State of West Virginia v. U.S. Department of the Treasury

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[PUBLISH]

United States Court of Appeals

For the Eleventh Circuit

____________________

No. 22-10168

____________________

STATE OF WEST VIRGINIA, by and through Patrick Morrisey,

Attorney General of the State of West Virginia,

STATE OF ALABAMA, by and through Steve Marshall,

Attorney General of the State of Alabama,

STATE OF ARKANSAS, by and through Leslie Rutledge,

Attorney General for the State of Arkansas,

STATE OF ALASKA, by and through Treg R. Taylor,

Attorney General of the State of Alaska,

STATE OF FLORIDA, by and through Ashley Moody,

Attorney General for the State of Florida,

STATE OF IOWA,

STATE OF KANSAS, by and through Derek Schmidt,

Attorney General for the State of Kansas,

STATE OF MONTANA, by and through Austin Knudsen,

Attorney General of the State of Montana,

STATE OF NEW HAMPSHIRE,

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2 Opinion of the Court 22-10168

STATE OF OKLAHOMA, by and through Mike Hunter,

Attorney General of the State of Oklahoma,

STATE OF SOUTH CAROLINA, by and through Alan Wilson,

Attorney General of the State of South Carolina,

STATE OF SOUTH DAKOTA, by and through Jason R. Ravns-

borg,

Attorney General of the State of South Dakota,

STATE OF UTAH, by and through Sean Reyes,

Attorney General of the State of Utah,

Plaintiffs-Appellees,

versus

U.S. DEPARTMENT OF THE TREASURY,

SECRETARY, U.S. DEPARTMENT OF THE TREASURY,

ACTING INSPECTOR GENERAL OF THE

DEPARTMENT OF THE TREASURY,

Defendants-Appellants.

____________________

Appeal from the United States District Court

for the Northern District of Alabama

D.C. Docket No. 7:21-cv-00465-LSC

____________________

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22-10168 Opinion of the Court 3

Before LUCK, BRASHER, and ED CARNES, Circuit Judges.

BRASHER, Circuit Judge:

The Constitution does not give the federal government au-

thority to require states to enact the laws or policies that Congress

prefers. But it does give Congress the power of the purse. The

Spending Clause of the U.S. Constitution grants Congress the

power to impose taxes and borrow money to “pay the Debts and

provide for the . . . general Welfare of the United States.” U.S.

Const. art. I, § 8, cl. 1. Although the federal government cannot

control state conduct directly, Congress often uses its power to tax

and spend as a work-around—offering federal funds in exchange

for states establishing preferred programs or enacting favored laws.

This appeal is about one of the limits of that authority. Thir-

teen states sued the Treasury Secretary and related officials to chal-

lenge a tax offset provision in the American Rescue Plan Act, a

coronavirus stimulus package passed by Congress in 2021. That off-

set provision prohibits states from using Rescue Plan funds “to ei-

ther directly or indirectly offset a reduction in [their] net tax reve-

nue” that results from a change in law that “reduces any tax.” 42

U.S.C. § 802(c)(2)(A). The States argued that this “tax mandate” ex-

ceeds Congress’s authority under the Constitution. The district

court agreed and permanently enjoined enforcement of the offset

provision. The Secretary appealed.

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4 Opinion of the Court 22-10168

We must decide two questions that the district court re-

solved in favor of the States. First, we must decide whether the

States’ challenge presents a justiciable controversy. Second, if any

of the States’ claims are justiciable, we must decide whether the

offset provision is unconstitutional. We believe the district court

answered both questions correctly. Specifically, we conclude that

the States’ challenge is justiciable and that the condition imposed

by the offset provision is not sufficiently ascertainable. Because we

conclude that this claim is both justiciable and successful, we do

not address the States’ other claims.

I.

The seeds of this controversy were sown when Congress

passed the American Rescue Plan Act of 2021, a $1.9 trillion stimu-

lus package aimed at mitigating the economic and public health ef-

fects caused by the coronavirus pandemic. Pub. L. No. 117-2, 135

Stat. 4. President Biden signed the bill into law on March 11, 2021.

The President described the legislation as a tool for “rebuilding the

backbone of this country and giving people in this Nation . . . a

fighting chance.” Remarks on Signing the American Rescue Plan

Act of 2021, 2021 Daily Comp. Pres. Doc. 220 (Mar. 11, 2021).

The Rescue Plan is a voluminous Act spanning hundreds of

pages. See Pub. L. No. 117-2, 135 Stat. 4. Central to this appeal, the

Act appropriated $195.3 billion to make payments to each of the

fifty states and the District of Columbia, 42 U.S.C. § 802(b)(3)(A),

which the states may use for four enumerated purposes: (1) “to

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22-10168 Opinion of the Court 5

respond to the public health emergency” caused by the coronavirus

pandemic or “its negative economic impacts”; (2) to support essen-

tial workers; (3) to provide “government services to the extent”

that the pandemic reduced states’ revenues; and (4) to invest in in-

frastructure, id. § 802(c)(1)(A)–(D).

But the Act contains some fine print––it imposes several ad-

ditional restrictions on the states as a condition of receiving funds.

Relevant here, states cannot “use [Rescue Plan] funds . . . to either

directly or indirectly offset a reduction in the[ir] net tax revenue”

resulting from a change in state law “during the covered period

that reduces any tax . . . or delays the imposition of any tax or tax

increase.” Id. § 802(c)(2)(A) (emphasis added). To receive the fed-

eral funds, a state must certify that it needs the payment to carry

out one of the Act’s four enumerated purposes and will comply

with this offset provision. Id. § 802(d)(1). States must also provide

a “detailed accounting of . . . all modifications to [their] . . . tax rev-

enue sources during the covered period.” Id. § 802(d)(2). The “cov-

ered period” began on March 3, 2021, and “ends on the last day of

the [state’s] fiscal year . . . in which all [Rescue Plan] funds . . . have

been” spent by the state or have been recovered by or returned to

the Treasury Secretary. Id. § 802(g)(1). The Secretary can recoup

any funds from the states used in violation of Section 802(c)’s offset

provision. Id. § 802(e). The Act provides that funds appropriated

for payments to the states will remain available through December

31, 2024. Id. § 802(a)(1).

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6 Opinion of the Court 22-10168

Some states signed on the dotted line. But on March 31,

2021, thirteen states 1 sued in the United States District Court for

the Northern District of Alabama, challenging Section 802(c)’s off-

set provision, or so-called “tax mandate.” The complaint averred

three claims: first, that Section 802(c)’s offset provision is an uncon-

stitutionally ambiguous and coercive condition under the Spending

Clause; second, that the offset provision violates the Tenth Amend-

ment’s anti-commandeering doctrine; third, that the harms alleged

in the first two counts entitle the States to declaratory relief under

28 U.S.C. § 2201.

Two weeks later, while their complaint remained pending,

the States sought to preliminarily enjoin the offset provision’s en-

forcement, arguing that they needed immediate relief before sub-

mitting the certification required by Section 802(d)(1). The district

court denied that motion. It concluded that the States had met the

three standing requirements––injury-in-fact, causation, and re-

dressability. It also found that the States sufficiently alleged a “cred-

ible threat” of enforcement in the form of a recoupment action.

West Virginia v. U.S. Dep’t of Treasury, No. 7:21-cv-00465-LSC,

2021 WL 2952863, at *7 (N.D. Ala. July 14, 2021). But the district

court determined that there was “virtually no likelihood” that the

1 The thirteen states were Alabama, Alaska, Arkansas, Florida, Iowa, Kansas,

Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, Utah,

and West Virginia. The States sued the Treasury Department, Treasury Sec-

retary, and Inspector General of the Treasury Department. We will refer to

the plaintiffs as the States and the defendants as the Secretary.

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22-10168 Opinion of the Court 7

Secretary would recoup any Rescue Plan funds before the ultimate

resolution of the case. Id. at *9. Because the States could not estab-

lish a likelihood of irreparable harm during the pendency of the

lawsuit, the district court did not issue a preliminary injunction.

On May 17, 2021, before the district court ruled on the

States’ motion for preliminary injunction, the Treasury Depart-

ment issued an interim final rule to clarify the Rescue Plan’s con-

tours and scope. See Coronavirus State and Local Fiscal Recovery

Funds, 86 Fed. Reg. 26786 (May 17, 2021). Recognizing that

“money is fungible,” the interim final rule creates a framework for

deciding whether a state has improperly offset a reduction in net

tax revenue with Rescue Plan funds. Id. at 26807–11. The rule

makes clear that “failure to comply with the [offset provision’s] re-

strictions on use . . . may result in recoupment of funds.” Id. at

26811 (footnote omitted). And the rule provides a detailed recoup-

ment procedure. Id. at 26811–12.

The rule sets the net tax revenue baseline for judging com-

pliance with the offset provision at “fiscal year 2019 tax revenue

adjusted for inflation.” Id. at 26808. It provides a four-part process

to “determin[e] whether, and the extent to which, Fiscal Recovery

Funds have been used to offset a reduction in net tax revenue” as

compared to the 2019 baseline. Id. at 26807. As part of this rubric,

recipient states must “identify and value the changes in law, regu-

lation, or interpretation that would result in a reduction in net tax

revenue.” Id. If one of these changes results in a reduction from the

2019 baseline as adjusted for inflation, then a state must “identify

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8 Opinion of the Court 22-10168

sufficient funds from sources other than the Fiscal Recovery Funds

to offset the reduction in net tax revenue.” Id. (emphasis added).

Permissible funding sources to offset a reduction in net tax revenue

include “organic growth, increases in revenue (e.g., an increase in

a tax rate), and certain cuts in spending.” Id. But the rule prohibits

recipient states from offsetting reductions in net tax revenue by

cutting spending “in an area where” they had “spent Fiscal Recov-

ery Funds.” Id. at 26809.

Shortly thereafter, ten of the thirteen States 2 stipulated that

they had certified their compliance with the offset provision to the

Secretary, as required by Section 802(d), and had received Rescue

Plan funds. Moreover, all thirteen States enacted tax-related laws

(e.g., credits, exemptions, phaseouts, reductions) during the cov-

ered period.

The States moved for a permanent injunction and declara-

tory judgment. This time, the district court granted the States’ mo-

tion and awarded them a permanent injunction. Like before, the

district court concluded that the States had standing to sue. Turn-

ing to the merits, the district court reasoned that the offset provi-

sion was unconstitutionally ambiguous under the Spending

Clause. Noting that (1) “[m]oney is fungible” and (2) the Act did

not flesh out what “directly or indirectly” means, the district court

concluded that receiving any Rescue Plan money could potentially

2 The ten states were Alabama, Arkansas, Alaska, Florida, Iowa, Kansas, Mon-

tana, New Hampshire, Utah, and West Virginia.

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22-10168 Opinion of the Court 9

constitute an indirect offset “in [a state’s] net tax revenue from a

change in state law or policy.” West Virginia v. U.S. Dep’t of Treas-

ury, 571 F. Supp. 3d 1229, 1250 (N.D. Ala. 2021). The Rescue Plan,

the district court observed, left states holding the bag, with “no

guidance on critical interpretive questions,” like how they can

avoid indirectly offsetting net tax revenue with recovery funds. Id.

at 1253. The Act is therefore inherently ambiguous, and that ambi-

guity may disincentivize the States in a way that unconstitutionally

infringes on state sovereignty.

Addressing the interim rule, the district court determined

that it did not cure the Act’s constitutional defects. The district

court explained that the Secretary appeared to concede that a fed-

eral rule cannot remedy a statute’s facial unconstitutionality. The

district court also believed that the rule was still too ambiguous on

certain points.

Finding that (1) the States “suffered an irreparable injury,”

(2) no adequate remedy at law could “compensate for that injury,”

(3) balancing the parties’ hardships favored the States, and (4) an

injunction would serve the public interest, the district court perma-

nently enjoined the Secretary from enforcing the offset provision.

Id. at 1255 (quotation omitted). The district court did not reach the

States’ coercion and anti-commandeering concerns. Nor did it en-

ter a declaratory judgment for the States because the permanent

injunction would fully rectify the harm.

The Secretary timely appealed. The Secretary also imple-

mented a final rule on January 27, 2022, which did not materially

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10 Opinion of the Court 22-10168

differ from the interim final rule. See Coronavirus State and Local

Fiscal Recovery Funds, 87 Fed. Reg. 4338 (Jan. 27, 2022).

II.

We will uphold a district court’s decision to enter a perma-

nent injunction unless we perceive an abuse of discretion. See Jones

v. Governor of Fla., 975 F.3d 1016, 1028 (11th Cir. 2020). We re-

view underlying legal conclusions and a challenged statute’s con-

stitutionality de novo, but factual findings for clear error. Id.; Frese-

nius Med. Care Holdings, Inc. v. Tucker, 704 F.3d 935, 939 (11th

Cir. 2013).

III.

The States argue that the offset provision is unconstitutional

for three independent reasons: first, the condition it imposes is not

ascertainable under the Spending Clause; second, it is coercive un-

der the Spending Clause; third, it violates the Tenth Amendment

by unlawfully commandeering the States. Conversely, the Secre-

tary contends that the suit is not justiciable and that, on the merits,

the offset provision violates neither the Spending Clause nor the

Tenth Amendment. Because we agree with the district court that

(1) the suit is justiciable and (2) the condition imposed by the offset

provision is not ascertainable, we do not address the States’ remain-

ing constitutional claims. We will start with the Secretary’s justici-

ability arguments and then address the merits of the States’ ascer-

tainability claim.

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22-10168 Opinion of the Court 11

A.

The Secretary contends that this case does not present a jus-

ticiable controversy and that the “posture of this suit is unprece-

dented.” Appellants’ Br. at 7. The Secretary makes two arguments

on this front. First, she argues that the States lack standing to chal-

lenge the offset provision because the Secretary has not initiated a

recoupment action against any of them. Thus, so the argument

goes, because our interpretation of the offset provision would oc-

cur in a hypothetical context, it would constitute an improper ex-

ercise of judicial authority under Article III of the Constitution. Sec-

ond, the Secretary’s argument suggests that the States’ challenge is

moot because the Secretary’s recent regulation makes it unlikely

that the offset provision will be enforced against the States. The

reasoning would be that, because the regulation adopts a limiting

construction of the offset provision, the States are unlikely to act in

a way that will result in a recoupment action going forward.

We address each of these arguments in turn. Although we

recognize these arguments carry some persuasive force, we con-

clude that the States have standing and that the Secretary’s regula-

tion does not moot their ascertainability challenge.

1.

We start with standing. We assess Article III standing at the

time the complaint is filed. See Trichell v. Midland Credit Mgmt.,

Inc., 964 F.3d 990, 1003 (11th Cir. 2020). “Standing doctrine func-

tions to ensure, among other things, that the scarce resources of

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12 Opinion of the Court 22-10168

the federal courts are devoted to those disputes in which the parties

have a concrete stake.” Friends of the Earth, Inc. v. Laidlaw Env't

Servs. (TOC), Inc., 528 U.S. 167, 191 (2000). Standing “in no way

depends on the merits” of the plaintiff’s claim. Warth v. Seldin, 422

U.S. 490, 500 (1975). Instead, the “irreducible constitutional mini-

mum of standing” requires three elements: (1) an “injury in fact”

that is “concrete and particularized” and “actual or imminent,” (2)

a “causal connection between the injury and the conduct com-

plained of,” and (3) redressability. Lujan v. Defs. of Wildlife, 504

U.S. 555, 560–61 (1992) (quotations omitted).

Starting with injury-in-fact, the States have two theories for

why they have suffered an actual and concrete harm. 3 First, the

States argue that their inability to ascertain the condition imposed

by the offset provision has already infringed, and continues to in-

fringe, on the States’ sovereign prerogatives as parties to a contract

with the federal government. Second, the States argue that they are

subject to the threat of a recoupment action if they spend funds

contrary to the offset provision. We agree that these theories es-

tablish that the States have suffered an injury-in-fact.

First, we conclude that the offset provision’s ambiguity has

injured, and continues to injure, the States’ sovereign interests. The

States are challenging a so-called “unconstitutional condition” that

was attached to federal funding. See Bourgeois v. Peters, 387 F.3d

1303, 1324 (11th Cir. 2004). Though not “all contract-law rules

3 The States also raise other grounds for injury-in-fact, which we do not reach.

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22-10168 Opinion of the Court 13

apply to Spending Clause legislation,” Barnes v. Gorman, 536 U.S.

181, 186 (2002), we can analogize the relationship between Con-

gress and the States in Spending Clause situations to that between

contracting parties. In essence, the States say that they were co-

erced into accepting an offer with an unascertainable condition,

they did accept the offer with the condition, and the terms of the

resulting contract are presently in force and effect. Indeed, the Sec-

retary concedes that the offset provision limits the ways in which

the States can spend funds.

This injury to state sovereignty is, to be sure, intangible. But

it is nonetheless concrete. States “are not normal litigants for the

purposes of invoking federal jurisdiction” and may suffer injuries

to their sovereignty that private parties do not. Massachusetts v.

EPA, 549 U.S. 497, 518 (2007). That the offset provision restricts the

ways in which states may reduce tax receipts or change tax rates

heightens its effect on state sovereignty. See McCulloch v. Mary-

land, 17 U.S. (4 Wheat.) 316, 428 (1819) (noting that the power to

tax “is essential to the very existence of government”).

Moreover, this injury has already occurred and is continu-

ing. The offset provision is in effect until the “last day of the [last]

fiscal year” in which a state spends the Act’s funds or returns them

to the Secretary. 42 U.S.C. § 802(g)(1). And, by the Act’s terms, the

funds are available until December 31, 2024. Id. § 802(a)(1). All the

States have now accepted the deal with its allegedly unconstitu-

tional condition, and that condition is a present and continuous in-

fringement on state sovereignty. Any state that “has failed to

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14 Opinion of the Court 22-10168

comply” with the offset provision is “required to repay to the Sec-

retary an amount equal to the amount of funds used in violation of

[the Act].” Id. § 802(e). To the extent the States seek a remedy to

this sovereign injury, this litigation is not a pre-enforcement chal-

lenge. Instead, the States seek to remedy an injury that has already

happened and that the States continue to experience.

We are not the first court of appeals to address this theory

of state standing to sue over the offset provision, and we find the

Ninth Circuit’s reasoning on this point particularly persuasive.

Analogizing to contract law, the Ninth Circuit reasoned that “[j]ust

as a contract can be challenged under state law for containing am-

biguous terms or being a product of duress, so too . . . the quasi-

contractual funding offer at issue here can be challenged by Ari-

zona at the outset for offering conditions that are unconstitution-

ally ambiguous or coercive.” Arizona v. Yellen, 34 F.4th 841, 853

(9th Cir. 2022). Because the injury to state sovereignty occurs when

a state must accept or reject an unascertainable funding offer, the

state does “not need to first violate a condition of an allegedly un-

constitutional contract to have standing to challenge it.” Id.; see

also Henry v. Att’y Gen., Ala., 45 F.4th 1272, 1288 (11th Cir. 2022).

Turning to the States’ second theory for an injury-in-fact, the

States say that they are injured by the threat of a recoupment pro-

ceeding. The States submitted evidence that they have enacted tax

cuts and related revenue laws that could reduce their net tax reve-

nue and trigger the offset provision, which the Secretary is

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22-10168 Opinion of the Court 15

committed to enforcing. This evidence, the States say, establishes

their standing for a pre-enforcement challenge to the offset provi-

sion.

We also agree that the States have an injury-in-fact under

this pre-enforcement theory. A plaintiff need not “expose himself

to liability” to have standing to challenge the enforcement of a law.

MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 128–29 (2007).

Instead, in a pre-enforcement constitutional challenge, the injury-

in-fact requirement can be satisfied by establishing “a realistic dan-

ger of sustaining direct injury” from “the statute’s operation or en-

forcement.” Ga. Latino All. for Hum. Rts. v. Governor of Ga., 691

F.3d 1250, 1257 (11th Cir. 2012) (quotations omitted) (analyzing a

constitutional challenge to a state statute). A plaintiff must establish

“(1) that he has ‘an intention to engage in a course of conduct ar-

guably affected with a constitutional interest,’ (2) that his conduct

is ‘arguably proscribed,’ and (3) that he is subject to ‘a credible

threat of enforcement.’” Speech First, Inc. v. Cartwright, 32 F.4th

1110, 1119–20 (11th Cir. 2022) (quoting Susan B. Anthony List v.

Driehaus, 573 U.S. 149, 159, 162 (2014)).

We believe the States have met the test for a pre-enforce-

ment lawsuit. There is no question that the States intend to con-

tinue cutting taxes and modifying their overall revenue. All the

States enacted revenue-related laws dealing with, among other

things, tax credits, exemptions, phaseouts, and reductions after

March 3, 2021, the beginning of the Rescue Plan’s “covered pe-

riod.” Moreover, the States submitted a declaration by Alabama

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16 Opinion of the Court 22-10168

State Senator Albritton, who noted that state legislatures must en-

sure that expenditures do not exceed estimated revenues and re-

sources. This balancing exercise requires understanding how tax

receipts will affect overall revenue, and state legislators often pass

tax-related laws to assist with budget balancing and to benefit con-

stituents. There is also no dispute that the Secretary intends to en-

force the offset provision against the States if she thinks they have

violated it. The Secretary’s interim final rule underscores that re-

coupment actions are still on the table if States impermissibly offset

reductions in net tax revenue with Rescue Plan funds. Coronavirus

State and Local Fiscal Recovery Funds, 86 Fed. Reg. at 26808 (de-

scribing how the interim final rule “implements a process for re-

couping Fiscal Recovery Funds” used in violation of the Act).

The Secretary argues that the offset provision does not pro-

scribe the States’ conduct because “its text makes clear” that States

may cut taxes so long as they “pay” for a tax cut without using Res-

cue Plan funds. Appellants’ Reply Br. at 2. This argument—that the

offset provision is clear—goes to the merits of the States’ claims,

not their standing to raise them. When we assess standing, we

“‘must be careful not to decide the questions on the merits for or

against the plaintiff, and must therefore assume that on the merits

the plaintiffs would be successful in their claims.’” Culverhouse v.

Paulson & Co., 813 F.3d 991, 994 (11th Cir. 2016) (quoting City of

Waukesha v. EPA, 320 F.3d 228, 235 (D.C. Cir. 2003)).

Reviewing the text of the statute for standing purposes, we

believe the States have shown that the offset provision arguably

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22-10168 Opinion of the Court 17

proscribes their conduct. The offset provision prohibits states from

using federal funds to “either directly or indirectly offset a reduc-

tion in the[ir] net tax revenue” resulting from a change in state law

“during the covered period that reduces any tax . . . or delays the

imposition of any tax or tax increase.” 42 U.S.C. § 802(c)(2)(A).

Money is fungible. By prohibiting both direct and “indirect” offsets,

the provision arguably proscribes a state from accepting the money

if it enacts any tax cut. The only way for the States to achieve une-

quivocal compliance with the Act is to refrain from cutting taxes

during the covered period.

Having concluded that the States have suffered an injury-in-

fact, we turn to the second and third elements of standing. The Sec-

retary does not contest traceability and redressability, but we will

address them anyway given our obligation to ensure our jurisdic-

tion. See, e.g., Bischoff v. Osceola Cnty., 222 F.3d 874, 877–78 (11th

Cir. 2000); Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 410

(11th Cir. 1999). The States’ injury is “fairly . . . trace[able]” to the

challenged conduct, namely, the promulgation and enforcement of

the allegedly unconstitutional offset provision. Lujan, 504 U.S. at

560 (alteration in original). And this injury is plainly redressable.

No one disputes that—absent court intervention—the States are

bound to comply with the offset provision and that the Secretary

intends to enforce it going forward. Like any other contracting

party bound to an objectionable provision in a contract, the States’

injury can be redressed by declaring that provision null and void.

This is a standard remedy when a single provision of a contract is

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18 Opinion of the Court 22-10168

contrary to public policy. See Restatement (Second) of Contracts §

178 & cmt. f (Am. L. Inst. 1981); id. § 183. And it redresses the

States’ injury by preventing the enforcement of the objectionable

provision. See Harrell v. The Fla. Bar, 608 F.3d 1241, 1257 (11th

Cir. 2010) (“As for the redressability prong, if the challenged rules

are stricken as unconstitutional, Harrell simply need not contend

with them any longer.”).

In short, the States argue that the agreement’s terms are not

“reasonably certain,” Restatement § 33(1), because no one knows

what a “reduction in the net tax revenue” and “indirectly offset”

mean. They contend that Congress cannot craft a deal that explains

“only some of the strings attached.” Appellees’ Br. at 33. And they

argue that, because of the offset provision’s ambiguity, they cannot

determine at what point a breach will occur. Id. § 33(2). The States

request a judicial remedy so that they do not have to comply with

any aspect of the offset provision, which they contend is unenforce-

able in all respects. The States have standing to make these claims.

2.

We turn now to the Secretary’s related (and somewhat im-

plicit) argument that, even if the States had standing to file this suit

initially, it has become moot. “Mootness can occur due to a change

in circumstances, or . . . a change in the law.” Coral Springs St. Sys.,

Inc. v. City of Sunrise, 371 F.3d 1320, 1328 (11th Cir. 2004). The

Secretary says that she has disclaimed the broad reading of the off-

set provision that would stop the States from cutting taxes.

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Accordingly, the Secretary does not intend to enforce the provision

to recoup money based on tax cuts “as long as [the States] can pay

for the tax cuts using their own funds.” Appellants’ Reply Br. at 2.

The Secretary explains that she has formalized this reading of the

offset provision in a regulation.

We cannot say that the Secretary’s decision to disclaim a

broad reading of the offset provision moots the States’ ambiguity

challenge. There is no doubt that the Secretary’s narrow construc-

tion of the offset provision reduces its effect on state sovereignty.

But the justiciability question is not quantitative; “rather, the focus

is on the qualitative nature of the [plaintiff’s] injury, regardless of

how small the injury may be.” See Salcedo v. Hanna, 936 F.3d 1162,

1172 (11th Cir. 2019) (quotation omitted). Even if the Secretary

gives it a narrow reading, the offset provision continues to limit

how the States may use federal funds. To the extent the limitation

is unascertainable, it remains an unconstitutional condition on

those funds.

The Secretary cites the Eighth Circuit’s decision that states

do not have standing to challenge the constitutionality of the

“broad interpretation” of the offset provision. Missouri v. Yellen,

39 F.4th 1063, 1069–70 (8th Cir. 2022). But we think this case is dis-

tinguishable. In Missouri, unlike in this case, the state was “not

challenging the Offset Restriction as written, but rather a specific

potential interpretation of the provision.” Id. at 1069. The Secretary

disclaimed that interpretation of the provision, and the court rea-

soned that it could not “declare, in the abstract, what a statute does

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20 Opinion of the Court 22-10168

not mean.” Id. at 1070. Here, on the other hand, the States are chal-

lenging the offset provision’s ascertainability. They seek not a judi-

cial determination of what it means, but a judicial determination

that it is too ambiguous to be enforced in any respect. Even if we

were to extend the Eighth Circuit’s reasoning on the standing ques-

tion to apply in the mootness context, the Secretary’s regulation

and litigating position do not moot that claim.

The Sixth Circuit has concluded that the Secretary’s em-

brace of a narrower construction, as represented by her regulation

and litigation position, mooted certain state challenges to the offset

provision. See Ohio v. Yellen, 53 F.4th 983, 990–92 (6th Cir. 2022);

Kentucky v. Yellen, 54 F.4th 325, 340–41 & n.11 (6th Cir. 2022). The

court explained that the Secretary had disclaimed enforcement of

the offset provision except in limited circumstances. Kentucky, 54

F.4th at 340–41. Addressing the states’ injuries, the court reasoned

that “because the States failed to provide evidence that they intend

to specifically violate the Rule (and provoke recoupment), and be-

cause Treasury established that there is no realistic prospect it will

enforce the States’ expansive interpretation of the Offset Provision,

we deem the imminent-recoupment and sovereign-authority the-

ories moot.” Id. at 341.

We disagree with this reasoning. A case is moot “only when

it is impossible for a court to grant any effectual relief whatever to

the prevailing party.” Knox v. Serv. Emps. Int’l Union, Loc. 1000,

567 U.S. 298, 307 (2012) (quotations omitted). Although the Secre-

tary has adopted a narrow construction of the offset provision, she

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22-10168 Opinion of the Court 21

has not disclaimed an intent to enforce the provision. Instead, she

has done the opposite, adopting a regulation that warns the States

that they must comply with a provision that they contend is un-

constitutional in all respects. We see no basis in mootness doctrine

to conclude that the Secretary’s willingness to provide a lesser rem-

edy (a narrower construction) to address the States’ constitutional

challenge moots the States’ request for a more substantial remedy

(facial invalidation). “Even with the Rules, the States still need in-

junctive and declaratory relief to avoid Treasury’s enforcement of

ARPA’s unconstitutionally vague conditions.” Kentucky, 54 F.4th

at 362 (Nalbandian, J., concurring in part and dissenting in part).

Our answer to the mootness question would be different if

the Secretary had disclaimed an intention to enforce the allegedly

unconstitutional provision at all. Indeed, “this Court has consist-

ently held that a challenge to a government policy that has been

unambiguously terminated will be moot in the absence of some

reasonable basis to believe that the policy will be reinstated if the

suit is terminated.” Troiano v. Supervisor of Elections in Palm

Beach Cnty., 382 F.3d 1276, 1285 (11th Cir. 2004). But an agency

cannot “cure” a standardless grant of authority by “adopting in its

discretion a limiting construction.” See Whitman v. Am. Trucking

Ass’ns, 531 U.S. 457, 472 (2001). Likewise, an executive agency’s

narrow construction cannot moot a plaintiff’s constitutional chal-

lenge when the very constitutional problem is that the statute pro-

vides too vague a standard. It is “the existence, not the imposition,

of standardless requirements that causes” an injury. CAMP Legal

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22 Opinion of the Court 22-10168

Def. Fund, Inc. v. City of Atlanta, 451 F.3d 1257, 1275 (11th Cir.

2006); see also City of Lakewood v. Plain Dealer Publ’g Co., 486

U.S. 750, 757, 772 (1988) (holding that a statute “placing unbridled

discretion in the hands of a government official or agency” is un-

constitutional). Despite the Secretary’s regulation and her litigation

position adopting a narrow construction of the offset provision, the

States have a continuing interest in challenging the validity of the

offset provision, and the Secretary has a continuing interest in de-

fending its facial constitutionality.

Finally, as we have already explained, the States are not un-

differentiated members of the public seeking to enjoin the enforce-

ment of a law of general applicability. They are more like parties to

a contract, seeking to adjudicate its terms. That contract provides

funds until the end of 2024, and its obligations run until the “last

day of the [last] fiscal year” in which the funds are spent or re-

turned. 42 U.S.C. § 802(g)(1). We conclude that the States’ lawsuit

is not moot.

B.

We now turn to the merits of the States’ constitutional

claim. The States argue that the offset provision violates the Spend-

ing Clause because they cannot ascertain the condition it imposes

on Rescue Plan funds. We agree.

The Spending Clause authorizes Congress to “lay and collect

Taxes, . . . to pay the Debts and provide for the common Defence

and general Welfare of the United States.” U.S. Const. art. I, § 8, cl.

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22-10168 Opinion of the Court 23

1. This clause gives Congress a wide berth not only to tax and spend

but also to exert influence on the states by attaching strings to fed-

eral funding. See Nat’l Fed’n of Indep. Bus. v. Sebelius (NFIB), 567

U.S. 519, 576 (2012) (opinion of Roberts, C.J., joined by Breyer and

Kagan, JJ.). Congress may, within limits, compel states to “tak[e]

certain actions that [it] could not [otherwise] require them to take,”

and a state’s acceptance of the federal funds will generally consti-

tute consent to the conditions imposed by Congress. Coll. Sav.

Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S.

666, 686 (1999).

The Supreme Court’s leading authority on the limits of the

Spending Clause is Pennhurst State School and Hospital v. Halder-

man, 451 U.S. 1 (1981). There, the Supreme Court held that, by

virtue of the Spending Clause, Congress can amplify its enumer-

ated Article I powers and influence state regulatory policy by

“fix[ing] the terms on which it shall disburse federal money to the

States.” Id. at 17. In this sense, “legislation enacted pursuant to the

spending power” is a species of contract. Id. But the Court recog-

nized that this broad authority is not limitless, and Congress must

speak “unambiguously” and “with a clear voice” when it imposes

conditions on federal funds. Id. Specifically, Congress must speak

clearly enough for “the States to exercise their choice knowingly,

cognizant of the consequences of their participation.” Id. The

Court explained that a state cannot knowingly accept a condition

if it “is unable to ascertain what is expected of it.” Id.

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24 Opinion of the Court 22-10168

The Court elaborated on this ascertainability principle in

South Dakota v. Dole, 483 U.S. 203 (1987). In Dole, the Court iden-

tified five elements that conditional funding grants must satisfy to

pass constitutional muster under the Spending Clause: (1) the ex-

penditure must “advance the general welfare”; (2) any attached

condition must be “unambiguous[]”; (3) conditions must relate “to

the federal interest in particular national projects or programs”; (4)

conditions cannot violate another constitutional provision; and (5)

conditions cannot “be so coercive . . . [that] pressure turns into

compulsion.” See id. at 207–11 (quotations omitted). If the expendi-

ture or condition does not satisfy these elements, then it is uncon-

stitutional.

It is against this backdrop that we turn to the merits. The

Secretary makes three arguments for why the offset provision is a

proper exercise of Congress’s spending powers. First, the Secretary

contends that the ascertainability principle set out in Pennhurst––

and refined in Dole––is a rule of statutory construction, not a basis

for holding a congressional spending condition facially unconstitu-

tional. Second, the Secretary posits that the offset provision is clear

enough for the States to ascertain what is expected of them as a

condition of accepting funds. Third, the Secretary says that her rule

provided an ascertainable condition by resolving ambiguities in the

offset provision. We are not persuaded.

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22-10168 Opinion of the Court 25

1.

As an initial matter, the Secretary urges us to view

Pennhurst’s ascertainability principle and Dole’s “unambiguous”

requirement as rules of construction, not reasons to enjoin the en-

forcement of a spending condition. The Secretary argues that these

are merely “tool[s] of statutory interpretation” to be applied “in re-

solving concrete disputes.” Appellants’ Reply Br. at 5. We believe

our precedent compels a different result. But even if it did not, we

think Dole and basic contract principles independently demand

such a result.

We will start with our precedent. We addressed the ascer-

tainability requirement in Benning v. Georgia, which involved a

prisoner’s claim that the State of Georgia had infringed on his right

to practice his religion by denying him a kosher diet and not allow-

ing him to wear a yarmulke. See 391 F.3d 1299,1303 (11th Cir.

2004). He alleged that such conduct violated section 3 of the Reli-

gious Land Use and Institutionalized Persons Act (RLUIPA), a fed-

eral statute that prohibited state prisons receiving federal funds

from burdening prisoners’ religious freedom. Id. RLUIPA “ap-

plie[d] strict scrutiny to government actions that substantially bur-

den[ed]” prisoners’ religious exercise and waived Georgia’s sover-

eign immunity in “suits filed by prisoners to enforce” the Act. Id.

at 1304–05.

Georgia defended the lawsuit on the grounds that section 3

of RLUIPA was unenforceable because it was facially

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26 Opinion of the Court 22-10168

unconstitutional. Id. at 1303. Specifically, Georgia argued that “the

standard of least restrictive means is too ambiguous to allow a state

an informed choice.” Id. at 1305. We disagreed. We explained that

Congress must spell out a condition “clearly enough for the states

to make an informed choice.” Id. at 1306. But we concluded that

condition was ascertainable because it (1) clearly caused “states [to]

incur an obligation when they accept[ed] federal funds” and (2) im-

posed strict scrutiny, a well understood means-end test, which was

“far from ambiguous.” Id. at 1306–07. Thus, Congress validly exer-

cised its spending power in enacting the statute, even if it did not

“specifically identify and proscribe in advance every conceivable

state action that would be improper.” Id. at 1306 (quotation omit-

ted). We held that “[i]t is sufficient for the text of RLUIPA to link

unambiguously its conditions to the receipt of federal funds and

define those conditions clearly enough for the states to make an

informed choice.” Id.

The Secretary’s rule-of-construction argument is incon-

sistent with Benning. To resolve that case, we followed a core tenet

from Dole––“conditions on the state receipt of federal funds must

be unambiguous.” Id. at 1305 (citing Dole) (emphasis added). And

we applied it to Georgia’s argument that section 3 of RLUIPA was

constitutionally invalid on its face, resolving that claim on its mer-

its. See id. at 1303–04, 1313. Benning therefore established the prop-

osition that the ascertainability principle is more than a precatory

rule of construction to be used in as-applied challenges—it is a bind-

ing constitutional command.

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22-10168 Opinion of the Court 27

We think Benning is dispositive, but even if it were not, we

would still reject the Secretary’s argument on this front. The Su-

preme Court’s precedents leave little doubt that the ascertainability

requirement is more than a rule of construction. In Dole, for exam-

ple, the Supreme Court expressly stated that a spending condition

must be “unambiguous[].” 483 U.S. at 207 (quotation omitted).

Likewise in Pennhurst, the Court said Congress must speak “un-

ambiguously” when it imposes conditions on federal funds. 451

U.S. at 17. Neither Pennhurst nor Dole suggests that this clarity el-

ement is hortatory.

Similarly, Dole’s treatment of coercion buttresses our belief

that unascertainability alone can render a spending restriction fa-

cially unconstitutional. Dole made clear that coercion will some-

times rise to unconstitutional compulsion, which can render a

spending restriction unenforceable. See 483 U.S. at 211. And the

Supreme Court has enjoined spending conditions that flunked this

coercion test. See NFIB, 567 U.S. at 579–81, 588 (opinion of Rob-

erts, C.J., joined by Breyer and Kagan, JJ.); id. at 681–89 (joint dis-

sent of Scalia, Kennedy, Thomas, and Alito, JJ.). A lack of coercion

is one of the five elements that a conditional funding grant must

satisfy to pass constitutional muster under the Spending Clause.

The Dole factors are not hierarchical; none of them, not even co-

ercion, is owed preferential treatment by the courts. All five factors

are equally important and equally required. It therefore cannot be

true that the presence of coercion suffices to invalidate a spending

condition, but a lack of clarity does not.

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28 Opinion of the Court 22-10168

Finally, we think principles of contract law are also illustra-

tive. Here, Congress, the offeror, has contracted with the States,

the offeree. It is hornbook contract law that an offeree cannot ac-

cept a bargain’s terms “so as to form a contract unless the terms . .

. are reasonably certain.” Restatement (Second) of Contracts § 33(1)

(Am. L. Inst. 1981). “[R]easonably certain” terms “provide a basis

for determining” whether a breach occurred and “for giving an ap-

propriate remedy.” Id. § 33(2). Moreover, the problem of indefi-

niteness is not always a mere issue of construction in contract law;

it may go to the validity of the contract itself. See id. § 33 cmt. a

(noting that “determining whether a manifestation of intention is

intended to be understood as an offer” may require ensuring that

the agreement can “be[] given an exact meaning and that all the

performances to be rendered [are] certain”); 17A Am. Jur. 2d Con-

tracts § 188 (2022) (“Definiteness as to material matters is of the

very essence of contract law, and impenetrable vagueness and un-

certainty will not do.”). An enforceable contract “must be suffi-

ciently definite as to its essential or material terms,” including “sub-

ject matter, quantity, and duration, so that the promises and per-

formance to be rendered by each party are reasonably certain.” 17A

Am. Jur. 2d Contracts § 188 (2022) (footnotes omitted).

Accordingly, our decision in Benning compels today’s hold-

ing that ascertainability is not merely a rule of construction, but a

stand-alone constitutional requirement. Even without this prece-

dent, however, we would hold that spending restrictions imposed

by Congress must be ascertainable to be enforceable. We therefore

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22-10168 Opinion of the Court 29

reject the Secretary’s argument that a spending condition may be

facially constitutional even if it is not ascertainable outside of an as-

applied challenge.

2.

We next decide whether the condition imposed by the offset

provision is ascertainable. The States argue that they do not know

what it means to use federal funds to “directly or indirectly offset a

reduction in the[ir] net tax revenue” caused by a tax cut. The Sec-

retary says that the offset provision provides sufficient clarity about

Congress’s conditions on recovery funds. Again, we disagree with

the Secretary.

A state’s knowledge that strings attach to federal funds is

necessary, but not sufficient, for the conditions to comport with

the Spending Clause. A state must also “clearly understand . . . the

obligations” of the deal and “cannot knowingly accept conditions

of which [it is] ‘unaware’ or which” it cannot ascertain. Arlington

Cent. Sch. Dist. Bd. of Educ. v. Murphy, 548 U.S. 291, 296 (2006)

(quoting Pennhurst, 451 U.S. at 17). When reviewing a spending

condition, “we must not be guided by a single sentence or member

of a sentence, but look to the provisions of the whole law.”

Pennhurst, 451 U.S. at 18 (quotations omitted). A law must “unam-

biguously” link “its conditions to the receipt of federal funds and

define those conditions clearly enough for the states to make an

informed choice.” Benning, 391 F.3d at 1306. Otherwise, state re-

cipients would not know what rules they must follow and “what

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30 Opinion of the Court 22-10168

sort of penalties might be on the table.” Kentucky, 54 F.4th at 348

(quoting Cummings v. Premier Rehab Keller, P.L.L.C., 142 S. Ct.

1562, 1570 (2022)).

Here, the Rescue Plan’s offset provision forbids states from

using recovery funds “to either directly or indirectly offset a reduc-

tion in [their] net tax revenue . . . resulting from a change in law,

regulation, or administrative interpretation . . . that reduces any

tax.” 42 U.S.C. § 802(c)(2)(A). Certain parts of this provision are

clear enough. For example, a “change in law” refers to any law

passed or amended during the covered period, which the Act de-

fines as the period between March 3, 2021, and “the last day of the

[state’s] fiscal year . . . in which all [Rescue Plan] funds . . . have

been” spent by the state or either recovered by or returned to the

Secretary. Id. § 802(g)(1). Likewise, the Act supplies examples of

what constitutes “reduc[ing] any tax”––rate reductions, rebates, de-

ductions, or credits. Id. § 802(c)(2)(A).

But there are three aspects of the Rescue Plan that give us

pause. We do not address whether any of these aspects would in-

dependently violate the Spending Clause. But, when combined, we

believe these three aspects of the Rescue Plan are inconsistent with

the constitutional imperative that Congress’s funding conditions

be ascertainable.

First and most importantly, the offset provision does not

provide a standard against which a state can assess whether it will

reduce or has reduced net tax revenue. The prohibition on any “re-

duction in the net tax revenue” presupposes a baseline against

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22-10168 Opinion of the Court 31

which to measure a potential reduction. Reduced as compared to

what? The Rescue Plan does not offer a baseline. Although the Sec-

retary’s rule supplies a benchmark, the Rescue Plan itself does not

provide any way to determine whether net tax revenues have been

reduced.

This lack of a baseline affects whether a state policymaker

can understand and comply with the statute. Consider a hypothet-

ical state sales tax cut, for example. The state legislature predicts

that consumption will increase in the next fiscal year and enacts a

sales tax rate reduction based on its forecast that overall tax receipts

will stay the same even if the rate is lower. Suppose that the legis-

lature is correct––consumption increased so much that year-over-

year sales tax revenue stayed the same or grew despite the rate re-

duction. If the baseline is the total tax revenue—which grew or

stayed the same—then the legislature has not violated the Rescue

Plan. But if the baseline is what sales tax revenue would have been

absent the tax cut, the legislature would have effectuated a “reduc-

tion in the net tax revenue.” 42 U.S.C. § 802(c)(2)(A).

Citing Benning, the Secretary argues that the Rescue Plan

sufficiently makes clear that the States cannot use recovery funds

to finance tax cuts, even though it leaves open whether any partic-

ular tax cut may violate the provision. We disagree. In Benning, we

held that a standard like strict scrutiny is ascertainable even though

it could have difficult-to-predict applications in particular cases.

Benning, 391 F.3d at 1306–07. But the problem here is that the off-

set provision provides no standard at all. As we have explained,

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32 Opinion of the Court 22-10168

without a baseline, there is no way to assess whether a tax cut has

caused a “reduction in the net tax revenue.” 42 U.S.C. §

802(c)(2)(A). The problem is not just that the States cannot know

what the offset provision means as to a particular tax cut; it is that

the States cannot know what it means as to any tax cut. There is

no standard akin to strict scrutiny by which to assess the States’

compliance with the offset provision.

Second, the Rescue Plan’s prohibition against “either di-

rectly or indirectly offset[ting]” net tax reductions with recovery

funds exacerbates this ascertainability problem. Id.; see Kentucky,

54 F. 4th at 348–49. The Act does not define “directly or indirectly,”

so we must turn to the ordinary meaning of the words at issue. See

United States v. Silva, 443 F.3d 795, 797–98 (11th Cir. 2006). “Indi-

rect” means “not immediately resulting from an action or cause”

or “round-about.” Indirect, Oxford English Dictionary (online ed.

Dec. 2022). “Direct” denotes “[p]roceeding from antecedent to

consequent” and “undeviating in course.” Direct, Oxford English

Dictionary (online ed. Dec. 2022) An “offset” is “anything that

counterbalances, compensates, or makes up for something else.”

Offset, Oxford English Dictionary (online ed. Dec. 2022). We there-

fore agree with the States that the phrase “directly or indirectly off-

set” seems “extraordinarily expansive.” Appellees’ Br. at 26. Even

if we accept that everyone understands what constitutes a “direct”

offset, Section 802 does not explain what constitutes an “indirect”

offset.

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22-10168 Opinion of the Court 33

The Secretary’s illustrations of the difference between “di-

rect” and “indirect” offsets fail to clear this fog. The Secretary sug-

gests that she would consider a direct offset to have occurred if a

“State were simply to deposit [Rescue Plan funds] into its general

treasury in order to fill a revenue hole” created by a tax cut. Appel-

lants’ Br. at 13. Fair enough. But then the Secretary describes an

impermissible indirect offset as follows: a State reduces expendi-

tures by $2 billion to compensate for a tax cut of the same amount

and uses $2 billion in Rescue Plan funds “to pay for those expendi-

tures instead.” Id. Extrapolating from the second example, an indi-

rect offset could be boundless. Even a novice in accounting readily

grasps that balancing a budget requires offsetting revenue shortfalls

with other funds––or with expenditure cuts. Thus, because money

is fungible, the Secretary could always assert a plausible argument

that a state, after a tax cut, committed an unlawful indirect offset

of the attendant revenue shortfall.

Revisiting the Secretary’s second illustration, the “indirect”

language reasonably extends one more degree––rather than paying

for the expenditures at issue with Rescue Plan funds (one degree of

separation), a state could use those Rescue Plan funds as collateral

for a third-party loan, fund the expenditures with that loan, and re-

pay the loan with Rescue Plan money. Again, despite the two de-

grees of separation that would now exist between the recovery

funds and the offset, the Secretary could contend that an indirect

offset has still occurred. In this light, the Secretary can view any

Rescue Plan funds received by the States as “indirectly offset[ting]

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34 Opinion of the Court 22-10168

a reduction in the[ir] net tax revenue” from a change in state law.

42 U.S.C. § 802(c)(2)(A). We simply cannot pin down when an off-

set becomes attenuated enough to no longer be “indirect.”

The Secretary says that the “directly or indirectly” language

is mere statutory gloss to put the States on notice that they cannot

engage in fiscal chicanery. In this sense, the Secretary argues, Sec-

tion 802(c) would “mean the same thing” with or without that

phrase. Appellants’ Br. at 13. But we must “give effect to Congress’

express inclusions and exclusions, not disregard them.” Nat’l Ass’n

of Mfrs. v. Dep’t of Def., 138 S. Ct. 617, 631 (2018). Striving for that

clarity, we remain unable to surmount the linguistic hurdle before

us––because of the fungibility of money, Rescue Plan funds could

conceivably “indirectly offset” any reduction in net tax revenue

caused by a change in law. Thus, the States may cut taxes, but the

Rescue Plan leaves them guessing whether and how they can spend

Rescue Plan funds after the tax cut.

Third, we think the Rescue Plan’s novelty and scope com-

pound these problems. Though “[l]egislative novelty is not neces-

sarily fatal,” it raises a red flag. NFIB, 567 U.S. at 549 (opinion of

Roberts, C.J.). Indeed, “lack of historical precedent” often signals a

“severe constitutional problem.” Free Enter. Fund v. Pub. Co.

Acct. Oversight Bd., 561 U.S. 477, 505 (2010) (quotations omitted).

And we cannot ignore that Congress has aimed this novel re-

striction at each state’s entire budget and every single one of its

taxes. The States face billions of dollars in potential recoupment

actions and must ensure that every tax and tax rate comply with

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22-10168 Opinion of the Court 35

this condition. See, e.g., NFIB, 567 U.S. at 581 (opinion of Roberts,

C.J., joined by Breyer and Kagan, JJ.) (recognizing that the amount

of the budget affected by a spending restriction bears on our con-

stitutional analysis); Dole, 483 U.S. at 211–12 (holding that a con-

gressional condition on federal funds that was directed at a “rela-

tively small percentage” of a state’s federal highway funds did not

violate the Spending Clause). The Rescue Plan’s novelty and scope

make it even more important that Congress speak with a clear

voice.

Accordingly, we hold that the condition imposed by the Res-

cue Plan’s offset provision is not ascertainable and does not provide

“clear notice,” Kentucky, 54 F.4th at 352 (quoting Cummings, 142

S. Ct. at 1570), about how to comply with it, rendering it unconsti-

tutional.

3.

Having addressed justiciability and the merits, we turn now

to the Secretary’s last argument. The Secretary suggested at oral

argument that her rule salvages the offset provision, even if the text

of the statute is unconstitutionally unascertainable. Congress gave

the Secretary discretion “to issue such regulations as may be neces-

sary or appropriate to carry out [the Act].” 42 U.S.C. § 802(f). The

Secretary’s rule specifies a baseline for determining whether a “re-

duction in . . . net tax revenue,” 42 U.S.C. § 802(c)(2)(A), has oc-

curred. See 86 Fed. Reg. at 26808 (“The baseline will be calculated

as fiscal year 2019 (FY 2019) tax revenue indexed for inflation in

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36 Opinion of the Court 22-10168

each year of the covered period . . . .”). The rule also “establishes a

step-by-step process” for deciding whether a state has directly or

indirectly offset a net tax revenue reduction with recovery funds.

Id. at 26807. There is no doubt that the rule is robust and resolves

many of the ambiguities about which the States complain. But we

do not believe the rule defeats the States’ constitutional arguments.

As an initial matter, we are not confident that the Secretary

preserved this argument for our review. The district court ex-

pressly found that the Secretary “appear[ed] to concede that, as-

suming that the language of the Tax Mandate is itself unconstitu-

tionally ambiguous, the Final Rule cannot cure that ambiguity.”

West Virginia, 571 F. Supp. 3d at 1254. Likewise, on appeal, the

Secretary’s brief did not expressly argue that the rule could elimi-

nate a constitutional problem with the Act. On the other hand, the

Secretary relied extensively on her rulemaking power as a reason

to reject the States’ ambiguity challenge. For example, in the dis-

trict court, the Secretary argued as a matter of justiciability that the

regulation resolved the claims of the ten plaintiff States that had

accepted the funds after she promulgated the interim final rule.

Moreover, the States directly addressed this issue in their brief, ar-

guing that the Secretary’s rule could not cure the Act’s constitu-

tional infirmities.

Assuming that this argument was adequately raised, we can-

not agree that the rule eliminates the constitutional problem with

the Rescue Plan. This is so for two reasons.

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22-10168 Opinion of the Court 37

First, we agree with the Sixth Circuit that we cannot be con-

fident that Congress intended the agency to answer the questions

the Act left open. See Kentucky, 54 F.4th at 353–54. The offset pro-

vision undoubtedly implicates questions of deep economic and po-

litical significance and alters the traditional balance of federalism by

imposing a condition on a state’s entire budget process. See King v.

Burwell, 576 U.S. 473, 486 (2015); Gregory v. Ashcroft, 501 U.S.

452, 460–61 (1991). As we have explained, because money is fungi-

ble, one reasonable interpretation of the offset provision is that it

proscribes all tax cuts during the covered period. On that reading,

the Act affects the states’ sovereign authority to tax, see McCul-

loch, 17 U.S. (4 Wheat.) at 370, and “intrudes into an area that is

the particular domain of state law,” see Ala. Ass’n of Realtors v.

Dep’t of Health & Hum. Servs., 141 S. Ct. 2485, 2489 (2021). The

choice between that reading and a narrower one is a major ques-

tion, such that Congress had to speak in a “specific and detailed”

way if it intended to delegate the authority to answer that question.

FCC v. Fox Television Stations, Inc., 556 U.S. 502, 536 (2009) (Ken-

nedy, J., concurring in part and concurring in the judgment) (quo-

tation omitted).

But Section 802(f)—the delegation provision—says nothing

about the executive agency’s power to define the scope of the offset

provision. Instead, Congress used the same kind of catchall delega-

tion language in this Act that the Supreme Court held to be insuf-

ficient to delegate major questions in King. See 576 U.S. at 485–86.

There, the statute at issue was 26 U.S.C. § 36B, which concerned

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38 Opinion of the Court 22-10168

the availability of tax credits, see King, 576 U.S. at 485–486, and the

delegation provision of that statute permitted the Secretary to “pre-

scribe such regulations as may be necessary to carry out the provi-

sions of [Section 36B],” 26 U.S.C. § 36B(h). Here, the Rescue Plan

allows the Secretary to “issue such regulations as may be necessary

or appropriate to carry out [the Act].” 42 U.S.C. § 802(f). If the avail-

ability of a tax credit is a major question that cannot be delegated

by generic language, see King, 576 U.S. at 485–86, then the same is

true for the way the offset provision applies to the States’ budget

process.

Second, an agency cannot exercise legislative power or oth-

erwise “operate independently of the statute that authorized it.”

FEC v. Cruz, 142 S. Ct. 1638, 1649 (2022) (quotation omitted). The

Constitution gives Congress, not the executive branch, the power

to tax and spend through the exercise of its legislative power. It

follows therefore that Congress, not an executive agency, must ex-

ercise that power constitutionally. As the Fifth Circuit explained in

a similar case, “the ability to place conditions on federal grants ul-

timately comes from the Spending Clause, which empowers Con-

gress, not the Executive, to spend for the general welfare.” Tex.

Educ. Agency v. U.S. Dep’t of Educ., 992 F.3d 350, 362 (5th Cir.

2021). Allowing an executive agency to impose a condition that is

not otherwise ascertainable in the law Congress enacted “would be

inconsistent with the Constitution’s meticulous separation of pow-

ers.” See id. Therefore, the “needed clarity” under the Spending

Clause “must come directly from the statute.” Id. at 361.

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22-10168 Opinion of the Court 39

In this respect, our conclusion that the offset provision does

not impose an ascertainable condition is similar to a conclusion that

it provides no intelligible principle to guide an agency. Congress

can delegate power to an agency only if it “lay[s] down by legisla-

tive act an intelligible principle to which [the agency] . . . is directed

to conform.” J.W. Hampton, Jr., & Co. v. United States, 276 U.S.

394, 409 (1928). When Congress does not provide an intelligible

principle, an agency cannot cure the “unconstitutionally standard-

less delegation of power by declining to exercise some of that

power.” Whitman, 531 U.S. at 473. Instead, “[t]he very choice of

which portion of the power to exercise—that is to say, the prescrip-

tion of the standard that Congress had omitted—would itself be an

exercise of the forbidden legislative authority.” Id.

We think the ambiguity of the offset provision presents a

similar problem. Just as an agency cannot choose its own intelligi-

ble principle, it cannot provide the content that makes a funding

condition ascertainable. “There is an obvious difference between a

statute stating the conditions upon which moneys shall be ex-

pended and one effective only upon assumption of a contractual

obligation to submit to a regulation which otherwise could not be

enforced.” United States v. Butler, 297 U.S. 1, 73 (1936).

To be clear, we do not question an agency’s authority to fill

in gaps that may exist in a spending condition. The Supreme Court

has explained that, when a state accepts federal funds, the state nec-

essarily agrees “to comply with, and its liability is determined by,

the legal requirements in place when the grants were made.”

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40 Opinion of the Court 22-10168

Bennett v. Ky. Dep’t of Educ., 470 U.S. 656, 670 (1985). These “legal

requirements” include existing regulations. See id. But the problem

we confront here is not whether Congress left a gap that an agency

may fill; it is the lack of an ascertainable condition in the statute.

The Constitution does not allow the Secretary to “suppl[y] content

without which the Offset Provision literally could not function.”

Kentucky, 54 F.4th at 354. Even assuming an agency can resolve

some ambiguity in a funding condition, the condition itself must

still be ascertainable on the face of the statute.

C.

Because we hold that the condition imposed by the Rescue

Plan’s offset provision violates the Spending Clause for its lack of

ascertainability, we need not address the States’ coercion and

Tenth Amendment claims. But we must still decide whether the

district court abused its discretion in permanently enjoining en-

forcement of the offset provision.

After finding a statute unconstitutional, we must ask

whether “the legislature [would] have preferred what is left of its

statute to no statute at all.” Ayotte v. Planned Parenthood of N.

New England, 546 U.S. 320, 330 (2006). When striking unconstitu-

tional provisions, we must “refrain from invalidating more of the

statute than is necessary.” United States v. Booker, 543 U.S. 220,

258 (2005) (quotation omitted). And we must retain the sections

“that are (1) constitutionally valid, (2) capable of ‘functioning inde-

pendently,’ and (3) consistent with Congress’ basic objectives in

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22-10168 Opinion of the Court 41

enacting the statute.” Id. at 258–59 (quoting Alaska Airlines, Inc. v.

Brock, 480 U.S. 678, 684 (1987)) (citations omitted). Everyone

agrees that the offset provision is severable from the rest of the Act,

and we accept the parties’ concession on this point.

To obtain a permanent injunction, the moving party must

show that (1) it has suffered irreparable harm; (2) remedies at law

will not provide adequate compensation for the injury; (3) on bal-

ance, an equitable remedy is warranted; and (4) a permanent in-

junction will not disserve the public interest. Angel Flight of Ga.,

Inc. v. Angel Flight Am., Inc., 522 F.3d 1200, 1208 (11th Cir. 2008).

The district court can exercise “a range of choice” when deciding

whether to grant a permanent injunction, so long as it does not

misapply legal standards or rely on clearly erroneous facts. Broad-

cast Music, Inc. v. Evie’s Tavern Ellenton, Inc., 772 F.3d 1254, 1257

(11th Cir. 2014) (quotation omitted). Applying this standard, the

district court did not abuse its discretion in concluding that a per-

manent injunction is warranted.

First, the States have suffered irreparable harm. The Rescue

Plan’s offset provision has affected the States’ sovereign authority

to tax by binding them to a deal with ambiguous terms and placing

them on the hook for billions of dollars in potential recoupment

actions. Second, money damages cannot adequately compensate

the States because the federal government generally enjoys im-

munity from suit. See Dep’t of Army v. Blue Fox, Inc., 525 U.S. 255,

260 (1999). Third, the States’ inability to promulgate their own tax

policies—and the attendant financial consequences—outweigh any

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42 Opinion of the Court 22-10168

inconvenience to the Secretary from the district court’s injunction.

Fourth, the injunction serves the public interest. Enforcing the

Spending Clause’s limitations helps preserve state sovereignty and

the “two-government system established by the Framers.” NFIB,

567 U.S. at 577 (opinion of Roberts, C.J., joined by Breyer and Ka-

gan, JJ.). Allowing Congress to run roughshod over the States’ sov-

ereign rights would threaten dual sovereignty and would be a step

toward “vest[ing] power in one central government.” Id.

All four elements weigh in favor of granting a permanent

injunction. The district court did not misapply the law nor base its

determination on clearly erroneous facts. It did not abuse its discre-

tion. We also agree with the district court that the permanent in-

junction fully redresses the States’ harm in this case—declaratory

relief is unnecessary. We reiterate, however, that the permanent

injunction applies only to Section 802(c)(2)(A), which is severable

from the remaining provisions of the Act.

IV.

The district court is AFFIRMED.