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States Wanting Stimulus Aid Can Cut Taxes to Align With IRS Code

April 8, 2021, 2:36 AM

States that pass tax cuts to conform with recent federal tax changes won’t run afoul of a rule in President Joe Biden’s economic rescue bill that says states can’t use federal stimulus funding to pay for cuts, the U.S. Treasury Department says.

“Regardless of the particular method of conformity and the effect on net tax revenue, Treasury views such changes as permissible under the offset provision,” according to a department statement released late Wednesday.

The statement gives states wiggle room for some changes to their tax laws, such as making some unemployment payments or restaurant grants tax-free, so that ...

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