Department of Health and Human Services v. Florida (11-398)
Oral argument: March 26, 2012
Appealed from: United States Court of Appeals for the Eleventh Circuit (Aug. 12, 2011)
HEALTH CARE, ANTI-INJUNCTION ACT, PPACA, JURISDICTION, TAX LAW
One issue that the Supreme Court will resolve regarding the Patient Protection and Affordable Care Act ("Health Care Act") is the Tax Anti-Injunction Act’s (“AIA”) applicability to the challenge against the minimum coverage provision. The Tax Anti-Injunction Act (“AIA”) bars suits seeking to restrain the assessment or collection of any tax. Though not a specific argument from any party, the Court has shown interest due to the impact that AIA applicability may have on challenges to the health care law, as well as the effect of any decision on the AIA’s scope. While the parties agree that the AIA only applies to taxes, and the minimum coverage provision provides for a penalty, the parties disagree on the scope of the AIA’s application. Court-appointed amicus Robert Long argues that the minimum coverage provision falls within the ordinary meaning of a “tax.” The government believes the AIA applies to states and private parties’ claims because it is jurisdictional and is implicated by the mandate’s potential tax collection consequences. Private parties, several states, and National Federation of Independent Business rejoin by noting that the AIA is not jurisdictional and their claims only run to the constitutionality of the minimum coverage provision, not its penalty.
Beginning in 2014, the minimum coverage provision of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119, amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029, will require non-exempted individuals to maintain a minimum level of health insurance or pay a tax penalty. 26 U.S.C.A. 5000A. The question presented is:
1. Whether Congress had the power under Article I of the Constitution to enact the minimum coverage provision.
Petitioners also suggest that the Court direct the parties to address the following question:
2. Whether the suit brought by respondents to challenge the minimum coverage provision of the Patient Protection and Affordable Care Act is barred by the Anti-Injunction Act, 26 U.S.C. 7421(a).
IN ADDITION TO QUESTION 1 PRESENTED BY THE PETITION, THE PARTIES ARE DIRECTED TO BRIEF AND ARGUE THE FOLLOWING QUESTION: “WHETHER THE SUIT BROUGHT BY RESPONDENTS TO CHALLENGE THE MINIMUM COVERAGE PROVISIONS OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT IS BARRED BY THE ANTI-INJUNCTION ACT, 26 U.S.C. §7421(A).”
Does the Anti-Injunction Act bar courts from considering the merits of a constitutional challenge to the Patient Protection and Affordable Care Act’s minimum coverage provision, which mandates individuals to obtain minimum health insurance coverage and permits the Internal Revenue Service to collect a penalty for failure to comply?
On March 23, 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act (“Health Care Act”), an immense piece of health care reform that, among other things, reshaped aspects of the private and public health insurance sectors, lowered the costs of Medicare, and generally expanded health care access. Few other portions of the law have drawn the same level of attention as the minimum coverage provision within the individual mandate. The individual mandate is an addition to the Internal Revenue Code that requires all individuals to maintain a minimum level of health insurance coverage or suffer a “penalty” that is administered by the Internal Revenue Service (“IRS”) and appended to each malfeasant’s tax return. See 26 U.S.C. § 5000A.
Soon after the Health Care Act passed, private claimants Mary Brown and Kaj Ahlburg, twenty-six states, and the National Federation of Independent Business (collectively “NFIB”) brought suit in the U.S. District Court for the Northern District of Florida challenging the Health Care Act’s constitutionality and, in particular, the individual mandate’s constitutionality. See Florida v. Dep't of Health & Human Servs., 716 F. Supp. 2d 1120 (2011). The district court found against the Department of Health and Human Services, Treasury Department, and Labor Department (collectively “HHS”) and determined the individual mandate was beyond Congress’s authority under the taxing power, the Commerce Clause, and the Necessary and Proper Clause. See id. at 1162–64. The district court refused to identify the individual mandate as a “tax,” thus removing the challenge from the purview of the Tax Anti-Injunction Act (“AIA”). See id. at 1143–44. HHS appealed to the United States Court of Appeals for the Eleventh Circuit; however, the Eleventh Circuit affirmed that the individual mandate exceeds congressional power. See Florida v. Dep't of Health & Human Servs., 648 F.3d 1235, 1311, 1317 (11th Cir. 2011). The Eleventh Circuit did not address the issue of the applicability of the AIA. The Supreme Court granted certiorari on November 14, 2011. See Dep't of Health & Human Servs. v. Florida, 132 S. Ct. 604 (2011).
Though the focal point of this case is the Health Care Act’s constitutionality, the Supreme Court instructed the parties to argue an issue that was abandoned during the appeals process—whether the AIA bars the challenge against the individual mandate. See Dep't of Health & Human Servs. v. Florida, 132 S. Ct. 604 (2011). The AIA blocks any court, with a few exceptions, from hearing challenges brought to “restrain the assessment or collection of any tax” before the government has attempted such assessment or collection. See 26 U.S.C. § 7421. The AIA’s applicability was settled in 1962 when the Supreme Court determined that the statute’s purpose was to facilitate effective tax assessment and to avoid time-consuming pre-enforcement suits. See Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7–8 (1962). The AIA was first implicated in the district court when, in response to NFIB’s arguments that the individual mandate represents an unconstitutional tax, HHS contended that the suit itself would be barred in such a scenario. See Florida v. Dep't of Health & Human Servs., 716 F. Supp. 2d 1120, 1130 (2011). As noted above, the district court refused to call the individual mandate a tax. See id. at 1143–44. On appeal, neither the parties nor the court revived the AIA argument.
This dispute concerns the applicability and potential effect of the Tax Anti-Injunction Act (“AIA”) on the challenge to the Patient Protection and Affordable Care Act’s (“Health Care Act”) minimum coverage provision within the individual mandate. The Supreme Court’s finding could halt all judicial proceedings regarding the individual mandate until the government attempts to implement the penalty provision.
What Effect will AIA Application have on the Court System?
The Cato Institute points out that the majority of courts to face this issue have concluded that the AIA does not apply to suits attempting to enjoin the individual mandate’s penalty provision. See Brief of Amicus Curiae Cato Institute in Support of Respondents at 22–23. The Center for the Fair Administration of Taxes (“CFAT”) contends that, if the Court were to rule that the AIA does apply to the individual mandate’s penalty, the decision would open the floodgates for taxpayer cases challenging penalties assessed against them. See Brief of Amicus Curiae Center for the Fair Administration of Taxes Opposing Vacatur at 21–22. CFAT argues that the same flood of individual mandate-related challenges would occur if the Court allowed Executive Branch to waive AIA application in situations such as this, where the Health Care Act would otherwise bar suit. See id. at 22–23. The States urge the Supreme Court to decide on the individual mandate’s constitutionality regardless of AIA applicability because Congress, by labeling the individual mandate as a penalty, should have to defend the constitutionality of such a decision. See Reply Brief for State Respondents at 22–23.
Mortimer Caplin and Sheldon Cohen, former IRS Commissioners, argue that if the AIA does not apply here, it would create an exception that would allow a mass of different claims against the individual mandate, clogging the courts and causing delays. See Brief of Amici Curiae Mortimer Caplin and Sheldon Cohen Urging Vacatur in Support of Neither Side at 27, 36. This flood of lawsuits, Caplin and Cohen contend, would begin because taxpayers could challenge individual mandate assessments in court, rather than availing themselves of tax code administrative procedures. See id. at 27–28. Robert Long, a court-appointed amicus curiae, notes that the AIA’s application here will prevent this premature judicial interference with the prompt administration of the tax system. See Brief of Court-Appointed Amicus Curiae Robert A. Long in Support of Vacatur at 26–28. Long also contends that the AIA applies to lawsuits challenging “any” tax, and therefore its application is not foreclosed by the fact that no taxes have been levied under the individual mandate to date. See id. at 34–35. Finally, Long argues that, as a general policy matter, courts should avoid deciding constitutional issues unless they prove unavoidable, a goal facilitated in this case by AIA application. See id. at 58.
What Effect will AIA Application have on the AIA’s Purpose and the Tax Law?
The American Center for Law and Justice (“ACLJ”) points out that this challenge to the individual mandate’s constitutionality does not justify AIA application because the suit poses no interference to the efficient administration of the tax system. See Brief of Amicus Curiae American Center for Law & Justice in Support of Respondents at 11–12. Citing the “unique restrictions” that Congress placed on the government’s ability to collect proceeds from the individual mandate’s penalty, CFAT asserts that Congress did not intend the AIA to apply to penalty challenges; therefore, allowing the challenge to go forward would not damage the AIA’s credibility or effectiveness. See id. at 11–12, 15. ACLJ further notes that Congress’s intended result vis-à-vis the individual mandate is to create effective health insurance markets, a goal that should not implicate the AIA. See Brief of ACLJ at 8–9. The States, along a similar vein, argue that Congress purposely used the label “penalty” because, rather than raise revenue, Congress hoped to reach widespread health coverage and punish those who fail or refuse to comply. See Reply Brief for State Respondents at 22.
Caplin and Cohen assert that if the individual mandate does not fall into the AIA’s purview, this would interfere with the orderly collection of taxes and circumvent the AIA’s very purpose. See Brief of Caplin and Cohen at 19–22. Various tax law professors reiterate the argument that the function of the AIA is to facilitate the “pay first, litigate later” tax regime that allows for the efficient administration of the tax system. See Brief of Amici Curiae Tax Law Professors in Support of Vacatur at 21. The tax law professors also note that AIA inapplicability at the outset would leave the IRS with a slim arsenal of collection tools as compared to the scenario in which the taxpayer first paid the penalty and then sued. See id. at 28, 30–31. The Department of Health and Human Services, Department of the Treasury, and Department of Labor (collectively “HHS”) contend that the relevant distinction for AIA purposes lies in the consequences flowing from a provision; therefore, the AIA applies regardless of the term employed (tax or penalty) because the individual mandate operates in conjunction with the penalty provision and creates “only tax consequences.” See Brief for Petitioners at 40–41.
The Tax Anti-Injunction Act (“AIA”) bars suits seeking to restrain the assessment or collection of any tax. See 26 U.S.C. § 7421. The minimum coverage provision within the individual mandate of the Patient Protection and Affordable Care Act requires individuals to obtain qualified health insurance or pay a penalty on their annual tax returns. See 26 U.S.C. § 5000A. The parties to this case all argue that the AIA does not apply to the individual mandate, but there is disagreement on the scope of the AIA and the reason why it does not apply. Robert Long, an amicus curiae appointed by the Supreme Court, argues that the AIA does apply and that it limits the Court’s jurisdiction to hear the underlying case.
Is the Individual Mandate’s Penalty Provision a Tax?
The Department of Health and Human Services, Department of the Treasury, and Department of Labor (collectively “HHS”) argue that the AIA only applies to cases involving taxes, whereas the individual mandate provides for a penalty. See Brief for Petitioners at 20. HHS contends that while labeling may not be determinative when resolving constitutional questions, Congress’s choice to refer to a statutory provision as a tax or penalty should control whether the AIA applies to challenges involving that statute. See id. at 21–22. Private Respondents, two individual citizens and the National Federation of Independent Business (collectively “NFIB”), add that “taxes” and “penalties” are treated as distinct legal concepts throughout the tax code. See Brief for Private Respondents at 29–30. The States assert that the individual mandate’s penalty must be something other than a tax because Congress specifically directed the IRS to collect the penalty in the same manner as a tax, language that Congress would not have included if the penalty itself was intended as a tax. See Brief for State Respondents at 52–53.
Long counters that the penalty at issue is a tax subject to the AIA because the provision falls within the broad ordinary meaning of “tax,” which Congress intended and the Court has previously recognized. See Brief of Court-Appointed Amicus Curiae Robert A. Long in Support of Vacatur at 37–39. Long contends that the penalty also falls under the tax category of “assessable penalties,” which are penalties included under the definition of a tax for the purpose of assessment and collection. See id. at 39–41. Finally, Long asserts that the argument over whether this is a tax or a penalty is not relevant to AIA application because Congress only used the term “penalty” to imply expected compliance with the mandate. See id. at 41–42. Long counters that the individual mandate’s penalty is a tax subject to the AIA because of Congress’s direction that the penalty be assessed and collected as a tax. See id. at 24–26. Long argues that this can only happen if the AIA applies to the mandate’s penalty because the AIA affects how taxes are assessed and collected—free of judicial restraint. See id.
Does the Suit contest the Coverage Mandate or the Penalty Provision?
HHS argues that if the individual mandate’s penalty provision is a tax subject to the AIA, then the Court can not hear the case because the challenges to the individual mandate implicitly include challenges the penalty provision. See Brief for Petitioners at 38–39. HHS contends that any decision invalidating the individual mandate will automatically affect the assessment and collection of the penalty provision. See id. at 39. HHS asserts that because parties may only contest a statute’s consequences, and not its phrasing, in court, the parties may not make a legal claim exclusively against the individual mandate where the mandate is not independent of its penalty. See id. at 40–41.
NFIB, however, argues that the AIA does not bar this suit because the claim concerns the individual mandate, and not the penalty. See Brief for Private Respondents at 10. NFIB asserts that the individual mandate itself is a substantive legal obligation on which they may sue. See id. at 11. NFIB contends that it seeks relief only from the mandate to purchase health insurance. See id. at 11–12. The penalty provision is irrelevant to this claim, NFIB argues, because if the individual mandate is found to be constitutional then its members will comply, thereby avoiding the penalty provision entirely. See id. at 13.
The States argue that their claim is also against the mandate itself because the States’ injury comes from future increased enrollment in state Medicaid programs and not from a penalty that does not apply to the States. See Brief for State Respondents at 43–45. The States contend that the individual mandate may be legally challenged separately from the penalty provision because what they request is not relief from the taxation of uninsured persons, but relief from the increased burden on state programs that results from the mandate itself. See id. at 45–48.
Long, however, argues that previous Supreme Court cases have held similar arguments regarding the AIA as “circular” and “unpersuasive.” See Brief of Court-Appointed Amicus Curiae at 45–47. Long asserts that the mandate and the penalty are tightly coupled because the penalty is the only method available to enforce the mandate. See id. at 48. Additionally, Long contends that the claims themselves do attack the penalty provision directly because the suit “seeks an injunction against ‘enforcement’ of the [Health Care] Act”—enforcement that is achieved through the penalty provision. See id. at 44–45.
How does the AIA apply to Lawsuits brought by States?
HHS argues that the AIA applies to states in the same manner as an individual. See Brief for Petitioners at 42. HHS contends that, as courts have found when applying other internal revenue laws, states are “persons” under the AIA. See id. at 46–47. HHS further asserts that the addition of “by any person” to the AIA’s language was intended to clarify that the AIA applies to third parties, like states, and not to limit the AIA from suits involving states. See id. at 47–48.
The States counter that the AIA does not apply to them because states are not “persons” under a statute unless Congress clearly intends to include states within that term. See Brief for State Respondents at 37–38. Additionally, the States rely upon South Carolina v. Regan, which held that the AIA did not apply to aggrieved parties who had no alternative forum to litigate claims. See id. at 34–36. The States argue that they are exempted from the AIA under Regan because they are aggrieved parties without any other recourse, as neither the mandate nor the penalty applies to them directly. See id. at 35–36. The States assert that the AIA is not intended to block States’ suits where there is no other available remedy. See id.
Long retorts that the States are not aggrieved parties under Regan. See Brief of Court-Appointed Amicus Curiae at 52. Unlike in Regan, Long contends, the individual mandate does not directly injure the States because they are not liable for the penalty and they are not authorized to sue on their citizenries’ behalf. See id. at 52–53. Without this direct injury, Long asserts that the States are not aggrieved parties and cannot avoid AIA application to their suit. See id. at 52–53, 57.
Are the AIA’s Limits Jurisdictional?
HHS argues that the AIA limits jurisdiction and restricts a court’s authority to hear cases. See Brief for Petitioner at 8. For support, HHS points to Supreme Court precedent that has regarded the AIA as a jurisdictional limitation on the courts. See id. at 11–13. Long adds support by comparing the AIA to the Tax Injunction Act, a related statute modeled on the AIA that the Supreme Court found jurisdictional. See Brief of Court-Appointed Amicus Curiae at 17–18. Long argues that the AIA’s language demonstrates that it is jurisdictional because the text bars suits in “any court.” See id. at 19. Long asserts that barring the suit in any court speaks directly to the power of the courts and not to the rights of any party. See id.
NFIB counters that the AIA is not jurisdictional because Congress did not clearly provide for such. See Brief for Private Respondents 42–43. NFIB argues that the AIA’s lack of jurisdictional language and its location in the tax code’s procedure and administration sections indicate that Congress did not intend for the AIA to be jurisdictional. See id. at 43–45. NFIB asserts that these factors distinguish the AIA from related jurisdictional statutes, which both contain jurisdictional language and are placed in the tax code’s jurisdiction section. See id. at 46–47. The States further argue that the AIA is merely a claims-processing rule, speaking to litigants’ rights and not to a court’s authority to adjudicate. See Brief for State Respondents at 14–15.
In this case, the Supreme Court will decide whether the Tax Anti-Injunction Act (“AIA”) prevents the Court from considering the constitutionality of the Patient Protection and Affordable Care Act’s minimum coverage provision. While the parties agree that the AIA should not apply because the challenged provision is a penalty and not a tax, they differ on the extent to which the AIA applies for cases challenging the mandate, instead of the penalty provision, and whether the AIA’s limitations are jurisdictional. However, Court-appointed amicus Robert Long argues that the AIA should apply in this case because the mandate is a tax subject to the AIA. Long further contends that the AIA imposes jurisdictional limitations on the courts. The Court’s decision will affect the on-going litigation regarding the individual mandate’s constitutionality, as well as the claimants’ ability to challenge the assessment of tax code penalties, which may have lasting effects on the efficient administration of tax laws.
Edited by: Jacqueline Bendert
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