Answer :
State and local governments are the entities that the federal government is allowed to participate in revenue sharing.
Revenue sharing refers to the distribution of a portion of a government unit's tax revenue to other governmental entities. For instance, national governments may share money with provinces or states, and vice versa for municipal governments. Revenue sharing formulae by which revenue is distributed are determined by law; the units that receive the funds are generally exempt from restrictions by the unit awarding it, and the recipients may or may not be obligated to match the funds received. Several nations, including Canada, India, and Switzerland, have used various types of revenue sharing. Federal tax income was distributed to state and local governments as part of a unique revenue-sharing arrangement in the United States from 1972 to 1986.
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