538 F.Supp.3d 906
E.D. Mo.2021Background
- Missouri sued seeking a pre-enforcement injunction against enforcement of ARPA §9901 (the Coronavirus State Fiscal Recovery Fund) insofar as it is read to prohibit States from enacting tax reductions that reduce net tax revenue through 2024.
- ARPA permits States to use recovery funds for COVID response, revenue loss replacement, premium pay, and infrastructure; §802(c)(2)(A) forbids using those funds to offset reductions in net tax revenue caused by changes in law, regulation, or interpretation (the "Offset Restriction").
- Missouri fears a "broad" Treasury interpretation that would effectively bar any state tax cuts that reduce net revenue (or force States to replace lost revenue by other means), and contends that such an interpretation would violate state sovereignty under the Tenth Amendment.
- Missouri sought a guarantee from Treasury; Secretary Yellen replied without endorsing Missouri’s narrow interpretation, producing the challenged uncertainty while Missouri’s legislature debates tax cuts.
- Treasury defended that ARPA does not prohibit tax cuts but only bars using Rescue Plan funds to offset resultant net revenue reductions; Missouri has not enacted tax cuts, has not used ARPA funds to offset tax cuts, and no recoupment has occurred.
- The district court denied the preliminary-injunction motion and dismissed for lack of jurisdiction, holding Missouri lacks Article III standing and the dispute is not ripe.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing (pre-enforcement injury-in-fact) | Missouri: uncertainty over Treasury's broad interpretation and choice between tax cuts or losing funds causes imminent injury | Yellen: ARPA does not prohibit tax cuts; injury is speculative because Missouri has not cut taxes or used funds to offset cuts | No standing: injury speculative; acceptance of ARPA funds is not a cognizable constitutional interest; no credible threat of recoupment |
| Ripeness | Missouri: need declaratory relief now to guide legislature and prevent coercion | Yellen: dispute depends on contingent events (legislation, revenue drop, Treasury action); Treasury has not adopted regs or recouped funds | Not ripe: issues contingent and would benefit from further factual/administrative development; hardship to Missouri is too abstract |
| Scope of Offset Restriction (narrow vs broad) | Missouri: Offset Restriction should be read narrowly to bar only using funds to directly offset a particular tax cut | Yellen: Plain text limits only use of Rescue Plan funds to offset net tax revenue reductions; States remain free to change taxes and use other funds | Court did not resolve merits; declined to preemptively resolve interpretation due to lack of jurisdiction |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing injury-in-fact requirements)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (Article III concreteness and particularity of injury)
- Clapper v. Amnesty Int'l USA, 568 U.S. 398 (threatened injury must be certainly impending; speculative injuries insufficient)
- Susan B. Anthony List v. Driehaus, 573 U.S. 149 (pre-enforcement standing framework)
- Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519 (deference to political branches on spending conditions and federalism considerations)
- Texas v. United States, 523 U.S. 296 (ripeness; courts should avoid abstract, contingent disputes)
- Nat'l Park Hosp. Ass'n v. Dep't of Interior, 538 U.S. 803 (ripeness principles to avoid premature adjudication)
- Abbott Laboratories v. Gardner, 387 U.S. 136 (ripeness factors: fitness and hardship)
- Pub. Water Supply Dist. No. 10 of Cass Cnty. v. City of Peculiar, 345 F.3d 570 (ripeness and hardship analysis in Eighth Circuit)