State Tax Freedom Act
Bill: H.R.2189 | Sponsor: Rep. Brady, Kevin (R-TX)
Policy area: Government Operations and Politics

Summary:
State Tax Freedom Act
This bill removes a prohibition on states and territories using COVID-19 relief funding under the American Rescue Plan Act of 2021 to offset a reduction in revenue resulting from a reduction in taxes or a delay in the imposition of a tax or tax increase.
Additionally, the bill requires the Department of the Treasury to refund the state, territory, or tribal government any money that was repaid to the federal government since enactment of the American Rescue Plan Act of 2021 due to the state cutting taxes.

To eliminate the prohibition on States and territories receiving 
      Coronavirus State Fiscal Recovery funds from lowering taxes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``State Tax Freedom Act''.

SEC. 2. REFUNDS TO OFFSET CORONAVIRUS STATE FISCAL RECOVERY FUNDS 
              ALREADY REPAID BY REASON LOWERING TAXES.

    (a) In General.--Subchapter B of chapter 65 of the Internal Revenue 
Code of 1986 is amended by inserting after section 6423 the following 
new section:

``SEC. 6424. REFUNDS TO STATES TO OFFSET CERTAIN REQUIRED REPAYMENTS OF 
              CORONAVIRUS STATE FISCAL RECOVERY FUNDS.

    ``(a) In General.--As soon as practicable after any specified State 
pays any specified repayment, the Secretary shall make a payment to 
such specified State in an amount equal to such specified repayment.
    ``(b) Specified Repayment.--For purposes of this section, the term 
`specified repayment' means any repayment required to be made under 
subsection (e) of section 602 of the Social Security Act by reason of 
subsection (c)(2)(A) thereof.
    ``(c) Specified State.--The term `specified State' means any State, 
territory, or Tribal government which is required to make to any 
specified repayment.
    ``(d) Other Terms.--The terms `State', `territory', and `Tribal 
government' shall have the same respective meanings as when used in 
section 602 of the Social Security Act.
    ``(e) Treatment of Payments.--For purposes of section 1324 of title 
31, United States Code, the payments under this subsection shall be 
treated in the same manner as a refund due from a credit provision 
referred to in subsection (b)(2) of such section.''.
    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 65 of such Code is amended by inserting after the item relating 
to section 6423 the following new item:

``Sec. 6424. Refunds to States to offset certain required repayments of 
                            coronavirus State and local fiscal recovery 
                            funds.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to repayments paid after the date of the enactment of the 
American Rescue Plan Act of 2021.

SEC. 3. ELIMINATION OF PROHIBITION ON STATES RECEIVING CORONAVIRUS 
              STATE FISCAL RECOVERY FUNDS FROM LOWERING TAXES.

    (a) In General.--Paragraph (2) of section 602(c) of the Social 
Security Act, as added by section 9901 of the American Rescue Plan Act 
of 2021, is amended to read as follows:
            ``(2) Further restriction on use of funds.--No State or 
        territory may use funds made available under this section for 
        deposit into any pension fund.''.
    (b) Conforming Amendments.--Section 602 of such Act is further 
amended--
            (1) in subsection (d)(2)(A), by striking ``, including, in 
        the case of a State or a territory, all modifications to the 
        State's or territory's tax revenue sources during the covered 
        period'';
            (2) in subsection (e), by striking ``such subsection,'' and 
        all that follows through the period and inserting ``such 
        subsection.''; and
            (3) in subsection (g)--
                    (A) by striking paragraph (1); and
                    (B) by redesignating paragraphs (2) through (7) as 
                paragraphs (1) through (6), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to repayments which would (but for such amendments) 
be required to be paid after the date of the enactment of this Act.
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