Whether the Spending Clause permits Congress to impose conditions on federal grants that restrict a state's ability to modify its tax policy through an ambiguous statutory offset provision

No question identified. : 2 court of appeals, which is reported at 105 F.4th 755, is attached. App., infra, 1a-25a. 1. In the American Rescue Plan Act of 2021 (ARPA), Pub. L. No. 117-2, Tit. IX, Subtit. M, 135 Stat. 223 (42 U.S.C. 802 et seq.), Congress established a Coronavirus State Fiscal Recovery Fund. 42 U.S.C. 802. The Fund provided nearly $200 billion in new federal grants to help States and the District of Columbia “mitigate the fiscal effects” of the COVID-19 pandemic. 42 U.S.C. 802(a)(1); see 42 U.S.C. 802(b)(3)(A). Section 802(c) establishes parameters for States’ “Use of funds.” 42 U.S.C. 802(c)(1) (emph asis omitted). Section 802(c)(1) provides that a State may use fiscal recovery funds to cover broadly defined categories of costs incurred through December 31, 2024, including costs related to the pandemic and certain infrastructure investments. Ibid. As a corollary, in order to ensure that States use the funds for the general purposes that Congress specified, Section 802(c)(2) establishes two “restric-tion[s] on [the] use” of fiscal recovery funds. 42 U.S.C. 802(c)(2) (emphasis omitted). The restriction at issue here, the offset provision, provides that: A State or territory shall not use the funds provided under this section * * * to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase. 3 42 U.S.C. 802(c)(2)(A). If a State does not use its fiscal recovery funds in conformity with the conditions in Section 802(c), the Treasury Department may require the State to repay “an amount equal to the amount of funds used in violation of” Section 802(c), up to the total amount of fiscal recovery funds received by the State. 42 U.S.C. 802(e). Congress authorized the Treasury Department “to issue such regulations as may be necessary or appropriat e to carry out” Section 802. 42 U.S.C. 802(f). In May 2021, the Treasury Department published an interim final rule implementing Section 802, including the offset provision. Coronavirus State and Local Fiscal Recovery Funds, 86 Fed. Reg. 26,786 (May 17, 2021); see id. at 26,807-26,811, 26,823. In January 2022, the Treasury Department issued a final rule, which implements the offset provision in substantially the same manner as the interim final rule. Coronavirus State and Local Fiscal Recovery Funds, 87 Fed. Reg. 4338 (Jan. 27, 2022); see id. at 4423-4429, 4452-4453. In brief, the Act and regulations make clear that no recoupment of funds will occur if a State cuts taxes but does not use fiscal recovery funds to pay for the cuts. 2. After accepting their allotments of fiscal recovery funds, Texas, Louisiana, and Mississippi filed this suit , asserting that the offset provision is an unlawful condition on the grant of funds they accepted. App., infra, 3a. The United States District Court for the Northern District of Texas granted 4 summary judgment to the plaintiff States and permanently enjoined enforcement of the offset provision against them. Id. at 4a. The court held that Congress’s offer of ARPA funds in exchange for States’ acceptance of the offset provision was unduly coercive and commandeered the States. Ibid. 3. The court of appeals affirmed on alternative grounds. App., infra, 1a-25a. As an initial matter, the court held that the States had Article III standing. Id. at 5a-9a. The court determined that the States suffered injury in fact because ARPA “coerces them into making a choice between losing potentially billions of dollars or surrendering their ability to set state tax policy.” Id. at 6a. And the court also found that the States face a “threat of future recoupment” if they violate the offset provision. Id. at 7a. On the merits, the court of appeals held that the