Most states impose limitations on the authority of the legislature to

Hmm, it sounds like you are trying to come up with a rule here, and if you've been reading our SC posts, you probably know how we feel about that sort of thing!

We are trying to encourage people to use their brains rather than relying on a made-up algorithm of grammar rules (even though the latter would be much easier, right?). In "most states impose limitations on the authority of the legislature to borrow money," the prepositional phrase "of the legislature" logically modifies "authority" -- so we can temporarily "ignore" that prepositional phrase in analyzing the rest of the sentence (as you saw in this post).

But looking at your example ("I impose limitations to borrow money"), the meaning is less clear, probably because neither interpretation makes much sense. Do I impose limitations IN ORDER TO borrow money? If so, what the heck does that mean? And if "to borrow money" modifies "limitations" directly, what the heck is a "limitation to borrow money"? Again, neither of these makes much sense, at least not without additional context.

On the other hand, "authority to borrow money" makes perfect sense -- the legislature has the authority to do something, and most states impose limitations on that authority.

Again, the context is crucial, and sadly there are no black and white rules telling us what the construction "...to {verb}" is modifying. As soon as we try to come up with such rules, the GMAT will be more than happy to break them.

I hope that helps!