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Wednesday, May 16, 2012

The Missing Argument on the Tax Anti-Injunction Act

The following is a guest post from Yale 3L, Daniel Hemel

During the March oral arguments in the health care cases, the Justices seemed skeptical of the claim that the individual mandate was a “tax” for the purposes of the Tax Anti-Injunction Act (TAIA). (If the Justices find that the Tax Anti-Injunction Act applies, they presumably would withhold a ruling on the constitutional questions.) The Tax Anti-Injunction Act states that unless one of the enumerated exceptions applies, “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.” But as Justice Breyer said of the individual mandate: “Now, here, Congress has nowhere used the word ‘tax.’ What it says is penalty. . . . And so why is this a tax?”  His colleagues on the Court were similarly unwilling to countenance the claim that the penalty provision of the Patient Protection and Affordable Care Act (ACA) was a “tax” for the purposes of the TAIA.

Yet while the oral arguments focused on whether the individual mandate is a tax for the purposes of the TAIA, no one seems to have remembered that the lawsuit in question—Florida v. HHS—is not simply a suit to restrain the enforcement of the individual mandate. The complaint in Florida v. HHS “requests that the Court . . . [d]eclare the Patient Protection and Affordable Care Act, as amended, to be unconstitutional.”  The plaintiffs explicitly argue that the mandate is not severable from the rest of the Act, and thus that “[t]he Court should hold the ACA invalid in its entirety.”


So for TAIA purposes, the relevant question is not whether the individual mandate meets the TAIA’s definition of a “tax.”

Rather, the relevant question is whether anything in the Patient Protection and Affordable Care Act meets the TAIA”s definition of a “tax.” If it does, then Florida v. HHS is a “suit for the purposes of restraining the assessment or collection of a[] tax,” since it is a suit for the purposes of restraining the enforcement of every single provision in the ACA.
This latter question is not a terribly difficult one. Section 1402 of the ACA, entitled “Unearned Income Medicare Contribution,” imposes a 3.8% tax on the non-wage income of high-income individuals. It is clearly a tax; indeed, it contains the words “there is hereby imposed . . . a tax.” Section 1405 imposes a 2.3% tax on the sale of certain medical devices (again, using the magic words “[t]here is hereby imposed . . . a tax”). Section 1409 codifies the common-law “economic substance doctrine” and imposes penalties for purely tax-motivated transactions. Congress has unambiguously called these provisions “taxes,” and the plaintiffs in Florida v. HHS have unambiguously sought to restrain their assessment and collection.
Even if the Court rejects the plaintiffs’ claim that the individual mandate is inseverable from the remainder of the Affordable Care Act, that doesn’t save their suit from the TAIA. As the Solicitor General argued, and as at least some of the Justices seemed willing to accept, the TAIA is a jurisdictional statute.  When the Court decides whether it has subject matter jurisdiction over a case, it must “take[] the allegations of the complaint as true.” Warth v. Seldin, 422 U.S. 490, 502 (1975).  If, as the plaintiffs allege, the whole Act is unconstitutional, then the challenge to the individual mandate cannot be separated from the challenge to the rest of the ACA (including the sections that clearly impose taxes). In other words, taking the allegations of the complaint as true, a ruling for the plaintiffs in Florida v. HHS would restrain the assessment and collection of several sections that walk like a tax and talk like a tax. According to this logic, the Court should throw the suit out on TAIA grounds regardless of whether it finds that the individual mandate is itself a tax.


It may be too late in the day to revive the argument that the TAIA bars a ruling on the merits of the constitutional challenges. And even if the Court did buy the argument laid out here, a future plaintiff could circumvent the TAIA by styling her suit as a challenge to the individual mandate specifically, rather than the Affordable Care Act as a whole. But given that the plaintiffs in Florida v. HHS decided to shoot for the moon and seek the invalidation of the Affordable Care Act in toto, it is difficult to see how their suit survives the TAIA. The irony is that, because the plaintiffs in Florida v. HHS asked the Court for too much, the TAIA may prevent them from receiving anything at all.

Posted by Dan Markel on May 16, 2012 at 10:07 PM in Constitutional thoughts, Current Affairs, Tax | Permalink

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I like this argument. One friendly amendment, however. I don't think you need to argue that the ACTA is jurisdictional to overcome the possibility that the Court might reject the inseverability argument after full consideration. Even if the Court ultimately finds the statute severable, the point of the ACTA is to shut down litigation before full consideration. Avoiding a full proceeding is not the same thing as saying something is jurisdictional. An liability insurer has an obligation to defend, which is surely not jurisdictional, but it is a threshold determination based on the allegations of a complaint (because if we have to determine first whether the insurer will in fact be liable on the real facts, that defeats the point of having an obligation to defend).

Posted by: TJ | May 16, 2012 11:00:13 PM

I have had a similar thought, but from a different perspective. Just brainstorming, but it seems to me that the States should definitely have standing to challenge the individual mandate due to severability analysis. After all, if the States can find anything at all -- anywhere -- in the entire Act that aggrieves them, then they should be able to challenge the mandate because, due to severability analysis, if the mandate were to fall, then they could argue that the whole Act should fall including the portion of the Act that directly aggrieves the States. (This is a non-issue because there are individual plaintiffs with standing, but state standing was an issue for a while ....)

Posted by: Aaron Nielson | May 17, 2012 12:55:57 AM

Oops. I meant the TAIA. I don't even know how I messed that up into the "ACTA."

Posted by: TJ | May 17, 2012 3:33:52 AM

So Congress immunizes inseverable provisions from judicial review every time it includes a tax somewhere else in the statute? That seems like a large pill to swallow. I think "purpose of restraining..." is amenable to a narrower reading and one that avoids constitutional concerns about massive (and likely unintentional) jurisdiction stripping.

Posted by: CM | May 17, 2012 12:35:35 PM

I don't think CM's complaint is quite fair. The AIA only delays justice, rather than denying it. (yes, yes, those two are the same sometimes, but tell that to the Court that created exhaustion requirements for habeas corpus, Younger abstention, etc.)

Having said that, the combination of the AIA (or the parallel TIA) and severability (or of the AIA and structurally similar doctrines, such as facial challenges) does make for some potentially messy situations -- e.g., if plaintiffs want to challenge a statute that includes a tax provision, but are not themselves subject to the tax and so cannot pay it as a predicate for filing the suit. Probably the answer is that those plaintiffs cannot ask for relief that would strike down the tax provision. I don't see that as being any worse than the existence of the AIA in general.

Posted by: BDG | May 17, 2012 5:10:21 PM

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