Schmitt sued the U.S. Department of the Treasury and Treasury Secretary Janet Yellen last month, pointing to a provision he said would force states to pick between COVID-19 relief funds or their tax policies if interpreted too broadly. The lawsuit asked the court to provide clarity over the interpretation; Schmitt said he supports a narrower reading of the provision that would just prohibit states from using COVID relief funds to offset tax reductions.
NFIB’s Small Business Legal Center joined the U.S. Chamber of Commerce in an amicus brief filed in the Eastern District Court of Missouri Friday backing the state’s challenge. State Director Brad Jones said the provision would damage businesses already struggling under the weight of the pandemic.
“Small business owners across Missouri have been hard hit by the COVID-19 pandemic,” Jones said. “They should be able to take advantage of tax cuts that Missouri lawmakers are considering right now. High taxes are a major concern for our small business owners. The ARP Act jeopardizes Missouri lawmakers from passing important COVID-19 tax relief for our struggling small business owners who are trying their best to keep Missourians employed and the economy running.”
According to NFIB, the package makes relief funds available to states under the condition that they agree not to pass laws or take administrative actions that decrease their net revenue through tax credits, rebates, or expanded and new deductions. Karen Harned, executive director of NFIB’s Small Business Legal Center, said the bureau supported the state’s attempt to challenge the provision.
“Small businesses are still struggling to rebound from the COVID-19 pandemic and need as much financial relief as possible,” Harned said. “Congress passed the American Rescue Plan to relieve some of the financial pressure caused by the pandemic, but a provision that blocks Missouri and other states from cutting taxes is eroding state sovereignty and hurts local businesses.”
Schmitt joined 20 other state attorneys general in a letter to the federal government asking for a narrow interpretation of the provision before filing the suit.
The first legislative victory of the new presidential administration, the $1.9 trillion American Rescue Plan Act, included the third wave of stimulus payments for Missouri taxpayers in addition to funds for benefits, tax credits, and various industries including agriculture and restaurants.