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Judge blocks tax cut rule in American Rescue Plan

U.S. Treasury Department
Patrick Semansky/AP
FILE - The Treasury Building is viewed in Washington, May 4, 2021. A federal judge has blocked the U.S. Treasury from enforcing a provision of the American Rescue Plan that prohibited states from using the pandemic relief funds to offset new tax cuts. (AP Photo/Patrick Semansky, File)

States can use pandemic relief funds to offset new tax cuts thanks to a lawsuit filed in Alabama.

Thirteen states filed the suit in federal court challenging the provision of the American Rescue Plan. U.S. District Judge L. Scott Coogler ruled Monday that Congress exceeded its power under the Constitution by including the so-called tax mandate.

The American Rescue Plan gave $200 billion in relief funds to states, specifying that states could not use it as a means to cut taxes and then use the federal relief money to offset the revenue reduction.

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