Bradley attorney Bruce Ely was quoted in Bloomberg Tax on the Republican states that are suing to invalidate the ban on using relief funds to cut taxes. The U.S. Department of the Treasury released interim final rules permitting states to issue tax relief under their own tax authorities and to adjust for inflation as long as the relief amounts to no more than 1% of a state’s 2019 reporting year’s total revenue. Republican lawmakers and attorneys general are arguing Congress’ tax cut prohibition is an unconstitutional overreach into state governance and illegal in its ambiguity. The Treasury Department’s rules acknowledge that states may need clarification on specific changes, and assures further guidance on how the department will work with them on specific proposals.
That could actually help the states’ case, Ely noted.
“You run this sort of gauntlet every time you want to deliver relief to a targeted group such as small businesses,” Ely said. “It illustrates the bad tax policy behind this provision, that states are going to have to ask ‘Mother, may I?’ before they do anything.”
The original article, "States Appear Undeterred in Suing on Relief Spending Limits (1)," appeared in Bloomberg Tax on May 11, 2021.