Blog

Editor’s Note: For an overview of the health care case oral arguments at the Supreme Court, click HERE.

The Tax Collectors, van Reymerswale, c.1540

“Nothing is certain but death and taxes,” they say.

Unfortunately, there’s some UNcertainty about what is, and is not, a tax at the U.S. Supreme Court, and Monday we all got a chance to listen in on the Justices’ attempt to clarify the matter. To most of us, it’s probably about as clear as mud right now. I have to include myself among those whose understanding is what I would call fair to partly cloudy.

Not These Supremes

DISCLAIMER: Although Shelli gives me a lot of (undeserved) credit just because I was a lawyer B.C. (Before Children), legal training and experience only get you so far. No matter your training and experience, no one can, with complete accuracy, predict what the Supremes — or any other judge or group of judges — will conclude with respect to a particular case. The Affordable Care Act¹ is not exceptional in this respect. So, sprinkle what follows with a healthy dose of salt — perhaps some of that coarse-grained sea-salt if you have some on hand — and proceed at your own risk.

a placeholder to FORCE the text

THESE Supremes

WHAT IS A TAX?

Perhaps the most striking statement made by any of the attorneys struggling to respond to the Justices’ questions on Monday was made by Mr. Robert Long, the Court-appointed attorney charged with arguing that the Anti-Injunction Act should apply. In response to questioning by Justice Breyer, Mr. Long observed:

“Somewhat to my surprise, ‘tax’ is not defined anywhere

in the Internal Revenue Code” (Transcript, page 18, lines 13-15).

You’d think, buried somewhere in the verbiage contained in the 20 volumes of the current U.S. Tax Code or in the thousands of pages of regulations promulgated by the Treasury Department in implementing the Code, someone would have defined their subject. On the other hand, definitions have a way of limiting the scope of one’s power, so I guess it’s not surprising that Congress and the bureaucrats at Treasury haven’t gotten around to crafting one yet.

In the absence of any clear definition, the courts have resorted to identifying certain attributes that taxes share and weighing whether something has a sufficient number of those characteristics to qualify as a tax. The decision process in this regard is similar to the old saw that, if something walks like a duck, and quacks like a duck, then it’s a duck.

Consequently, it’s not surprising that the questions posed by the Justices and the answers given by the parties’ attorneys concerning whether or not the penalty provision contained in the Affordable Care Act is or is not a tax focused on the following factors:

• “Now, here, Congress has nowhere used the word ‘tax.’ What it says is penalty.”(Justice Breyer, Transcript, page 16, lines 24-25).

• “This [i.e., the penalty provision] is not in the Internal Revenue Code ‘but for purposes of collection.’” (Justice Breyer, Transcript, pages 16-17, lines 25-2).

• “[T]his is not attached to a tax. It is attached to a health care requirement.” (Justice Breyer, Transcript, page 17, lines 7-8).

• “If it’s being collected in the same manner as a tax doesn’t automatically make it a tax.” (Justice Breyer, Transcript, pages 17-18, lines 25-1).

• “In about the time that Congress passed the Anti-Injunction Act, ‘tax’ had a very broad definition. It’s broad enough to include this exaction, which is codified in the Internal Revenue Code. It’s part of the taxpayer’s annual income tax return. The amount of the liability and whether you owe the liability is based in part on your income. It’s assessed and collected by the IRS.” (Mr. Long, Transcript, page 18, lines 15-22).

• “[U]nder the Tax Injunction Act, what can’t be enjoined is an assessment for the purpose of raising revenue. The Tax Injunction Act does not apply to penalties that are designed to induce compliance with the law, rather than to raise revenue. And this is not a revenue-raising measure because, if it’s successful, they — nobody will pay the penalty, and there will be no revenue to raise.” (Justice Ginsberg, Transcript, page 19, lines 13-20).

There was more back and forth on this issue, but I’ve covered the high points. Surprisingly, none of the Justices cited any of the various times members of this administration have gone on the record categorically denying that the penalty you are required to pay if you fail or refuse to buy health insurance is a tax. Even our fearless leader has a very visible piece of that action.

Bottom line: The tenor and frequency of the questions fielded by the attorneys during oral argument lead me to believe that the majority of the members of the Court are skeptical that the penalty provision contained in the Affordable Care Act is a tax FOR THE PURPOSES OF THE ANTI-INJUNCTION ACT. (Whether it is or is not a tax or tax penalty that Congress is authorized by the Constitution to enact under its taxing power is a question for another day — Tuesday’s argument.)

WHAT DOES THE ANTI-INJUNCTION ACT HAVE TO DO WITH THIS HEALTH CARE REFORM CASE ANYWAY?

The Anti-Injunction Act states:

“(N)o suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.”

The Court was apparently concerned that this language MIGHT leave the lower courts and the Supreme Court itself with no jurisdiction to hear and decide the cases challenging the Affordable Care Act. That reasoning goes:

• IF the penalty imposed by the Affordable Care Act is a tax; AND

• IF the purpose of the lawsuits challenging the Affordable Care Act is to restrain “the assessment or collection” of that tax; THEN

• NO suit could be maintained in a court of law (i.e., no court would have jurisdiction to hear and decide the claim) before the tax was, first, paid and, second, the aggrieved person exhausted his or her administrative remedies² to get the money back.

Clearly, if the Anti-Injunction Act applies AND it operates to deprive courts of jurisdiction, all the lower courts erred when they allowed the plaintiffs to file and maintain their cases challenging the Affordable Care Act. The Anti-Injunction Act would similarly bar the Supreme Court from considering the appeals until the universal mandate to purchase health insurance goes into effect in 2014, someone refuses to obey the requirement, is charged the penalty, pays it, challenges it before the IRS and the Tax Court and loses there, files a lawsuit in the lower courts, and appeals it all the way back to the U.S. Supreme Court. Obviously, years would pass before all of this could be accomplished and the constitutionality of the Affordable Care Act could finally be decided, so a lot is at stake.

Although the United States initially argued in the trial courts that the Anti-Injunction Act barred the plaintiffs’ claims, interestingly, both sides to the dispute now contend the Anti-Injunction Act poses no obstacle to the Supreme Court’s review. BUT, the Court was so concerned about the possibility that it might do so, the Court took the very unusual step of appointing a special counsel to argue that the Anti-Injunction applies and bars the appeal. The parties then took the laboring oar arguing in opposition. That’s what we all heard and/or read about during Monday’s hearing.

Professional Court watchers in the media and elsewhere seem to uniformly agree that the Justices will reject the jurisdictional argument and decide the case on the merits. The aggressive questioning Mr. Long was subjected to and the tone of those questions seem to support that conclusion. However, it seems equally probable the Justices will reach that conclusion on different grounds:

1. Some concluding that, although the Anti-Injunction Act is jurisdictional, it doesn’t apply here because the sanction imposed by the Affordable Care Act is not a tax; and
2. Some concluding that the Anti-Injunction Act applies, but it is not jurisdictional and, therefore, the United States’ attorneys have now waived it; and
3. Some concluding that the Anti-Injunction Act is jurisdictional and it would apply, but for the fact that the present action is a challenge to the individual mandate (which is definitely NOT a tax), rather than to the tax imposed if the mandate is not obeyed.

During Monday’s argument, different Justices seemed to view one or the other of the first two alternatives favorably. They were, as a whole, critical of the last alternative.

BUT, as I said at the beginning, take all of this with a liberal dose of salt.  No one can predict what any court ruling will be with complete accuracy, because…

“Nothing is certain but death and taxes”

Email subscribers, click HERE to view the included video.

• Contacting Your Senator: LB599 Medicaid Expansion, Illegals
• Legislative Irresponsibility: LB599, NE Budget & Health Care Law
• LB599: The Procreation Protection and Affordable Sex Act
• Golden Oldie: Past Shows Us How Health Care OUGHT to Be
• Lies, Health Care, and Uninsure-able Statistics
• Individual Mandate Penalty a Tax? If YES – Then What?
• Supreme Court Oral Arguments on Health Care: From Outside the Chamber
• US Supreme Court Health Care Arguments: The Basics
• Health Care Reform: Republicans Helping Implementation (For Our Own Good)
• So We Had A Resolution, Huh? Hmm. How IS That State Sovereignty Thing Workin’ Out For Us?