Except as provided in sections 6015 (e), 6212 (a) and (c), 6213 (a), 6225 (b), 6246 (b), 6330 (e)(1), 6331 (i), 6672 (c), 6694 (c), and 7426 (a) and (b)(1),7429 (b), and 7436, no 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 panel asked for briefing on three questions. The first one has two parts. It asks, generically, whether the statute, when applicable, divests the courts of jurisdiction to hear this type of case, and, if so, whether it does that in these cases. The two parts, each of which references a particular earlier Supreme Court holding—one in a 1962 opinion called J.L. Enochs v. Williams Packing & Navigation Co., that created an exception to the statute when the statute otherwise would apply, the other a 1974 opinion called, Bob Jones University v. Simon, saying that in that particular case, the exception created in Williams Packing doesn’t apply—appears to me to be just a clumsy way of asking whether, if the penalty assessment is a “tax,” the ACA cases come within the exception created by Williams Packing. Clearly, the statute indicates that when it is applicable, it divests the courts of jurisdiction to hear the case.
The second question asks whether “a challenged exaction”—here, the fee that must be paid through the IRS for failure to purchase health insurance—can qualify as a “tax” under the Anti-Injunction Act whether or not it qualifies as a tax for purposes of Congress’s taxing power under Article I of the Constitution, the part of the Constitution that lists most of Congress’s powers.
The third question asks whether, if the Anti-Injunction Act does apply to these lawsuits—that is, if the exaction is considered a tax for purposes of the Act—the plaintiffs (the State of Virginia, in one of the lawsuits; Liberty University and a few named individuals, in the other lawsuit) will have “the ability to challenge the exaction … in a refund suit or otherwise.” Williams Packing held that the statute would violate the Fifth Amendment’s due process clause unless an exception to the statute’s applicability is created if there otherwise will never be an avenue in which the plaintiff can challenge the constitutionality of the tax and obtain redress if the tax is unconstitutional; that’s the exception that Williams Packing creates. But the ability to sue to request a refund of the tax once the tax has been paid usually will suffice, according to Williams Packing, for due process purposes.
The two ACA cases were decided at the trial-court level by different judges. The judge in the case filed by Virginia ruled that the “mandate” part of the ACA is unconstitutional. The judge in the Liberty U. case ruled the entire ACA constitutional.
The Anti-Tax Injunction Act was never an issue in the Virginia case, because Virginia itself will not be subject to the penalty for failure to obtain health insurance. In fact, for that reason, the three-judge panel will dismiss that lawsuit, saying that Virginia has no legal “standing”—no right—to challenge the statute’s constitutionality because the state will have no concrete injury from the statute. That much was clear from the oral argument. The Constitution’s Article III, which creates the federal judicial branch, gives the federal courts the power to hear only certain identified types of “cases” or “controversies.” The Supreme Court has always interpreted the case or-controversy” language to mean that only parties that have sustained or are about to sustain a “particularized”—i.e., a concrete—injury, have “standing” to sue. You can’t sue if your injury is only hypothetical. You have to have an “injury in fact.”
But at least some of the individuals in the Liberty U. case, if not the U. itself, apparently do have standing to challenge the mandate’s penalty fee. And the Anti-Injunction Act became an issue in that case because the Justice Dept. had called the penalty fee a “tax.” Rather than relying just on the power that the Constitution gives Congress to regulate commerce, and its authority under the Constitution to enact laws “necessary and proper” to execute its commerce-regulating power, the Justice Dept. claimed that Congress also had the authority under its taxing power to enact the ACA, including the mandate provision. The Justice Dept. then invoked the Tax Anti-Injunction Act and claimed that the court lacked jurisdiction to hear the part of the case that challenges the constitutionality of the mandate and the penalty “tax.” But the trial-level judge rejected the characterization of the penalty fee as a tax, saying it’s more accurately characterized as a regulatory penalty. Holding that he had the authority to consider the constitutionality of the ACA, he ruled the law constitutional.
The Justice Dept. didn’t raise the Tax Anti-Injunction issue on appeal. But the judges now have, and what’s clear from the May 23 order is that, at least at this point, they plan to characterize the mandate penalty as a tax for purposes of that statute. That’s a curious view, since the purpose of the taxing power is to raise revenue and the purpose of the Anti-Injunction Act is to allow the revenue to be raised, unencumbered by court injunctions. The purpose of the ACA’s mandate is to require almost everyone to have health insurance, and the point of the penalty is to require everyone to comply with that mandate. Which is why the panel apparently has concluded, accurately, in my opinion, that the penalty is not a tax under Article I of the Constitution. And which is why, if that the Tax Injunction Act nonetheless applies to the penalty, the Supreme Court will reverse them. And, on this issue, it should. The penalty does raise revenue, but only incidentally, just as other government fines, including fines as criminal sentences, do. But fines aren’t taxes.
There’s also, at least in my opinion, a big question whether the Anti-Injunction Act applies even when what’s at issue is clearly a tax, if, as here, what the plaintiffs are asking for is just a declaration (called a declaratory judgment) that the statute is unconstitutional, rather than asking the court to enjoin collection of the tax. In Williams Packing and Bob Jones University, the plaintiffs were asking the court to enjoin the collection of the tax. In the ACA cases, they’re asking the court to declare the statute, or at least the mandate provision, to which the penalty fee is only an enforcement tool, unconstitutional. A purpose of the lawsuits is to restrain the assessment or collection of the fee, but they’re not asking the court to do that directly.
Meanwhile, in an ACA case scheduled for oral argument on June 1 in the Sixth Circuit appellate court, the court that hears federal appeals from Michigan, Ohio, Kentucky and Tennessee, the three-judge panel asked the parties on May 12, the day after the argument in the Virginia case, to briefly brief three questions, two of which concern whether the controversy is “ripe” for resolution—that is, whether, given that the ACA mandate doesn’t begin until 2014, the plaintiffs have alleged an injury in fact, and, if not, whether they’ve alleged “an ‘imminent injury’ creating a case or actual controversy under Article Ill and the Declaratory Judgment Act” this long before the effective date of the mandate provision. The panel also requested briefing on whether the IRS’s enforcement mechanisms impact whether there is a current or imminent injury because, the plaintiffs claim, they must plan long ahead for this extra expense.
The panel also asked a question about the substance of the case: whether these plaintiffs are claiming that the statute is unconstitutional on its face—i.e., that it is unconstitutional vis-à-vis everyone—or whether instead they’re just claiming that the statute is unconstitutional as it would be applied to them and others like them but not to everyone.
The parties filed their brief briefs on Wednesday. And from there, the plot thickens.
Part II to follow.