Amicus Curiae Brief — Ohio, Petitioner v. Janet L. Yellen, Secretary of the Treasury, et al.

No. 22-880

IN THE

Supreme Court of the United States

___________

STATE OF OHIO,

v.

Petitioner,

JANET YELLEN, IN HER OFFICIAL CAPACITY AS

SECRETARY OF THE TREASURY, ET AL.,

___________

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

___________

BRIEF FOR THE BUCKEYE INSTITUTE AS

AMICUS CURIAE IN SUPPORT OF

PETITIONER

___________

ANDREW M. GROSSMAN

ROBERT ALT

Counsel of Record

DAVID C. TRYON

KRISTIN SHAPIRO

THE BUCKEYE INSTITUTE BAKER & HOSTETLER LLP

1050 Connecticut Ave., N.W.

NICHOLAS A. CORDOVA

Washington, D.C. 20036

BAKER & HOSTETLER LLP (202) 861-1697

agrossman@bakerlaw.com

Counsel for Amicus Curiae

i

QUESTIONS PRESENTED

This amicus curiae brief addresses the second question presented by the Petition: Whether the American

Rescue Plan Act of 2021’s prohibition of using federal

funds to “either directly or indirectly offset a reduction in the net tax revenue” through “a change in law,

regulation, or administrative interpretation…that reduces any tax,” 42 U.S.C. § 802(c)(2)(A), satisfies the

constitutional requirement that “if Congress desires

to condition the States’ receipt of federal funds, it

‘must do so unambiguously..., enabl[ing] the States to

exercise their choice knowingly, cognizant of the consequences of their participation.’” South Dakota v.

Dole, 483 U.S. 203, 207 (1987).

ii

TABLE OF CONTENTS

Page

INTEREST OF THE AMICI CURIAE .................... 1

INTRODUCTION AND SUMMARY OF

ARGUMENT.......................................................... 2

ARGUMENT ............................................................ 4

I.

The Court’s Review Is Urgently Needed To

Clarify the Tax Mandate’s Impact on States’

Exercise of Their Core Police and Taxing

Powers ................................................................ 4

II. The Tax Mandate Is Fundamentally Vague and

Therefore Unenforceable ................................. 10

III. The Court’s Review Is Inevitable, and This

Case Presents an Ideal and Timely Vehicle ... 16

CONCLUSION ....................................................... 17

iii

TABLE OF AUTHORITIES

CASES

Arlington Cent. Sch. Dist. Bd. of Educ. v.

Murphy,

548 U.S. 291 (2006) ........................................... 10

Davis Next Friend LaShonda D. v. Monroe

Cnty. Bd. of Educ.,

526 U.S. 629 (1999) ........................................... 11

Gregory v. Ashcroft,

501 U.S. 452 (1991) ..................................... 11, 12

Kentucky v. Yellen,

54 F.4th 325 (6th Cir. 2022) ................. 12, 15, 16

Nat’l Fed’n of Indep. Bus. v. Sebelius,

567 U.S. 519 (2012) ........................................... 11

Pennhurst State Sch. & Hosp. v.

Halderman,

451 U.S. 1 (1981) ..................................... 2, 10, 13

South Dakota v. Dole,

483 U.S. 203 (1987) ................................. 2, 10, 12

United States v. Bass,

404 U.S. 336 (1971) ........................................... 11

W. Virginia by & through Morrisey v. U.S.

Dep’t of the Treasury,

59 F.4th 1124 (11th Cir. 2023) ......................... 16

iv

Whitman v. Am. Trucking Ass’ns,

531 U.S. 457 (2001) ........................................... 13

CONSTITUTIONAL PROVISION

U.S. Const. art. I, § 8, cl. 1 ............................... 12, 13

FEDERAL STATUTE

42 U.S.C. § 802 ......................................................... 2

FEDERAL REGULATIONS

31 C.F.R. §35.1 ......................................................... 3

31 C.F.R. § 35.4 .................................................. 3, 15

31 C.F.R. § 35.8 ...................................................... 14

Coronavirus State and Local Fiscal

Recovery Funds,

87 Fed. Reg. 4338 (Jan. 27, 2022) .......3, 4, 14, 15

STATE STATUTES

Ala. Code §§ 40-23-211–213 ..................................... 7

Ariz. Rev. Stat. § 48-701 .......................................... 9

Iowa Code § 423.3 .................................................... 7

Ohio Rev. Code § 5739.02 ........................................ 7

Okla. Admin. Code. § 710:65-13-511 ....................... 7

S.C. Code § 12-36-2120 ............................................ 7

v

W. Va. Code § 11-15-9s ............................................ 7

W. Va. Code § 11-24-3 .............................................. 9

OTHER AUTHORITIES

Fla. Dep’t of Revenue, Tax Holidays and

Exemption Periods .............................................. 7

Larry J. Obhof, Federalism, I Presume? A

Look at the Enforcement of Federalism

Principles Through Presumptions and

Clear Statements Rules,

2004 Mich. St. L. Rev. 123 (2004) .................... 11

Patrick Gleason, Rate-Cutting, Flattening

Tax Reform Rolls On In Ohio,

Wisconsin, Iowa, Kansas And Beyond,

Forbes, Feb. 24, 2023 .......................................... 5

The Quarterly CARES Act Report to

Congress: Hearing before the S. Comm.

on Banking, Housing, and Urban

Affairs, 117th Cong., at 1:11:47–1:13:30

(Mar. 24, 2021) (testimony of Secretary

Yellen) ................................................................. 3

1

INTEREST OF THE AMICI CURIAE1

The Buckeye Institute was founded in 1989 as an independent research and educational institution—a

think tank—to formulate and promote free-market

solutions for Ohio’s most pressing public policy problems. Through its Legal Center, the Buckeye Institute

engages in litigation in support of the principles of

federalism and separation of powers as enshrined in

the U.S. Constitution. The Buckeye Institute is dedicated to upholding the balance of power between

States and the federal government that the U.S. Constitution prescribed. It is also dedicated to creating a

pro-growth tax system that rewards work and encourages entrepreneurship. The “Tax Mandate” challenged in this case directly threatens Buckeye’s policy

priorities, including those related to federalism, clear

lines of government accountability, and pro-growth

tax policy.

1 Pursuant to Sup. Ct. R. 37.6, amicus curiae states that no coun-

sel for any party authored this brief in whole or in part, nor did

any person or entity, other than amicus, its members, or its

counsel make a monetary contribution to the preparation or submission of this brief. All parties were timely notified of the filing

of this brief.

2

INTRODUCTION AND

SUMMARY OF ARGUMENT

The American Rescue Plan Act of 2021 (“ARPA”)

conditions federal funding to States on a vague prohibition against using federal funds to “either directly

or indirectly offset a reduction in the net tax revenue”

through “a change in law, regulation, or administrative interpretation…that reduces any tax…or delays

the imposition of any tax or tax increase.” 42 U.S.C.

§ 802(c)(2)(A). What precisely this language proscribes is anyone’s guess, as practically any action by

a State may, intentionally or not, reduce tax revenues. The Tax Mandate’s radical indeterminacy mires

States in uncertainty and chills the exercise of their

core taxing and police powers, violating the constitutional mandate that, “if Congress desires to condition

the States’ receipt of federal funds, it ‘must do so unambiguously..., enabl[ing] the States to exercise their

choice knowingly, cognizant of the consequences of

their participation.’” South Dakota v. Dole, 483 U.S.

203, 207 (1987) (quoting Pennhurst State Sch. &

Hosp. v. Halderman, 451 U.S. 1, 17 (1981)). The

Court’s review is urgently needed so that States may

again exercise those powers free from federal interference and legal uncertainty.

To get a sense of the Cartesian doubt the Tax Mandate imposes on States, consider some questions it

raises. For example, what does it mean to use ARPA

funds to “directly or indirectly” offset a reduction in

tax revenue? Even the Secretary of the Treasury admitted to Congress that this is a “thorny” issue, and

“[g]iven the fungibility of money, it’s a hard question

3

to answer.”2 To this day, Treasury has never offered a

definition of an “indirect offset”—despite being

pressed for an answer by multiple federal courts. Nor

does the Tax Mandate define what “a change in law,

regulation, or administrative interpretation” is. Is renewal of existing tax credits a “change” or continuation? Must States assess every administrative adjudication, zoning variance, and guidance letter for its effect on tax revenue? States can play it safe only by

making no policy change that may decrease tax revenue until the funding condition expires in 2026.

The Department of the Treasury, charged with administering the Tax Mandate, and recognizing these

problems, attempted to provide some answers in a

117-page regulation. Coronavirus State and Local

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

2022) (codifying 31 C.F.R. §35.1 et seq.). These regulations not only fail to clarify the fundamental vagueness of the Tax Mandate, but also effectively appoint

the Secretary as a virtual viceroy over the States,

with authority to review practically every decision

that might affect tax revenue—i.e., potentially any exercise of tax and police powers—and discretion to approve or reject those decisions. To rub salt in the

wound, the Final Rule states that the Rule does not

limit the Secretary’s discretion “to take action to enforce conditions or violations of law,” 31 C.F.R.

§ 35.4(a), and that Treasury may change the regulations

2 The Quarterly CARES Act Report to Congress: Hearing before

the S. Comm. on Banking, Housing, and Urban Affairs, 117th

Cong., at 1:11:47–1:13:30 (Mar. 24, 2021) (testimony of Secretary

Yellen).

4

at any time without notice and comment, 87 Fed. Reg.

at 4445.

When Ohio and other States accepted ARPA funding, they had no way of knowing what the Tax Mandate’s condition on those funds prohibited, and that

uncertainty remains today. The lower courts meanwhile, are divided on when and how a State may obtain clarity on its obligations under ARPA, and a series of decisions have given legal assurance to some

States—but not all—that the Tax Mandate is unconstitutional and does not constrain their policymaking

discretion. The Constitution does not tolerate this disparate treatment of the States, and the pall over the

exercise of their core powers, to persist. The Court’s

intervention is urgently needed, and this case is an

ideal vehicle for it to resolve the question of the Tax

Mandate’s constitutionality once and for all, restore

uniformity among the States, and permit the States

to exercise their core taxing and police powers free

from legal doubt.

The Court should grant the petition.

ARGUMENT

I.

The Court’s Review Is Urgently Needed To

Clarify the Tax Mandate’s Impact on States’

Exercise of Their Core Police and Taxing

Powers

States cannot freeze their policies in place to ensure they do not make a “change” that inadvertently

violates the Tax Mandate, as interpreted by the Secretary. States must set budgets and respond in real-

5

time to changing conditions, and the Constitution preserves their power as sovereigns to do so. But because

they all accepted ARPA funds subject to undefined

federal oversight, States now exercise their core powers to set internal tax, health, and safety regulations

in trepidation that doing so will violate the Tax Mandate.

States’ most obvious concerns stem from the application of the phrase “indirectly offset” to changes to

their tax laws. Any State that both spends ARPA

funds and alters tax provisions in ways that may reduce tax revenues has arguably “indirectly offset” the

revenue reduction with ARPA funds because whatever the State spends these funds on would otherwise

have been funded by taxation. So how can States tell

which changes (if any) are permissible and which are

not? Neither Congress nor Treasury has explained.

See § II.C, infra (addressing regulations). But States

need certainty about the Tax Mandate’s meaning to

make informed decisions about legislative proposals

like Ohio’s House Bill 1, which would set a flat income

tax.3 Wisconsin, Kansas, Montana, Arkansas, Iowa,

North Carolina, and Arizona are also currently considering changes to their tax laws that may reduce

3 Patrick Gleason, Rate-Cutting, Flattening Tax Reform Rolls On

In Ohio, Wisconsin, Iowa, Kansas And Beyond, Forbes, Feb. 24,

2023, https://www.forbes.com/sites/patrickgleason/2023/02/24

/rate-cutting-flattening-tax-reform-rolls-on-in-ohio-wisconsiniowa-kansas-and-beyond/.

6

revenues.4 As of now, they do not know whether acting on these proposals would violate the Tax Mandate. Their only safe option is to do nothing.

Changes to tax law, however, are just the tip of the

iceberg, given the Tax Mandate’s sweeping language.

After all, practically any exercise of State power may

affect tax revenues. To wit, what qualifies as a

“change in law, regulation, or administrative interpretation” subject to the Tax Mandate? Does an administrative adjudication that reduces just one individual’s tax liability qualify as a “change in…administrative interpretation” such that States must prevent any Rescue Plan funds from “indirectly offset[ting]” its result? How will the Secretary view

State agencies’ application of existing definitions to

new facts? Imagine an administrative decision that

individuals with “long COVID syndrome” qualify for

an existing tax credit for “disabled” persons. This decision would reduce taxes for those with long COVID,

but is it a “change” in “administrative interpretation”? By what criteria will the Secretary decide? Does

the answer turn on whether a Treasury bureaucrat

thinks the decision is a straightforward application of

the existing law defining “disabled” or a novel extension of it? If such a credit is due to expire, would renewing it be a “change in law”? Similarly, are new

property tax assessments that might reduce new construction and thereby tax revenues a “change in law”

subject to federal oversight?

4 Id.

7

These questions are not merely hypothetical. Ohio

law provides for an annual sales tax “holiday” each

August.5 During that weekend, unofficially kicking off

the “Back to School” period, sales of clothing items

costing less than $75 and school supplies are exempt

from sales and use tax. What if Ohio changes the

dates to be more convenient for parents or to prevent

crowding in stores? Can the State add additional supplies to the approved list, such as hand sanitizer? Either decision could lower tax revenue. If ARPA funds

indirectly offset that reduction, has Ohio violated the

Tax Mandate? Ohio has no way of knowing, nor does

Alabama, Iowa, and at least four other States with

similar sales tax holidays.6

Even had the Tax Mandate informed States what

constitutes a relevant “change,” States still may not

know whether a given change is one that “reduces any

tax.” That phrase, on its face, extends beyond purposeful tax cuts to every potentially revenue-reducing

decision. That includes prohibiting sale of otherwisetaxable Cannabidiol products, increasing access to

justice by reducing filing fees, mandating increased

electrical vehicle sales causing reduced gas-tax collections, and requiring licensure of a profession thereby

reducing taxable services.

5 Ohio Rev. Code § 5739.02.

6 Ala. Code §§ 40-23-211–213; Iowa Code § 423.3(68)(a)(2); Okla.

Admin. Code. § 710:65-13-511; S.C. Code. § 12-36-2120(57); W.

Va. Code § 11-15-9s; Fla. Dep’t of Revenue, Tax Holidays and

Exemption Periods, https://floridarevenue.com/pages/salestaxholidays.aspx.

8

One can imagine that a new wave of COVID-19 or

another infectious disease might lead a State to prohibit property-tax assessors from making their

rounds during an outbreak. That decision would “delay[] the imposition of any tax or tax increase” and so

seemingly violate the Tax Mandate. Likewise, a governor, responding to the same crisis, might prohibit

indoor dining, causing a drop in sales-tax revenue.

Would the Tax Mandate really put States to the Hobson’s choice between forgoing such health and safety

regulations and violating ARPA? Less dramatically,

lowering the speed limit to save lives is likely also to

reduce gas-tax collections and taxable commerce. So

must States make traffic regulations cognizant of Tax

Mandate concerns?

These are the sort of policy decisions that form the

core of States’ police powers constitutionally reserved

from federal oversight. The States need this Court’s

intervention to clarify how, if at all, the Tax Mandate

limits the exercise of their core powers.

Besides questions of scope are questions of

method. How are States to know whether a particular

policy decision results in a “reduction” in “net tax revenue”? The statute provides no baseline against

which to measure a “reduction” and no timeframe for

assessing a policy’s effects. If a State reduces income

tax rates based on a forecast that the cut will increase

tax revenue by stimulating economic growth, has that

State violated the Tax Mandate? Such questions are

not merely hypothetical. The Buckeye Institute’s Economic Research Center performs dynamic analysis of

9

state budgets to model just these kinds of questions—

i.e., whether decreasing tax rates will stimulate economic growth, and correspondingly increase tax revenues—and it has done so in 11 states to date. If a

State reduces income tax based on The Buckeye Institute’s dynamic analysis, how quickly must the forecasted growth materialize, and how must States

prove the growth resulted from the rate cut?

Finally, when a “reduction” does occur, what

funds, if any, may States draw on without having “indirectly offset a reduction” using ARPA funds? Can

the State issue bonds or draw on a rainy-day fund to

cover the difference? Are streams of tax revenue from

different sources assessed separately such that a drop

in say, income tax revenue, might permissibly be offset by an increase in revenue from sales tax? The Tax

Mandate does not say.

Then there are equitable considerations. What, for

example, will be the fate of Arizona, which conformed

its own tax policy to federal law by exempting from

state income tax the first $10,000 in employment aid

and forgiven Paycheck Protection Program loans?7

West Virginia made similar changes for conformity’s

sake.8 These decisions reduced tax revenue. Did these

States violate the Tax Mandate by following Congress’s lead?

Congress has not given the States a light to legislate by. Unless and until the Court acts, States cannot

7 Ariz. Rev. Stat. § 48-701.

8 W. Va. Code § 11-24-3.

10

see where the boundaries of federal and state power

have been redrawn.

II. The Tax Mandate Is Fundamentally Vague

and Therefore Unenforceable

A. Conditions on States’ Receipt of Federal

Funds Must Be “Unambiguous[]”

“The legitimacy of Congress’ power to legislate under the spending power…rests on whether the State

voluntarily and knowingly accepts the terms of the

‘contract.’” Pennhurst, 451 U.S. at 17. Accordingly,

this Court has consistently emphasized that “if Congress desires to condition the States’ receipt of federal

funds, it ‘must do so unambiguously..., enabl[ing] the

States to exercise their choice knowingly, cognizant of

the consequences of their participation.’” Dole, 483

U.S. at 207 (quoting Pennhurst, 451 U.S. at 17); see

also Arlington Cent. Sch. Dist. Bd. of Educ. v. Murphy, 548 U.S. 291, 296 (2006) (same). To determine

whether a condition is clear enough, a court “must

view the [funding offer] from the perspective of a state

official who is engaged in the process of deciding

whether the State should accept [the] funds and the

obligations that go with those funds.” Arlington, 548

U.S. at 296. “There can, of course, be no knowing acceptance if a State is unaware of the conditions or is

unable to ascertain what is expected of it.” Pennhurst,

451 U.S. at 17 (emphasis added). Congress therefore

must provide “clear notice regarding the liability”

that comes with the funding. Arlington, 548 U.S. at

296.

11

As this Court recently explained, the limits on

Congress’s Spending Clause authority are “critical to

ensuring that Spending Clause legislation does not

undermine the status of the States as independent

sovereigns in our federal system.” Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 577 (2012); see also

Davis Next Friend LaShonda D. v. Monroe Cnty. Bd.

Of Educ., 526 U.S. 629, 655 (1999) (“A vital safeguard

for the federal balance is the requirement that, when

Congress imposes a condition on the States’ receipt of

federal funds, it must do so unambiguously.” (quotation marks omitted)) (Kennedy, J., dissenting).

The requirement that federal funding conditions

be unambiguous is one of several related clear-statement rules that preserve the vertical separation of

powers. See generally Larry J. Obhof, Federalism, I

Presume? A Look at the Enforcement of Federalism

Principles Through Presumptions and Clear Statements Rules, 2004 Mich. St. L. Rev. 123, 132 (2004).

Such rules “acknowledg[e] that the States retain substantial sovereign powers under our constitutional

scheme, powers with which Congress does not readily

interfere.” Gregory v. Ashcroft, 501 U.S. 452, 461

(1991). Thus, “[i]n traditionally sensitive areas, such

as legislation affecting the federal balance, the requirement of clear statement assures that the legislature has in fact faced, and intended to bring into issue, the critical matters involved in the judicial decision.’” United States v. Bass, 404 U.S. 336, 349 (1971).

For these reasons, the Court has refused “to give the

12

state-displacing weight of federal law to mere congressional ambiguity.” Gregory, 501 U.S. at 464

(cleaned up).

B. The Tax Mandate Is Anything But Unambiguous

The Tax Mandate imposes a fundamentally ambiguous condition on States’ receipt of ARPA funds. It

therefore violates the Spending Clause and impermissibly intrudes on States’ exercise of the internal police

and taxing powers the Constitution withholds from

the national government. See U.S. Const. art. I, § 8,

cl. 1. The open questions discussed above illustrate

that, when the States accepted ARPA funds, they

could not have been “cognizant of the consequences of

their participation.” Dole, 483 U.S. at 207. Congress

failed to set forth any clear condition.

As shown above, the Tax Mandate fails to define

the critical phrases “indirectly offset,” “change in law,

regulation, or administrative interpretation,” and “reduces any tax.” Having accepted needed funds in the

midst of an unprecedented public-health emergency,

the States now have not an inkling of an idea of what

“the consequences of their participation” will be. See

Dole, 483 U.S. at 207. As the Sixth Circuit observed

in a companion case, the Tax Mandate is marked by a

startling “lack of inherent content.” Kentucky v.

Yellen, 54 F.4th 325, 350 (6th Cir. 2022).

In short, the only thing the Tax Mandate’s language communicates clearly is that it imposes some

kind of condition on funding offered to States. But the

13

Constitution requires that, “when the Federal Government takes over...local radiations in the vast network of our national economic enterprise and thereby

radically readjusts the balance of state and national

authority, those charged with the duty of legislating

[must be] reasonably explicit.’” BFP v. Resolution

Trust Corp., 511 U.S. 531, 544 (1994) (quotation

marks omitted). Because the Tax Mandate fails to

provide such clarity, it is unconstitutional.

C. Treasury’s Regulations Are Irrelevant

and Inadequate

Treasury’s regulations attempting to provide content to the Tax Mandate cannot and do not fix the

problem.

As a constitutional matter, funding conditions

must be clear prior to acceptance “so that the States

can knowingly decide whether or not to accept those

funds.” Pennhurst, 451 US. at 24. Treasury’s Final

Rule was promulgated after Ohio and other States accepted ARPA funds, too late to contribute to a knowing decision.

More fundamentally, no agency action could ever

cure an ambiguous spending condition. The Constitution assigns the power to spend for the general welfare to Congress alone, see U.S. Const. art. I, § 8, cl. 1,

so it follows that Congress alone must decide what

conditions, if any, accompany its spending. Cf. Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 472–73

(2001) (rejecting the proposition that “an agency can

cure an unlawful delegation of legislative power by

adopting in its discretion a limiting construction of

14

the statute”). Also, a legislative condition is more permanent than a regulatory one, and only legislative decisionmakers are electorally accountable. These safeguards for States are especially necessary when a condition impinges on their core tax and police powers.

And nothing prevents Treasury from changing the

rules of the game after a State has already played its

hand. Regulations are subject to change with little or

no notice. See 5 U.S.C. § 553(a) & (b) (listing exceptions to notice and comment). Indeed, Treasury

claims that the Final Rule here was exempt from notice and comment as a “matter relating to

agency…grants” and for “good cause.” 87 Fed. Reg. at

4445 (quoting 5 U.S.C. § 553). In Treasury’s view, it

may unilaterally rewrite States’ obligations under the

Tax Mandate at the drop of a hat. Whether or not that

position is consistent with the Administrative Procedure Act, it underscores that agency rulemaking cannot backfill Congress’s failure to enact unambiguous

and durable conditions on States’ acceptance of federal funds.

In any event, Treasury’s Final Rule fails to provide

the certainty and clarity required of funding conditions. It tries and fails to answer some of the questions raised above, while refusing to answer others.

For example, the Final Rule’s 117 pages include a

complex page-long formula at 31 C.F.R. § 35.8(b) that,

along with an additional seven preamble pages, attempts to define how Treasury will determine what

constitutes a Tax Mandate “violation.” That purported guidance leaves States with no “explanation on

how to (1) calculate a ‘reduction’ in net tax revenue,

(2) determine whether such a reduction resulted from

15

a tax cut, and (3) tell what particular conduct constitutes an ‘indirect’ offset.” Kentucky v. Yellen, 54 F.4th

at 363 (Nalbandian, J. concurring in part and dissenting in part). And even if the regulatory formula were

crystal clear, an adjacent provision renders it inconsequential by stating that no part of the Rule “shall

limit the authority of the Secretary to take action to

enforce conditions or violations of law, including actions necessary to prevent evasions of this subpart.”

31 C.F.R. § 35.4(a). So much for providing guidance.

Among the questions Treasury refused to answer

is “whether covered changes must be broad-based policies or whether administrative decisions applicable

to individuals would be considered covered changes.”

87 Fed. Reg. at 4425. Treasury responded that an administrative decision applicable to just one individual

is a covered change if it “result[s] from a change in

law, regulation, or administrative interpretation”

(i.e., a covered change), id., which is equivalent to saying that a decision is a covered change if it is a covered

change. In the end, the Final Rule tells States only

that a violation of the Tax Mandate is whatever the

Secretary says it is.

Ultimately, the Final Rule only confirms the allencompassing sweep and fundamental ambiguity of

the Tax Mandate. It establishes a proto-receivership

under which State governments and their budget offices are mere functionaries reporting to a federal superintendent. It requires States to quantify every policy decision that they make, and then identify an offset for any decisions that reduce revenue to the satisfaction of the Treasury Department. And, despite all

that, it indicates that the Treasury will be monitoring

16

the States and—at its discretion—may determine

that an unsuspecting State is evading the restrictions

and seek recoupment of funds, notwithstanding compliance with the onerous procedures it has put in

place. This regime is inimical to constitutional federalism.

III. The Court’s Review Is Inevitable, and This

Case Presents an Ideal and Timely Vehicle

Two courts of appeals have ruled that the Tax

Mandate is unconstitutionally vague, affirming permanent injunctions against enforcement of the Tax

Mandate with respect to thirteen States. W. Virginia

by & through Morrisey v. U.S. Dep’t of the Treasury,

59 F.4th 1124, 1140 (11th Cir. 2023); Kentucky v.

Yellen, 54 F.4th 325, 358 (6th Cir. 2022). Meanwhile,

the remaining States are still subject to the Tax Mandate’s uncertain requirements. Those States and their

citizens should not have to bear this uneven application of the law. It is practically inevitable that the

Court will review the constitutionality of the Tax

Mandate, and there is no reason, after so much percolation on that issue in the lower courts, for this Court

to delay its review.

This case presents a clean and timely vehicle for

the Court to resolve the issue once and for all. The

State of Ohio has consistently challenged the Tax

Mandate’s constitutionality from day one, and its circumstances are identical to those of other states

whose exercise of core powers lays beneath a cloud of

uncertainty. Although the Court below held Ohio’s

17

challenge to be moot, that determination was intertwined with its view of the merits, in particular its

acceptance of the view that Treasury’s rulemaking

could cure or at least obviate the injury inflicted by

the statutory Tax Mandate. See Pet.App.16a–18a.

And the question of mootness is itself independently

worthy of review. Not only has it split the appeals

courts, see Pet.23–25, but it is also indisputably important, given the apparent injury a State suffers

when federal law casts a pall over the exercise of its

core police and taxing powers. If the Court does grant

review on the mootness question, which it should do,

it should also grant review on the Tax Mandate’s constitutionality so as to provide the States the certainty

of law that they desperately need.

CONCLUSION

The Court should grant the petition.

Respectfully submitted,

ANDREW M. GROSSMAN

Counsel of Record

KRISTIN SHAPIRO

BAKER & HOSTETLER LLP

1050 Connecticut Ave., N.W.

NICHOLAS A. CORDOVA

Washington, D.C. 20036

BAKER & HOSTETLER LLP (202) 861-1697

agrossman@bakerlaw.com

ROBERT ALT

DAVID C. TRYON

THE BUCKEYE INSTITUTE

Counsel for Amicus Curiae The Buckeye Institute

APRIL 2023