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Montana Joins Suit Over Federal Stimulus Rule

Montana Attorney General Austin Knudsen

Montana has joined 31 other states in suing the U.S. Treasury Department over a provision that bars states from using federal stimulus dollars to offset tax cuts.

Montana is set to see roughly $3 billion in federal stimulus funds through the American Rescue Plan Act with the stipulation that the money can’t be used to offset revenue reductions caused by tax cuts. 

Republican Attorney General Austin Knudsen signed onto a lawsuit that calls this rule "one of the most egregious power grabs by the federal government in the nation’s history." 

In a letter to attorneys general last week, U.S. Treasury Secretary Janet Yellen said states are free to cut taxes as long as federal dollars aren’t used to make up the dip in state revenue, adding it’s common for Congress to include stipulations for federal funds.

Montana lawmakers are proposing tax cuts for individuals and businesses this session. It’s not yet clear if the state would violate the rule in question if lawmakers proceed with proposed tax cuts.

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