The National Federation of Independent Business’ Small Business Legal Center has filed an amicus brief in the U.S. District Court for the Eastern District of Kentucky supporting Kentucky and Tennessee in their challenge to the provision of the American Rescue Plan Act of 2021 that would prevent states from using federal funds for state tax relief for small business owners.

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

Earlier, Kentucky and Tennessee filed a lawsuit questioning Treasury Secretary Janet Yellen over part of the $1.9 trillion American Rescue Plan Act that prevents states from using the funds they receive from the law to offset tax cuts.

“With our rebounding economy, Tennessee demonstrated prowess last year in allocating federal relief funds to commonsense tax relief policies,” said NFIB Tennessee state director Jim Brown. “The extraordinary restrictions in the most recent federal legislation should be removed so our state has the flexibility to establish tax policies that will help continue our post-pandemic economic recovery.”

The American Rescue Plan Act of 2021 made funds available to states if and only if states agree to not pass any laws or take any administrative actions that decrease their net revenue, whether that decrease comes through tax credits, rebates, reductions in tax credits, or new or expanded deductions. NFIB believes the court should block this unprecedented tax mandate and grant the states’ motion for a preliminary injunction.

The NFIB Small Business Legal Center protects the rights of small business owners in the nation’s courts. NFIB is currently active in over 40 cases in federal and state courts across the country and in the U.S. Supreme Court.

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