The Wednesday decision was a blow to Republicans who had sought injunctive relief on a provision in the American Rescue Plan Act that says relief funding received by states cannot be used to offset tax cuts or credits “directly or indirectly.” The states had argued that the mandate violates the Constitution’s spending clause and the 10th Amendment.
Chief U.S. District Judge L. Scott Coogler did not rule on the merits of the plaintiffs’ arguments about the constitutionality of the law but rather only on a preliminary injunction that would have enjoined the provision. Coogler also ruled that the 13 states suing do have standing in the case, a loss for the Biden administration, which argued they did not.
In his 25-page decision, Coogler pointed out that to get a preliminary injunction, parties must show they have a substantial likelihood of success based on the merits and that they will suffer irreparable injury unless an injunction is issued, among other elements.
The judge wrote that while he would typically begin by evaluating whether the case is likely to succeed on its merits, he didn’t need to do so because the plaintiffs were not able to establish that they would suffer irreparable injury unless the court issued a preliminary injunction.
Coogler said that if states were to issue tax cuts and their relief funds were to be taken by the Treasury Department because they violated the tax mandate, it would be a “quintessentially reparable” injury.
“Indeed, if the Secretary were to recoup ARPA funds from the Plaintiff States during the pendency of this lawsuit, this Court could simply—assuming it ultimately issues a permanent injunction and declares the Federal Tax Mandate unconstitutional—order the funds returned to the Plaintiff States,” he said.
West Virginia, Alabama, Arkansas, Alaska, Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, and Utah are the plaintiffs in the case. Their lawsuit is separate from other legal action from more states targeting the provision.
The Wednesday ruling saw a different result than Ohio Attorney General Dave Yost’s lawsuit against the Biden administration.
Earlier this month, a federal judge granted Ohio a preliminary injunction and ruled that the tax mandate “falls short of the clarity” that Supreme Court precedent requires for the Constitution’s spending clause as it relates to conditional grants to states.
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