Congress called it a tax, so Anti-Injunction Act bars court challenge

The federal courts lacked jurisdiction to hear a challenge to the employer mandate provisions of the Patient Protection and Affordable Care Act (ACA) because the litigation was barred by the Anti-Injunction Act (AIA), a federal appeals court has ruled. The assessable payment imposed on employers who do not offer affordable minimum essential coverage is a tax, and the AIA prohibits lawsuits to prevent the collection of any tax. The party objecting to the tax must first pay it and then sue for a refund. Therefore, the court vacated the district court ruling that dismissed the case on the merits and directed the court to dismiss for lack of subject matter jurisdiction. The court also ruled that it had no jurisdiction over Dr. Steven Hotze’s challenge to the individual mandate because he did not have standing to sue; his complaint did not allege that his employer-sponsored coverage failed to meet ACA requirements. The case is Hotze v. Burwell.

The plaintiffs’ argument. Dr. Hotze and his employer, Braidwood Management, Inc. (BMI) brought their suit in a Texas federal court, claiming that both the employer mandate and the individual mandate violated Art. I, Sec. 7 of the United States Constitution, the Origination Clause, which requires that all legislation to raise revenue must begin in the House of Representatives. H.R. 3590, which passed the House in October 2009, was the Service Members Home Ownership Tax Act of 2009 (SMHOTA). The Senate, in Amendment 2786, struck everything in the bill except the enacting clause and bill number and replaced it with the proposed ACA. It passed that bill and returned it to the House, which passed it on March 21, 2010. Hotze and BMI argued that because the House had sent SMHOTA, not the ACA, to the Senate, the ACA originated in the Senate. They also challenged the shared responsibility payments as unconstitutional takings that violated the Fifth Amendment to the U.S. Constitution.

The district court ruling. Relying on the Supreme Court’s decision in National Federation of Independent Business v. Sebelius, the trial court ruled that both BMI and Hotze had standing to sue and the payments required by the mandates were valid as taxes, but the Anti-Injunction Act did not apply because the primary purpose of the ACA was not to raise revenue. The court rejected the Origination Clause argument because there was no requirement that amendments to revenue bills be germane, i.e., related to the bill that the House passed.

The appeal. The Fifth Circuit rejected the trial court’s view of the Supreme Court decision. First, Hotze did not have standing to sue because the complaint did not allege that the mandate would apply to him; his employer provided coverage, and he alleged no facts from which the court could conclude that the coverage did not satisfy the ACA requirements. Rather, he alleged only that he would have to consider whether to purchase less desirable coverage. Because the decision whether to offer ACA-compliant coverage was his employer’s, he was not threatened with any injury as a result of the ACA.

In ruling that the AIA barred BMI’s challenge to the employer mandate, the court distinguished the employer mandate from the individual mandate. It reasoned that Congress had labeled the assessable payment due from employers as a tax and noted that several other sections of the ACA refer specifically to the “tax required by [26 U.S.C. Sec. 4980H.]” Although Congress prohibited the use of levies, liens, or criminal prosecution to collect the shared responsibility payment required of individuals, it allowed the use of these typical tax collection remedies to enforce the assessable payment required of employers. The purpose of the AIA is to protect the government’s use of those remedies. In addition, the court rejected the district court’s examination of the primary purpose of the mandate to decide whether the AIA applied. Because the application of the AIA should be clear and simple for the courts to administer, the court only needed to look at the language of the statute to see whether the assessment is a tax. If Congress called it a tax, the court should rule that it was a tax.

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