The Supreme Court is scheduled to hear arguments today on whether it is premature for the court to consider a challenge to the individual mandate, a key provision of the Affordable Care Act, that requires almost every individual to buy health insurance by 2014 or pay a penalty.
At issue will be the Anti Injunction Act (AIA), a federal tax law that says, in essence, that a taxpayer cannot challenge a tax, at a minimum, until it comes into effect.
If the Supreme Court eventually rules that the individual mandate triggers the AIA, the court will have effectively punted the constitutional debate concerning the individual mandate down the road. It will have found that no challenge to the mandate can be brought until it goes into effect, which is after 2014.
The AIA, enacted in 1867, says “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.” It was passed to protect the government’s need to assess and collect taxes as expeditiously as possible with minimum interference from the judiciary.
Because lower courts have divided on whether the AIA applies, the Supreme Court dedicated 90 minutes of arguments to the issue.
Back in September, when Brett M. Kavanaugh, a federal judge on the U.S. Appeals Court for the DC Circuit, heard a similar challenge to the Affordable Care Act, spectators noticed several large tax tomes sitting beside him on the dais.
At arguments Kavanaugh, who sat on a panel of three judges hearing the case, zeroed in on the AIA. He said he had “major concerns” that the tax law precluded a challenge to the mandate.
Indeed when the DC Circuit decision came down in November, two of Kavanaugh’s colleagues, Judges Laurence H. Silberman and Harry T. Edwards, voted to uphold the mandate. But Kavanaugh wrote a dissenting opinion that never addressed the merits of the constitutional questions. Instead, he said the case should be dismissed under the AIA as premature.
“The Anti-Injunction Act means, ” Kavanaugh wrote, “that a suit challenging the individual mandate cannot be entertained until 2015, unless Congress acts before then to exempt these suits from the Act.
“The Tax Code is never a walk in the park, ” Kavanaugh wrote. “But the statutory analysis here leads to a firm conclusion that the Anti-Injunction Act bars this suit.”
Kavanaugh is not the only federal appellate judge to say that a suit challenging the individual mandate is premature.
In September, the U.S. Court of Appeals for the 4th Circuit in Virginia, hearing a separate challenge to the health care law, dismissed the challenge based on the Anti-Injunction Act .
What is unusual is that in the appellate courts and at the Supreme Court, neither the government, nor the challengers believe the AIA should apply. In the case before the Supreme Court — brought by lawyers for 26 states, the National Federation of Independent Business, and four individuals — the Court appointed a lawyer to argue that particular issue today.
Robert A. Long Jr. of Covington & Burling writes in court papers that the penalty associated with the minimum coverage provision “falls within the ordinary meaning of ‘tax’ because it is codified in the Code, calculated as part of the taxpayer’s federal income tax liability, assessed and collected by the IRS, and paid into the federal government’s general revenues.” Long argues that Congress knows how to create an exception to the Anti-Injunction Act , and it chose not to.
The government argues that while Congress had authority to pass the mandate under its taxing power, the penalty is not the kind of tax that triggers the Anti-Injunction Act. In Court briefs government lawyers say, “It suffices here to conclude that Congress does not intend every exercise of its taxing power to be deemed a ‘tax’ for any and all purposes under the Internal Revenue Code.”
As for the challengers, lawyers for the 26 states say the AIA is not applicable to the states because they are not “persons” to whom the statute applies. Lawyers for the National Federation of Independent Business say that the mandate isn’t a tax in the first place and therefore cannot trigger the AIA.
While most of the attention to the health care debate has centered on the law’s individual mandate and its expansion of Medicaid, tax experts are keenly interested in how the court will address the Anti-Injunction Act. They are particularly interested in the government’s position that the AIA shouldn’t apply to the health care law.
George A. Hani, a tax law expert at Miller & Chevalier, says that if the government wins its argument that the AIA shouldn’t apply in this case it could bring more challenges to other tax laws that previously were believed to be barred by the AIA.
“If the government wins on its AIA argument , tax practitioners will seize the language with the eye toward bringing additional challenges to the tax law which previously were believed could only be brought after assessment and collection,” Hani said.
As for Kavanaugh, who was appointed to the bench by George W. Bush and served as a clerk for Justice Anthony Kennedy, he seemed to be sending smoke signals to the high court in his dissent. He suggested that judges should “exercise great caution” before getting to the merits of the case and deciding the much larger question of whether the Commerce Clause authorizes Congress to pass the mandate.
“The significant implications of a Commerce Clause decision in this case — in either side’s favor — lead to this point: If we need not decide the Commerce Clause issue now, we should not decide the Commerce Clause issue now,” he wrote.