Day One - U.S. Supreme Court Hears Oral Arguments on PPACA Tax Issue

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On Monday, the highest court in the United States began hearing oral arguments on the constitutionality of the Patient Protection and Affordable Care Act (PPACA). Additional oral arguments are scheduled for today and tomorrow as well. 

Yesterday, arguments centered on the issue of legal standing -- specifically, whether the parties suing have the ability to bring the case before the U.S. Supreme Court at this point in time. The issue is whether or not the Anti-Injunction Act of 1867 effectively renders the case moot, or premature, until a new tax goes into full effect several years from now. The Fourth Circuit District Court in Richmond, Virginia, previously held that it lacked the authority to decide the constitutionality of the Affordable Care Act based on the Anti-Injunction Act.    

Commentators speculate the line of questioning from the Justices on Monday suggests the Court will likely find the case is not moot, and that they are not procedurally barred from issuing a legal decision. This position supports U.S. Solicitor General Donald B. Verilli’s argument which he made during the hearing. He asserted that although the penalty for failing to purchase insurance is enforced through tax collection laws, Congress did not intend for the penalty to be construed as a tax. 

In contrast, Court appointed attorney Robert Long argued that the Anti-Injunction Act should render the case moot until 2014. By all accounts, the Justices closely scrutinized Mr. Long’s argument that the Anti-Injunction Act mandates a “pay first, litigate later rule” that forces the Court to delay issuing a decision until 2015 when tax returns are filed. In response, Justice Stephen G. Breyer commented that although the penalty is “being collected in the same manner of a tax doesn’t automatically mean it’s a tax…particularly since the purpose of the Anti-Injunction Act is to prevent interference with the revenue stream.”  

Some of the questioning suggested the Justices were anticipating what problems or issues might arise if the Court ruled that the Anti-Injunction Act did not apply under the facts presented in this case. In particular, Justice Sonya Sotomayor asked, “What is the parade of horribles” that could occur as a result. In a more light-hearted moment, Justice Antonin Scalia responded, “There will be no parade of horribles because all federal courts are intelligent.”

Neither the 26 plaintiff States nor the U.S. Department of Justice argued that the Anti-Injunction Act would apply. However, Solicitor Verrilli was forced to walk a tight line as he urged the Court to judge the merits of the case. On the one hand, he asserted that the Anti-Injunction Act does not apply so the Court can rule on the legality of PPACA this spring; but on the other hand, he had to defend PPACA as a valid extension of Congress’ ability to tax. He began his argument by urging the Court to judge the merits of the case, but he was ultimately chastised by Justice Samuel Alito. “General Verrilli,” he said, “today you are arguing that the penalty is not a tax. Tomorrow you are going to be back and you will be arguing that the penalty is a tax.” At one point in his argument, Solicitor Verrilli repeatedly referred to the penalty as a tax and was questioned by Justice Breyer, “Why do you keep saying it’s a tax?”

Perhaps the most telling statement made by the Justices that foreshadows their decision on the applicability of the Anti-Injunction Act, and whether they have jurisdiction to decide the merits of the case, was made by Justice Scalia. “Unless it’s clear, courts are not deprived of jurisdiction,” he said. “And I find it hard to think that this is clear. Whatever else it is, it’s easy to think that it’s not clear.”    

Tomorrow’s hearing will get to the heart of the controversy when it addresses the individual mandate, which will require most individuals to have health insurance or pay a fine. The specific argument before the Court asks whether the federal government has the authority to regulate interstate commerce by mandating that individuals purchase insurance. 

We have covered many PPACA-related issues since its inception, and will continue to follow these issues and provide updates and analysis for you. Please visit for past blog posts, polls, surveys and numerous resources or to view past Legislative Alerts.

The views expressed in this post do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

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