compliance is
left to the states. Pennhurst does not require more.” Id. at 1307. Recognizing that the
Ninth and Seventh Circuits had reached the same conclusion in similar cases, the
Eleventh Circuit continued:
In Mayweathers [v. Newland, 314 F.3d 1062 (9th Cir. 2002)], the Ninth
Circuit stated, “Congress is not required to list every factual instance
in which a state will fail to comply with a condition. Such specificity
would prove too onerous, and, perhaps, impossible. Congress must,
however, make the existence of the condition itself—in exchange for
the receipt of federal funds—explicitly obvious.” 314 F.3d at 1067. The
Seventh Circuit explained, “Congress permissibly conditioned the
receipt of federal money in such a way that each State is made aware of
the condition and is simultaneously given the freedom to tailor
compliance according to its particular penological interests and
circumstances.” Charles [v. Verhagen], 348 F.3d [601,] 608 [(7th Cir.
2003)]. No federal appellate court has held otherwise, and we decline
to be the first.
Id.
There are several reasons why Benning does not foreclose the Plaintiff States’
ambiguity argument. For one thing, the ARPA’s Tax Mandate is nothing like a
Congressional spending condition that prohibits States from discriminating based on
an individual’s religion, as was the case in Benning. Although the strict scrutiny
standard may result in different applications among the courts, there is no question
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that the RLUIPA expressly conditions the receipt of federal money upon States’
refraining from creating substantial burdens on prisoners’ religious rights that are
not justified by a compelling governmental interest and are not furthered by the least
restrictive means possible. See 42 U.S.C. § 2000cc-1(a). As the Plaintiff States say,
every lawyer is familiar with that standard. In contrast, the Tax Mandate that
Congress crafted provides no guidance on critical interpretive questions. It does not
tell States how they can avoid being found to have indirectly offset a net tax revenue
reduction with ARPA funds. There is thus no way for States to comply with the
ARPA by looking to the text of the provision itself. In other words, the condition is
not “define[d] . . . clearly enough,” which dooms it under Benning. 391 F.3d at 1306.
Additionally, the Court is cautious not to read Benning as applying too far
outside the scope of spending conditions that prohibit unlawful discrimination. See
Benning, 391 F.3d at 1306 (“The Supreme Court has explained that so long as a
spending condition has a clear and actionable prohibition of discrimination, it does not
matter that the manner of that discrimination can vary widely.”) (emphasis added).
Indeed, all of the cases that Benning relies upon in support of the conclusion that
Congress need not identify in advance very State action that may be improper
address spending clause legislation related to federal nondiscrimination statutes. See
Benning, 391 F.3d at 1306–07 (citing Sandoval, 197 F.3d at 495 (spending condition
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prohibited discrimination on the basis of national origin in violation of Title VI of the
Civil Rights Act of 1964); Davis v. Monroe County Bd. of Edu., 526 U.S. 629, 651
(1999) (spending condition prohibited student-on-student sexual harassment in
violation of Title IX of the Education Amendments of 1972); Mayweathers, 314 F.3d
at 1067 (the same RUILPA spending condition prohibiting religious discrimination
that was the subject of Benning); Charles, 348 F.3d at 607–08 (same)). The common
denominator in these cases is that they addressed statutes, like the RLUIPA, that
“follow[] in the footsteps of a long-standing tradition of federal legislation that seeks
to eradicate discrimination and [are] ‘designed to guard against unfair bias and
infringement on fundamental freedoms.’” Charles, 348 F.3d at 607 (quoting
Mayweathers, 314 F.3d at 1067)). The Eleventh Circuit in Benning recognized the
importance of Congress’s ability to place conditions on its offers of federal funds to
States in this area:
[T]he United States has a substantial interest in ensuring that state
prisons that receive federal funds protect the federal civil rights of
prisoners. . . .
Congress has a strong interest in making certain that
federal funds do not subsidize conduct that infringes
individual liberties, such as the free practice of one’s
religion. The federal government also has a strong interest
in monitoring the treatment of federal inmates housed in
state prisons and in contributing to their rehabilitation.
Congress may allocate federal funds freely, then, to
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protect the free exercise of religion and to promote
rehabilitation. . . .
Mayweathers, 314 F.3d at 1067; see also Charles, 348 F.3d at 608–09.
Benning, 391 F.3d at 1307.6 Simply put, the Federal Government’s paramount
interest in protecting individuals from discrimination that was present in Benning is
simply not present in this case. See Pennhurst, 451 U.S. at 18 (reminding courts to
“look to the provisions of the whole law, and to its object and policy,” in determining
whether Congress intended to impose a condition). To the contrary, the Federal
Government has no interest in proscribing state tax policy. Yet the Tax Mandate
dictates more than what States do with federal funds; it dictates what States do with
State funds as well. The Tax Mandate’s restriction on direct or indirect state tax cuts
pressures States into adopting a particular—and federally preferred—tax policy.
The inherent ambiguity in the text of the mandate may disincentive the Plaintiff
States from considering any tax reductions for fear of forfeiting ARPA funds. This is
a federal invasion of State sovereignty that was just simply not at issue in Benning.
Accordingly, the Court finds no precedential authority that would proscribe
6
The Benning court made these statements in response to Georgia’s argument that the
federal grants for its prisons were unrelated to the objective of the RLUIPA in contravention of
Dole’s requirement that any condition Congress imposes on the States’ receipt of federal funds be
related to a particular federal interest. See id.
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its ruling today that Congress exceeded its Spending Clause authority in crafting an
unconstitutionally ambiguous spending condition in the Tax Mandate.
Having determined that the Tax Mandate falls short of the clarity required
when Congress exercises its powers under the Spending Clause, the Court must now
determine what effect, if any, the Final Rule has on the Tax Mandate’s failure—as
enacted—to meet that requirement. Although the issuance of the Final Rule raises
the question whether an administrative regulation can provide the clarity needed for
a statutorily ambiguous spending condition to pass muster under the Spending
Clause jurisprudence, little discussion is ultimately needed on this point. This is
because the Defendants appear to concede that, assuming that the language of the
Tax Mandate is itself unconstitutionally ambiguous, the Final Rule cannot cure that
ambiguity. (See Doc. 76 at 32 (“Both sides agree that agencies cannot impose funding
conditions that Congress itself has not attached. . . . Defendants are not asking the
Court to defer to the [Final] Rule because Plaintiffs have not challenged it.”)).
It bears noting, however, that the Final Rule still fails to define how a State
“indirectly offsets” spending cuts with ARPA funds. A State, for example, can cut
taxes so long as decreases in revenue are counterbalanced by “[s]pending cuts in
areas not being replaced by [ARPA] Funds.” 86 Fed. Reg. at 26808. But the Rule
does not define “areas.” And because the Final Rule “provides benefits across
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several areas” due to the breadth with which ARPA funds can be used, id. at 26816,
few “areas” of State spending will be suitable candidates for spending cuts that could
offset a decrease in revenue. Further, the Treasury has multiple years during which
it can assess whether “a spending cut is subsequently replaced with [ARPA] Funds
and used to indirectly offset a reduction in net tax revenue resulting from a covered
change.” Id. at 26810. Thus, a spending cut in 2021 followed by a use of ARPA funds
in 2023 could later be deemed “an evasion of the restrictions of the offset provision”
that would entitle Treasury to recoupment. Id. In short, the Final Rule still leaves
States guessing as to how they may exercise their sovereign power to tax.
D. Remedies
Having found that the Tax Mandate exceeds Congress’s power under the
Constitution, the Court now turns to the remedies sought by the Plaintiff States. The
Plaintiff States request both declaratory relief and a permanent injunction enjoining
the Secretary from enforcing the Tax Mandate provision of the ARPA against the
thirteen Plaintiff States.
1. Permanent Injunction
A plaintiff who has demonstrated success on the merits is entitled to a
permanent injunction if: (1) it “suffered an irreparable injury”; (2) the “remedies
available at law, such as monetary damages, are inadequate to compensate for that
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injury”; (3) the “balance of hardships between the plaintiff and the defendant”
justify an equitable remedy; and (4) “the public interest would not be disserved by a
permanent injunction.” eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006).
The Plaintiff States satisfy each factor. First, the Tax Mandate has and will
continue to inflict irreparable injury on the Plaintiff States, who are all either faced
with or bound by an unconstitutionally ambiguous “deal” that is intruding on each
State’s ability to exercise its “indispensable” sovereign power to tax. See Gibbons,
22 U.S. at 199. Second, the States cannot sue the federal government for damages.
See F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994) (“Absent a waiver, sovereign
immunity shields the Federal Government and its agencies from suit.”). Thus, since
their harms are not redressable through damages, “the remedies available at law”
are “inadequate.” eBay, 547 U.S. at 391. Third, the balance of hardships favors the
States, which have a strong interest in not having their sovereign authority impinged
by an unconstitutional law, while the Defendants have no legitimate interest in
enforcing that law. Additionally, given the limited scope of the permanent
injunction, the Defendants will be free to enforce every other provision of the ARPA.
Fourth, an injunction will promote the public interest because “the public . . . has no
interest in enforcing an unconstitutional law.” Scott v. Roberts, 612 F.3d 1279, 1297
(11th Cir. 2010).
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A permanent injunction is proper in this case, as enjoining the enforcement of
the Tax Mandate against the Plaintiff States alleviates the constitutional harm.
2. Declaratory Relief
The Declaratory Judgment Act provides a federal court with jurisdiction over
“a case of actual controversy” the authority to “declare the rights and other legal
relations of any interested party seeking such declaration, whether or not further
relief is or could be sought. Any such declaration shall have the force and effect of a
final judgment or decree and shall be reviewable as such.” 28 U.S.C. § 2201(a).
“The Declaratory Judgment Act is ‘an enabling Act, which confers a discretion on
courts rather than an absolute right upon the litigant.’” Ameritas Variable Life Ins.
Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir. 2005) (quoting Wilton v. Seven Falls Co.,
515 U.S. 277, 287 (1995)). “It only gives the federal courts competence to make a
declaration of rights; it does not impose a duty to do so.” Id. (citing Brillhart v. Excess
Ins. Co. of America, 316 U.S. 491, 494 (1942)). Here, because a permanent injunction
fully rectifies the Plaintiff States’ harm, the Court need not also issue a declaratory
judgment.
IV. Conclusion
For the aforementioned reasons, the Plaintiff States’ motion for a final
judgment and permanent injunction is due to be granted, and the Defendants’
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motion to dismiss the complaint is due to be denied. A separate order consistent with
this opinion will be issued.
DONE and ORDERED on November 15, 2021.
_____________________________
L. Scott Coogler
United States District Judge
160704
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