Treasury Defends Covid Aid Limits to Fifth Circuit in Texas Case

A trial court ruling blocking the Treasury Department from trying to recover any pandemic relief funds from Texas, Louisiana, or Mississippi if the states use the aid to fund tax cuts “rests on an incorrect reading” of the statute, the agency told an appeals court.

The states challenged the American Rescue Plan Act’s “offset provision,” which says states can’t use the federal money to either directly or indirectly offset a reduction in net tax revenue. A federal trial court in Texas held in April that the provision “prohibits tax cuts altogether,” making it unconstitutionally coercive and in violation of anti-commandeering ...