H.R. 4208: Taxpayer Protection Act

This bill, named the Taxpayer Protection Act, introduces regulations regarding the treatment of states that contribute more in federal taxes than they receive in federal funding, referred to as “donor States.” Here is a summary of the bill's key provisions:

Prohibition of Political Punishment

The bill establishes that:

• The executive branch, including the President, cannot impose general prohibitions on awarding federal grants or entering into contracts with a donor State or related entities.
• Federal funding to a donor State cannot be revoked or suspended unless the United States Comptroller General verifies that fraud, waste, or abuse has occurred in relation to the awarded funds.

Definitions

For the purposes of this bill:

• Donor State: A state whose taxpayers, on average over the three years before the bill’s enactment, paid more in federal income taxes than the federal funding that the state received during that same period.
• Public Entity: Includes public schools and public hospitals in the donor State.

Donor State Protection Trust Fund

The bill creates a fund called the Donor State Protection Trust Fund, which is established in the U.S. Treasury. The fund will:

• Receive amounts equivalent to the federal taxes collected from donor States.
• Be designed to provide financial assistance to those states in case the federal government violates the provisions against penalizing donor States, such as by improperly revoking grants.
• Make available funds without the need for additional appropriation to donor States for necessary expenditures if they face penalties as outlined above.

Notably, if there is an excess amount in the Trust Fund beyond $4 trillion at the end of a calendar year, that excess will be transferred to the government’s general fund.

Limitation on Trust Fund Withdrawals

When funds are drawn from the Donor State Protection Trust Fund due to violations related to revoked grants or contracts, the amount available is limited to what the donor State would have received if not for the wrongful action.

Effective Date

The provisions of this act would apply to taxes received after the date it is enacted.

Relevant Companies

None found