RECOMMENDED FOR PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b) File Name: 22a0245p.06 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT ┐ COMMONWEALTH OF KENTUCKY; STATE OF TENNESSEE, │ Plaintiffs-Appellees, │ > No. 21-6108 v. │ │ JANET YELLEN, in her official capacity as Secretary of the │ U.S. Department of the Treasury; RICHARD K. DELMAR, in │ his official capacity as Acting Inspector General of the U.S. │ Department of the Treasury; UNITED STATES DEPARTMENT │ OF THE TREASURY, │ Defendants-Appellants. │ ┘ Appeal from the United States District Court for the Eastern District of Kentucky at Frankfort. No. 3:21-cv-00017—Gregory F. Van Tatenhove, District Judge. Argued: July 21, 2022 Decided and Filed: November 18, 2022 Before: DONALD, BUSH, and NALBANDIAN, Circuit Judges. _________________ COUNSEL ARGUED: Daniel Winik, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants. Brett R. Nolan, OFFICE OF THE ATTORNEY GENERAL OF KENTUCKY, Frankfort, Kentucky, for Appellees. ON BRIEF: Daniel Winik, Alisa B. Klein, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants. Brett R. Nolan, Barry L. Dunn, Matthew F. Kuhn, OFFICE OF THE ATTORNEY GENERAL OF KENTUCKY, Frankfort, Kentucky, Andrée S. Blumstein, Brandon J. Smith, OFFICE OF THE ATTORNEY GENERAL AND REPORTER OF TENNESSEE, Nashville, Tennessee, for Appellees. Paul D. Clement, KIRKLAND & ELLIS LLP, Washington, D.C., Joseph D. Henchman, NATIONAL TAXPAYERS UNION FOUNDATION, Washington, D.C., Sheng Li, NEW CIVIL LIBERTIES ALLIANCE, Washington, D.C., Drew C. Ensign, OFFICE OF THE ATTORNEY GENERAL OF ARIZONA, Phoenix, Arizona, for Amici Curiae. No. 21-6108 Commonwealth of Ky., et al. v. Yellen, et al. Page 2 BUSH, J., delivered the opinion of the court in which DONALD, J., joined in full, and NALBANDIAN, J., joined in part. NALBANDIAN, J. (pp. 43–51), delivered a separate opinion concurring in part and dissenting in part. _________________ OPINION _________________ JOHN K. BUSH, Circuit Judge. In response to the grave economic challenges posed by COVID-19, Congress enacted the American Rescue Plan Act of 2021 (“ARPA” or “the Act”). Pursuant to Congress’s spending power, ARPA set aside $195.3 billion in stimulus funds, to be distributed by the Treasury Department to states and the District of Columbia. This appeal concerns a challenge brought by Kentucky and Tennessee (“the States”) to what they allege is an ambiguous, coercive, and commandeering condition attached to those funds. Specifically, to get the money, the States had to certify that they would comply with the Act’s “Offset Provision.” Its terms bar the States from enacting tax cuts and then using ARPA funds to “directly or indirectly offset a reduction in [their] net tax revenue” resulting from such tax cuts. 42 U.S.C. § 802(c)(2)(A). And a related portion of the Act explains that should a State violate the Offset Provision, Treasury may initiate a recoupment action to recover the misused funds. 42 U.S.C. § 802(e)(1)–(2). What the Offset Provision actually means, however, is the subject of grave dispute. Because money is fungible, enacting any tax cut and then spending ARPA funds could be construed, the States say, as having impermissibly used …
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