Business group joins New Hampshire lawsuit over use of federal relief funds
(The Center Square) – A national business group is backing New Hampshire’s legal challenge to the Biden administration’s rule barring states from using federal pandemic relief funds to cut taxes.
In an amicus brief filed in support of the state’s suit challenging the rules, the National Federation of Independent Businesses said it is “concerned that the tax mandate in the American Rescue Plan Act will prevent states from exercising their sovereign authority to tailor and implement their own tax policies, including those directly affecting businesses.”
“Many states are considering or have recently passed legislation that promotes economic recovery by easing tax burdens on businesses of all kinds, including, especially, small businesses harmed by the COVID-19 pandemic,” the group’s attorneys wrote in a court filing. “These policies and others may be stymied by the tax mandate’s prohibition on the use of federal funds to offset any decrease in a state’s tax revenue.”
In April, New Hampshire’s Attorney General joined twelve other states in a lawsuit against the Biden administration over a key element of the recently enacted $1.9 trillion coronavirus relief law that prevents states from using government aid to lower taxes.
The American Rescue Plan, which President Joe Biden signed into law last month, included about $350 billion in aid to states and local governments.
Specific rules for dispersing that money have not yet been released but the Biden administration has set basic parameters on the spending. That includes a provision preventing the relief funds from being used to “directly or indirectly offset a reduction in the net tax revenue.”
Bruce Berke, NFIB’s state director in New Hampshire, said that provision “will do nothing more than hurt small business owners” and hold back the state’s economic recovery.
“It’s one of their major concerns as they recover financially from COVID-19,” he said in a statement. “If they are not allowed to take advantage of lower taxes, it will take our state even longer to bounce back.”
Meanwhile, New Hampshire Democratic Sens. Jeanne Shaheen and Maggie Hassan are pressuring the Biden administration for more guidance on how states can spend the relief money.
“Given impending budget deadlines, New Hampshire and other states require prompt guidance from the Treasury regarding the eligible uses of state and local relief funds,” they wrote in an April 30 letter to Treasury Secretary Janet Yellen.
Yellen has said the law is not meant to be a moratorium on tax cuts and has pointed out that states can lower tax rates without using federal stimulus aid.
“Nothing in the act prevents states from enacting a broad variety of tax cuts,” Yellen wrote in March in response to inquiries from states. “It simply provides that funding received under the Act may not be used to offset a reduction in net tax revenue resulting from certain changes in state law.”
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