539 F.Supp.3d 802
S.D. Ohio2021Background
- The American Rescue Plan Act of 2021 (ARPA) created ~ $195.3 billion in state fiscal relief; Ohio's offered share is ~$5.5 billion.
- ARPA conditions receipt on a state certification to the Treasury and limits permitted uses; it includes a “Further Restriction On Use Of Funds” (the "Tax Mandate") barring states from using funds to "directly or indirectly offset a reduction in the net tax revenue" caused by certain changes in law during the covered period.
- Ohio sued Treasury seeking declaratory relief and a preliminary injunction, arguing the Tax Mandate (1) violates the Spending Clause as unconstitutionally ambiguous and coercive and (2) violates the Tenth Amendment (commandeering). Ohio sought an injunction only as to enforcement against Ohio.
- Treasury opposed, raising standing/ripeness and arguing the rule is not impermissibly vague; after briefing Treasury issued an Interim Final Rule purporting to clarify the Tax Mandate.
- The district court held it had Article III jurisdiction (Ohio had standing and the Spending-Clause claim was ripe) and found Ohio showed a substantial likelihood of success on the Spending-Clause ambiguity claim, but denied the preliminary injunction because the requested relief would not prevent the irreparable harm Ohio relied on and recoupment was not imminent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing / Ripeness to challenge ARPA Tax Mandate | Ohio: ambiguity in statutory terms injures sovereign immediacy — States are entitled to clear terms before deciding to accept funds. | Treasury: injury speculative until Ohio certifies or funds are recouped; claims not ripe. | Court: Ohio has justiciable injury and ripeness as of filing (sovereign "right to clarity"), though close call. |
| Spending Clause — Ambiguity of Tax Mandate | Ohio: statutory terms ("indirectly offset," "net tax revenue") are ambiguous; Congress must speak unambiguously; ambiguity violates Spending Clause. | Treasury: statute sufficiently indicates conditions exist; ambiguity could be resolved by Treasury regulations. | Court: Ohio showed substantial likelihood of success on ambiguity claim; statutory language is reasonably susceptible to being unconstitutionally unclear. |
| Mootness / Effect of Interim Final Rule | Ohio: post-filing rule may not cure constitutional defect and cannot erase pre-filing injury; interim rule may leave ambiguity. | Treasury: Interim Final Rule clarifies Tax Mandate and may moot challenge. | Court: Interim rule does not yet carry the government's heavy burden to show mootness; effect unresolved and requires further briefing. |
| Preliminary injunction (irreparable harm & redressability) | Ohio: ambiguity causes irreparable sovereign harm to budgeting/tax decisions; injunction needed to prevent injury. | Treasury: relief premature; injunction would enjoin speculative recoupment and cannot meaningfully prevent alleged harm. | Court: Although irreparable harm exists and likelihood on merits is substantial, the requested injunction would not avert the harm Ohio relies on (recoupment not imminent), so injunction denied. |
Key Cases Cited
- McCulloch v. Maryland, 4 Wheat. 316 (establishing federal-state sovereignty framework)
- National Federation of Independent Business v. Sebelius, 567 U.S. 519 (discussing limits of federal power and Spending Clause coercion context)
- South Dakota v. Dole, 483 U.S. 203 (Spending Clause: conditions on federal grants and limits)
- Pennhurst State School & Hospital v. Halderman, 451 U.S. 1 (Spending Clause clarity requirement and contract-analogy)
- City of Pontiac Retired Emps. Ass’n v. Schimmel (City of Pontiac), 584 F.3d 253 (6th Cir.) (discussing clarity/contract analogy for conditions on federal funds)
- Bennett v. Kentucky Dep’t of Educ., 470 U.S. 656 (agency guidance can clarify program requirements where statute already provides requisite clarity)
- United States v. Salerno, 481 U.S. 739 (facial-challenge ‘‘no set of circumstances’’ standard)