(1) Treatment as State and local government.

(2) Reduction in case of income tax on non-resident individuals.

(a) General rule.

(b) Administration Procedure Act to apply. Judicial review.

(a) Petitions for review.

(b) Record.

(c) Jurisdiction of court.

(d) Review by Supreme Court.

SUBCHAPTER I-ALLOCATION AND PAYMENT OF FUNDS

SUBCHAPTER REFERRED TO IN OTHER SECTIONS

This subchapter is referred to in sections 1241, 1242, 1243, 1261 of this title.

§ 1221. Payments to State and local governments.

Except as otherwise provided in this chapter, the Secretary shall, for each entitlement period, pay out of the Trust Fund to

(1) each State government a total amount equal to the entitlement of such State government determined under section 1226 of this title for such period, and

(2) each unit of local government a total amount equal to the entitlement of such unit determined under section 1227 of this title for such period.

In the case of entitlement periods ending after October 20, 1972, such payments shall be made in installments, but not less often than once for each quarter, and, in the case of quarters ending after September 30, 1972, shall be paid not later than 5 days after the close of each quarter. Such payments for any entitlement period may be initially made on the basis of estimates. Proper adjustment shall be made in the amount of any payment to a State government or a unit of local government to the extent that the payments previously made to such government under this subchapter were in excess of or less than the amounts required to be paid. (Pub. L. 92512, title I, § 102, Oct. 20, 1972, 86 Stat. 919.)

CODIFICATION

"This chapter", referred to in the text, read in the original "this title" meaning title I of Pub. L. 92-512, which is classified to this chapter and sections 6017A and 6687 of Title 26, Internal Revenue Code.

SHORT TITLE

Section 101 of Pub. L. 92-512 provided that: "This title [which enacted this chapter and sections 6017A and 6687

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(G) social services for the poor or aged, and (H) financial administration; and

(2) ordinary and necessary capital expenditures authorized by law.

(b) Certificates by local governments.

The Secretary is authorized to accept a certification by the chief executive officer of a unit of local government that the unit of local government has used the funds received by it under this subchapter for an entitlement period only for priority expenditures, unless he determines that such certification is not sufficiently reliable to enable him to carry out his duties under this chapter. (Pub. L. 92-512, title I, § 103, Oct. 20, 1972, 86 Stat. 919.)

CODIFICATION

"This chapter", referred to in subsecs. (a) and (b), read in the original "this title" meaning title I of Pub. L. 92512, which is classified to this chapter and sections 6017A and 6687 of Title 26, Internal Revenue Code.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1243 of this title.

§ 1223. Prohibition on use as matching funds by State or local governments.

(a) In general.

No State government or unit of local government may use, directly or indirectly, any part of the funds it receives under this subchapter as a contribution for the purpose of obtaining Federal funds under any law of the United States which requires such government to make a contribution in order to receive Federal funds.

(b) Determinations by Secretary of the Treasury.

If the Secretary has reason to believe that a State government or unit of local government has used funds received under this subchapter in violation of subsection (a) of this section, he shall give reasonable notice and opportunity for hearing to such government. If, thereafter, the Secretary of the Treasury determines that such government has used funds in violation of subsection (a) of this section, he shall notify such government of his determination and shall request repayment to the United States of an amount equal to the funds so used. To the extent that such government fails to repay such

amount, the Secretary shall withhold from subsequent payments to such government under this subchapter an amount equal to the funds so used. (c) Increased State or local government revenues.

No State government or unit of local government shall be determined to have used funds in violation of subsection (a) of this section with respect to any funds received for any entitlement period to the extent that the net revenues received by it from its own sources during such period exceed the net revenues received by it from its own sources during the one-year period beginning July 1, 1971 (or one-half of such net revenues, in the case of an entitlement period of 6 months).

(d) Deposits and transfers to general fund.

Any amount repaid by a State government or unit of local government under subsection (b) of this section shall be deposited in the general fund of the Treasury. An amount equal to the reduction in payments to any State government or unit of local government which results from the application of this section (after any judicial review under section 1263 of this title) shall be transferred from the Trust Fund to the general fund of the Treasury on the day on which such reduction becomes final. (e) Certificates by State and local governments.

The Secretary is authorized to accept a certification by the Governor of a State or the chief executive officer of a unit of local government that the State government or unit of local government has not used any funds received by it under this subchapter for an entitlement period in violation of subsection (a) of this section; unless he determines that such certification is not sufficiently reliable to enable him to carry out his duties under this chapter. (Pub. L. 92-512, title I, § 104, Oct. 20, 1972, 86 Stat. 920.)

CODIFICATION

"This chapter", referred to in subsec. (e), read in the original "this title" meaning title I of Pub. L. 92-512, which is classified to this chapter and sections 6017A and 6687 of Title 26, Internal Revenue Code.

SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1263 of this title. § 1224. Creation of Trust Fund; appropriations. (a) Trust Fund.

(1) In general.

There is hereby established on the books of the Treasury of the United States a trust fund to be known as the "State and Local Government Fiscal Assistance Trust Fund" (referred to in this subchapter as the "Trust Fund"). The Trust Fund shall remain available without fiscal year limitation and shall consist of such amounts as may be appropriated to it and deposited in it as provided in subsection (b) of this section. Except as provided in this chapter, amounts in the Trust Fund may be used only for the payments to State and local governments provided by this subchapter. (2) Trustee.

The Secretary of the Treasury shall be the trustee of the Trust Fund and shall report to the Congress not later than March 1 of each year on the operation and status of the Trust Fund during the preceding fiscal year.

(b) Appropriations. (1) In general.

There is appropriated to the Trust Fund, out of amounts in the general fund of the Treasury attributable to the collections of the Federal individual income taxes not otherwise appropriated

(A) for the period beginning January 1, 1972, and ending June 30, 1972, $2,650,000,000;

(B) for the period beginning July 1, 1972, and ending December 31, 1972, $2,650,000,000;

(C) for the period beginning January 1, 1973, and ending June 30, 1973, $2,987,500,000;

(D) for the fiscal year beginning July 1, 1973, $6,050,000,000;

(E) for the fiscal year begining July 1, 1974, $6,200,000,000;

(F) for the fiscal year beginning July 1, 1975, $6,350,000,000; and

(G) for the period beginning July 1, 1976, and ending December 31, 1976, $3,325,000,000. (2) Noncontiguous States adjustment amounts.

There is appropriated to the Trust Fund, out of amounts in the general fund of the Treasury attributable to the collections of the Federal individual income taxes not otherwise appropriated—

(A) for the period beginning January 1, 1972, and ending June 30, 1972, $2,390,000;

(B) for the period beginning July 1, 1972, and ending December 31, 1972, $2,390,000;

(C) for the period beginning January 1, 1973, and ending June 30, 1973, $2,390,000;

(D) for each of the fiscal years beginning July 1, 1973, July 1, 1974, and July 1, 1975, $4,780,000; and

(E) for the period beginning July 1, 1976, and ending December 31, 1976, $2,390,000. (3) Deposits.

Amounts appropriated by paragraph (1) or (2) for any fiscal year or other period shall be deposited in the Trust Fund on the later of (A) the first day of such year or period, or (B) October 21, 1972.

(c) Transfers from Trust Fund to general fund.

The Secretary shall from time to time transfer from the Trust Fund to the general fund of the Treasury any moneys in the Trust Fund which he determines will not be needed to make payments to State governments and units of local government under this subchapter. (Pub. L. 92-512, title I, § 105, Oct. 20, 1972, 86 Stat. 920.)

CODIFICATION

"This chapter", referred to in subsec. (a)(1), read in the original "this title" meaning title I of Pub. L. 92512, which is classified to this chapter and sections 6017A and 6687 of Title 26, Internal Revenue Code.

SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1225 of this title.

§ 1225. Allocation among States. (a) In general.

There shall be allocated to each State for each entitlement period, out of amounts appropriated under section 1224 (b) (1) of this title for that entitlement period, an amount which bears the same

ratio to the amount appropriated under that section for that period as the amount allocable to that State under subsection (b) of this section bears to the sum of the amounts allocable to all States under subsection (b) of this section.

(b) Determination of allocable amount. (1) In general.

For purposes of subsection (a) of this section, the amount allocable to a State under this subsection for any entitlement period shall be determined under paragraph (2), except that such amount shall be determined under paragraph (3) if the amount allocable to it under paragraph (3) is greater than the sum of the amounts allocable to it under paragraph (2) and subsection (c) of this section.

(2) Three factor formula.

For purposes of paragraph (1), the amount allocable to a State under this paragraph for any entitlement period is the amount which bears the same ratio to $5,300,000,000 as

(A) the population of that State, multiplied by the general tax effort factor of that State, multiplied by the relative income factor of that State, bears to

(B) the sum of the products determined under subparagraph (A) for all States.

(3) Five factor formula.

For purposes of paragraph (1), the amount allocable to a State under this paragraph for any entitlement period is the amount to which that State would be entitled if

(A) 3 of $3,500,000,000 were allocated among the States on the basis of population,

(B) 3 of $3,500,000,000 were allocated among the States on the basis of urbanized population,

(C) 3 of $3,500,000,000 were allocated among the States on the basis of population inversely weighted for per capita income,

(D) 1⁄2 of $1,800,000,000 were allocated among the States on the basis of income tax collections, and

(E) 1⁄2 of $1,800,000,000 were allocated among the States on the basis of general tax effort. (c) Noncontiguous States adjustment. (1) In general.

In addition to amounts allocated among the States under subsection (a) of this section there shall be allocated for each entitlement period, out of amounts appropriated under section 1224(b) (2) of this title, an additional amount to any State (A) whose allocation under subsection (b) of this section is determined by the formula set forth in paragraph (2) of that subsection and (B) in which civilian employees of the United States Government receive an allowance under section 5941 of Title 5.

(2) Determination of amount.

The additional amount allocable to any State under this subsection for any entitlement period is an amount equal to a percentage of the amount allocable to that State under subsection (b) (2) of this section for that period which is the same as

the percentage of basic pay received by such employees stationed in that State as an allowance under such section 5941. If the total amount appropriated under section 1224 (b) (2) of this title for any entitlement period is not sufficient to pay in full the additional amounts allocable under this subsection for that period, the Secretary shall reduce proportionately the amounts so allocable. (Pub. L. 92-512, title I, § 106, Oct. 20, 1972, 86 Stat. 921.)

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1227, 1228 of this title.

§ 1226. Entitlements of State governments.

(a) Division between State and local governments.

The State government shall be entitled to receive one-third of the amount allocated to that State for each entitlement period. The remaining portion of each State's allocation shall be allocated among the units of local government of that State as provided in section 1227 of this title.

(b) State must maintain transfers to local govern

ments.

(1) General rule.

The entitlement of any State government for any entitlement period beginning on or after July 1, 1973, shall be reduced by the amount (if any) by which

(A) the average of the aggregate amounts transferred by the State government (out of its own sources) during such period and the preceding entitlement period to all units of local government in such State, is less than,

(B) the similar aggregate amount for the oneyear period beginning July 1, 1971. For purposes of subparagraph (A), the amount of any reduction in the entitlement of a State government under this subsection for any entitlement period shall, for subsequent entitlement periods, be treated as an amount transferred by the State government (out of its own sources) during such period to units of local government in such State. (2) Adjustment where State assumes responsibility for category of expenditures.

If the State government establishes to the satisfaction of the Secretary that since June 30, 1972, it has assumed responsibility for a category of expenditures which (before July 1, 1972) was the responsibility of local governments located in such State, then, under regulations prescribed by the Secretary, the aggregate amount taken into account under paragraph (1) (B) shall be reduced to the extent that increased State government spending (out of its own sources) for such category has replaced corresponding amounts which for the one-year period beginning July 1, 1971, it transferred to units of local government.

(3) Adjustment where new taxing powers are conferred upon local governments.

If a State establishes to the satisfaction of the Secretary that since June 30, 1972, one or more units of local government within such State have had conferred upon them new taxing authority, then, under regulations prescribed by the Secretary, the aggregate amount taken into account

under paragraph (1)(B) shall be reduced to the extent of the larger of

(A) an amount equal to the amount of the taxes collected by reason of the exercise of such new taxing authority by such local governments,

or

(B) an amount equal to the amount of the loss of revenue to the State by reason of such new taxing authority being conferred on such local governments.

No amount shall be taken into consideration under subparagraph (A) if such new taxing authority is an increase in the authorized rate of tax under a previously authorized kind of tax, unless the State is determined by the Secretary to have decreased a related State tax.

(4) Special rule for period beginning July 1, 1973. In the case of the entitlement period beginning July 1, 1973, the preceding entitlement period for purposes of paragraph (1)(A) shall be treated as being the one-year period beginning July 1, 1972. (5) Special rule for period beginning July 1, 1976. In the case of the entitlement period beginning July 1, 1976, and ending December 31, 1976, the aggregate amount taken into account under paragraph (1)(A) for the preceding entitlement period and the aggregate amount taken into account under paragraph (1)(B) shall be one-half of the amounts which (but for this paragraph) would be taken into account.

(6) Reduction in entitlement.

If the Secretary has reason to believe that paragraph (1) requires a reduction in the entitlement of and State government for any entitlement period, he shall give reasonable notice and opportunity for hearing to the State. If, thereafter, he determines that paragraph (1) requires the reduction of such entitlement, he shall also determine the amount of such reduction and shall notify the Governor of such State of such determinations and shall withhold from subsequent payments to such State government under this subchapter an amount equal to such reduction.

(7) Transfer to general fund.

An amount equal to the reduction in the entitlement of any State government which results from the application of this subsection (after any judicial review under section 1263 of this title shall be transferred from the Trust Fund to the general fund of the Treasury on the day on which such reduction becomes final.

(Pub. L. 92-512, title I, § 107, Oct. 20, 1972, 86 Stat. 922.)

SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1221, 1263 of this title.

§ 1227. Entitlements of local governments. (a) Allocation among county areas.

The amount to be allocated to the units of local government within a State for any entitlement period shall be allocated among the county areas located in that State so that each county area will receive an amount which bears the same ratio to the

total amount to be allocated to the unit of local government within that State as

(1) the population of that county area, multiplied by the general tax effort factor of that county area, multiplied by the relative income factor of that county area, bears to

(2) the sum of the products determined under paragraph (1) for all county areas within that State.

(b) Allocation to county governments, municipalities, townships, etc.

(1) County governments.

The county government shall be allocated that portion of the amount allocated to the county area for the entitlement period under subsection (a) of this section which bears the same ratio to such amount as the adjusted taxes of the county government bear to the adjusted taxes of the county government and all other units of local government located in the county area.

(2) Other units of local government.

The amount remaining for allocation within a county area after the application of paragraph (1) shall be allocated among the units of local government (other than the county government and other than township governments) located in that county area so that each unit of local government will receive an amount which bears the same ratio to the total amount to be allocated to all such units as

(A) the population of that local government, multiplied by the general tax effort factor of that local government, multiplied by the relative income factor of that local government, bears to (B) the sum of the products determined under subparagraph (A) for all such units.

(3) Township governments.

If the county area includes one or more township governments, then before applying paragraph (2)

(A) there shall be set aside for allocation under subparagraph (B) to such township governments that portion of the amount allocated to the county area for the entitlement period which bears the same ratio to such amount as the sum of the adjusted taxes of all such township governments bears to the aggregate adjusted taxes of the county government, such township governments, and all other units of local government located in the county area, and

(B) that portion of each amount set aside under subparagraph (A) shall be allocated to each township government on the same basis as amounts are allocated to units of local government under paragraph (2).

If this paragraph applies with respect to any county area for any entitlement period, the remaining portion allocated under paragraph (2) to the units of local government located in the county area (other than the county government and the township governments) shall be appropriately reduced to reflect the amounts set aside under subparagraph (A).

(4) Indian tribes and Alaskan native villages.

If within a county area there is an Indian tribe or Alaskan native village which has a recognized governing body which performs substantial governmental functions, then before applying paragraph (1) there shall be allocated to such tribe or village a portion of the amount allocated to the county area for the entitlement period which bears the same ratio to such amount as the population of that tribe or village within that county area bears to the population of that county area. If this paragraph applies with respect to any county area for any entitlement period, the amount to be allocated under paragraph (1) shall be appropriately reduced to reflect the amount allocated under the preceding sentence. If the entitlement period of any such tribe or village is waived for any entitlement period by the governing body of that tribe or village, then the provisions of this paragraph shall not apply with respect to the amount of such entitlement for such period.

(5) Rule for small units of government.

If the Secretary determines that in any county area the data available for any entitlement period are not adequate for the application of the formulas set forth in paragraphs (2) and (3) (B) with respect to units of local government (other than a county government) with a population below a number (not more than 500) prescribed for that county area by the Secretary, he may apply paragraph (2) or (3) (B) by allocating for such entitlement period to each such unit located in that county area an amount which bears the same ratio to the total amount to be allocated under paragraph (2) or (3) (B) for such entitlement period as the population of such unit bears to the population of all units of local government in that county area to which allocations are made under such paragraph. If the preceding sentence applies with respect to any county area, the total amount to be allocated under paragraph (2) or (3) (B) to other units of local government in that county area for the entitlement period shall be appropriately reduced to reflect the amounts allocated under the preceding sentence.

(6) Entitlement.

(A) In general.

Except as otherwise provided in this paragraph, the entitlement of any unit of local government for any entitlement period shall be the amount allocated to such unit under this subsection (after taking into account any applicable modification under subsection (c) of this section).

(B) Maximum and minimum per capita entitlement.

Subject to the provisions of subparagraphs (C) and (D), the per capita amount allocated to any county area or any unit of local government (other than a county government) within a State under this section for any entitlement period shall not be less than 20 percent, nor more than 145 percent, of two-thirds of the amount allocated to the State under section