The NFIB Small Business Legal Center this week announced it has filed an amicus brief in the U.S. District Court for the Northern District of Alabama supporting the State of Alabama in its challenge to the Biden administration regarding a provision of the American Rescue Plan Act (ARPA) of 2021 that would prevent states from using federal funds for state tax relief for small business owners.

Alabama Attorney General Steve Marshall is leading the multi-state lawsuit against the Biden administration. Called the American Rescue Plan by its Democratic authors and derided as mostly unrelated to the pandemic by conservatives, the $1.9 trillion spending bill is sending $350 billion to state and local governments. It was championed by President Joe Biden during its path through Congress.

The bill contains language that prevents state legislatures from using the funds to “offset a reduction in the net tax revenue” of the state in question.

Marshall has said that the provision in question “effectively bans states from cutting taxes for several years.” ARPA attempts to force states to accept money only if they do not decrease their net revenue, whether that decrease comes through tax credits, rebates, or new or expanded deductions.

A dozen other state attorneys general have joined the Marshall-led lawsuit, which is meant to prevent the Biden administration from enforcing the provision. NFIB also believes the court should block ARPA’s unprecedented tax mandate and grant the states’ motion for a preliminary injunction.

“Small businesses are still struggling to rebound from the COVID-19 pandemic and need as much financial relief as possible,” said Karen Harned, executive director of NFIB’s Small Business Legal Center. “Congress passed the American Rescue Plan to relieve some of the financial pressure caused by the pandemic, but a provision that blocks Alabama and other states from cutting taxes is eroding state sovereignty and hurts local businesses.”

NFIB Alabama state director Rosemary Elebash added, “The pandemic took a tremendous toll on Alabama’s small businesses. Owners simply can’t afford to pay higher taxes. Using federal funds to avoid a tax increase would go a long way toward helping owners keep the lights on and keep people employed.”

Sean Ross is the editor of Yellowhammer News. You can follow him on Twitter @sean_yhn