Federal Court Rules in Favor of Tennessee and Kentucky, Halts American Rescue Plan Tax Mandate

September 28, 2021

A U.S. district court has ruled in favor of Tennessee Attorney General Herbert H. Slatery III and Kentucky Attorney General Daniel Cameron in their lawsuit to stop the Biden Administration from enforcing a tax mandate in the American Rescue Plan Act.

The American Rescue Plan Act, which was signed into law on March 11, 2021, appropriated $200 billion to state governments to assist with COVID-19 relief. As a condition of receiving the aid, the Act required states to comply with a tax mandate preventing them from lowering taxes for their citizens for four years. Tennessee and Kentucky argued that the mandate is unconstitutional and will prevent state legislatures from enacting beneficial tax policies.

In its decision, the court ruled that the tax mandate is unconstitutional. The court writes, “Thus, where the federal government unduly influences the States’ power to set their own tax policies, the federal government oversteps its bounds. Not only does this threaten the dual nature of our federalist system, but such federal overreach threatens individual liberties that ‘derive from the diffusion of sovereign power.’”

Read the full court ruling on TN.gov.