(Tax) Anti-Injunction Act Backgrounder

One important question that the Supreme Court will likely address is whether the Anti-Injunction Act (“AIA”) bars challenges against the Patient Protection and Affordable Care Act’s (“PPACA”) minimum health coverage requirement (the “individual mandate”). See Dep’t of Health & Human Serv. v. Florida, 181 L. Ed. 2d 420 (U.S. Nov. 14, 2011). This issue went largely unnoticed until the United States Court of Appeals for the Fourth Circuit ruled that the AIA applies to a challenge to the individual mandate’s penalty, and, therefore, that courts lack jurisdiction to hear challenges to the penalty. See Liberty Univ. v. Geithner, No. 6:10-CV-00015 (4th Cir. Sept. 8, 2011). Somewhat unexpectedly, the AIA has the potential to alter the course of the health care litigation; if found to be applicable, the AIA may block all suits, both private and public, brought against the individual mandate, because courts may be deemed to lack subject matter jurisdiction until the mandate’s penalty is actually assessed against a party. See Brad Joondeph, The Anti-Injunction Act Complications, Health Reform Watch, Sept. 12, 2011; see also Liberty Univ. v. Geithner, No. 6:10-CV-00015 (4th Cir. Sept. 8, 2011).

The Anti-Injunction Act

The AIA, with a few exceptions, forbids courts to entertain pre-enforcement suits brought with the purpose of “restraining the assessment or collection of any tax.” 26 U.S.C. § 7421. (The AIA in this context refers to the Tax Anti-Injunction Act, which should not be confused with another statute of the same name—the Anti-Injunction Act enacted as Section 5 of the Judiciary Act of 1793.) The AIA came into full force in 1962. See Enochs v. Williams Packing & Navigation Co., 370 U.S. 1 (1962). Early case law relating to the AIA addressed speedy tax assessment and collection. See Brief of Court-Appointed Amicus Curiae in Support of Vacatur at 5 (citing Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974)). The Supreme Court has since concluded that the term “tax” in the AIA should be read broadly, in order to facilitate the AIA’s purpose and to avoid a flood of time-consuming pre-enforcement suits. See id. at 7–8; see also Brief of Court-Appointed Amicus Curiae at 37.

Health Care Implications

The PPACA implicates the AIA from a procedural standpoint; although no party raised the AIA in its arguments, the Supreme Court has instructed the parties to brief the question of whether the underlying suit challenging the PPACA’s minimum coverage penalty is barred by the AIA. See Brief of Court-Appointed Amicus Curiae at 9. The arguments being circulated relate to the AIA’s applicability, from both substantive and procedural perspectives.

Certain Amici Curiae maintain the notion—allegedly backed by Supreme Court precedent—that the AIA is jurisdictional, as it removes jurisdiction from courts that are anticipating suits challenging tax assessment or collection. See id. at 17–18. These Amici contend that the AIA primarily governs a court’s “adjudicatory capacity” and has a primarily jurisdictional purpose. See id. at 19–22. Others contest this jurisdictional point, arguing that the AIA does not speak to jurisdiction. See Brief in Response for Private Respondents at 16–17. Notwithstanding Supreme Court “passing” references to the contrary, these parties contend that the Court is often reckless in its categorization of “jurisdictional” matters, and that precedent demonstrates that the Court does not treat the AIA as a jurisdictional statute. See id. at 17–18. Because the AIA is non-jurisdictional, they contend, the government’s position that the AIA does not bar pre-enforcement challenges to the minimum coverage provision has implicitly waived any arguments under the AIA. See id. at 18.

Some parties have argued that Congress intended for the individual mandate to be executed in the same manner as the tax code. See Brief of Court-Appointed Amicus Curiae at 23–24. It follows, they argue, that the AIA, which specifically addresses “taxes,” should enjoin any judicial challenges brought against the mandate. See id. at 24–26; see also Brief of Amici Curiae Mortimer Caplin and Sheldon Cohen in Support of Neither Side at 13–14. As a corollary, the parties argue that judicial review should only be allowed after a penalty has been levied. See Brief of Court-Appointed Amicus Curiae at 27–29. Amici also argue that the term “tax,” as used in the AIA, encompasses the mandate because certain statutory provisions define the term “tax” to include “assessable penalties.” See id. at 36–39. The Fourth Circuit agrees, noting that the term “tax,” as used in the AIA, should reach any statutory assessment of exactions by the Internal Revenue Service. See Liberty Univ. v. Geithner, No. 6:10-CV-00015 (4th Cir. Sept. 8, 2011). It is further contended that, should the mandate be excluded from the explicit meaning of “tax,” it should still fall within the purview of the AIA, as the Supreme Court has previously extended the AIA’s jurisdiction to include other tax-like provisions. See Brief of Court-Appointed Amicus Curiae at 42–43. Several courts of appeal have reached the opposite conclusion, however, deciding that the mandate specifically imposes a “penalty,” not a tax, and should not be treated as a tax for purposes of the AIA. See, e.g., Seven-Sky v. Holder, No. 1:10-cv-00950 (D.C. Cir. Nov. 8, 2011).

The Supreme Court may ultimately decide that it does not have jurisdiction to decide the constitutionality of the individual mandate. See Kevin C. Walsh, Congress can and Should Enact a Statutory Fix for the Tax Anti-Injunction Act Defect in the Private-Party Constitutional Challenges to the Individual Mandate, Walshslaw, Sept. 9, 2011. However, one commentator has proposed a solution consistent with the bipartisan call for a timely decision on the merits by suggesting a legislative overturning of the AIA. See id.

Closing Remarks

Several other points of contention remain unresolved. First, it is unclear what the government’s plan of attack will be as the case unravels, as its argumentative positions have been fluctuating between fighting on the merits and arguing lack of jurisdiction. See Brad Joondeph, The Anti-Injunction Act Complications, Health Reform Watch, Sept. 12, 2011. Second, though private parties may be barred from action until the first penalties are assessed, state actors—provided they can survive other jurisdictional hurdles—may be able to circumvent the AIA and obtain more immediate relief; however, there are strong arguments against state circumvention. See id.; see also Brief of Court-Appointed Amicus Curiae at 48–49. Finally, it remains to be seen how the Supreme Court will categorize the individual mandate (i.e. as a tax or penalty), a decision will impact the force of the AIA argument.

Prepared by: Milson Yu