Decision on Health Law Might Not Come This Year if Court Rules Coverage Mandate a “Tax”

by Rebecca Farley on March 12, 2012

Tax formsIn the Affordable Care Act legal challenge that is now before the Supreme Court, most of the public’s attention has been focused on the question of whether the individual mandate – a requirement that all Americans have health insurance – is constitutional. Supporters and opponents alike hope that their side will be vindicated when the Court hands down a ruling this summer.

But whether or not the Court is even able to issue a ruling on the mandate this year will depend on its decision on a separate legal issue. That issue deals with the Anti-Injunction Act, a tax law passed by Congress in 1867. The Anti-Injunction Act was enacted in response to a slew of post-Civil War lawsuits challenging the government’s right to impose taxes. When courts began issuing orders to halt the collection of taxes during the litigation process, Congress passed a law that prevents individuals from suing before they have paid the tax. As former Internal Revenue Service commissioner Sheldon Cohen explained, “With 140, 150, 160 million individual tax returns a year, if everybody could bring an injunctive action saying ‘You can’t do this to me’ before a tax is collected, the system would go into chaos.”

What does this have to do with the Affordable Care Act? The answer lies in the question of whether the financial penalty for a person’s failure to obtain health insurance can be considered a “tax.” If the Court decides it is a tax, then the Anti-Injunction Act applies and the mandate cannot be challenged until after the tax is first assessed in 2015 (for the 2014 tax year, the first that the coverage mandate will be in effect). If the penalty is not deemed a tax, then the Anti-Injunction Act does not apply, and the Court can hand down its ruling on the coverage mandate this year.

The Anti-Injunction Act question is unique because both supporters and opponents of the law concur that the penalties do not constitute a tax. In addition, most lower courts that have heard arguments on this issue have agreed that Congress’ decision to use the word “penalty” instead of “tax” in the law indicates that lawmakers did not intend for it to be considered a tax. However, the Supreme Court is required to consider jurisdictional issues such as the Anti-Injunction Act even if the parties in a lawsuit are not contesting it.

In the event that the Court pushes consideration of the mandate until after 2014, continued uncertainty about the constitutionality of the mandate could keep the ACA in the political spotlight and hinder its implementation. Both sides in the debate, wishing to put the question to rest, are hoping the Court will decide that the Anti-Injunction Act does not apply and issue a ruling this year.

This month, the National Council is covering the historic Supreme Court hearings on the Affordable Care Act. We’ve already written an overview of the 4 key constitutional questions and an in-depth analysis of the case for and against the Medicaid expansion. Stay tuned next week for an analysis of the “severability” issue before the Court.


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