States Challenge Tax Cut Offset Provision

The American Rescue Plan (ARP) Act of 2021 includes the establishment of a State Fiscal Recovery Fund which appropriates $219.8 billion to states to address the continued economic effects caused by the COVID-19 pandemic. One of the restrictions established in the ARP is that states shall not “…either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase”.