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11th Circuit Affirms Permanent Injunction Against U.S. Treasury that Protects State Tax Cuts

January 20, 2023

(Anchorage, AK) – The U.S. Court of Appeals for the 11th Circuit affirmed a permanent injunction from a lower court benefiting states this morning. It held that the offset provision in the American Rescue Plan Act is unconstitutional under the Spending Clause as it prohibits states from using Rescue Plan funds to directly or indirectly offset a reduction in their net tax revenue. It also held that the provision injured states’ sovereignty.

The Act appropriated $195.3 billion to make payments to each of the fifty states and the District of Columbia, to respond to the health and economic emergency of COVID-19. But the Act also contained restrictions on the states receiving the funds.

In 2021, Alaska Attorney General Treg Taylor joined a 13-state, bipartisan coalition in filing suit to protect the well-established and critical taxing authority of states – in this case, the power to lower State taxes for their residents. That offset provision prohibits states from using Rescue Plan funds “to either directly or indirectly offset a reduction in [their] net tax revenue” that results from a change in law that “reduces any tax.”

The lawsuit – led by West Virginia Attorney General Patrick Morrisey, Alabama Attorney General Steve Marshall, and Arkansas Attorney General Leslie Rutledge – argues federal treasury officials cannot force states to relinquish control of their taxing authority in return for much-needed economic aid related to COVID-19. The states take specific issue with a stimulus bill provision that the coalition refers to as “one of the most egregious power grabs by the federal government in the nation’s history.”

“The opinion by the 11th Circuit today highlights the importance of the State's ongoing efforts to protect states’ sovereign rights in the federal arena. This case reinforces that federal executive agencies, like the U.S. Department of Treasury, cannot use generic delegation language to operate outside of the statutory authority on major questions,” said Alaska Attorney General Treg Taylor. “The Spending Clause requires that Congress speak clearly so states can make informed decisions about federal funding conditions. My office appreciates the diligent efforts by the Attorneys General offices in West Virginia and Alabama on leading the briefs.”

Alaska Revenue Commissioner Adam Crum remarked on the affirmed opinion. “This ruling from the 11th Circuit is a win for states’ rights and sovereignty, reasserting that the power of taxation is essential to state governments, and not subject to unconstitutional provisions that violate the Spending Clause,” Crum said.

The attorneys general had argued that the mandate could be used to claw back a share of a state’s stimulus allotment. This creates an impermissible chilling effect on state lawmakers’ willingness to reduce the tax burdens on their citizens.

The lawsuit sets forth charges of unconstitutional exercise of federal power, specifically violations of the 10th Amendment, the conditional spending doctrine and the anti-commandeering doctrine.

Alaska joined the West Virginia-Alabama-and Arkansas-led lawsuit with support from Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota and Utah.

Read the 11th Circuit Opinion (239KB PDF).

For more information, contact Chief Assistant Attorney General for the Oil and Gas Section, Mary Gramling at

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Department Media Contacts: Communications Director Patty Sullivan at (907) 269-6368 desk, cell (907) 310-7490 or