A three-judge panel of the United States Court of Appeals for the Ninth Circuit on May 19, 2022, ruled 3-0 that Arizona Attorney General Mark Brnovich (R) has standing to challenge the constitutionality of the federal tax mandate under the American Rescue Plan Act..
Brnovich filed a lawsuit against the U.S. Department of the Treasury in March 2021 arguing the tax mandate is unconstitutional because it penalizes a state if they use federal COVID-19 relief funding to subsidize a tax cut. Outlined in the American Rescue Plan Act, states are not permitted to use COVID-19 relief funds to offset reduction in net tax revenues. States can use the funds to respond to the public health emergency, to assist households, small businesses, and nonprofits, and to aid affected industries such as tourism, travel, and hospitality.
The United States District Court for the District found that Arizona lacked standing to bring the lawsuit and dismissed the case for lack of subject matter jurisdiction. Brnovich appealed to the Ninth Circuit, which remanded the case back to the district court, finding that Arizona “had standing to challenge ARPA both because there was a realistic danger of ARPA’s enforcement, and because there was a justiciable challenge to the sovereignty of the State, which alleges infringement on its authority to set tax policy and its interest in being free from coercion impacting its tax policy.”
Attorney General Brnovich argued that the tax mandate threatens state sovereignty. “The federal government does not get to tell states how to set their tax rates. Yet, the Biden administration is attempting to intimidate and punish states with the loss of COVID-19 relief funding if they don’t submit to these unconstitutional demands,” said Brnovich.
The U.S. Department of the Treasury had yet to comment on the ruling as of June 8, 2022.
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