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supported by the statute, advocated for a larger de minimis and suggested that the amount be tied <br />to the recipient government's total expenditures in the prior fiscal year. <br />Treasury Response: Treasury adopted a de minimis threshold as an administrative <br />accommodation for the reasons discussed above. As discussed in the interim final rule, Treasury <br />determined that the 1 percent de minimis level reflects the historical reductions in revenue due to <br />minor changes in state fiscal policies and was determined by assessing the historical effects of <br />state -level tax policy changes in state EITCs implemented to effect policy goals other than <br />reducing net tax revenues.362 <br />For these reasons, Treasury is adopting the 1 percent de minimis without change. <br />(3) Safe harbor. Next, under the interim final rule, if the revenue reduction caused by the <br />covered changes exceeds the 1 percent de minimis threshold, the recipient government compares <br />the reporting year's actual tax revenue to the baseline. If actual tax revenue is greater than the <br />baseline, Treasury will deem the recipient government not to have any recognized net reduction <br />for the reporting year, and therefore to be in a safe harbor and outside the ambit of the offset <br />provision. This approach is consistent with the ARPA, which contemplates recoupment of <br />SLFRF funds only in the event that such funds are used to offset a reduction in net tax revenue. <br />If net tax revenue has not been reduced, the offset provision does not apply. In the event that <br />actual tax revenue is above the baseline, the organic revenue growth that has occurred, plus any <br />other revenue -raising changes, by definition must have been enough to offset the in -year costs of <br />any covered changes. One commenter argued that the offset for organic growth be adjusted to <br />reflect population growth. To minimize administrative burden, and for the reasons discussed <br />362 Data provided by the Urban -Brookings Tax Policy Center for state -level EITC changes for 2004-2017. <br />332 <br />