59 F.4th 1124
11th Cir.2023Background
- Congress enacted the American Rescue Plan Act (ARPA) in 2021, appropriating $195.3 billion to states for pandemic-related uses and conditioning receipt on compliance with restrictions including Section 802(c)(2)(A), which bars using Rescue Plan funds “to either directly or indirectly offset a reduction in [their] net tax revenue” caused by changes that “reduce any tax.”
- The Act requires states to certify they need the funds for enumerated purposes and to provide detailed accounting of tax‑revenue modifications; the Secretary may recoup funds used in violation and Congress authorized agency regulations to carry out the Act.
- Thirteen states sued the Treasury Secretary challenging the offset provision as (1) unascertainable and therefore an unconstitutional Spending Clause condition, (2) coercive under the Spending Clause, and (3) violative of the Tenth Amendment; the district court permanently enjoined enforcement of Section 802(c)(2)(A).
- The Secretary issued interim and final Treasury rules attempting to define a baseline and a multi‑step test (using FY2019 tax revenue adjusted for inflation) to determine whether states indirectly offset tax reductions with Rescue Plan funds.
- The Eleventh Circuit affirmed: it held the states had Article III standing (sovereign‑interest and credible‑threat theories) and that the offset provision fails the Pennhurst/Dole ascertainability requirement on the statute’s face; the agency rule cannot cure the statute’s facial unascertainability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Justiciability / Standing | States: ambiguity and threat of recoupment inflict present sovereign injury and create a credible pre‑enforcement threat. | Secretary: no actual recoupment yet; regulation narrows interpretation so case is speculative or moot. | States have standing; case is justiciable; agency narrowing does not moot facial ascertainability challenge. |
| Ascertainability under Spending Clause | States: statute lacks a measurable baseline and fails to define “directly or indirectly offset,” so states cannot know obligations. | Secretary: statutory text is sufficient; agency rule supplies the necessary baseline and process. | Section 802(c)(2)(A) is facially unascertainable; the agency rule cannot supply the required statutory clarity. |
| Agency rulemaking as cure | States: agency cannot supply core mandatory content the statute omitted; major questions separation limits delegation. | Secretary: regulation fills gaps and resolves ambiguities, obviating constitutional defect. | Court: regulation cannot rescue an unascertainable statutory condition; Congress must provide the clarity. |
| Remedy — permanent injunction | States: irreparable sovereign harm; money damages inadequate; injunction appropriate. | Secretary: (implicitly) enforcement should be allowed under clarified rule; no irreparable harm. | Permanent injunction of Section 802(c)(2)(A) affirmed; provision severable from remainder of ARPA. |
Key Cases Cited
- Pennhurst State School & Hosp. v. Halderman, 451 U.S. 1 (1981) (Spending Clause requires Congress to speak unambiguously so states can knowingly accept conditions)
- South Dakota v. Dole, 483 U.S. 203 (1987) (Spending Clause tests including that conditions be unambiguous and not coercive)
- Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (limits on spending/coercion and federalism considerations)
- Benning v. Georgia, 391 F.3d 1299 (11th Cir. 2004) (ascertainability is a binding Spending Clause requirement; applied facial challenge)
- King v. Burwell, 576 U.S. 473 (2015) (major‑questions and need for clear congressional intent for consequential statutory constructions)
- Whitman v. Am. Trucking Ass’ns, 531 U.S. 457 (2001) (agency cannot cure an unlawfully standardless delegation by declining to exercise power)
- J.W. Hampton, Jr. & Co. v. United States, 276 U.S. 394 (1928) (intelligible principle doctrine for delegation)
- Bennett v. Kentucky Dep’t of Educ., 470 U.S. 656 (1985) (states agree to comply with legal requirements in place when grants are made)
- McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819) (core principle that power to tax is essential to sovereignty)