Fourth Circuit Opinion 1

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Date Filed: 09/08/2011
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PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 10-2347
LIBERTY UNIVERSITY, INCORPORATED, a Virginia Corporation; MICHELE G. WADDELL; JOANNE V. MERRILL, Plaintiffs Appellants, and
Nonprofit
MARTHA A. NEAL; DAVID STEIN, M.D.; PAUSANIAS ALEXANDER; MARY T. BENDORF; DELEGATE KATHY BYRON; JEFF HELGESON, Plaintiffs, v. TIMOTHY GEITHNER, Secretary of the Treasury of the United States, in his official capacity; KATHLEEN SEBELIUS, Secretary of the United States Department of Health and Human Services, in her official capacity; HILDA L. SOLIS, Secretary of the United States Department of Labor, in her official capacity; ERIC H. HOLDER, JR., Attorney General of the United States, in his official capacity, Defendants Appellees. ------MOUNTAIN STATES LEGAL FOUNDATION; REVERE AMERICA FOUNDATION, Amici Supporting Appellants, AMERICAN CIVIL LIBERTIES UNION; AMERICAN CIVIL LIBERTIES UNION OF VIRGINIA, INCORPORATED; AMERICAN NURSES ASSOCIATION; AMERICAN ACADEMY OF PEDIATRICS, INCORPORATED; AMERICAN MEDICAL STUDENT ASSOCIATION; CENTER FOR AMERICAN PROGRESS, d/b/a Doctors for America; NATIONAL HISPANIC MEDICAL ASSOCIATION; NATIONAL PHYSICIANS ALLIANCE; HARRY REID, Senate Majority Leader; NANCY PELOSI, House Democratic Leader; DICK DURBIN, Senator, Assistant
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Majority Leader; CHARLES SCHUMER, Senator, Conference Vice Chair; PATTY MURRAY, Conference Secretary; MAX BAUCUS, Senator, Committee on Finance Chair; TOM HARKIN, Senator, Committee on Health, Education, Labor and Pensions Chair; PATRICK LEAHY, Senator, Committee on the Judiciary Chair; BARBARA MIKULSKI, Senator, HELP Subcommittee on Retirement and Aging Chair; JOHN D. ROCKEFELLER, IV, Senator, Committee on Commerce Chair; STENY HOYER, Representative, House Democratic Whip; JAMES E. CLYBURN, Representative, Democratic Assistant Leader; JOHN B. LARSON, Representative, Chair of Democratic Caucus; XAVIER BECERRA, Representative, Vice Chair of Democratic Caucus; JOHN D. DINGELL, Representative, Sponsor of House Health Care Reform Legislation; HENRY A. WAXMAN, Representative, Ranking Member, Committee on Energy and Commerce; FRANK PALLONE, JR., Representative, Ranking Member, Commerce Subcommittee on Health; SANDER M. LEVIN, Representative, Ranking Member, Committee on Ways and Means; FORTNEY PETE STARK, Representative, Ranking Member, Ways and Means Subcommittee on Health; ROBERT E. ANDREWS, Representative, Ranking Member, Education and Workforce Subcommittee on Health; JERROLD NADLER, Representative, Ranking Member, Subcommittee on Constitution; GEORGE MILLER, Representative, Ranking Member, Education and the Workforce Committee; JOHN CONYERS, JR., Representative, Ranking Member, Committee on the Judiciary; JACK M. BALKIN, Knight Professor of Constitutional Law and the First Amendment, Yale Law School; GILLIAN E. METZGER, Professor of Law, Columbia Law School; TREVOR W. MORRISON, Professor of Law, Columbia Law School; AMERICAN ASSOCIATION OF PEOPLE WITH DISABILITIES; THE ARC OF THE UNITED STATES; BREAST CANCER ACTION; FAMILIES USA; FRIENDS OF CANCER RESEARCH; MARCH OF DIMES FOUNDATION; MENTAL HEALTH AMERICA; NATIONAL BREAST CANCER COALITION; NATIONAL ORGANIZATION FOR RARE DISORDERS; NATIONAL PARTNERSHIP FOR WOMEN AND FAMILIES; NATIONAL SENIOR CITIZENS LAW CENTER; NATIONAL WOMEN'S HEALTH NETWORK; THE OVARIAN CANCER NATIONAL ALLIANCE; AMERICAN HOSPITAL ASSOCIATION; ASSOCIATION OF AMERICAN MEDICAL COLLEGES; FEDERATION OF AMERICAN HOSPITALS; NATIONAL ASSOCIATION OF PUBLIC HOSPITALS AND HEALTH SYSTEMS; CATHOLIC HEALTH ASSOCIATION OF THE UNITED STATES; NATIONAL ASSOCIATION OF CHILDREN'S HOSPITALS; CHRISTINE O. GREGOIRE, Governor; DR. DAVID CUTLER, Deputy, Otto Eckstein Professor of Applied Economics, Harvard University; DR. HENRY AARON, Senior Fellow, Economic Studies Bruce and Virginia MacLaury Chair, The Brookings Institution; DR. GEORGE AKERLOF, Koshland Professor of Economics, University of CaliforniaBerkeley, 2001 Nobel Laureate; DR. STUART ALTMAN, Sol C. Chaikin Professor of National Health Policy, Brandeis University; DR. KENNETH ARROW, Joan Kenney Professor of Economics and Professor of Operations Research, Stanford 2
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University 1972 Nobel Laureate; DR. SUSAN ATHEY, Professor of Economics, Harvard University, 2007 Recipient of the John Bates Clark Medal for the most influential American economist under age 40; DR. LINDA J. BLUMBERG, Senior Fellow, The Urban Institute, Health Policy Center; DR. LEONARD E. BURMAN, Daniel Patrick Moynihan Professor of Public Affairs at the Maxwell School, Syracuse University; DR. AMITABH CHANDRA, Professor of Public Policy Kennedy School of Government, Harvard University; DR. MICHAEL CHERNEW, Professor, Department of Health Care Policy, Harvard Medical School; DR. PHILIP COOK, ITT/Sanford Professor of Public Policy, Professor of Economics, Duke University; DR. CLAUDIA GOLDIN, Henry Lee Professor of Economics, Harvard University; DR. TAL GROSS, Department of Health Policy and Management, Mailman School of Public Health, Columbia University; DR. JONATHAN GRUBER, Professor of Economics, MIT; DR. JACK HADLEY, Associate Dean for Finance and Planning, Professor and Senior Health Services Researcher, College of Health and Human Services, George Mason University; DR. VIVIAN HO, Baker Institute Chair in Health Economics and Professor of Economics, Rice University; DR. JOHN F. HOLAHAN, Director, Health Policy Research Center, The Urban Institute; DR. JILL HORWITZ, Professor of Law and Co Director of the Program in Law & Economics, University of Michigan School of Law; DR. LAWRENCE KATZ, Elisabeth Allen Professor of Economics, Harvard University; DR. FRANK LEVY, Rose Professor of Urban Economics, Department of Urban Studies and Planning, MIT; DR. PETER LINDERT, Distinguished Research Professor of Economics, University of California, Davis; DR. ERIC MASKIN, Albert O. Hirschman Professor of Social Science at the Institute for Advanced Study, Princeton University, 2007 Nobel Laureate; DR. ALAN C. MONHEIT, Professor of Health Economics, School of Public Health, University of Medicine & Dentistry of New Jersey; DR. MARILYN MOON, Vice President and Director Health Program, American Institutes for Research; DR. RICHARD J. MURNANE, Thompson Professor of Education and Society, Harvard University; DR. LEN M. NICHOLS, George Mason University; DR. HAROLD POLLACK, Helen Ross Professor of Social Service Administration, University of Chicago; DR. MATTHEW RABIN, Edward G. and Nancy S. Jordan Professor of Economics, University of CaliforniaBerkeley, 2001 Recipient of the John Bates Clark Medal for the most influential American economist under age 40; DR. JAMES B. REBITZER, Professor of Economics, Management, and Public Policy, Boston University School of Management; DR. MICHAEL REICH, Professor of Economics, University of California at Berkeley; DR. THOMAS RICE, Professor, UCLA School of Public Health; DR. MEREDITH ROSENTHAL, Department of Health Policy and Management, Harvard University, Harvard School of Public Health; 3
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DR. CHRISTOPHER RUHM, Professor of Public Policy and Economics, Department of Economics, University of Virginia; DR. JONATHAN SKINNER, Professor of Economics, Dartmouth College, and Professor of Community and Family Medicine, Dartmouth Medical School; DR. KATHERINE SWARTZ, Professor, Department of Health Policy and Management, Harvard School of Public Health; DR. KENNETH WARNER, Dean of the School of Public Health and Avedis Donabedian Distinguished University Professor of Public Health, University of Michigan; DR. PAUL N. VAN DE WATER, Senior Fellow, Center on Budget and Policy Priorities; DR. STEPHEN ZUCKERMAN, Senior Fellow, The Urban Institute; NATIONAL WOMEN'S LAW CENTER; AMERICAN ASSOCIATION OF UNIVERSITY WOMEN; AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES; AMERICAN MEDICAL WOMEN'S ASSOCIATION; ASIAN & PACIFIC ISLANDER AMERICAN HEALTH FORUM; BLACK WOMEN'S HEALTH IMPERATIVE; CHILDBIRTH CONNECTION; IBIS REPRODUCTIVE HEALTH; INSTITUTE OF SCIENCE AND HUMAN VALUES; MARYLAND WOMEN'S COALITION FOR HEALTH CARE REFORM; MENTAL HEALTH AMERICA; NATIONAL ASIAN PACIFIC AMERICAN WOMEN'S FORUM; NATIONAL ASSOCIATION OF SOCIAL WORKERS; NATIONAL COALITION FOR LGBT HEALTH; NATIONAL COUNCIL OF JEWISH WOMEN; NATIONAL COUNCIL OF WOMEN'S ORGANIZATIONS; NATIONAL EDUCATION ASSOCIATION; NATIONAL LATINA INSTITUTE FOR REPRODUCTIVE HEALTH; OLDER WOMEN'S LEAGUE; PHYSICIANS FOR REPRODUCTIVE CHOICE AND HEALTH; RAISING WOMEN'S VOICES; SARGENT SHRIVER NATIONAL CENTER ON POVERTY LAW; SOUTHWEST WOMEN'S LAW CENTER; WIDER OPPORTUNITIES FOR WOMEN; WOMEN'S LAW CENTER OF MARYLAND, INCORPORATED; WOMEN'S LAW PROJECT, Amici Supporting Appellees.
Appeal from the United States District Court for the Western District of Virginia, at Lynchburg. Norman K. Moon, Senior District Judge. (6:10-cv-00015-nkm-mfu)
Argued:
May 10, 2011
Decided:
September 8, 2011
Before MOTZ, DAVIS, and WYNN, Circuit Judges.
Vacated and remanded by published opinion. Judge Motz wrote the opinion, in which Judge Wynn concurred. Judge Wynn wrote a concurring opinion. Judge Davis wrote a dissenting opinion.
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ARGUED: Mathew D. Staver, LIBERTY COUNSEL, Orlando, Florida, for Appellants. Neal Kumar Katyal, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees. ON BRIEF: Anita L. Staver, LIBERTY COUNSEL, Orlando, Florida; Stephen M. Crampton, Mary E. McAlister, LIBERTY COUNSEL, Lynchburg, Virginia, for Appellants. Tony West, Assistant Attorney General, Beth S. Brinkmann, Deputy Assistant Attorney General, Mark B. Stern, Alisa B. Klein, Samantha L. Chaifetz, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Timothy J. Heaphy, United States Attorney, Roanoke, Virginia, for Appellees. Joel Spector, MOUNTAIN STATES LEGAL FOUNDATION, Lakewood, Colorado, for Mountain States Legal Foundation, Amicus Supporting Appellants. Brian S. Koukoutchos, Mandeville, Louisiana; Charles J. Cooper, David H. Thompson, COOPER & KIRK, PLLC, Washington, D.C., for Revere America Foundation, Amicus Supporting Appellants. Rebecca Glenberg, AMERICAN CIVIL LIBERTIES UNION OF VIRGINIA, Richmond, Virginia; Daniel Mach, Heather L. Weaver, AMERICAN CIVIL LIBERTIES UNION, Washington, D.C.; Andrew D. Beck, Brigitte Amiri, AMERICAN CIVIL LIBERTIES UNION, New York, New York, for American Civil Liberties Union and American Civil Liberties Union of Virginia, Incorporated, Amici Supporting Appellees. Ian Millhiser, CENTER FOR AMERICAN PROGRESS, Washington, D.C., for American Nurses Association, American Academy of Pediatrics, Incorporated, American Medical Student Association, Center for American Progress, d/b/a Doctors for America, National Hispanic Medical Association, and National Physicians Alliance, Amici Supporting Appellees. Professor Walter Dellinger, Washington, D.C.; Professor H. Jefferson Powell, GEORGE WASHINGTON UNIVERSITY LAW SCHOOL, Washington, D.C., for Senate Majority Leader Harry Reid, House Democratic Leader Nancy Pelosi, and Congressional Leaders and Leaders of Committees of Relevant Jurisdiction, Amici Supporting Appellees. Gillian E. Metzger, Trevor W. Morrison, New York, New York; Andrew J. Pincus, Charles A. Rothfeld, Paul W. Hughes, Michael B. Kimberly, MAYER BROWN LLP, Washington, D.C., for Constitutional Law Professors, Amici Supporting Appellees. Rochelle Bobroff, Simon Lazarus, NATIONAL SENIOR CITIZENS LAW CENTER, Washington, D.C., for American Association of People with Disabilities, The ARC of the United States, Breast Cancer Action, Families USA, Friends of Cancer Research, March of Dimes Foundation, Mental Health America, National Breast Cancer Coalition, National Organization for Rare Disorders, National Partnership for Women and Families, National Senior Citizens Law Center, National Womens Health Network, and The Ovarian Cancer National Alliance, Amici Supporting Appellees. Sheree R. Kanner, Catherine E. Stetson, Dominic F. Perella, Michael D. Kass, Sara A. Kraner, HOGAN LOVELLS US LLP, Washington, D.C.; 5
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Melinda Reid Hatton, Maureen D. Mudron, AMERICAN HOSPITAL ASSOCIATION, Washington, D.C.; Ivy Baer, Karen Fisher, ASSOCIATION OF AMERICAN MEDICAL COLLEGES, Washington, D.C.; Jeffrey G. Micklos, FEDERATION OF AMERICAN HOSPITALS, Washington, D.C.; Larry S. Gage, President, NATIONAL ASSOCIATION OF PUBLIC HOSPITALS AND HEALTH SYSTEMS, Washington, D.C.; Lisa Gilden, Vice President, General Counsel/Compliance Officer, THE CATHOLIC HEALTH ASSOCIATION OF THE UNITED STATES, Washington, D.C.; Lawrence A. McAndrews, President and Chief Executive Officer, NATIONAL ASSOCIATION OF CHILDRENS HOSPITALS, Alexandria, Virginia, for American Hospital Association, Association of American Medical Colleges, Federation of American Hospitals, National Association of Public Hospitals and Health Systems, Catholic Health Association of the United States, and National Association of Childrens Hospitals, Amici Supporting Appellees. Kristin Houser, Adam Berger, Rebecca J. Roe, William Rutzick, SCHROETER, GOLDMARK & BENDER, Seattle, Washington, for Christine O. Gregoire, Governor of Washington, Amicus Supporting Appellees. Richard L. Rosen, ARNOLD & PORTER LLP, Washington, D.C., for Economic Scholars, Amici Supporting Appellees. Marcia D. Greenberger, Emily J. Martin, Judith G. Waxman, Lisa Codispoti, NATIONAL WOMENS LAW CENTER; Melissa Hart, UNIVERSITY OF COLORADO LAW SCHOOL, Boulder, Colorado, for National Women's Law Center, American Association of University Women, Amerian Federation of State, County and Municipal Employees, American Medical Women's Association, Asian & Pacific Islander American Health Forum; Black Women's Health Imperative, Childbirth Connection, Ibis Reproductive Health, Institute of Science and Human Values, Maryland Women's Coalition for Health Care Reform, Mental Health America, National Asian Pacific American Women's Forum, National Association of Social Workers, National Coalition for LGBT Health, National Council of Jewish Women, National Council of Women's Organizations, National Education Association, National Latina Institute for Reproductive Health, Older Women's League, Physicians for Reproductive Choice and Health, Raising Women's Voices, Sargent Shriver National Center on Poverty Law, Southwest Women's Law Center, Wider Opportunities for Women, Women's Law Center of Maryland, Incorporated, and Women's Law Project, Amici Supporting Appellees.
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DIANA GRIBBON MOTZ, Circuit Judge: Liberty suit to University as and certain individuals brought of this two and the
enjoin, of Care the
unconstitutional,
enforcement
provisions Affordable
recently-enacted The
Patient
Protection amend
Act.
challenged
provisions
Internal Revenue Code by adding:
(1) a penalty payable to the
Secretary of the Treasury by an individual taxpayer who fails to maintain adequate health insurance coverage and (2) an
assessable payment payable to the Secretary of the Treasury by a large employer if at least one of its employees receives a tax credit or government subsidy to offset payments for certain health-related expenses. The district court upheld these
provisions, ruling that both withstood constitutional challenge. Because this suit constitutes a pre-enforcement action seeking to restrain the assessment of a tax, the Anti-Injunction Act strips us of of jurisdiction. the district Accordingly, court and we must the vacate case the with
judgment
remand
instructions to dismiss for lack of jurisdiction.
I. A. On March 23, 2010, the President signed into law the
Affordable Care Act, a comprehensive bill spanning 900 pages, which institutes numerous changes to the financing of health 7
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care in the United States.
See Pub. L. No. 111-148.
Liberty
and some individuals (collectively plaintiffs) challenge only two provisions of the Act. 1. The first amends the Internal Revenue Code (sometimes the Code) by adding 5000A (the individual mandate). 1 1501(b). individual individual The to is individual ensure covered mandate requires an See id.,
applicable 2013, the
that under
beginning minimum
after
essential
coverage.
I.R.C. 5000A(a).
The individual mandate lists a number of
health insurance programs that qualify for minimum essential coverage: government- and employer-sponsored plans, individual
market plans, and other health plans recognized as adequate. 5000A(f)(1). If an individual taxpayer fails to obtain the
required coverage, the taxpayer is subject to a penalty. 5000A(b)(1). The Affordable Care Act uses the Internal Revenue Codes existing tax collection system to implement the penalty. Only a
taxpayer is subject to the penalty, id., and the Code defines a taxpayer as any person subject to any internal revenue
tax.
1
Id. 7701(a)(14).
A taxpayer must include the penalty
The Affordable Care Act itself refers to the provision as the Requirement to maintain minimum essential coverage. Pub. L. No. 111-148, 1501. Because plaintiffs refer to it as the individual mandate throughout their complaint and briefs, we often do so as well. 8
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payment
with
his
regularly-filed
income
tax
return.
5000A(b)(2).
The taxpayer owes the penalty only if he fails
to maintain minimum coverage for a continuous period of three months or longer. also makes a 5000A(e)(4)(A). liable for a The individual mandate penalty imposed on his
taxpayer
dependent, as defined in 152 of the Code.
5000A(b)(3)(A).
Akin to the joint liability of spouses for income taxes, I.R.C. 6013(d)(3), a taxpayer is also jointly liable for a spouses penalty if filing a joint income tax return. 5000A(b)(3)(B). (1) year
A taxpayer subject to the penalty owes the greater of: a flat dollar amount equal to $95 for the taxable
beginning 2014, $325 for 2015, $695 for 2016, and $695 indexed to inflation for in every 2014, year 2% thereafter; in 2015, or and (2) 2.5% a graduated year
percentage
(1%
every
thereafter) of the amount by which the taxpayers household income, as defined by the Code, exceeds gross income specified in I.R.C. 6012(a)(1) (the amount of income triggering the requirement to file a tax return). See 5000A(c)(2), (3). But
the penalty may not exceed the cost of the national average premium for qualified health plans of a certain level of
coverage.
5000A(c)(1). 5000A(g)(1) authorizes the Secretary of the
Section
Treasury (the Secretary) to assess and collect the penalty in the same manner as an assessable penalty under subchapter B of 9
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chapter 68 of the Internal Revenue Code, which in turn contains penalties that the Secretary is to assess[] and collect[] in the same manner as taxes. Id. 6671(a). Accordingly, the
Affordable Care Act provides the Secretary with all the civil enforcement tools of the Internal Revenue Code subject to only one express limitation: the Secretary may not seek collection
of the penalty by fil[ing] [a] notice of lien with respect to any property or levy[ing] on [a taxpayers] property.
5000A(g)(2)(B). 2. The other provision of the Act challenged by plaintiffs amends the Internal Revenue Pub. Code L. No. by adding 4980H 1513. (the That
employer provision
mandate). imposes an
111-148, on
assessable
payment
any
applicable
large employer if a health exchange notifies the employer that at least one full-time employee obtains an applicable premium tax credit or cost-sharing reduction. An applicable of premium (1) tax a credit tax or I.R.C. 4980H(a), (b). cost-sharing to assist a reduction low-income
consists
either
credit
individual with financing premiums for qualified health plans or (2) a government subsidy to help finance an individuals share of out-of-pocket health care costs, as provided by the
Affordable Care Act.
4980H(c)(3).
10
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Section 4980H calculates the assessable payment differently depending on whether the employer offers adequate health
insurance coverage to its employees. offer adequate coverage is to its
If the employer fails to full-time by employees, the
assessable
payment
calculated
multiplying
$2,000
(increased yearly by the rate of inflation), by the number of total full-time employees, prorated over the number of months an employer is liable. the employer does 4980H(a), (c)(1), (c)(5). offer adequate insurance If, however, coverage, the
assessable payment is calculated by multiplying $3,000 by the number of employees receiving the applicable premium tax credit or cost-sharing reduction, prorated on a monthly basis and
subject to a cap.
4980H(b)(1), (2).
A large employer must pay these assessments upon notice and demand by the Secretary. 4980H(d)(1). The Secretary has
the authority to assess and collect the exaction in the same manner as an assessable penalty provided by subchapter B of Chapter 68 of the Code. Id. B. On March 23, 2010, the day the President signed the
Affordable Care Act into law, plaintiffs filed this action to enjoin the Secretary and other government officials from
enforcing the Act. following facts.
In their complaint, plaintiffs allege the
11
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One
of
the
individual
plaintiffs,
Michele
G.
Waddell,
asserts that she has made a personal choice not to purchase health insurance coverage and does not want to do so in the future. Waddell maintains that she pays for needed health care Another individual plaintiff, Joanne
services as she uses them.
V. Merill, asserts that she too has elected not to purchase health insurance coverage and does not want to do so. Both
Waddell and Merill contend that the individual mandate requires them to either pay for health insurance coverage or face
significant penalties. They seek to enjoin the Secretary from assessing or
collecting the exaction prescribed for failure to comply with the individual mandate. part of his oversight of Waddell and Merill assert that, as the Internal Revenue Service, the
Secretary has the power to collect the penalties as part of an individual[s] income tax return. They describe the
individual mandate as imposing a penalty in the form of a tax . . . on any taxpayer who fails to maintain minimum essential coverage. They further allege that the Taxing and Spending
Clause . . . only grants Congress the power to impose taxes upon certain purchases, not to impose taxes upon citizens who choose not to purchase something such as health insurance. Waddell and Merrill repeatedly assert that the Similarly, individual
mandate assesses a direct tax that is not apportioned according 12
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to
Census
data
or
other
population-based
measurement,
in
violation of Congresss Taxing Power. be free from improper taxation
Accordingly, they ask to is likely to cause
[that]
significant financial hardships. individual mandate exceeds
They also contend that the authority under the
Congresss
Commerce Clause of the Constitution. Liberty, a private Christian university located in
Lynchburg, Virginia, challenges the employer mandate as a tax that will impose tax penalties on it because it has employees who will likely receive a tax credit or cost-sharing reduction. Liberty alleges that these significant penalties will cause it to suffer substantial employer financial mandate hardship. an According to
Liberty,
the
constitutes
unapportioned
direct tax upon employers in violation of the Constitution, and [i]mposition of the tax infringes upon Liberty Universitys
rights to be free from improper taxation.
Liberty also asserts
that the employer mandate exceeds Congresss authority under the Commerce Clause. For relief, plaintiffs ask for an injunction restraining all defendants, including the Secretary of the Treasury, from acting in any manner to implement, enforce, or otherwise act under the authority of the Affordable Care Act. They seek a
declaration that the Act is unconstitutional and assert that
13
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they have no adequate remedy at law to correct the continuing constitutional violation. Before the district court, the Secretary moved to dismiss the case, contending Act (AIA), inter alia that the federal tax Anti-
Injunction
I.R.C.
7421(a),
barred
the
district
court from reaching the merits because the challenged penalty is to be assessed and collected in the same manner as a tax and other penalties to which the AIA clearly applies. The court
rejected this argument, holding that Congress did not intend to convert the[se] penalties into taxes for purposes of the AntiInjunction Act. The court reasoned that (1) Congress did not
specifically extend the term tax in the AIA to include the challenged exactions; and (2) the exactions did not qualify as a tax for purposes of the AIA because they function as
regulatory penalties.
After rejecting the AIA argument and the
Secretarys other jurisdictional contentions, the district court concluded that the challenged exactions are valid exercise[s] of federal power under the Commerce Clause and dismissed the complaint for failure to state a claim upon which relief can be granted. Plaintiffs district court Care then erred Act. filed as a this appeal, of asserting in to that the the
matter Secretary
law
upholding the
Affordable
The
argued
contrary,
specifically declining to attack the district courts threshold 14
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determination[] as to the applicability of the Anti-Injunction Act. The Secretary did, however, maintain that Congresss
Taxing Power under Article I, 8, cl. 1 of the Constitution authorized because the exactions mandates imposed operate as to the by as the challenged mandates the the
those
taxes.
Because of
Secretarys
contention
constitutionality
mandates under the Taxing Power suggested that the AIA bar might apply to this suit, we ordered the parties to file supplemental briefs to address the applicability of the AIA. In these
briefs, both the Secretary and plaintiffs contend that the AIA does not bar this action. We disagree.
We initially explain why we believe that the plain language of the AIA bars our consideration of this challenge. address the parties contrary arguments: We then
first those offered by
the Secretary (and largely adopted by the dissent), then those advanced by plaintiffs.
II. A. We note at the outset the inescapable fact that federal courts are courts of limited jurisdiction. They possess only
that power authorized by Constitution and statute, which is not to be expanded by judicial decree. Life Ins. Co. of Am., 511 U.S. 15 See Kokkonen v. Guardian 375, 377 (1994) (internal
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citations
omitted).
Accordingly, to
federal the
court limits
has of
an its
independent
obligation
investigate
subject-matter jurisdiction. 500, 514 (2006). overlook or elect
See Arbaugh v. Y&H Corp., 546 U.S.
This is so even when the parties either not to press the issue, Henderson v.
Shinseki, 131 S. Ct. 1197, 1202 (2011), or attempt to consent to a courts jurisdiction, see Sosna v. Iowa, 419 U.S. 393, 398 (1975). Our obligation to examine our subject-matter
jurisdiction is triggered whenever that jurisdiction is fairly in doubt. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1945 (2009).
As part of the Internal Revenue Code, the AIA provides that no suit for the purpose of restraining the assessment or
collection of any tax shall be maintained in any court by any person. that, I.R.C. 7421(a). 2 applicable, the The parties concede, as they must, AIA divests federal courts of
when
subject-matter jurisdiction. so held.
The Supreme Court has explicitly
See Enochs v. Williams Packing & Navigation Co., 370
U.S. 1, 5 (1962).
The Declaratory Judgment Act authorizes a federal court to issue a declaratory judgment except with respect to Federal taxes. 28 U.S.C. 2201(a). In Bob Jones Univ. v. Simon, 416 U.S. 725, 732 n.7 (1974), the Court held that the federal tax exception to the Declaratory Judgment Act is at least as broad as the Anti-Injunction Act. Accordingly, our holding as to the Anti-Injunction Act applies equally to plaintiffs request for declaratory relief. 16
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By its terms the AIA bars suits seeking to restrain the assessment or collection of a tax. pre-enforcement actions brought Thus, the AIA forbids only the Secretary of the
before
Treasury or his delegee, the Internal Revenue Service (IRS), has assessed or collected an exaction. A taxpayer can always pay an
assessment, seek a refund directly from the IRS, and then bring a refund action in federal court. See United States v.
Clintwood Elkhorn Mining Co., 553 U.S. 1, 4-5 (2008). The parties recognize that plaintiffs here have brought a pre-enforcement action. Moreover, although Congress has
provided numerous express exceptions to the AIA bar, see I.R.C. 7421(a), the parties do not claim that any of these exceptions applies here. Resolution of the case at hand therefore turns on
whether plaintiffs suit seeks to restrain the assessment or collection of any tax. B. A tax, in the general understanding of the term, is
simply an exaction for the support of the government. States v. Butler, 297 U.S. 1, 61 (1936).
United
An exaction qualifies
as a tax even when the exaction raises obviously negligible revenue and furthers a revenue purpose secondary to the
primary goal of regulation.
United States v. Sanchez, 340 U.S. Thus, See
42, 44 (1950); see also Bob Jones, 416 U.S. at 741 n.12. the term tax can describe a wide variety of exactions. 17
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Trailer Marine Transp. Corp. v. Rivera Vazquez, 977 F.2d 1, 5 (1st Cir. 1992) (surveying cases that have regularly applied the label tax to a range of exactions, even those that might not be commonly described as taxes). The Supreme Court has concluded that the AIA uses the term tax in its broadest possible sense. This is so because the
AIA aims to ensure prompt collection of . . . lawful revenue by preventing taxpayers from inundating tax collectors with preenforcement lawsuits over disputed sums. 370 U.S. at 7-8. Williams Packing,
Thus, an exaction constitutes a tax for
purposes of the AIA so long as the method prescribed for its assessment conforms to the process of tax enforcement. See
Snyder v. Marks, 109 U.S. 189, 192 (1883) (defining a tax in the AIA as any exaction in a condition [of being] collected as a tax). Specifically, the AIA prohibits a pre-enforcement
challenge to any exaction [that] is made under color of their offices by revenue officers charged with the general authority to assess and collect the revenue. Phillips v. CIR, 283 U.S.
589, 596 (1931) (citing Snyder, 109 U.S. at 192); see also Bob Jones, 416 U.S. at 740 (applying the AIA bar when IRS action is authorized by requirements of the [Internal Revenue Code]). The Supreme Court has steadfastly adhered to this broad construction, enforcement notably challenges in to holding exactions 18 that that the do AIA not bars pre-
constitute
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taxes under the Constitution.
Compare Bailey v. George, 259
U.S. 16 (1922) with Bailey v. Drexel Furniture Co., 259 U.S. 20 (1922). In Bailey v. Drexel Furniture, a refund action, the
Court held unconstitutional as beyond Congresss Taxing Power a so-called tax, finding it was in truth a mere penalty, with the characteristics of regulation and punishment. 38. 259 U.S. at
Yet the Court held the very same provision a tax for
purposes of the AIA and so dismissed a pre-enforcement challenge to the exaction. See Bailey v. George, 259 U.S. at 20. In
recent years, the Court has expressly affirmed these holdings, reiterating that the term tax in the AIA encompasses penalties that function as mere regulatory measure[s] beyond the taxing power of Congress and Article I of the Constitution. Bob
Jones, 416 U.S. at 740. The Courts broad interpretation of the AIA to bar
interference with the assessment of any exaction imposed by the Code entirely accords with, and indeed seems to be mandated by, other provisions of the Internal Revenue Code. use the term tax in a vacuum; rather, The AIA does not it protects from
judicial interference the assessment . . . of any tax. 7421(a) (emphasis added).
I.R.C.
The Secretarys authority to make
such an assessment . . . of any tax derives directly from another provision in the Code, which charges the Secretary with making assessments of all taxes (including interest, additional 19
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amounts, additions to the tax, and assessable penalties) imposed by this title. 6201(a) (emphases added); see also 6202
(assessment of any internal revenue tax includes assessment of penalties). authority penalties that (as Thus, the well for purposes of the very made assessment clear that [and]
AIA as
protects, interest,
Congress
additional
amounts,
additions to the tax) count as taxes.
Congress must have
intended the term tax in the AIA to refer to this same broad range of exactions. 239, 243 (1972) See Erlenbaugh v. United States, 409 U.S. ([A] legislative body generally uses a
particular word with a consistent meaning in a given context.). In sum, the AIA forbids actions that seek to restrain the Secretary from exercising his statutory authority to assess
exactions imposed by the Internal Revenue Code.
See, e.g., Bob
Jones, 416 U.S. at 740 (holding AIA barred suit challenging IRS regulatory action when action was authorized by requirements of the [Internal States, Revenue 353 Code]); 1357, Mobile 1362 & Republican n.5 (11th Assembly Cir. v.
United
F.3d
2003)
(holding AIA barred suits challenging penalties imposed for violating disclosure conditions of tax-exempt status); In re
Leckie Smokeless Coal Co., 99 F.3d 573, 583 & n.12 (4th Cir. 1996) (holding AIA applied to premiums assessed and collected by the Secretary under color of the Internal Revenue Code); cf. Fed. Energy Admin. v. Algonquin SNG, Inc., 426 U.S. 548, 558 n.9 20
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(1976) (holding AIA did not bar challenge to fees because fees not assessed under the Internal Revenue Code). imposed for a failure tax[] See to comply as with in the the 6202, The exaction mandate
individual Codes
constitutes provisions.
defined
assessment For
I.R.C.
6201(a),
5000A(g)(1).
these reasons, the AIA bars this action. 3
III. The Secretarys contrary contention primarily relies on the fact that the individual mandate labels the imposed exaction a penalty, not a tax. 5000A(b). For the Secretary, the
Sixth Circuit, see Thomas More Law Center v. Obama, -- F.3d -(6th Cir. 2011) [No. 10-2388], and now our friend in dissent, this penalty label renders the AIA inapplicable. A. Indisputably, the AIA bars pre-enforcement challenges even when Congress has exhibit[ed] its intent that a challenged Although both parties generally contend that the AIA does not bar this suit, neither offers any reason why the challenge to the employer mandate escapes the AIA bar. There is good reason for that. Because Congress placed the employer mandate in the Internal Revenue Code, triggering the Secretarys authority to assess and collect payment, all of the reasons set forth in the text as to why the AIA bars a pre-enforcement challenge to the individual mandate also apply to the employer mandate. We additionally note that Congress waived none of the Secretarys collection tools in imposing the employer mandate and labeled the exaction a tax in certain subsections. See 4980H(b)(2), (c)(7), (d)(1). Accordingly, the AIA clearly bars Libertys challenge to the employer mandate. 21
3
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exaction function as a penalty.
Compare Bailey v. Drexel, 259 The term
U.S. at 38, with Bailey v. George, 259 U.S. at 20.
penalty therefore describes a category of exaction to which the Supreme Court has already applied the AIA. 4 Given this
history, it seems inconceivable that Congress would intend to exclude an exaction from the AIA merely by describing it as a penalty. To be sure, Congress called the penalty at issue in the Bailey cases if a tax. is That fact, however, only aids the the
Secretary
there
something
talismanic
about
label
penalty that removes a challenged exaction from the scope of the AIA. The Secretary has cited no case even remotely
supporting such a proposition. repeatedly bearing on instructed whether that an
In fact, the Supreme Court has labels as a have little for
congressional
exaction
qualifies
tax
This is not to elide the general distinction between taxes and penalties. We agree with the Sixth Circuits general observation that there are contexts in which the law treats taxes and penalties as mutually exclusive. Thomas More, -- F.3d at ___ (slip op. at 11) (citing one bankruptcy and two constitutional cases). The question here is whether the AIA is one of these contexts. Neither the Secretary nor the Sixth Circuit cites a single case suggesting that it is. The dissent relies on some bankruptcy cases in an attempt to import the distinction between a revenue-raising tax and a regulatory penalty from that context. To accept the dissents view would place us at odds with the Supreme Courts explicit holding, in the context of the AIA, that the distinction between regulatory and revenue-raising exactions has been abandoned. Bob Jones, 416 U.S. at 741 & n.12. 22
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statutory purposes.
See, e.g., Helwig v. United States, 188
U.S. 605, 613 (1903) (holding use of words does not change the nature and character of the enactment in the context of the revenue laws); 5 see also United States v. Reorganized CF & I Fabricators of Utah, Inc., 518 U.S. 213, 220 (1996) (requiring a court to look behind the label placed on the exaction and
rest[] its answer directly on the operation of the provision); United States v. Sotelo, 436 U.S. 268, 275 (1978) (holding
exactions penalty label not dispositive, but its essential character controls, in determining whether exaction is a tax for bankruptcy purposes); United States v. New York, 315 U.S. 510, 515-16 (1942) (stressing that the term tax includes any pecuniary burden laid upon individuals . . . for the purpose of
Helwig does not, as the dissent contends, support its view that an exactions label controls. The Court in Helwig acknowledged that Congress may expressly classify an exaction as a penalty or in the nature of one, with reference to the further action of the officers of the government, or with reference to the distribution of the moneys thus paid, or with reference to its effect upon the individual, and that it is the duty of the court to be governed by such statutory direction. 188 U.S. at 613 (emphasis added). The Court then identified statute after statute illustrating the various ways in which Congress has historically directed a duty, additional duty, or penalty to be treated with reference to a specified governmental action. Id. at 614-19. Congress has provided no such direction with reference to the AIA, and Helwig makes clear that a mere label describing an exaction does not constitute such direction. See id. at 613 (explaining that describing an exaction as a further sum or an additional duty will not work a statutory alteration of the nature of the imposition). 23
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supporting the government, by whatever name it may be called (internal quotation omitted and emphasis added)). Indeed, the Court has specifically found an exactions See Lipke,
label immaterial to the applicability of the AIA. 259 U.S. 557 (1922).
In Lipke, the Supreme Court held that the
mere use of [a] word to describe a challenged exaction was not enough to show whether a tax was laid. Id. at 561. The
Court concluded that one of the challenged exactions, although labeled a tax, functioned in reality to suppress crime and so fell outside the AIA bar. Id. Moreover, notwithstanding the
penalty and special penalty labels of the other challenged exactions, neither the majority nor Justice Brandeis in dissent gave these labels any import in determining the applicability of the AIA. Compare id. at 561-62 with id. at 563-65 (Brandeis,
J., dissenting). In light of this history, it is not surprising that no federal More, appellate ever court, that except the the label Sixth Circuit to an in Thomas
has
held
affixed
exaction
controls, or is even relevant to, the applicability of the AIA. 6
We certainly respect the views of the courts, trumpeted by the dissent, that have held the AIA inapplicable to suits like the one at hand. We note, however, that even unanimity among the lower courts is not necessarily predictive of the views of the Supreme Court. See CBOCS West, Inc. v. Humphries, 553 U.S. 442, 472 (2008) (Thomas, J., dissenting) (collecting cases where the Supreme Court has reject[ed] a view uniformly held by the courts of appeals). 24
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Nonetheless, the Secretary and the dissent insist that the label of an exaction We does control address in the determining Secretarys if the AIA on bar this
applies.
first
argument
point and then the dissents. The Secretary acknowledges that when passing on the
constitutionality of a tax law, a court places no weight on the precise form of descriptive words attached to the challenged exaction. (1941) citing Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 363 quotation Bailey omitted) as (emphasis authority, added). the But
(internal the twin
cases
Secretary
contends that the opposite rule must apply for purposes of the AIA, i.e. that for purposes of the AIA, the precise form of descriptive words given an exaction becomes dispositive. The Secretarys reliance on the twin Bailey cases is
mystifying.
In fact, they provide no support for his position.
In Bailey v. Drexel Furniture, 259 U.S. at 38, a refund action, the Court held that an exaction while exceeded on the Congresss day, in
constitutional
taxing
authority,
same
Bailey v. George, 259 U.S. at 16, it dismissed a pre-enforcement challenge to the same exaction, characterizing it as a taxing statute for purposes of the AIA. When dismissing the pre-
enforcement action, the Court did not state or suggest that it classified the challenged statute as a taxing statute because Congress labeled it as such. Nor does it seem plausible that 25
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the Court implicitly relied on that label, given that it had never before and has never since found an exactions label
controlling for statutory purposes.
See, e.g., Reorganized CF &
I, 518 U.S. at 220; Sotelo, 436 U.S. at 275; Lipke, 259 U.S. at 561; Helwig, 188 U.S. at 613. Rather, only one explanation of the the
the twin Bailey cases coheres with the Courts precedents: term tax in the AIA reaches any exaction assessed by
Secretary pursuant to his authority under the Internal Revenue Code -- even one that constitutes a penalty for constitutional purposes. The dissents contention that the Supreme Courts reliance on the statutory label in Bailey v. George is so obvious that it required no explanation by the Court strikes us as unsound. It seems doubtful that the Court departed from its normal
practice of ignoring statutory labels without explaining why it was doing so. Instead, the more likely -and just as
straightforward -- explanation is that the Court described the exaction as a taxing statute because Congress had charged the tax collector with assessing the challenged exaction. See
Snyder, 109 U.S. at 192. 7
Contrary to the dissents belief, this
The dissent argues that the statement in Snyder, 109 U.S. at 192-93, that the term tax in the AIA refers to those exactions claimed by the proper public officers to be a tax, makes relevant the Secretarys present litigation position that the AIA does not bar this lawsuit. The most fundamental problem with this argument is that the Secretary still does claim that 26
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holding
did
not
require
the
Court
to
perform
any
elaborate
functional analysis, but rather to recognize simply that the challenged exaction formed part of the general revenue laws. The dissents related contention -- that our interpretation of Bailey v. George brings that case into conflict with Lipke, in which the Supreme Court held that the AIA did not bar a certain pre-enforcement challenge -- also misses the mark. In
Lipke, the Court faced a challenge to the Secretarys assessment of an exaction imposed pursuant to the National Prohibition Act, a statute primarily designed to define and suppress crime. 259 U.S. at 561 (emphasis added). Congress had enacted the
statute to prohibit intoxicating beverages and authorized the tax collector of to this 41 enforce criminal Stat. a tax against illegally National persons who in or
violation sold
statute The
manufactured Prohibition
liquor.
318.
Act,
however, did not authorize the collector to make an assessment under his general revenue authority; rather, it converted him
the challenged exaction is a tax, albeit one authorized by the Constitutions Taxing Clause. See Appellees Br. at 58. We cannot hold that the AIA does not apply to this tax merely because the Secretary has changed his stance on the AIA and now contends that the exaction is a tax only for constitutional purposes. To give the Secretarys lawyers such a veto over the AIA bar would abdicate our independent obligation to assure ourselves of our own jurisdiction. Arbaugh, 546 U.S. at 514. Moreover, Congress called the exaction in the employer mandate a tax. See 26 U.S.C. 4980H(b)(2), (c)(7), (d)(1). The argument is for this reason, too, fatally flawed. 27
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into a federal prosecutor.
Specifically, it (1) conferred upon
the collector an array of prosecutorial powers, subject to the control of the Attorney General, and (2) predicated the
enforcement of the challenged tax on proof of criminal guilt. 41 Stat. 305, 317-18. bar a The Lipke Court held that the AIA did not challenge to this exaction because
pre-enforcement
guarantees of due process required pre-enforcement review of penalties for crime. 262 U.S. at 562.
Lipke thus casts no doubt on our conclusion that the term tax in the AIA reaches any exaction imposed by the Code and assessed by the tax collector pursuant to his general revenue authority. Lipke held only that when Congress converts the tax
assessment process into a vehicle for criminal prosecution, the Due Process Clause prohibits courts from applying the AIA. See
United States v. One Ford Coupe Auto., 272 U.S. 321, 329 (1926) (characterizing Lipke as merely a due process case); see also Bob Jones, 416 U.S. at 743 (describing Lipke as permitting pre-enforcement review of tax statutes that function as
adjuncts to the criminal law); Lynn v. West, 134 F.3d 582, 594-95 (4th Cir. 1998) (citing Lipke for proposition that courts possess jurisdiction to enjoin a tax that is in reality a
criminal penalty).
Of course, the individual mandate imposes
no such criminal penalty, and thus presents no constitutional impediment to applying the AIA. 28
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In sum, the Supreme Court has itself emphasized that Lipke creates only a narrow constitutional limitation, not applicable here, on the holding of the twin Bailey cases that the AIA reaches a broader range of exactions than does the term tax in the Constitution. See Bob Jones, 416 U.S. at 741 n.12 (citing
Lipke and noting, in the context of the AIA, that the Court has since abandoned any distinction between revenue-raising
taxes and regulatory penalties). the Secretary and the dissent --
Yet the theory propounded by that a label transforms a
constitutional tax into a penalty for AIA purposes - would yield an AIA that As reaches former fewer exactions of the than IRS does noted the in
Constitution.
Commissioners
criticizing this argument, this is the opposite of what the Supreme Court held in the twin Bailey cases. Mortimer Caplin & Sheldon Cohen as Amici See Brief for Supporting
Curiae
Appellees at 24, Seven-Sky v. Holder, No. 11-5047 (D.C. Cir. July 1, 2011). The Secretary all but acknowledges this fact,
admitting that the Bailey cases show only the converse of the position that he now propounds. We cannot upend the Supreme
Courts settled framework for determining if an exaction is a tax for statutory purposes on the basis of a theory for which the Secretary musters only cases that hold the converse. B.
29
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Perhaps in recognition of the dearth of case law supporting their argument, the Secretary and the dissent rely heavily on an inference they draw from the structure of the Internal Revenue Code to support their position. Section 6665(a)(2) provides the starting point for this
inference; it states that any reference in this title to tax imposed by this title shall be deemed also to refer to the . . . penalties provided by this added); chapter, see also i.e. Chapter 68. See
6665(a)(2)(emphasis
6671(a)
(redundantly
stating the same for penalties and liabilities provided by subchapter B of Chapter 68). dissent, 6665(a)(2) According to the Secretary and the implies that any penalty
necessarily
outside of Chapter 68 does not qualify as a tax for purposes of the Code. in Chapter 48 Because Congress codified the individual mandate of the than Code (entitled 68 Miscellaneous (entitled Excise
Taxes)
rather
Chapter
Assessable
Penalties), the Secretary and the dissent urge us to infer that Congress did not intend the individual mandate to constitute a tax for purposes of the AIA. The fundamental difficulty with this argument is that
6665(a)(2) merely clarifies that the term tax encompasses the penalties contained in Chapter 68; it does not limit the term tax to only these penalties. Nor can we imply such an
limitation, for courts must not read the enumeration of one 30
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case
to
exclude
another
unless
it
is
fair
to
suppose
that
Congress considered the unnamed possibility and meant to say no to it. Barnhart v. Peabody Coal Co., 537 U.S. 149, 168 (2003).
There is no evidence that in enacting the clarifying language of 6665(a)(2), Congress intended to exclude a penalty codified outside of Chapter 68 from also qualifying as a tax. See
United States v. Sischo, 262 U.S. 165, 169 (1923) (holding no inference can be made to imply an exclusion when Congress enacts an extension, rather than restriction, of a term). Furthermore, the suggestion that we infer from 6665(a)(2) a categorical exclusion from the term tax of all non-Chapter 68 penalties of violates the Congresss Congress express has instructions. courts In from
7806(b)
Code,
forbidden
deriving any inference or implication from the location or grouping of any particular section or provision or portion of this title. I.R.C. 7806(b). The argument of the Secretary
and the dissent demands that we draw precisely such a forbidden inference, for under their theory, the character of a penalty turns entirely on the Chapter in which it is locat[ed]. 8
Contrary to the dissents contention, this conclusion does not reject the legal force of 6665(a)(2). When Congress expressly directs that the location of a provision matters, as it has in 6665(a)(2), then a court need not infer anything and Congresss direction controls. But to adopt the position of the Secretary and the dissent, a court would have to infer that an exaction is not to be treated as a tax from the exactions place 31
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Moreover,
the
Secretarys
newly-minted
position
that
Congress has implicitly excluded any penalty codified outside of Chapter 68 from qualifying of the as AIA. a tax In contradicts his
previous
interpretation
Mobile
Republican
Assembly, 353 F.3d 1357, the Secretary defended against a preenforcement challenge to an exaction imposed by I.R.C. 527(j), for failure to comply with the conditions attached to tax-exempt status. precisely because The the district reasons had court that held the AIA inapplicable espouses, penalty for i.e. and
the
Secretary
now a
Congress
labeled
the
exaction
codified it outside of Chapter 68.
See National Federation of
Republican Assemblies v. United States, 148 F. Supp. 2d 1273, 1280 (S.D. Ala. 2001). But the Secretary appealed, insisting
that the AIA did apply because the challenged penalty was to be assessed and collected in the same manner as taxes. Br. of
Appellant at 32, Mobile Republican Assembly, 353 F.3d 1357 (Feb. 18, 2003) (No. 02-16283), 2003 WL 23469121. The Eleventh
Circuit agreed and dismissed the suit because the exaction was based squarely Code upon the explicit part of language the of the tax Internal subsidy
Revenue scheme.
and
form[ed]
overall
353 F.3d at 1362 n.5.
in the Code (here Chapter 48 rather than Chapter 68). this inference that the Code forbids. 32
It is
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The Secretary fails to explain his change in position or even refer to the Eleventh Circuits holding that the AIA
applies to penalties codified outside of Chapter 68.
Instead,
the Secretarys argument boils down to his intuition, accepted by the Sixth Circuit and the dissent, that Congress said one thing in sections 6665(a)(2) and 6671(a), and something else in section 5000A [the individual mandate], and we should respect the difference. slip op. at 12]. But we can easily respect the difference in congressional wording without holding plaintiffs challenge exempt from the AIA bar. that The legislative history of 6665(a)(2) makes clear inserted that provision in the course of Thomas More, --- F.3d at ___ [No. 10-2388,
Congress
reorganizing and codifying the revenue laws in 1954, and did so merely to declare explicitly what had been implicit -- that the term tax for purposes of the Code also refers to penalties imposed by the Code. See H.R. Rep. No. 83-1337, at A420 (1954)
(noting that predecessor to 6665(a)(2) conforms to the rules under existing law and contain[s] no material changes to
existing law); S. Rep. No. 83-1622, at 595-96 (1954) (same). 9
Congress originally inserted the text of 6665 as 6659 of the 1954 Code, see Internal Revenue Code of 1954, Pub. L. No. 83-289, 6659(a)(2), 68A Stat. 1, 827 (1954), but relocated it to 6665 in 1989 without making any changes to it, see Omnibus Reconciliation Act of 1989, Pub. L. No. 101-239, tit. VII, 33
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Given this history, we cannot interpret 6665(a)(2) as working any substantive change to the Code; rather, it simply mak[es] explicit what was already implied by the Code. U.S. at 169; see also Walters v. Natl Assn Sischo, 262 of Radiation
Survivors, 473 U.S. 305, 317-18 (1985).
That Congress did not
repeat this clarifying language when it enacted the individual mandate, which is not part of any reorganization or
recodification of the Code, demonstrates nothing. 10 Rather, Congress well knew that the Code had for decades expressly provided that for purposes of the Secretarys
assessment power, the term tax includ[es] . . . penalties. I.R.C. 6201(a). AIA encompass the Specific direction that the term tax in the individual mandate penalty was therefore
unnecessary. Congress federal
Cf. Bob Jones, 416 U.S. at 741-42 (noting that AIA to Put adapt to evolving way, complexity of
intended tax
system).
another
6201
specifically
provides the Secretary with authority to make assessments of 7721(a), (c)(2), I.R.C. 6665(a)).
10
103
Stat.
2106,
2399
(1989)
(codified
at
This does not mean that 6665(a)(2), which includes Chapter 68 penalties within the term tax throughout the Code, serves no purpose. For example, 6665(a)(2) may well be necessary to authorize a taxpayer to pursue a civil suit for the illegal collection of Federal tax against a collector who intentionally misinterprets the Code in collecting a Chapter 68 penalty. See I.R.C. 7433(a); cf. Sylvester v. United States, 978 F. Supp. 1186, 1189 (E.D. Wis. 1997); Le Premier Processors, Inc. v. United States, 775 F. Supp. 897, 902 n.6 (E.D. La. 1990). 34
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all taxes (including . . . penalties), and the AIA specifically bars judicial interference with the Secretarys power to make assessment . . . of any tax. Given that Congress has not
provided to the contrary, these two provisions taken together mandate the conclusion that the AIA bars this suit seeking to restrain an assessment of the exaction challenged here,
regardless of the exactions label. The Secretarys contrary label argument not only fails to persuade, Code. it also requires a strained interpretation of the
The Secretary urges us to take the view that Congress
intended the individual mandate to constitute the only exaction imposed by the lengthy Internal Revenue Code that does not
qualify as a tax. 11
The consequences of this counterintuitive For example, accepting the penalty exempts the
argument extend well beyond the AIA. Secretarys contention that the
label
individual mandate from provisions applicable to taxes would inexplicably eliminate a host of procedural safeguards against abusive
11
tax
collection.
See,
e.g.,
7217(a)
(prohibiting
The Secretary yet again employs faulty reasoning to reach this remarkable conclusion. He contends that three other exactions labeled as penalties and codified outside Chapter 68 - I.R.C. 5114(c)(3), 5684(b), 5761(e) -- constitute taxes for purposes of the AIA because they shall be assessed, collected, and paid in the same manner as taxes, as provided in section 6665(a). But the only meaningful difference between these provisions and the individual mandate is the addition of the phrase, as provided in section 6665(a), which refers only to the previous clause and does not incorporate the separate, unreferenced parts of 6665(a). 35
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executive
branch
officials
from
requesting
IRS
officials
to
conduct or terminate an audit . . . with respect to the tax liability of any particular taxpayer), 7433(a) (providing civil damages for unauthorized civil damages collection for of Federal tax), 7435 of
(providing
unauthorized
enticement
disclosure concerning the collection of any tax).
We will not
presume that Congress intended such an anomalous result, and we certainly cannot infer this intent on the basis of a mere label. C. The Secretarys remaining contentions, some of which are adopted by the dissent, are brief and unsupported by any statute or case law. view All of are what policy the 2010 arguments, Congress, relying in on the the
Secretarys individual
enacting as
mandate,
assertedly
would
regard
mak[ing]
sense, or would not have wanted, or as the dissent would have it, what the and 2010 the Congress dissent, intended. policy According concerns to the
Secretary
these
demonstrate
that the 2010 Congress could not have wanted the AIA to bar preenforcement challenges to the individual mandate. The most fundamental difficulty with this contention is its focus on the intent of the 2010 Congress in enacting the
individual mandate.
Our task is not to divine the intent of the
2010 Congress but simply to determine whether the term tax in the AIA encompasses the exaction challenged here. 36 To resolve
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this question, we must look to the text of the AIA and the intent of the Congresses that enacted and re-enacted that
statute, just as the Supreme Court has done in its AIA cases. See, e.g., South Carolina v. Regan, 465 U.S. 367, 375 (1984); Bob Jones, 416 U.S. at 741-42; Snyder, 109 U.S. at 191. Once we conclude that the term tax in the AIA does
encompass a challenged exaction, we can go no further. terms of the AIA declare not that courts, here, save may for
For the specific no
statutory
exceptions,
applicable
entertain
suit for the purpose of restraining the assessment or collection of any tax. 26 U.S.C. leaves no 7421(a) room (emphasis a court added). to carve This out
expansive
language
for
exceptions based on the policy ramifications of a particular pre-enforcement challenge. Bob Jones, repudiating from the its The Supreme Court said as much in old cases that of the had embraced based a on
departure
literal
reading
Act
exceptional circumstances.
416 U.S. at 743.
In doing so, the
Court instructed that courts must give the AIA literal force, without regard to the . . . nature of the pre-enforcement
challenge. Of
Id. at 742. the 2010 Congress AIA. could But to have date exempted it has the not
course,
individual
mandate
from
the
provided for such an exemption, and surely we cannot hold it has implicitly done so. To infer an intent on the part of the 2010 37
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Congress
to
exempt
this
pre-enforcement
challenge
from
the
otherwise-applicable AIA bar would be tantamount to finding an implicit repeal of that bar; such an approach would violate the cardinal rule that repeals by implication are not favored. TVA v. Hill, 437 U.S. 153, 189 (1978) (applying the implicit repeal doctrine to the TVAs argument that the Act cannot reasonably be interpreted as applying to [the challenged]
federal project); see also United States v. United Continental Tuna Corp., 425 U.S. 170, 169 (1976) (holding that courts must be hesitant to infer that Congress, in enacting a later
statute, intended to authorize evasion of a [prior] statute). Given that the terms of the AIA encompass the exaction imposed by 5000A(b), that the only is permissible if the justification mandate at for is 189.
exempting
exaction with the
individual 437
irreconcilable
AIA.
Hill,
U.S.
Obviously, it is not. Accordingly, it is simply irrelevant what the 2010 Congress would have thought about the AIA; all that matters is whether the 2010 Congress imposed a tax. If it did, then the AIA bars After all, were we to
pre-enforcement challenges to that tax.
embrace the argument pressed by the Secretary and the dissent that the AIA an applies intent for only it when to a subsequent we would Congress has
exhibited render the
apply, a
impermissibly suggestion to
AIA
little
more
than 38
non-binding
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future Congresses, devoid of independent legal force. Corp., 425 U.S. at 169 by (holding Congress that courts it must
See Tuna require the
explicit
expression
that
intends
compromise or abandonment of previously articulated policies). The Supreme Court has rejected this very view, holding that the AIA establishes a nearly irrebuttable presumption that no tax may be challenged in any pre-enforcement action. 416 U.S. at 743-46. Even taken on their own terms, however, the proffered See Bob Jones,
policy arguments fail.
Neither the Secretary nor the dissent
has identified any persuasive evidence that the 2010 Congress in fact intended to permit pre-enforcement best evidence challenges of what to the
individual
mandate. 12
The
Congress
The Secretary offers only congressional floor statements as evidence of this supposed congressional intent. In those statements, two Senators contemplated a potential onslaught of challenges to the individual mandate but, as the Secretary puts it, never suggested that the only way for an individual to obtain review would be . . . [through] a refund action. The Supreme Court has long held that such statements are of little assistance in ascertaining congressional intent. See, e.g., Grove City College v. Bell, 465 U.S 555, 567 (1984). Moreover, the floor statements relied on here are irrelevant, because at most they signal an acknowledgment of potential lawsuits, not an endorsement of challenges seeking pre-enforcement injunctive relief. The dissent goes even a step further than the Secretary, inferring an AIA exception because drafts of what became the Affordable Care Act had previously called the challenged exaction a tax. The Supreme Court has warned against such an approach, cautioning courts not to read much into Congresss unexplained decision to change wording in a final bill. See 39
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intended, of course, is the legislation it actually enacted. See Carcieri v. Salazar, 129 S. Ct. 1058, 1066-67 (2009).
Congress could have enacted an exemption from the AIA bar; it did so in other instances. See, e.g., I.R.C. 4961(c)(1)
(second-tier tax exempt from AIA), 6703(c)(1) (penalty exempt from AIA upon satisfying statutory conditions), 7421(a) (listing several exactions and procedures exempt from AIA). has provided so such exemption here. But Congress
Alternatively, Congress
could have crafted a specific route to pre-enforcement judicial review. See Sigmon Coal Co. v. Apfel, 226 F.3d 291, 301 (4th
Cir. 2000); see also Clinton v. City of New York, 524 U.S. 417, 428-29 (1998). Again, it did not do so here. Thus, Congress
knows how to exempt a specific exaction from the AIA bar, and that it did not do so here strongly undermines the contention that Congress intended such an exemption.
Trailmobile Co. v. Whirls, 331 U.S. 40, 61 (1947) (noting that the interpretation of statutes cannot safely be made to rest upon mute intermediate legislative maneuvers). Moreover, the dissent errs in suggesting that our holding ignores this wording change; rather, we simply hold that change irrelevant to the AIA bar. Congresss decision to call the challenged exaction a penalty may affect its treatment under sections of the Code that expressly distinguish taxes from penalties, e.g. those pertaining to the timing of interest accrual. See Latterman v. United States, 872 F.2d 564, 569-70 (3d Cir. 1989). Or Congresss wording change may have simply carried political benefits. See Florida v. HHS, 716 F. Supp. 2d 1120, 1142-43 (N.D. Fla. 2010). No evidence, however, indicates that the change was intended to exempt the individual mandate from the AIA. 40
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Nor do the Secretarys policy arguments, which the dissent embraces, demonstrate that the AIA should not apply here. Secretary contends that it makes sense that Congress The would
regard it as unnecessary to apply the AIA bar to the individual mandate because, in the mandate, Congress prohibited the
Secretary from using his principal tools to collect unpaid taxes. fact that Maybe so. the or AIA But the Secretarys argument ignores the bars challenges of any seeking tax. to to restrain the
assessment (emphasis
collection
I.R.C. waive
7421(a) of the
added).
Congresss
intent
some
Secretarys collection tools does not in any way evidence that it would want to invite pre-enforcement challenges to the
Secretarys remaining collection powers or all of his assessment authority. And the Supreme Court has left no doubt that
restraining even one method of collection triggers the AIAs prohibition on injunctive suits. Serv. Comm., 419 U.S. 7, 10 (1974). Alternatively, the Secretary argues that because the United States v. Am. Friends
individual mandate is integral to the [Affordable Care Acts] guaranteed-issue and community-rating provisions and has a
delayed . . . effective date, Congress would have wanted early resolution of challenges to it and did not intend the AIA to prohibit pre-enforcement challenges. that any holding that the AIA 41 bar This argument ignores not apply to the
does
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individual mandate might have serious long-term consequences for the Secretarys revenue collection. The Congressional Budget
Office projects that 34 million people will remain uninsured in 2014 and thus potentially subject to the challenged penalty. Letter from Douglas W. Elmendorf, CBO Director, to Hon. Harry Reid, Senate Majority Leader, at table 4 (Dec. 19, 2009). To
exempt the individual mandate from the AIA would invite millions of taxpayers -- each and every year -- to refuse to pay the 5000A(b) exaction and instead preemptively challenge the IRSs assessment. Moreover, some of those taxpayers will undoubtedly possess a host of non-constitutional, individual grounds upon which to challenge the assessment of the 5000A(b) exaction. As former
IRS Commissioners warned in a recent brief, allowing these suits would severely hamper IRS collection efforts. Mortimer Caplin & Sheldon Cohen as Amici See Brief for Supporting
Curiae
Appellees at 12-15, Seven-Sky v. Holder, No. 11-5047 (D.C. Cir. July 1, 2011). This would threaten to interrupt the IRSs
collection of $4 billion annually from the challenged exaction. See Letter from Elmendorf to Reid at table 4. Moreover, those
challenges could impede the collection of other income taxes by preemptively resolving -in litigation over the exaction
imposed by 5000A(b) -- issues basic to all tax collection,
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such
as
taxpayers
adjusted
gross
income. 13
See
I.R.C.
5000A(c)(2)(B); C.I.R. v. Sunnen, 333 U.S. 591, 597-98 (1948) (issue preclusion applicable in the federal income tax field). Thus, while the Secretary and the dissent may be correct that we could resolve this one lawsuit with few adverse revenue consequences, the holding necessary to reach the merits here could, in the long-run, wreak havoc on the Secretarys ability to collect revenue. present exception mandate. litigation for If Congress is persuaded by the Secretarys position, it can craft to a specific AIA
constitutional
challenges
the
individual
See I.R.C. 7428(a) (inserting, after Bob Jones, an
exemption for the exact sort of pre-enforcement challenge the Bob Jones Court had held barred by the AIA). Until it does so,
however, we are bound by its directive that we entertain no suit restraining the assessment of any tax. 7421(a).
IV. Having dispensed with the Secretarys arguments, we turn finally to the arguments pressed by plaintiffs. A. Other issues raised by the individual mandate that are common to many taxes include certain deductions from income taxes ( 5000A(c)(4)(C)(i)), child dependency determinations ( 5000A(b)(3)(A)), joint liability for spouses ( 5000A(b)(3)(B)), the income level triggering a taxpayers duty to file a return ( 5000A(c)(2)(B)), and family size for deduction purposes ( 5000A(c)(4)(A)). 43
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Plaintiffs apply because
initially this
contend does
that not
the seek
AIA to
bar
does
not the
case
restrain
assessment or collection of a tax.
The plaintiff university in Its
Bob Jones tendered precisely the same initial argument.
first contention was that the AIA did not apply because its suit was not brought for the purpose of restraining the The
assessment or collection of any tax. Supreme Court held Id. that the
416 U.S. at 738. complaint
universitys
belie[d]
[this] notion.
So it is here.
For, in their complaint,
plaintiffs characterize the individual mandate as a tax and ask for a judicial invalidation of this tax[] upon citizens who choose They not to purchase the something individual such as health insurance. although
assert
that
mandate
provision,
labeled a penalty, is a tax not apportioned as required by Article I of the Constitution, and a tax beyond the scope of congressional Constitution. power Thus, under as in the Bob Sixteenth Jones, Amendment of the
plaintiffs
complaint
belies their initial contention. 14
Moreover, Bob Jones forecloses an argument that the AIA allows a challenge to the requirement that an individual maintain insurance, i.e. 5000A(a), separate from a challenge to the penalty for noncompliance with this requirement, i.e. 5000A(b). Some district courts have accepted this argument. See, e.g., Goudy-Bachman v. U.S. Dept of Health & Human Servs., 764 F. Supp. 2d 684, 695 (M.D. Pa. 2011); Thomas More Law Center v. Obama, 720 F. Supp. 2d 882, 891 (E.D. Mich. 2010). But invalidation of the individual mandate would necessarily preclude the Secretary from exercising his statutory authority 44
14
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Plaintiffs remaining contention as to why the AIA does not bar their challenge to the individual mandate is that it imposes an unconstitutional regulatory penalty not designed to raise revenue, Taxing which and assertedly Spending violates Clause, the and Commerce Clause, the
unspecified
other
constitutional rights. a claim that an
The problem with this argument is that is an unconstitutional regulatory
exaction
penalty does not insulate a challenge to it from the AIA bar. Again, in Bob Jones, the Court confronted and rejected precisely this argument. Like plaintiffs here, the university in Bob Jones asserted that the IRSs threatened action would violate [its
constitutional] rights.
Id. at 736 (asserting various First In fact, in its brief to the
and Fourteenth Amendment rights).
Supreme Court, the university made an argument identical to that here. The university maintained that what the government would
have the University do . . . involves not revenue but rather unconstitutional compulsion, Brief for Petitioner at 28, Bob Jones Univ. v. Simon, 416 U.S. 725 (1973) (No. 72-1470), 1973 WL 172321. This mirrors the plaintiffs contention here that the
to assess the accompanying penalty. Moreover, in Bob Jones, the Court held that the AIA barred a challenge to the IRSs interpretation of I.R.C. 501(c)(3), even though that provision itself did not impose any tax; only when coupled with 501(a) (making a 501(c)(3) organization exempt from income taxes) did tax consequences result. 416 U.S. at 738. 45
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mandate
is
not
designed
to
raise
revenue
but
instead
to
unconstitutionally compel[] specific behavior.
Just as the
Bob Jones Court held the universitys argument foreclosed by the twin Bailey cases, see 416 U.S. at 740-41, we must hold
plaintiffs identical argument foreclosed by those cases. For in Bob Jones, the Supreme Court not only reaffirmed the twin Bailey cases as setting forth the proper course by which a taxpayer could challenge an exaction but also explained that it had abandoned . . . distinctions between regulatory and
revenue-raising taxes.
Id. at 741 n.12.
The Court held that
the AIA bar applied even to an exaction implementing a social policy unless a plaintiff could demonstrate that the IRS has no legal basis in the Code for assessing the exaction or seeks an objective unrelated to the protection of the revenues. 740. Id. at
Plaintiffs cannot and do not make any contention that the
IRS has no legal basis in the Code for assessing the penalty in 5000A or that this exaction is unrelated to the protection of the revenues. In sum, we find plaintiffs argument that the AIA does not apply here wholly unpersuasive. B. Perhaps recognizing the weakness of their argument as to the inapplicability of the AIA, plaintiffs principally contend that a narrow judicially-created exception to the AIA permits 46
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pursuit
of
their
action
seeking
pre-enforcement
injunction
against enforcement of the individual mandate. That exception allows a plaintiff to escape the AIA bar if he demonstrates that (1) equity jurisdiction otherwise exists, i.e. irreparable injury results if no injunction issues, and that (2) it is clear that under no circumstances could the [Secretary] ultimately prevail. 7. 15 Williams Packing, 370 U.S. at
When making the latter determination, a court must take
the most liberal view of the law and the facts in favor of the Secretary. Id. It is difficult to see how any irreparable But even
injury justifies the injunctive relief requested here.
assuming equity jurisdiction does exist here, plaintiffs cannot meet the stringent standard of proving with certainty that the Secretary has no chance of success on the merits. 416 U.S. at 745. In rejecting the universitys contention that it would Bob Jones,
prevail on the merits, the Bob Jones Court explained that the sole case in which a plaintiff had met this exacting standard was Miller v. Standard Nut Margarine Co., 284 U.S. 498 (1932). That case is a far cry from the case at hand. In Standard Nut,
The Court has carved out one other exception to the AIA for aggrieved parties for whom [Congress] has not provided an alternative remedy. See Regan, 465 U.S. at 378. That exception clearly does not assist plaintiffs because, as the Secretary concedes, they may challenge the individual mandate in a refund action. See Bob Jones, 416 U.S. at 746. 47
15
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a tax collector attempted to assess a tax that federal courts had already held in a proper post-enforcement action did not apply to the plaintiffs product. date, no court has even Id. at 510. the By contrast, to validity of the
considered
individual mandate in a post-enforcement action, let alone held it invalid in such a proceeding. actions, the courts of appeals Moreover, in pre-enforcement have divided as to the
constitutionality of the individual mandate.
Compare Florida v.
HHS, --- F.3d --- (11th Cir. 2011) (invalidating mandate) with Thomas More, --F.3d --(upholding mandate). Given this
history and the presumption of constitutionality a federal court must afford every congressional enactment, see United States v. Morrison, 529 U.S. 598, 607 (2000), we can hardly hold that the Secretary has no chance of success on the merits. 416 U.S. at 745. Bob Jones,
V. In closing, we recognize regime on that some Congress taxpayers. has imposed at a
potentially
harsh
Id.
749.
However, as in Bob Jones, the question of whether these concerns merit consideration is a matter for Congress to weigh. 750. Id. at
Unless and until Congress tells us otherwise, we must
respect the AIAs bar to the intrusion of the injunctive power
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of the courts into the administration of the revenue. 465 U.S. at 388 (OConnor, J., concurring). For all these reasons, we vacate the judgment
Regan,
of
the
district court and remand the case to that court to dismiss for lack of subject-matter jurisdiction. VACATED AND REMANDED
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WYNN, Circuit Judge, concurring:
I. I concur in Judge Motzs fine opinion holding that the
Anti-Injunction Act applies to this case.
I therefore agree
that it should be remanded to the district court for dismissal. I note that my distinguished colleague, after vigorously dissenting from the majoritys holding that the AIA applies, chose to exercise his prerogative to address the merits. 1 While
I think that his position on the Commerce Clause is persuasive, were I to reach the merits, I would uphold the constitutionality of the Affordable Care Act on the basis that Congress had the authority to enact the individual and employer mandates under its plenary taxing power. 2 However, my conclusion that the
The majority opinion vacates the district courts decision and remands plaintiffs lawsuit for dismissal. Judge Davis dissents from the majoritys dismissal of plaintiffs suit on AIA grounds; nonetheless, on the merits, he, too, would dismiss plaintiffs lawsuit. Justices and judges have previously spoken on the merits after stating that the court lacked jurisdiction; my approach today is therefore nothing new. See Stolt-Nielsen S.A. v. AnimalFeeds Intl Corp., 130 S. Ct. 1758, 1777 (2010) (Ginsburg, J., dissenting) (The Court errs in addressing an issue not ripe for judicial review . . . . I would dismiss the petition as improvidently granted. Were I to reach the merits, I would adhere to the strict limitations the Federal Arbitration Act (FAA), 9 U.S.C. 1 et seq., places on judicial review of arbitral awards. 10. Accordingly, I would affirm the judgment of the Second Circuit, which rejected petitioners plea for vacation of the arbitrators decision.); Pennzoil Co. v. 50
2
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mandates are (constitutional) taxes inevitably leads back to the AIAs bar to this case.
II.
A. Plaintiffs contend that [t]he Taxing and Spending or
General Welfare Clause does not vest Congress with the authority to enact the mandates. University, Liberty Michele v. G. Opening Brief of Appellants Liberty Waddell No. and Joanne J. I Merrill at 40, The
Univ. and by
Geithner,
10-2347. provisions
disagree.
individual authorized
employer Congresss
mandate
are
independently to lay and
constitutional
power
collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States . . . . U.S. Const. art. I, 8, cl. 1.
Texaco, Inc., 481 U.S. 1, 23 (1987) (Marshall, J., concurring in the judgment) (Were I to reach the merits I would reverse for the reasons stated in the concurring opinions of Justices Brennan and Stevens, in which I join. But I can find no basis for the District Courts unwarranted assumption of jurisdiction over the subject matter of this lawsuit, and upon that ground alone I would reverse the decision below.); Veterans for Common Sense v. Shinseki, 644 F.3d 845, 900 (9th Cir. 2011) (Kozinski, J., dissenting) (determining that court lacked jurisdiction but also analyzing claims on their merits); Patel v. Holder, 563 F.3d 565, 569 (7th Cir. 2009) (majority opinion doing same); cf. Helvering v. Davis, 301 U.S. 619, 639-40 (1937) (noting the belief of Justices Cardozo, Brandeis, Stone, and Roberts that the case should be dismissed but nevertheless reaching the merits in an opinion authored by Justice Cardozo). 51
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A tax, in the general understanding of the term, and as used in the Constitution, signifies an exaction for the support of the government. (1936). United States v. Butler, 297 U.S. 1, 61
Stated differently, a tax is a pecuniary burden laid
upon individuals or property for the purpose of supporting the government. (1942) United States v. New York, 315 U.S. 510, 515-16 New Jersey v. Anderson, 203 U.S. 483, 492
(quoting
(1906)). Before analyzing whether the exactions in question were
authorized under Congresss taxing power, it is useful first to clarify that neither an exactions label nor its regulatory To
intent or effect is germane to the constitutional inquiry.
determine whether an exaction constitutes a tax, the Supreme Court has instructed us to look not at what an exaction is called but instead at what it does. Nelson v. Sears, Roebuck &
Co., 312 U.S. 359, 363 (1941) (stating that when passing on the constitutionality of a tax law, a court is concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it) (quoting Lawrence v. State Tax Commn, 286 U.S. 276, 280 (1932)); see also United States v. New York, 315 U.S. at 515-16 (stating that an exaction meeting the definition of a tax will be construed as such regardless of whatever name it may be called). makes sense, given that the Constitution 52 itself uses This four
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different
terms
to
refer
to
the
concept
of
taxation:
taxes,
imposts, duties, and excises. Accordingly, the
U.S. Const. art. I, 8, cl. 1. 3 Court has characterized
Supreme
legislative acts as taxes without regard to the labels used by Congress. See, e.g., United States v. Sotelo, 436 U.S. 268, 275
(1978) (deeming an exaction labeled a penalty in the Internal Revenue Code a tax for bankruptcy purposes); License Tax Cases, 72 U.S. (5 power Wall.) a 462, 470-71 statute (1866) (sustaining the under the of a
taxing
federal
requiring
purchase
license before engaging in certain businesses and stating that the granting of a license . . . must be regarded as nothing more than a mere form of imposing a tax); see also In re Leckie Smokeless Coal Co., 99 F.3d 573, 583 (4th Cir. 1996) (holding that, for purposes of the AIA, premiums constituted taxes). Further, a taxregardless of its labeldoes not cease to be valid merely deters U.S. because the 42, it regulates, discourages, United as a or even v. is
definitely Sanchez,
activities 44 (1950).
taxed. As long
States statute
340
productive of some revenue, Congress may exercise its taxing power without collateral inquiry as to the measure of the
regulatory effect [of the statute in question].

3
Sonzinsky v.
Congress also does not have to invoke the source of authority for its enactments. The question of the constitutionality of action taken by Congress does not depend on recitals of the power which it undertakes to exercise. Woods v. Cloyd W. Miller Co., 333 U.S. 138, 144 (1948). 53
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United
States,
300
U.S.
506,
514
(1937).
And
if
the
legislation enacted has some reasonable relation to the exercise of the taxing authority conferred by the Constitution, it cannot be invalidated because of the supposed motives which induced it. I United States v. Doremus, 249 U.S. 86, 93 (1919). recognize that some cases from the 1920s and 1930s
suggest that taxes are either regulatory or revenue-raising and that the former are unconstitutional. See, e.g., Bailey v.
Drexel Furniture Co., 259 U.S. 20, 37-44 (1922) (holding that a tax on goods made by child labor was an unconstitutional
penalty).
However, both older and newer opinions indicate that
the revenue-versus-regulatory distinction was short-lived and is now defunct. 28 (1953) See, e.g., United States v. Kahriger, 345 U.S. 22, tax on bookmakers and stating, It is
(upholding
conceded that a federal excise tax does not cease to be valid merely because it discourages or deters the activities taxed.), overruled in part on other grounds, Marchetti v. United States, 390 U.S. 39 a (1968); tax on Sonzinsky, firearm 300 U.S. at 514 (1937 case
upholding
dealers
despite
registration
provision and alleged regulatory effects); Doremus, 249 U.S. at 95 (1919 case upholding the Narcotic Drugs Act, which taxed and regulated sales of narcotics); McCray v. United States, 195 U.S. 27, 59 (1904) (upholding tax on colored margarine and stating, Since . . . the taxing power conferred by the Constitution 54
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knows
no
limits
except
those
expressly
stated
in
that
instrument, it must follow, if a tax be within the lawful power, the exertion of that power may not be judicially restrained
because of the results to arise from its exercise.). It is not surprising that this distinction did not endure, given that taxes can, and do, both regulate and generate revenue at the same time. Indeed, as the Supreme Court recognized in To some activity
Sonzinsky, [e]very tax is in some measure regulatory. extent it interposes an economic impediment to the
taxed as compared with others not taxed.
But a tax is not any 300
the less a tax because it has a regulatory effect . . . . U.S. at 513.
And [i]n like manner every rebate from a tax when But
conditioned upon conduct is in some measure a temptation.
to hold that motive or temptation is equivalent to coercion is to plunge the law in endless difficulties. Chas. C. Steward Accordingly, (1974), cases the it
Mach. Co. v. Davis, 301 U.S. 548, 589-90 (1937). in Bob Jones Court University recognized v. Simon, 416 in U.S. some 725
Supreme
that,
while
early
drew what it saw at the time as distinctions between regulatory and revenue-raising taxes, the Court subsequently abandoned
such distinctions.
Id. at 741 n.12, overruled in part on other
grounds by South Carolina v. Ragan, 465 U.S. 367, 379 (1984). Courts, therefore, do not look to labels, regulatory
intent, or regulatory effect.
Instead, we must consider whether 55
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something that operates as a tax is authorized under Congresss taxing power, which has been described as very extensive,
License Tax Cases, 72 U.S. at 471, and indeed virtually without limitation. (1983). United States v. Ptasynski, 462 U.S. 74, 79
As Justice Cardozo recognized in Helvering,
The discretion [to tax and spend for the general welfare] belongs to Congress, unless the choice is clearly wrong, a display of arbitrary power, [or] not an exercise of judgment. This is now familiar law. When such a contention comes here we naturally require a showing that by no reasonable possibility can the challenged legislation fall within the wide range of discretion permitted to the Congress. 301 U.S. at 640-41 (quoting Butler, 297 U.S. at 67). There are essentially three features that a tax must
exhibit to be constitutional.
First, to pass constitutional
muster, a tax must bear some reasonable relation to raising revenue. Doremus, 249 U.S. at 93. The amount of revenue raised
is irrelevant:
A tax does not cease to be one even though the
revenue obtained is obviously negligible, or the revenue purpose of the tax may be secondary. Instead, revenue. the Sanchez, measure 340 must 300 U.S. at 44 be 514
(citations productive
omitted). of some
simply at
Sonzinsky,
U.S.
(upholding tax that raised $5,400 in revenue in 1934). Second, to be constitutional, a tax must be imposed for the general welfare. is in the Congress enjoys wide discretion regarding what welfare. The discretion . . . is not
general
56
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confided to the courts. unless the choice is
The discretion belongs to Congress, wrong, a display of arbitrary
clearly
power, not an exercise of judgment. 640. Therefore, furthers in the determining general
Helvering, 301 U.S. at whether a congressional should defer
enactment
welfare,
courts
substantially to the judgment of Congress. Dole, 483 U.S. 203, 207 (1987). Finally, raising even if an exaction the is
South Dakota v.
rationally
related to
to be
revenue
and
furthers
general
welfare,
constitutional, it must not infringe upon another constitutional right. right For example, a tax may not infringe on an individuals to be free from double jeopardy by further punishing
criminal conduct.
See Dept of Revenue of Montana v. Kurth
Ranch, 511 U.S. 767, 780-83 (1994) (concluding that a drug tax was actually a criminal penalty based on its high rate, its deterrent activity purpose, and and a criminal the tax prohibition consequently on the taxed the
holding
that
violated
Double Jeopardy Clause of the Fifth Amendment).
B. Turning now to the case at hand, the provisions at issue are the exaction provisions in the individual and employer
mandates.
I would conclude, after examining their practical
operation, that these provisions impose taxes. 57
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The individual mandate exaction in 26 U.S.C. 5000A(b) amends the Internal Revenue Code to provide that a non-exempted individual who fails to maintain a minimum level of insurance must pay a penalty. Notably, while the individual mandate in
some places uses the term penalty, some form of the word tax appears in the statute over forty times. 26 U.S.C. 5000A.
For example, it references taxpayers and their returns, includes amounts due under the provision in the taxpayers tax return liability, income for calculates tax the penalty and by reference the to household of the
purposes,
allows
Secretary
Treasury to enforce the provision like other taxes (with several procedural exceptions). Id. Yet, as explained above, the label
applied to an exaction is irrelevant; instead, in assessing an exactions operation. The practical operation of the individual mandate provision is as a tax. tax returns Individuals who are not required to file income are not required of to any pay the penalty. is Id. constitutionality, we look to its practical
5000A(e)(2).
The
amount
penalty
owed
generally
calculated by reference to household income and reported on an individuals federal income tax return. Id. 5000A(b)-(c). 4
The statute prescribes monthly penalties in an amount calculated by identifying a specified percentage of the excess of the taxpayers household income for the taxable year over the amount of gross income specified in section 6012(a)(1) unless 58
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Taxpayers filing jointly are jointly liable for the penalty. Id. 5000A(b)(3)(B). empowered to enforce And the the Secretary like of a the tax, Treasury albeit is
provision
with
several procedural exceptions. 5 mandate exaction, codified in
Id. 5000A(g). the Internal
The individual Revenue Code,
therefore functions as a tax. Looking next at the employer mandate exaction in 26 U.S.C. 4980H, it amends the Internal Revenue Code to impose an
assessable payment on large employers if a health exchange notifies the employer that at least one full-time employee Id. is
obtains a premium tax credit or cost-sharing reduction. 4980H(a)(b). calculated adequate The amount based of on the assessable the
payment
differently
whether to
employer
offers Id.
health
insurance
coverage
its
employees.
that calculation produces an amount that is less than certain statutorily defined thresholds. 26 U.S.C. 5000A(c)(2). Ultimately, the penalty owed by a taxpayer is equal to the lesser of either the sum of the monthly penalties owed by the taxpayer or the cost of the national average premium for qualified health plans which have a bronze level of coverage, provide coverage for the applicable family size involved, and are offered through Exchanges for plan years beginning in the calendar year with or within which the taxable year ends. Id. 5000A(c)(1). The fact that Congress considered it necessary to exempt the individual mandate exaction from some traditional tax collection procedures like criminal liability and liens evidences that the exaction is a tax. 26 U.S.C. 5000A(g)(2). Otherwise, there would be no need to except the exaction from some of the standard tax collection procedures, which otherwise apply. 59
5
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4980H(a)(c).
And instead of the term penalty, the employer Id.
mandate uses the terms assessable payment and tax. 4980H(b).
Like the individual mandate exaction, the practical
operation of this provision is as a tax that is assessed and collected in the same manner as other Internal Revenue Code
penalties treated as taxes. 6
Id. 4980H(d).
Having concluded that the individual and employer mandates operate as taxes, 7 to determine whether they are constitutional, I must consider whether they: 1) are reasonably related to
raising revenue; 2) serve the general welfare; and 3) do not infringe upon any other right. The individual and employer exactions are surely related to raising revenue. The Congressional Budget Office estimated that
the individual mandate exaction will generate approximately $4 billion annually, and the employer mandate exaction, $11 billion annually, by 2019. Letter from Douglas W. Elmendorf, Dir.,
Cong. Budget Office, to Hon. Nancy Pelosi, Speaker, U.S. House of Representatives, tbl. 4 (Mar. 20, 2010), available at
http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf; No exceptions to the standard collection procedures exist in the case of the employer mandate. 26 U.S.C. 4980H(d). Since the Supreme Court long ago established that Congress did not have to invoke the word tax to act within its taxing power, Congresss use of other verbiage in portions of the individual and employer mandates, and most notably in the penalty provision of the individual mandate, sheds little light on Congressional intent. See Nelson, 312 U.S. at 363. 60
7 6
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see also Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 1563(a), 124 Stat. 119, 270 (stating that the Not
Affordable Care Act will reduce the Federal deficit).
only will the exactions raise significant amounts of revenue, but the revenue raised can cover the [h]igher government costs attributable to the uninsured . . . implicitly paid for by the insured . . . through increased taxes or reductions in other government services as money is spent on the uninsured. Amici Curiae of Economic Scholars in Support of Brief
DefendantsIn
Appellees at 13, Liberty Univ. v. Geithner, No. 10-2347.
other words, as Judge Davis notes in his opinion, [b]ecause the uninsured effectively force the rest of the nation to insure them with respect to basic, stabilizing care, this penalty is something like a premium paid into the federal government, which bears a large share of the shifted costs as the largest insurer in the nation. Post at 125. Clearly, then, the exactions bear Doremus, 249
some reasonable relation to raising revenue. U.S. at 93.
See also Sonzinsky, 300 U.S. at 514 (upholding tax
that raised $5,400 in revenue). Further, the individual and employer mandate exactions
serve the general welfare.
The Affordable Care Act is aimed at,
among other things, reducing the number of the uninsured as well as the cost of those who remain uninsured imposed on those who are insured. Congress found 61 that, nationwide, hospitals
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provided $43 billion in uncompensated care to the uninsured in 2009 and that these costs were shifted onto insured individuals, increas[ing] family premiums by on average over $1,000 a year. 42 U.S.C. 18091(a)(2)(F). reducing the It number with also of the found the other that [b]y the of By and
significantly [individual th[e] Act,
uninsured, provisions Id.
mandate], will lower
together health to
insurance purchase
premiums. health
encouraging
individuals
insurance
employers to provide it, the individual and employer mandates alleviate the costs associated with providing uncompensated care to the uninsured and lower health insurance premiums. Such cost
reductions and expansions in access to health insurance surely constitute contributions to the general welfare. Finally, neither the exaction in the individual mandate nor that in the employer mandate infringes on other rights. The
exactions do not, for example, operate to impose duplicative criminal penalties in violation of the prohibition against
double jeopardy.
See Kurth Ranch, 511 U.S. at 780-83 (Taxes
imposed upon illegal activities are fundamentally different from taxes with a pure revenue-raising effect on the purpose taxed that are imposed The
despite their
adverse
activity.).
provisions lack the punitive character of other measures the Supreme Court has held to be penalties. Bailey, 259 U.S. at 36. Id.; see also, e.g.,
And the provisions do not appear to 62
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violate any other rights: taxation. 8
No one has a right to be free from
C. It bears mention that the individual and employer mandate exactions do not run afoul of the constitutional requirement that [n]o Capitation, or other direct, Tax shall be laid,
unless in Proportion to the Census or Enumeration herein before directed to be taken. clause has its origins U.S. Const. art. I, 9, cl. 4. in the Constitutional This
Conventions
slavery debates.
The Northern states consented to count a slave
as three-fifths of a person for allocating representatives in Congress in exchange for a corresponding increase in the tax liability of Southern states. the Affordable 120 Care Yale Act, L.J. and Brian Galle, The Taxing Power, the Limits 407, 414 of Constitutional 5, at 2011), that
Compromise,
Online
(Apr. Even
http://yalelawjournal.org/2011/4/5/galle.html. time, the definition of direct tax was unclear.
Id.; Springer
v. United States, 102 U.S. 586, 596 (1880) (It does not appear
Additionally, any contention that the individual mandate violates either the First, Fifth, or Tenth Amendment is, in my opinion, meritless. See post at 134-40; Florida ex rel. Atty. Gen. v. U.S. Dept of Health & Human Servs., --- F.3d ---, 2011 WL 3519178, at *113-17 (11th Cir. Aug. 12, 2011) (Marcus, J., dissenting). 63
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that an attempt was made by any one to define the exact meaning of the language employed.). It is therefore understandable that the Supreme Court has demonstrated reluctance to strike a tax based solely on the
direct/indirect distinction.
See Knowlton v. Moore, 178 U.S.
41, 83 (1900) ([I]t is no part of the duty of this court to lessen, impede, or obstruct the exercise of the taxing power by merely abstruse and subtle distinctions as to the particular nature of a specified tax, where such distinction rests more upon the differing theories of political economists than upon the practical nature of the tax itself. (quoting Nicol v. Ames, 173 U.S. 509, 515 (1899)). Indeed, the Supreme Court restricted
the meaning of direct taxes to capitation, or head taxes, and taxes on the ownership of real property. Springer, 102 U.S. at
602; Veazie Bank v. Fenno, 75 U.S. (8 Wall.) 533, 544 (1869). Taxes on personal property have also been held to be direct. Pollock v. Farmers Loan & Trust Co., 158 U.S. 601, 637 (1895), superseded on other grounds by constitutional amendment, U.S. Const. amend. XVI, as recognized in Brushaber, 240 U.S. 1. The Supreme Court has never struck down a federal tax as an unapportioned capitation tax. And the Supreme Court has
repeatedly upheld a variety of federal taxes as indirect and therefore outside the apportionment requirement. See Knowlton,
178 U.S. at 83 (upholding a federal estate tax); Bromley v. 64
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McCaughn, 280 U.S. 124, 138 (1929) (upholding a federal gift tax); United States v. Mfrs. Natl Bank of Detroit, 363 U.S. 194, 199 (1960) (upholding a federal estate tax collected on an insurance policy). As the Supreme Court has explained, [a] tax
laid upon the happening of an event, as distinguished from its tangible fruits, is an indirect tax which Congress . . .
undoubtedly may impose. 502 (1930). The capitation apportioned. individual taxes; Far and nor
Tyler v. United States, 281 U.S. 497,
employer are they being
mandate direct imposed
exactions taxes that
are must
not be to
from
without
regard
circumstance, they will be imposed only upon taxpayers who can afford, but fail to maintain, health insurance, or upon
employers who fail to provide adequate and affordable insurance. See 26 U.S.C. of an 4980H, 5000A. the As taxes and laid upon the
happening
event,
individual
employer
mandate
exactions are clearly indirect.
See Tyler, 281 U.S. at 502.
Nor are they property taxes, since they will not be assessed based on the ownership of property. Indeed, the Supreme Court has so limited the application of the Direct Tax Clause that the Sixth Circuit concluded that it relates solely to taxation generally for the purpose of revenue only, and not impositions made incidentally under the commerce clause exerted either directly or by delegation, as a means of 65
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constraining Congress as
and
regulating or
what
may to
be
considered
by
the v.
pernicious
harmful
commerce.
Rodgers
United States, 138 F.2d 992, 995 (6th Cir. 1943).
Since the
individual and employer mandate exactions are neither capitation nor property taxes, the Direct Tax Clause is inapplicable, and the individual and employer mandate taxes stand.
III. In sum, I concur in Judge Motzs fine opinion holding that the AIA applies here. dissents from our Our distinguished colleague vigorously and presents a credible basis for
holding
upholding the constitutionality of the Affordable Care Act under the Commerce Clause. the reasons given However, were I to rule on the merits, for in this opinion, I would uphold the
constitutionality of the Affordable Care Act on the basis that Congress had the authority to enact the individual and employer mandates, which operate as taxes, under its taxing power.
Accordingly, I must agree with Judge Motz that the AIA bars this suit.
66
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DAVIS, Circuit Judge, dissenting: Today we are asked to rule on the constitutionality of core provisions of the Patient Protection and Affordable Care Act. Appellants advance several arguments against the Act, chief
among them their claim that Congress exceeded its power when it sought to require all individuals (with narrow exceptions) to obtain a certain minimum of health insurance coverage starting in 2014. 26 U.S.C. 5000A. In particular, appellants urge that the Commerce Clause, which authorizes Congress To regulate
Commerce . . . among the several States, U.S. Const. art. I, 8, cl. 3, allows only regulation of economic activity. Thus, they contend, Congress cannot regulate appellants decision not to purchase health insurance and to otherwise privately manage [their] own healthcare, which they characterize as inactivity in commerce, Appellants Br. 1. They also contend that
upholding the Act under the Commerce Clause would create an unconstitutional national police power that would threaten all aspects of American life, id. at 11, suggesting in particular that Congress could require that people buy and consume
broccoli at regular intervals or that everyone above a certain income threshold buy a General Motors automobile, Appellants Reply Br. 9 (quoting Florida ex rel. Bondi v. Dept of Health and Human Servs., --- F. Supp. 2d ----, ----, 2011 WL 285683, at *24 (N.D. Fla. Jan. 31, 2011), affd in part and revd in part 67
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sub nom. Florida v. U.S. Dept. of Health & Human Servs., --F.3d ----, 2011 bring mandate, WL a 3519178 similar and they (11th facial also Cir. Aug. to Free 12, the 2011)). Acts
Appellants employer
challenge assert
Exercise,
Establishment Clause, and Equal Protection claims against the Act. My good colleagues strips in us the of majority hold in that this the AntiFor
Injunction
Act
jurisdiction
case.
reasons I explain at length below, I disagree. As I reject the reasoning analysis, and I am the result to of the majoritys the merits jurisdictional of appellants
entitled
reach
claims. Reaching the merits, I would hold that the challenged provisions of the Act are a proper exercise of Congresss
authority under the Commerce Clause to regulate the interstate markets for health services and health insurance. I do not
believe that constitutional review of the Act requires courts to decide whether the Commerce Clause discriminates between
activity and inactivity. But even if I were to assume appellants were inactive, I could not accept appellants contention that a distinction between activity and inactivity is vital to Commerce Clause analysis. I would therefore affirm the district courts dismissal of appellants suit. Appellants raise two major concerns about upholding the
Act: first, they believe that individual liberty is infringed 68
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when the federal government is permitted to regulate involuntary market participants; second, they fear that our liberty will be further eroded in the future, as a ruling sustaining the Act would permit Congress to establish arbitrary purchase mandates. Because I take these concerns very seriously, I explain at some length why the Act is a far more limited exercise of federal power than appellants fear. I. Anti-Injunction Act A. My View The majority concludes that the Anti-Injunction Act (AIA) applies to the challenged provisions of the Affordable Care Act, depriving us of subject-matter jurisdiction. Although the
parties argue that we have jurisdiction, federal courts have an independent obligation to . . . raise and decide jurisdictional questions that the parties either overlook or elect not to
press. Henderson ex rel. Henderson v. Shinseki, --- U.S. ---, --, 131 S. Ct. 1197, 1202 (2011). Before today, nine federal judges had expressly considered the application of the Anti-Injunction Act, and all nine held it inapplicable to the Affordable Care Acts mandates. See Thomas More Law Center v. Obama, --- F.3d ----, ----, 2011 WL 2556039, at *6-*8 (6th Cir. June 29, 2011); Goudy-Bachman v. United
States Dept. of Health & Human Servs., 764 F. Supp. 2d 684, 69597 (M.D. Pa. 2011); Liberty University, Inc. v. Geithner, 753 F. 69
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Supp. 2d 611, 627-29 (W.D. Va. 2010); United States Citizens Assn v. Sebelius, 754 F. Supp. 2d 903, 909 (N.D. Ohio 2010); Florida ex rel. McCollum v. United States Dept. of Health & Human Servs., 716 F. Supp. 2d 1120, 1130-44 (N.D. Fla. 2010); Thomas More Law Center v. Obama, 720 F. Supp. 2d 882, 890-91 (E.D. Mich. 2010); Virginia ex rel. Cuccinelli v. Sebellius, 702 F. Supp. 2d 598, 603-605 (E.D. Va. 2010). Although the two
circuit courts that have considered challenges to the mandates have split, all six members of those panels agreed that the courts should reach the merits; only the Sixth Circuit panel thought it necessary to discuss the AIA. Florida v. U.S. Dept. of Health & Human Servs., --- F.3d ----, 2011 WL 3519178 (11th Cir. Aug. 12, 2011) (reaching the merits without raising the applicability of the AIA); Thomas More Law Center, --- F.3d at ---, 2011 WL at *6-*8 (expressly holding the AIA does not
apply). For the following reasons, I agree with these judges and would hold that the AIA does not strip us of jurisdiction in this case. The directs Anti-Injunction that no suit Act, for the originally purpose enacted of in 1867, the
restraining
assessment or collection of any tax shall be maintained in any court by any person, certain enumerated exceptions aside. 26
70
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U.S.C. 7421(a). 1 Thus, we have jurisdiction only if the penalty provisions attached to the challenged mandates do not constitute tax[es] for purposes of the AIA. 2 The Sixth Circuit recently held that the individual
mandates penalty provision was not a tax within the meaning of the AIA. Thomas More Law Center, --- F.3d at ----, 2011 WL at *6-*8. Its reasoning is straightforward: Congress spoke only of tax[es] in the Anti-Injunction Act, while it deemed the amount owed by those in violation of the individual mandate a
penalty. See id. at *7; compare 26 U.S.C. 7421(a) with id. 5000A(b), (c), (e), (g). And Congress did not simply use the term penalty in passing: Congress refers to the exaction no fewer than seventeen times in the relevant provision, and each time Congress calls it a penalty.
Although appellants also requested declaratory relief, the Declaratory Judgment Act enlarged the range of remedies available in the federal courts but did not extend their jurisdiction. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671 (1950); In re Leckie Smokeless Coal Co., 99 F.3d 573, 582 (4th Cir. 1996). In any case, the Declaratory Judgment Act expressly excludes claims with respect to Federal taxes. 28 U.S.C. 2201(a). The Supreme Court has held this exclusion to be at least as broad as the Anti-Injunction Act. Bob Jones Univ. v. Simon, 416 U.S. 725, 732 n.7 (1974). This question of statutory interpretation is wholly distinct from the constitutional question concerning Congresss power under the Taxing and Spending Clause, U.S. Const. art. I, 8, cl. 1, to enact these mandates. Because I would hold the Act constitutional under the Commerce Clause, I need not and do not reach the latter issue. 71
2
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In
fact,
Congress
considered
earlier
versions
of
the
individual mandate that clearly characterized the exaction as a tax and referred to it as such more than a dozen times. See H.R. 3962, 501, 111th Cong. (2009) (impos[ing] a tax in section entitled Tax on individuals without acceptable health care coverage, and repeatedly referring to this exaction as a tax); H.R. 3200, 401, 111th Cong. (2009) (same); S. 1796, 1301, 111th Cong. (2009) (impos[ing] a tax in section entitled Excise tax on individuals without essential health benefits
coverage, and repeatedly referring to exaction as a tax). Congress deliberately deleted all of these references to a tax in the final a version of As the the Act and instead Court designated in INS the v.
exaction
penalty.
Supreme
noted
Cardoza-Fonseca, [f]ew principles of statutory construction are more compelling than the to proposition that Congress does it not has
intend sub
silentio
enact
statutory
language
that
earlier discarded in favor of other language. 480 U.S. 421, 442-43 (1987). Thus, it seems odd for the majority to ignore Congresss deliberate drafting decision to call the exaction a penalty rather than a tax. When Congress has wished penalties to be treated as
taxes, it has said so expressly. In Subchapter A of Chapter 68 of the Internal Revenue Code, Congress directed that any
reference in this title [Title 26 of the United States Code (the 72
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Internal Revenue Code)] to tax imposed by this title shall be deemed also to refer to the additions to the tax, additional amounts, and penalties provided by this chapter. Id.
6665(a)(1). Likewise, in Subchapter B of that chapter, Congress instructed that any reference in this title to tax imposed by this title shall be deemed also to refer to the penalties and liabilities provided by this subchapter. Id. 6671(a). Yet, Congress chose to place the individual mandate and its penalty provisions not in Chapter 68 but in Chapter 48, which contains no such instructions. Though Congress did provide that this
penalty be assessed and collected in the same manner as an assessable Chapter 68 penalty under subchapter are treated B of as chapter taxes, 68, the and term
penalties
assessment and collection like a tax does not imply that the penalty should Id. be treated as a As tax the for any and all other
purposes.
5000A(g)(1).
Sixth
Circuit
recently
observed, Congress said one thing in sections 665(a)(2) and 6671(a), and something else in section 5000A, and we should
respect the difference. Thomas More, 2011 WL at *7. Where, as here, resolution of federal law turns on a
statute and the intention of Congress, we look first to the statutory language and then to the legislative history if the statutory language is unclear. Blum v. Stenson, 465 U.S. 886, 896 (1984). Courts look to legislative 73 history first to see
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whether it indicates that Congress intended a particular result and then, if not, to find evidence of the purposes of the
statute. Cf. Dolan v. United States Postal Service, 546 U.S. 481, 486 (2006) (Interpretation of a word or phrase depends upon reading the whole statutory text, considering the purpose and context of the statute . . . .). Even if the statutory text were unclear here, legislative history indicates that the AIA should not apply. Legislative history of the Affordable Care Act reveals that Congress never considered application of the Anti-Injunction
Act. Nowhere in the Acts voluminous legislative history can I find a single reference to the AIA. And when members of Congress discussed the inevitable judicial review of the Affordable Care Act, no one appears to have contemplated that the AIA might bar such review for the five years, post-enactment, that would have to elapse before a tax refund suit could be brought. Looking, then, to legislative purpose, it appears that
immediate judicial review of the individual mandate would do little to frustrate the aims of the AIA. The Anti-Injunction Act was intended to protect[] the expeditious collection of
revenue. South Carolina v. Regan, 465 U.S. 367, 376 (1984). Revenue from the individual mandates penalty provision will not be assessed and collected until the year after the mandate
becomes operative2015. Judicial review of the mandate in 2011 74
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most assuredly will not frustrate the expeditious collection of revenue four years later. I also note that Congress forbid the Internal Revenue Service from employing its primary enforcement mechanisms to collect this penalty: the IRS may not seek the institution of criminal prosecutions by the Justice Department or impose a lien or levy on an individuals property for failure to pay the penalty. 26 U.S.C. 5000A(g)(2). This indicates that Congress had scant concern for the expeditious collection of revenue from the penalty provision. A failure to provide immediate judicial review in reliance on a rather strained construction of the AIA, on the other hand, might undermine the core purpose of the Affordable Care Act. In the absence of a conclusive ruling from the federal courts, some individuals may well decide for themselves that the Act is
unconstitutional and thus can be ignored. In the case of an ordinary tax this would simply result in some lost revenue and the costs of tax prosecutions; here, it would push the nation farther from Congresss goal of attaining near-universal health insurance coverage. And, as leaving the constitutionality of the Act unsettled would seem likely to create uncertainty in the health insurance and health care industries, which might depress these major sectors of the economy, it seems that application of the AIA would be at cross-purposes with the Acts reforms. Thus, I believe that there is ample reason for me to conclude that 75
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Congress had no design that the Anti-Injunction Act might apply to the individual mandates penalty provisions. The question of our jurisdiction over appellants challenge to the analogous a closer penalty attached That to the employer is mandate an
presents
question.
exaction
termed
assessable payment in the provision that imposes it, but it is then twice referred Compare to Id. as a tax in later, id. qualifying 4980H(b)(2),
provisions.
4980H(a)
with
(c)(7). The . . . ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole. Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997). Given these mixed references, and mindful of the Supreme Courts warning in United States v. Am. Trucking Assns, 310 U.S. 534, 542 (1940), that [t]o take a few words from their context and with them thus isolated to attempt to determine
their meaning, certainly would not contribute greatly to the discovery of the purpose of the draftsmen of a statute, I find the text of the employer mandate provision ambiguous on the
application of the Anti-Injunction Act. Thus, I would again look to legislative history and
Congressional purpose. Cf. SEC v. C.M. Joiner Leasing Corp., 320 U.S. 344, 350-51 (1943) (Jackson, J.) (explaining that our
canons of statutory construction long have been subordinated to 76
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the doctrine that courts will construe the details of an act in conformity with its dominating general purpose, will read text in the light of context and will interpret the text so far as the meaning of the words fairly permits so as to carry out in particular cases the generally expressed legislative policy). For the reasons stated above, I would hold that Congress did not intend the Anti-Injunction Act to block timely judicial review of the employer mandate provisions. Accordingly, I would hold that we have jurisdiction to consider all of appellants claims. B. The Majoritys View The majoritys contrary conclusion relies on two arguments, neither of which I find convincing. First, the majority contends that the Supreme Court has repeatedly instructed that
congressional labels have little bearing on whether an exaction qualified as a tax for statutory purposes and that the Court has specifically found an exactions label immaterial to the applicability of the AIA, displacing the ordinary methods of statutory interpretation with a functional analysis of the
challenged exactions. Ante pp. 22-24. Thus, in the majoritys view, it is simply irrelevant what the 2010 Congress would have thought about the AIA; all that matters is whether the 2010 Congress imposed a tax. Ante p. 38. Second, the majority
asserts that [t]he Supreme Court has concluded that the AIA uses the term tax in its broadest possible sense and thus 77
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that this functional analysis sweeps quite broadly: the majority holds that the AIA prohibits a pre-enforcement challenge to any exaction that is made under color of their offices by revenue officers charged with the general authority to assess and
collect the revenue. Ante p. 18 (internal quotation marks and braces omitted). 1. The majoritys functional approach hinges on its
interpretation of two Supreme Court cases from 1922: Bailey v. George, 259 U.S. 16 (1922), and Lipke v. Lederer, 259 U.S. 557 (1922). I read these cases differently from the manner in which the majority reads them. Because the majoritys view of George and Lipke brings these cases into conflict, I believe my
approach, which harmonizes them, is preferable. The majority found asserts an that in Lipke label the Court . to . .
specifically
exactions
immaterial
the
applicability of the AIA. Ante p. 24. The Lipke Court held that [t]he mere use of the word tax in an act primarily designed to define and suppress crime is not enough to show that within the true intendment of the term a tax was laid. 259 U.S. at 561 (emphases added). That is, [t]he mere use of the word tax in a criminal statuteparticularly where, as in the statute at
issue in Lipke, the word tax is immediately followed by the word penaltyis not dispositive of Congresss true inten[t] 78
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regarding
application
of
the
AIA.
Id.
This
is
an
ordinary
exercise in statutory interpretation, not an instruction from the Court to disregard Congressional designations as immaterial to the applicability of the AIA. Ante p. 24. The Court did go on to examine the function of the
exaction, noting that [w]hen by its very nature the imposition is a penalty, it must be so regarded, but it did not do so in the course of an ordinary application of the AIA. Lipke, 259 U.S. at 561. Rather, it is clear that the Court considered the function of the exaction because that function (as a criminal penalty) was relevant to the Courts due process concerns. It was to resolve this constitutional problem, not simply to
construe the word taxes in the AIA, that the Court looked to the exactions function. Thus, the Court reasoned, Before collection of taxes levied by statutes enacted in plain pursuance of the taxing power can be enforced, the taxpayer must be given fair opportunity for hearing; this is essential to due process of law. And certainly we cannot conclude, in the absence of language admitting of no other construction, that Congress intended that penalties for crime should be enforced through the secret findings and summary action of executive officers. The guaranties of due process of law and trial by jury are not to be forgotten or disregarded. Id. at 562 (emphasis added). This passage strongly indicates that the Court was applying the canon of constitutional
avoidance, construing the exaction at issue together with the 79
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AIA so as not to run afoul of due process. Cf. South Carolina v. Regan, 465 U.S. 367, 398-400 (1984) (OConnor, J., concurring in the judgment) (relying on doctrine of constitutional avoidance to interpret the AIA not to apply to original jurisdiction of the Supreme Court). The functional analysis was required by the Courts when constitutional penalty is concerns, criminal, as due process its is triggered by
the
whatever
designation
Congress. As the AIA was simply being interpreted to accord with the constitutional mandate of due processwhich binds Congress and thus of course requires that we look beyond Congressional labels to the nature and function of the exactionLipke did not establish a new methodology for construing taxes under the AIA. Instead, it recognized that the term taxes in the AIA is flexible, like nearly all statutory language, and may admit to alternative constructions. And it affirmed that a courts goal when applying the AIA, like any other statute, is to do so in accord with the true intendment of Congress. Id. at 561. This reading of Lipke harmonizes it with the two Bailey cases. As the majority explains, the Supreme Court considered a tax refund suit in Bailey v. Drexel Furniture Co. and held the Child Labor Tax Law unconstitutional as a penalty rather than a tax. 259 U.S. 20, 38-39 (1922). The same day, in Bailey v. George, the Court dismissed, pursuant to the AIA ( 3224,
precursor to the modern AIA), a pre-collection suit alleging the 80
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Child Labor Tax Law was unconstitutional. 259 U.S. 16 (1922). The George Courts reasoning is extremely brief (in a one-page opinion): The averment that a taxing statute is
unconstitutional does not take this case out of [the AIA]. Id. at 20. The question, of course, is why the statute, though an unconstitutional exercise of the taxing power per Drexel
Furniture, is still a taxing statute for purposes of the AIA. My answer is the more straightforward one: it constitutes a taxing statute for purposes of the AIA because it purported to be a taxing statute and appeared to be one on its facethat is, because it was designated as a taxing statute by Congress. See Drexel Furniture, 259 U.S. at 34 (noting exaction was called Tax on Employment of Child Labor, part of An act to provide revenue . . .). Thus, the Court provided no explanation because it relied on the most obvious reason for deeming the statute at issue a taxing statute. The majority disagrees, arguing that the Court never mentioned the statutory label in George and that it [does not] seem plausible that the Court implicitly relied on that label, given that it had never before and has never since found an exactions label controlling for statutory purposes. Ante pp. 25-26. Under the majoritys approach, the George Court must have conducted a functional analysis of the exaction and determined that it qualified as a tax. 81 Yet this supposed functional
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analysis
appears
nowhere
in
the
opinion.
It
is
difficult
to
believe that the Court would not bother to specify any criteria for determining when an exaction is functionally a tax, given that the Court had just held the statute not to qualify as a tax for constitutional purposes in Drexel Furniture. If the George Court were relying on anything beyond the face of the statute, surely the Court would have provided some explanation of why the enactment qualified as a tax under the AIA but not under the Taxing and Spending Clause. More brings it troubling into still, the with majoritys Lipke. reading the of George
conflict
Under
majoritys
approach, the Court in George must have simply recognized that the AIA . . . [reaches] any exaction that is made under color of their offices by revenue officers charged with the general authority to assess and collect the revenue. Ante 18 (internal quotation marks and braces omitted). But these criteria fail to distinguish the penalty in Lipke, which was held to be outside the AIA. The the penalty National in Lipke also Act met simply the majoritys taxes
criteria:
Prohibition
doubled
already assessed and collected by the Commissioner, 41 Stat. 305, 317-18 (1919), which were laid down in the Revenue Act of 1918 on all distilled spirits, and were to be paid by the distiller or importer when withdrawn, and collected under the provisions of existing law, 40 Stat. 1057, 1105, Title VI Tax 82
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on
Beverages,
600(a).
That
the
Court
found
the
exaction
tantamount to a criminal penalty does not change this. 3 Thus, by the majoritys understanding of the AIA, there should have been no room for constitutional avoidance, and the Court in Lipke should have held the AIA applicable and refused jurisdiction. 4 The majority seems to recognize that Lipke may appear
problematic, but it contends that it is not. It argues that Lipke held only that when Congress converts the tax assessment process into a vehicle for criminal prosecution, the Due Process Clause prohibits courts from applying the AIA. Ante p. 28. That
The majority attempts to sidestep this conflict, nicely arguing that the Act did not authorize the collector to make an assessment under his general revenue authority because it converted him into a federal prosecutor. Ante p. 27. But the constitutional failings of the Act does not change the fact that the Commissioner would be collecting the challenged tax under his general revenue authority. The Act did not provide any separate mechanism for the assessment and collection of this tax, or even expressly assign those duties to the Commissioner; it simply stated that a tax shall be assessed . . . and collected . . . in double the amount now provided by law from those illegally manufacturing or selling alcohol. Thus, the Commissioner could only perform such assessments and collections under the general revenue authority granted by the Internal Revenue Code. 41 Stat. at 318. That such assessments violated due process does not change the fact that the revenue officers doing the assessment would be acting under color of their offices. Ante p. 18 (internal quotation marks omitted). This was the view of the dissenting opinion in Lipke, which relied on George. See Lipke, 259 U.S. at 563 (Brandeis, J., dissenting) (The relief should therefore be denied, whatever the construction of section 35, tit. 2, of the Volstead Act, and even if it be deemed unconstitutional. Compare Bailey v. George, 259 U. S. 16, 42 Sup. Ct. 419, 66 L. Ed. 816, decided May 15, 1922.). 83
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was the core holding of Lipke, yes, but the question is whether the Courts construction of the AIA in reaching that holding accords with the majoritys rigid interpretative regime
constructed ninety years later. 5 Under the majoritys proposed construction, the term tax in the AIA reaches all exactions which the Commissioner is empowered to collect. Ante pp. 19-20. Yet, the Lipke Court held that the AIA did not reach such an exaction. Though the majority would prefer that Lipke create[d] only a narrow constitutional limitation to the AIA, ante p. 28, the Courts to holding the the is simply Rather, tax not the in framed Court the AIA as creating that an it
exception
AIA. term
explained (in
constru[ed]
accord
with
Congress[s] inten[t]) and held that it was not so broad. 229 U.S. at 561-62. The majoritys view of the AIA, and its
corresponding interpretation of these cases, inescapably places George and Lipke in conflict. My reading of these cases, which is fully consistent with my approach to the AIA, harmonizes them. Under my view of Lipke, the AIAs taxes is recognized to be, like any statutory
language, a flexible term that must be interpreted in accord with

5
Congressional
intent
and,
when
applicable,
bounding
Indeed, the rigidity of the majoritys approach prompts a reminder that we confront here the courts statutory jurisdiction, not its Article III jurisdiction. Congress grants, and Congress restricts, as it chooses, the statutory jurisdiction of the lower federal courts. 84
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constitutional mandates. In many cases, Congresss decision to designate something a tax will prove dispositiveindeed, the designation did so in Bailey v. George. Lipke simply reflects the recognition that Congresss use of the word tax in an otherwise non-tax provision (followed closely by the word
penalty) does not invariably mandate that the AIA be applied constitutional concerns can override congressional designations. This is fully in accord with my view of the AIA and its relation to subsequent enactments, particularly an expansive programmatic enactment such as the ACA that would alter the fabric of many layers of American life. 6 The majority cites several other cases for the proposition that we are to ignore Congressional designations when applying the AIA, instead asking only whether an exaction is
intrinsically a tax according to its nature and character. Ante p. 23 (quoting Helwig v. United States, 188 U.S. 605, 613 (1903)). I will briefly discuss two of them. Helwig interaction
6
v. of
United a
States, that
for
instance, a
concerned sum
the when
statute
imposed
further
In this regard, Justice OConnor nicely captured the essential purpose of the AIA when she declared: The AIA depriv[es] courts of jurisdiction to resolve abstract tax controversies . . . . South Carolina v. Regan, 465 U.S. 367, 386 (1984) (OConnor, J., concurring in the judgment); and see id. at 392 (the Act generally precludes judicial resolution of all abstract tax controversies . . .). The essential issues presented in this case are about as far from abstract tax controversies as one can get. 85
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importers declared a value more than 10% lower than customs subsequent appraisal and a statute that gave federal district courts exclusive jurisdiction over penalties and
forfeitures. The passage the majority excerpted from is quite instructive: Although the statute . . . terms the money demanded as a further sum, and does not describe it as a penalty, still the use of those words does not change the nature and character of the enactment. Congress may enact that such a provision shall not be considered as a penalty or in the nature of one, with reference to the further action of the officers of the government, or with reference to the distribution of the moneys thus paid, or with reference to its effect upon the individual, and it is the duty of the court to be governed by such statutory direction, but the intrinsic nature of the provision remains, and, in the absence of any declaration by Congress affecting the manner in which the provision shall be treated, courts must decide the matter in accordance with their views of the nature of the act. 188 U.S. 605, 612-13 (emphases added). Thus, the Court
emphasized that it looked to the nature and character of the enactment only in the absence of any declaration by Congress giving direction claim that to that the court. Far from Court supporting has the
majoritys instructed whether an
[t]he
Supreme labels as
repeatedly bearing on
congressional
have a
little for
exaction Helwig court
qualifies
tax
statutory that an
purposes, direct the a
indicates may of
that
Congressional be dispositive. the
labels
course did
Terming
exaction
further
sum
not
help
Court
determine
86
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whether expressly deleting
or
not
that
sum
was an
penalty; exaction to a a
but tax
Congresss and then
considering the dozens
calling of
references
tax
and
instead
designating it a penalty (as Congress did in the course of its enactment of the ACA) does help courts determine whether
Congress wished us to view the exaction as a tax for purposes of the AIA. 7 Though Congress did not expressly reference the AIA hereand, judging from the legislative history, may well not have considered application of the AIA specificallyit did
consider whether to attach all the trappings of a tax to the exaction (including, among many others provisions, the AIA), and decided instead to specify the ones it wanted. The AIA is not among them.
The majority focuses on Helwigs use of the phrase with reference to, suggesting that Helwig would have us consider Congressional direction here only if it is expressly labeled as being made with reference to the AIA. Ante 23 n.5. But that very sentence in Helwig goes on to describe such direction as any declaration by Congress affecting the manner in which the provision shall be treated. 188 U.S. at 613 (emphasis added). The following citations to statute after statute which the majority references are part of the Courts analysis, the Court tells us, because it must determine whether the words [employed by Congress] are not regarded by Congress as imposing a penalty and [thus] should not be so treated by the court, for [i]f it clearly appear that it is the will of Congress that the provision shall not be regarded as in the nature of a penalty, the court must be governed by that will. Id. I do not mean to suggest that Helwig teaches that an exactions label controls, ante p. 23 n.5, only that any Congressional direction that indicates the will of Congress on the application of the AIA should be considered. 87
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The majoritys second citation for that proposition, United States v. Reorganized CF & I Fabricators of Utah, Inc., 518 U.S. 213, (1996), is much like Helwig. There the Court determined whether a tax an imposed tax on for certain Chapter funding 11 deficiencies (as an
constituted
excise
purposes
excise tax was accorded higher priority than ordinary claims). It prefaced its discussion by recognizing that Congress could have included a provision in the Bankruptcy Code calling [the relevant] exaction an excise tax . . . ; the only question is whether the exaction ought to be treated as a tax (and, if so, an excise) without some such dispositive direction. Id. at 219. Its ultimate conclusion considered legislative history of the exaction at issue and conclude[d] that the 1978 Act reveals no congressional intent to reject generally the interpretive
principle that characterizations in the Internal Revenue Code are not dispositive in the bankruptcy context . . . . Id. at 224. Here, where Congress provided one of the most direct
signals it can of its intentionsit expressly considered calling the exaction a tax and ultimately decided not to do soHelwig and Reorganized CF & I would direct us to follow Congresss direction and treat an exaction denominated a penalty as a penalty and not as a tax for purposes of the AIA. 2.
88
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Second, the majoritys approach relies upon its assertion that [t]he Supreme Court has concluded that the AIA uses the term tax in its broadest possible sense and thus that the AIA prohibits a pre-enforcement challenge to any exaction that is made under color of their offices by revenue officers charged with the general authority to assess and collect the revenue. Ante p. 18 (internal quotation marks and braces omitted). This definition is far from self-evident. As the majority concedes, taxes and penalties are distinguished in some federal statutory contexts. Ante p. 22 n.4. In the very case discussed above, Reorganized CF & I Fabricators, which dates from 1996, the Court adopted these definitions for its functional inquiry of the exaction at issue: A tax is an enforced contribution to provide for the support of government; a penalty . . . is an exaction imposed by statute as punishment for an unlawful act. 518 U.S. at 224. The majority reasons that [n]either the
Secretary nor the Sixth Circuit cites a single case suggesting that [this distinction applies to the AIA]. Ante p. 22 n.4. Of course, Lipke, on which the majority relies, is one major AIA case that distinguishes between taxes and penalties. And, as the Court in Reorganized CF & I Fabricators borrowed its definitions of tax and penalty from a somewhat different context, it appears that these definitions are not particularly context-
specific. 518 U.S. at 224. Thus, if a court is to perform a 89
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functional examination of its own, why would it not use these well-settled definitions, under which the Affordable Care Acts exaction would clearly be a penalty (for noncompliance with the individual mandate)? By my count, the majority puts forward three affirmative arguments favoring the broadest possible definition for the word taxes in the AIA: (1) Snyder v. Marks, 109 U.S. 189 (1883), established a broad definition of tax under the AIA; (2) the twin Bailey cases show that the AIA is broader than the taxing clause; and (3) the fact that the IRS grants the Secretary the authority to make assessments of all taxes
(including interest, additional amounts, additions to the tax, and assessable penalties) imposed by this title implies that the AIA, which generally protects the Governments interest in effecting unfettered tax assessments, must apply to all
exactions. 26 U.S.C. 6201(a) (emphasis added). I find these arguments unpersuasive. First, Snyder does not establish the broad definition the majority cites it for. The Court explains that tax meant that which is in condition to be collected as a tax, and is claimed by the proper public officers to be a tax. 109 U.S. at 192 (emphasis added). Thus, Snyder of clearly an makes relevant the
Commissioners
designation
exaction
and,
reasonably
viewed, requires that the Commissioner claim[] an exaction to 90
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be a tax. Here, of course, the Secretary of the Treasury is a party before us and supports Congresss designation of the
mandate as a penalty rather than a tax. 8 Second, the Bailey cases have already been dealt with at length above. I agree that they show that the AIA is broader than the taxing clause when applied to exactions that are
designated by Congress as taxesin the limited sense that they include some exactions that purport to be taxes yet are
unconstitutionalbut they do no more than that. As for the majoritys final argument, it seems to require a logical leap. I reproduce the relevant paragraph for ease of reference: The Courts broad interpretation of the AIA to bar interference with the assessment of any exaction imposed by the Code entirely accords with, and indeed seems to be mandated by, other provisions of the Internal Revenue Code. The AIA does not use the term tax in a vacuum; rather, it protects from judicial interference the assessment . . . of any tax. I.R.C. 7421(a) (emphasis added). The Secretarys authority to make such an assessment . . . of any tax derives directly from another provision in the Code, which charges the Secretary with making interest, assessments of all taxes (including additional amounts, additions to the tax, and assessable penalties) imposed by this title. 6201(a) (emphases added); see also 6202 (assessment The majority believes the fundamental problem with this argument is that the Secretary still does claim that the challenged exaction is a tax, albeit one authorized by the Constitutions Taxing Clause. Ante p. 26-27 n.7. As Snyder is discussing the use of the word tax in the precursor to the modern AIA, I read Snyder to refer to the Commissioners designation with respect to the statute. 91
8
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of any internal revenue tax includes assessment of penalties). Thus, for purposes of the very assessment authority that the AIA protects, Congress made clear that penalties (as well as interest, additional amounts, [and] additions to the tax) count as taxes. Congress must have intended the term tax in the AIA to refer to this same broad range of exactions. See Erlenbaugh v. United States, 409 U.S. 239, 243 (1972) ([A] legislative body generally uses a particular word with a consistent meaning in a given context.). Ante p. 19-20 (large emphasis mine). I agree, of course, that for purposes of the [Secretarys] assessment authority, Congress made clear that the penalties . . . count as taxes. Indeed, where Congress has wished
penalty to be treated as a tax, it has said so. See, e.g., 26 U.S.C. 6665(a)(2), 6671(a) (directing that tax be
deemed also to refer to . . . penalties in Chapter 68 of the Internal Congress Revenue has Code). It this is not at all when surprising defining that the
employed
shorthand
Secretarys authorities. The problematic leap is this: simply because the AIA
generally protects the Secretarys assessment authority does not mean that the AIA must apply to all exactions. The many
exemptions included in the AIA as currently codified show that Congress has often wished to exempt certain exactions from the AIA. As a matter of statutory interpretation, it seems improper for a court to insist that taxes means any exaction (despite the fact that Congress does not say so) and thereby to undercut 92
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Congresss deliberate decision to reject designating an exaction as a tax and instead to call it a penalty. Given that we have been cited no cases that would require such a large
redrafting of the AIAother penalties to which the AIA have been applied were placed in Chapter 68, which expressly directs that all references to tax in the IRC are to refer also to the Chapters penaltiesI believe that this broadest possible
interpretation of the AIA is unwarranted and unwise. The majority appears to reject the legal force of sections 6665(a)(2) and 6671(a), arguing that section 7806(b) forbid[s] courts from deriving any inference or implication from the location or grouping of any particular section or provision or portion of this title. Ante p. 31. This puzzles me, as it is absolutely clear that sections 6665(a)(2) and 6671 have the
force of law. Section 6665(a)(2) directs that any reference in this title to tax imposed by this title shall be deemed also to refer to . . . penalties provided by this chapter. This instructs courts that Congress wished to make the word penalty inclusive of the word tax in this particular chapter (Chapter 68). Congress remains free to do otherwise in other chapters; indeed, it chose not to do so in Chapter 48, in which the
individual mandate is found. Giving force to section 6665(a)(2) in no way contradicts section 7806(b) by drawing a prohibited implication from the location or grouping of Internal Revenue 93
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Code
(IRC)
provisions.
Section
7806(b)
prohibits
inferences
drawn from the location or group itself; instructions can still flow from section 6665(a)(2) that are to apply only to a
specified chapter. This seems to me to be beyond serious doubt. Likewise, section 7806(b) does not prohibit courts interpreting one provision of the IRC from looking to other provisions of the IRC and noting that, where Congress has desired a particular result, it has stated so. To suggest that a court cannot draw the traditional as do inference of from Congresss in other decision chapters by to define its
penalty failure 7806(b). 9 to
inclusive so here
tax
and
seems
wholly
unwarranted
section
In the final analysis, the majoritys approach essentially imposes a clear-statement rule on Congress, making the AIA
applicable to all exactions, regardless of statutory language and in disregard of apparent Congressional intent, unless
Congress had the foresight to expressly exempt an exaction from the AIA. The majority concedes, as it must, that the 111th
Congress could have exempted the individual mandate from the AIA, but it suggests that the only way Congress could avoid the I do not suggest that we [should] infer from 6665(a)(2) a categorical exclusion from the term tax of all non-Chapter 68 penalties. Ante p. 31 (emphasis added). Rather, the fact that Congress has directed us to treat some penalties as taxes simply makes it less likely that Congress desired this result where it enacted no such direction (and in fact expressly rejected the term tax for the term penalty). 94
9
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AIAs bar on immediate judicial review of the ACA is by amending the AIA itself to include an express exemption for the ACA or (in what amounts to the same thing) by referencing the AIA by name in the ACA. That is, the majority seems to believe that a clear-statement rule is operative here, and that absent a clear statement regarding the inapplicability of the AIA, it must
apply to any and all exactions. Given that the Supreme Court has never recognized such a clear-statement rule, it seems to me that this turns the ordinary principles of statutory
interpretation on their head. As Justice Kennedy recently recognized for a plurality of the Court, clear-statement of otherwise rules are designed statutes to that avoid would
applications
unambiguous
intrude on sensitive domains in a way that Congress is unlikely to have intended had it considered the matter. Spector v.
Norwegian Cruise Line Ltd., 545 U.S. 119, 139 (2005) (plurality op.). Justice Kennedy even warned in his plurality opinion
against convert[ing] the clear statement rule from a principle of interpretive caution into a trap for an unwary Congress. Id. That seems to be precisely what the majority does today. Presumably because the majority believes such a clear-
statement rule applies, it asserts that [t]o infer an intent on the part of the 2010 Congress to implicitly exempt this preenforcement challenge from the AIA bar would be tantamount to 95
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inferring an implicit repeal of that bar. Ante p. 37. But our case is nothing like implicit repeal cases like TVA v. Hill, 437 U.S. 153 (1978), which the majority cites in that paragraph. In Hill, the Court for a considered dam after whether notice continued federal was an an
appropriations being
that
construction Act the worked dam. In
challenged repeal
under of the
the Act
Endangered with
Species to
implicit
respect
implicit repeal case, the Court is forced to consider whether Congressional action definitively to the contrary of an earlier enactment works an implied repeal. In our case, on the other hand, we are simply asking whether Congress created with the ACA the sort of exaction to which the earlier act (the AIA) applies. This requires us to construe both the word taxes under the AIA and the word penalty in the ACA, applying our ordinary tools of statutory interpretation. We look first to the text itself, and, after finding that it is at best ambiguous, we look to legislative history and Congressional purpose. Because the
application of the AIA to the ACA is in doubtthis is precisely the question we are deciding sua sponteour case is nothing like implicit repeal cases. Of course, my approach fully recognizes that the AIA has legal force. But, as the AIA can undoubtedly be sidestepped by any Congress as it creates a new exaction (at the very least, in the majoritys view, by a clear statement that the AIA is not to 96
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apply), the AIA is non-binding on future Congresses. When courts determine the application of the AIA to the ACA, they are only considering the application of one Congressional enactment to a later one. Because one Congress cannot bind a later one, the 111th Congress was fully within its prerogative to indicate, even if only implicitly, that the AIA should not apply. See United States v. Winstar (quoting Corp., 518 U.S. for 839, 872 (1996)
(plurality concept
op.) one
Blackstone may
the the
centuries-old legislative
that
legislature
not
bind
authority of its successors). The independent legal force of the AIA does not spring from the fact that it can trap future, unwary Congresses, but rather from the fact that we must seek to harmonize its terms with that of future legislation. That is, the AIA is not binding on Congress, it is binding on us, the judiciary. Finally, as for the majoritys suggestion that policy
arguments favor its position because a contrary holding might have serious long-term consequences for the Secretarys revenue collection, ante p. 41, I would simply note again that the Secretary of the Treasury is a party before us and argues that the AIA does not apply. Indeed, I cannot find a Supreme Court case where the AIA has been applied over the objection of the Secretary. 3. 97
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The majority suggests that the issue presented here is one of context, and I agree. The majority accepts the Sixth
Circuits general observation that there are contexts in which the law treats taxes and penalties as mutually exclusive and explains that [t]he question here is whether the AIA is one of these contexts. Ante p. 22 n.4 (internal quotation marks omitted). To my mind, the proper question is not whether taxes and penalties are always mutually exclusive under the AIA, but whether Congress, in creating a later-enacted exaction,
intended to create a tax for purposes of the AIA. But the more important question of context is this: whether, in light of the context provided by Congresss deliberate decision to
designate the individual mandates exaction a penalty rather than a tax and the evidence of Congresss desire to erect no jurisdictional bar to immediate judicial review of the ACA, we should nonetheless interpret the ACA as creating a tax within the meaning of the AIA. My effort here, to marshal the
historical, jurisprudential, interpretive, and, yes, commonsense factors necessary to answer this question, persuades me that we should not. Given this larger context, I do not believe that one interpretation of near century-old AIA casescases that fail to devote enough space to the AIA analysis to even spell out their reasoningshould carry the day. If the Supreme Courts
98
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vacillations
concerning
the
proper
interpretation
of
the
AIA
teach us anything, they teach us that context matters. 10 * * * *
Because I do not believe that Lipke and George instruct courts to eschew and I our do ordinary not agree methods that the of AIA statutory reaches all
interpretation
exactions though by its terms it is limited to taxes, I cannot join the majority. Where Congress expressly rejected the term tax in favor of penalty, and where it appears that
application of the AIA would do little to further the purposes of the AIA, but would do much to frustrate the Affordable Care Acts reforms desired by the Congress that approved the Act, I would hold that the AIA does not strip us of jurisdiction. Thus, I would reach (and I do indeed reach) the merits of appellants challenges. II. The Act
Justice Powell follows, in part:
10
summarized
the
history
of
the
AIA
as
[T]he Court's unanimous opinion in Williams Packing indicates that the case was meant to be the capstone to judicial construction of the Act. It spells an end to a cyclical pattern of allegiance to the plain meaning of the Act, followed by periods of uncertainty caused by a judicial departure from that meaning, and followed in turn by the Court's rediscovery of the Act's purpose. Bob Jones Univ., 416 U.S. at 742. Rediscoveries of congressional intent abound in the law and should not surprise us. 99
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After a months-long national debate, the Patient Protection and Affordable Care Act was signed into law on March 23, 2010. Pub. L. No. 111-148, 124 Stat. 119, amended by The Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (2010). The Affordable Care Act is comprised of a half-dozen initiatives designed to reduce the costs of health care and the number of Americans who remain uninsured. First, the Act creates health benefit exchanges in each state, which are regulated to increase transparency concerning premium increases and claim denials and which offer market-based incentives tied to increases in efficiency and better health outcomes. 42 U.S.C. 18031(e), (g). Second, the Act prevents insurers from rejecting applicants with preexisting conditions (the guaranteed issue requirement) and bars insurers from charging higher premiums to those with serious medical conditions or a history of past illness (the community rating requirement). Id. 300gg 300gg-3. Third, the Act makes more Americans eligible for Medicaid, and to many of those who earn too much to receive Medicaid it grants tax credits to subsidize the cost of insurance premiums and pledges federal dollars to reduce out-of-pocket expenses. Id. 1396a(10)(A)(i)(VIII), 18071; 26 U.S.C. 36B. Fourth, the Act requires that individuals keep up minimum essential [health insurance] coverage. 100 Id. 5000A. In
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particular, it directs that [a]n applicable individual shall for each month beginning after 2013 ensure that the individual, and any [applicable] dependent . . ., is covered under minimum essential coverage for such month. Id. Appellants term this the individual mandate, and it is the chief target of their suit. Appellants Br. 3. Congress found that hospitals provided $43 billion in uncompensated care to the uninsured in 2009, and that these costs were shifted onto insured individuals, increas[ing] family premiums by on average over $1,000 a year. 42 U.S.C. 18091(a)(2)(F). It also found that, [b]y significantly lowering the number of the insured, the [minimum coverage] requirement, together with the other provisions of th[e] Act, will lower
health insurance premiums. Id. Congress created two religious exemptions to the individual mandate: a religious conscience exemption and a health-care
sharing ministry exemption. 26 U.S.C. 5000A(d)(2). I discuss the particulars of these exemptions in Part VIII, where I
consider appellants First Amendment claims. Fifth, the Act created tax incentives making it more
affordable for small businesses to offer health insurance to their employees. Id. 45R. Finally, the Act required applicable large employers . . . to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an 101
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eligible
employer-sponsored
plan
if
at
least
one
full-time
employee is receiving federal subsidies for health insurance. Id. 4980H(a). Appellants call this the employer mandate. Appellants Br. 3. Appellants Michele Waddell, Joanne Merrill, and Liberty
University assert an array of constitutional challenges to the Acts individual and employer mandates and request declaratory and injunctive relief. They allege that the mandates are outside Congresss Article I powers and that the individual mandates religious exemptions effect violations of the First Amendments Free Exercise and Establishment Clauses as well as the equal protection Clause. component of chief the Fifth Amendments is that Due Process
Appellants
contention
the
individual
mandate was not validly enacted pursuant to Congresss commerce power because it regulates what they call inactivity. Id. at 1. The district court carefully parsed appellants arguments and dismissed their suit pursuant to Federal Rule of Civil Procedure 12(b)(6), concluding that appellants had failed to state a
legally sufficient claim. Liberty University, Inc. v. Geithner, 753 F. Supp. 2d 611 (W.D. Va. 2010). For the following reasons, I would affirm. III. Constitutionality, Inactivity Aside Putting aside appellants inactivity argument, to which I return in Parts IV and V, I first consider whether the Act is 102
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otherwise activities
authorized that
under
Congresss affect
power
to
regulate commerce.
substantially
interstate
Gonzalez v. Raich, 545 U.S. 1, 16-17 (2005). In particular, I ask whether the Act runs afoul of the teachings of United States v. Lopez and United States v. Morrison, two cases in which the Supreme Court enforced limits on the Commerce Clause so as not to convert congressional authority under the Commerce Clause to a general police power. Lopez, 514 U.S. 549, 567 (1995); see Morrison, 529 U.S. 598, 617-19 (2000). A. Lopez and Morrison In Lopez and Morrison the Supreme Court struck down two congressional enactments because the objects of regulationthe possession of guns in school zones in Lopez, violence against women in Morrisonwere authority noneconomic. the Affirming power to that Congress those
commerce
includes
regulate
activities having substantial relation to interstate commerce, i.e., those activities that substantially affect interstate
commerce, Lopez held that gun possession in schools did not substantially affect interstate commerce. 514 U.S. at 559-60
(internal citations omitted). The Court worried that to identify the effect of guns in schools on interstate commerce it would have to pile inference upon inference in a manner that would bid fair to convert congressional authority under the Commerce
Clause to a general police power of the sort retained by the 103
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States.
Id. at 567.
If gun possession in schools were held to
be substantially related to interstate commerce simply because such incidents harmed our national productivity, then
Congress could regulate any activity that it found was related to the economic productivity of individual citizens and it
would be difficult to perceive any limitation on federal power, even in areas such as criminal law enforcement or education
where States historically have been sovereign.
Id. at 564.
Morrison further clarified the holding of Lopez. The Court explained that a fair reading of Lopez shows that the
noneconomic, criminal nature of the conduct at issue was central to our decision in that case. 529 U.S. at 610. Without express congressional findings regarding the effects upon interstate
commerce of gun possession in a school zone, the Court refused to find a substantial effect upon interstate commerce, as it believed the link between gun possession and . . . interstate commerce was attenuated. Id. at 612. The Court noted that it has upheld Commerce Clause regulation of intrastate activity only where that activity is economic in nature. Id. at 613. Because the Morrison Court found that [g]ender-motivated crimes of violence are not, in any sense of the phrase, economic
activity and that their effects on interstate commerce (many of which were expressly enumerated by Congress) are attenuated, it struck down the challenged congressional regulation of these 104
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crimes.
Id.
at
613,
615.
As
it
did
in
Lopez,
the
Court
emphasized that the regulation . . . of intrastate violence . . . has always been the province of the States and affirmed that [t]he Constitution requires a distinction between what is truly national and what is truly local. Id. 617-18. Without doubt, appellants are correct to insist that Lopez and Morrison remind us that any formulation of the Commerce
Clause must admit to limiting principles that distinguish the truly national from the truly local. But the concern
directly animating Lopez and Morrisonthe noneconomic character of the regulated activitiesis not present in this case, where the failure to obtain health insurance is manifestly an economic fact with direct effects on the interstate markets for both
health insurance and health services. Cf. Thomas More, --- F.3d at ----, 2011 WL at *11-12 (Martin, J.); Florida, --- F.3d, at ---, 2011 WL at *94, *106 (Marcus, J., dissenting). Nor can it be said that health insurance or health services have always been the province of the states in the way that education, family law, and criminal law have been. Raich, 529 U.S. at 618. Since the Social Security Act of 1965, Pub. L. No. 89-97, 79 Stat. 286, established Medicare and Medicaid benefits, the federal government has been the single largest provider in the interstate health insurance market and the largest purchaser in the health services market. Federal dollars have accounted 105
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for more than one-quarter of all health spending each year since 1974; in 2008, Americans spent $2.3 billion on health services, of which the federal government paid more than $815 million nearly 35%. Ctrs. for Medicare & Medicaid Servs., National
Health Expenditure Amounts by Type of Expenditure and Source of Funds: Calendar Years 1965-2019. The year 1974 also saw the
passage of the Employee Retirement Income Act (ERISA), which has a broadly worded and clearly expansive preemption provision. 29 U.S.C. 1144(a); Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 146 (2001). Through ERISA, as well as later enactments like the Health Insurance Portability and Accountability Act of 1996, Pub. L. has No. come 104-191, to 110 Stat. of 1936, the the field federal of the
government
occupy
much
regulation of health benefits, and many state and local attempts to regulate health insurance have been held preempted. See,
e.g., Retail Industry Leaders Assn v. Fielder, 475 F.3d 180 (4th Cir. 2007) (holding Marylands Fair Share Health Care Fund Act, which regulated employer health care spending, preempted by ERISA, as ERISA establishes comprehensive federal regulation of employers provisions of benefits to their employees); but see Metropolitan (holding preemption Life Ins. Co. v. Mass., 471 law U.S. 724 (1985) ERISA or
that as a
state law
mandated-benefit that regulates
survives
insurance,
banking,
securities within the meaning of ERISAs savings clause). Given 106
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nearly half a century of extensive federal involvement in the national health insurance and health services sectors, it seems clear that Lopez and Morrisons interest in protecting areas of traditional state sovereignty is not directly implicated. That said, Lopez and Morrison do remind us that the scope of the Commerce Clause is finite and that its jurisprudence must admit to bounding principles. Thus courts must assure themselves that upholding the Act under the Commerce Clause would not
effectively create a federal police power. B. Substantial Effects Appellants argue that if we were to hold that failure to obtain insurance substantially affects interstate commerce, we would be forced product to find that the failure to purchase any
marketed
substantially
affects
interstate
commerce.
Thus, they quote Florida ex rel. Bondi, where the district court for the Northern District of Florida found the Act
unconstitutional in part because it believed that a Commerce Clause broad enough to authorize the Act must also support
purchase mandates for broccoli or GM cars. Appellants Reply Br. 9 (quoting Bondi, --- F. Supp. 2d at ----, ----, 2011 WL 285683, at *24). The Eleventh Circuit, upholding the district court on that point, expressed judicially similar fears that there are no
cognizable,
administrable
limiting
principles.
Florida, --- F. 3d at ----, 2011 WL at *54. This is not so. 107
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begin
by
noting
that
whether
failure
to
purchase
insurance substantially affects interstate commerce relies on a great number of factual determinations. These are to be made not by the courts but by Congress, an institution with far greater ability to gather As the and critically Court evaluate noted in the relevant [i]n
information.
Supreme
Raich,
assessing the scope of Congress authority under the Commerce Clause, . . . [our] task . . . is a modest one. We need not determine whether respondents activities, taken in the
aggregate, substantially affect interstate commerce in fact, but only whether a rational basis exists for so concluding. 545 U.S. at 22. The Acts effects on interstate commerce depend in large part on an unusual feature of the health care market. By federal law, a hospital participating in Medicare must stabilize any patient who arrives at its emergency room, regardless of the patients ability to pay for treatment, Emergency Medical
Treatment and Active Labor Act, 42 U.S.C. 1395dd(b)(1), and many states impose similar requirements, see, e.g., H.R. Rep. No. 99-241(III), at 5 (1985), reprinted in 1986 U.S.C.C.A.N. 726, 726-27 or (noting issued that at least 22 states the have enacted of
statutes
regulations
requiring
provision
limited medical services whenever an emergency situation exists and that many state court rulings impose a common law duty on 108
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doctors and hospitals to provide necessary emergency care). As a result, the uninsured often receive care that they are unable to pay for: in 2008, hospitals provided $43 billion in
uncompensated care to the uninsured. 42 U.S.C. 18091(a)(2)(F). To cope with these costs, hospitals increase the price of health care services, which in turn leads to rising health insurance premiums; Congress found that [t]his cost-shifting increases
family premiums by on average over $1,000 a year. Id. Recognizing these direct effects on the health insurance and health services markets does not require us to pile
inference upon inference in the way linking noneconomic acts like the possession of guns in schools or gender-motivated
violence to interstate commerce might have done in Lopez and Morrison. Lopez, 514 U.S. at 567; see Morrison, 529 U.S. at 615. In Lopez, the Court rejected the Governments argument that gun possession in schools substantially affected interstate commerce due to the general costs of crime or because the presence of guns in schools which 514 poses in U.S. in a substantial will 564. threat in a the they to the education productive rejected the
process,
turn, at
result
less Court
citizenry. Congresss but-for crime .
Likewise, because initial
findings
Morrison the
follow[ed] of
causal . .
chain to
from
occurrence upon
violent
every
attenuated
effect
interstate
commerce, chiefly deterring potential victims from interstate 109
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travel,
employment,
general
commercial
transactions,
diminishing national productivity, increasing medical and other costs, and decreasing the supply of and demand for interstate products. 529 U.S. at 615 (quoting H.R. Rep. No. 103-711, at 385 (1990), reprinted in 1994 U.S.C.C.A.N. 1803, 1853). Where the proffered substantial effects in Lopez and Morrison were attenuated, here the effects are direct: considered as a class (per Wickard and Raichs aggregation principle, see Wickard v. Filburn, 317 U.S. 111, 127-28 (1942); Raich, 545 U.S. at 22; post pp. 46-48), those who fail to purchase health insurance will seek and receive medical care they cannot afford; the cost of that care ($43 billion in 2008) is borne by the hospitals, which are forced to increase the price of health care services. And recognizing that the uninsureds passing on $43 billion in health care costs to the insured constitutes a substantial effect on interstate commerce in no way authorizes a purchase mandate for broccoli or any other vegetable. The health care market is unique in that its product (medical care) must be provided even to those who cannot pay, which allows some (the uninsured) to consume care on anothers (the insureds) dime. Here the substantial effect on commerce comes not from simply manipulating demand in a market, as it would in the case of a broccoli or GM car mandate, but from correcting a massive market failure caused by tremendous negative externalities. Thus, we 110
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need
not
decide
today
whether
the
reasoning
of
Wickard
and
Raich, which were both concerned in part about limiting supply in interstate markets for demand fungible via a goods, purchase extends mandate. to See
artificially
inflating
Wickard, 317 U.S. at 128 (recognizing that even wheat grown for home consumption overhangs the market and if induced by rising prices tends to flow into the market and check price
increases); Raich, 545 U.S. at 19 (noting that high demand in the interstate marketand consequent higher pricesis likely to draw [home consumed] marijuana into that market). For these reasons, I would hold that the failure to obtain health insurance substantially affects the interstate markets
for health insurance and health care services. Accord Thomas More, --- F.3d at ----, 2011 WL at *12 (Martin, J.); id. at *2425 (Sutton, J.); Florida, --- F.3d at ----, 2011 WL at *106 (Marcus, J., dissenting). IV. Universal Participation in the Health Care Market Nor need I decide today whether and the Commerce Clause
discriminates
between
activity
inactivity.
Appellants
concede that virtually all persons will voluntarily enter into the interstate health services market in their lifetimes, and they concede further, as they must, that this constitutes
activity in commerce. Yet appellants insist that the Commerce Clause requires Congress to adopt 111 an extremely narrow time-
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horizon: it may regulate persons seeking health care, but only once they have sought it. Appellants Br. 34. A faithful
application of Wickards and Raichs teachings requires us to reject this contention. Wickard introduced the aggregation principle into Commerce Clause jurisprudence: That appellees own contribution to the demand for wheat may be trivial by itself is not enough to remove him from the scope of federal regulation where, as here, his contribution, taken together with that of many others
similarly situated, is far from trivial. 317 U.S. at 127-28. Raich reaffirmed looks this to the approach, regulated noting that Commerce taken Clause in the
analysis
activities,
aggregate. 545 U.S. at 22. Further, Raich emphasized that Congress [need not] legislate with scientific exactitude. When Congress decides that the total incidence of a practice poses a threat to a national market, it may regulate the entire class. See United States v. Perez, 402 U.S. at 154-55 ([W]hen it is necessary in order to prevent an evil to make the law embrace more than the precise thing to be prevented it may do so.). In this vein, we have reiterated that when a general regulatory statute bears a substantial relation to commerce, the de minimis character of individual instances arising under that statute is of no consequence. Id. at 17 (some internal quotation marks and citations omitted). Under Wickard and Raich, we are to take the view of the legislators, not those who are regulated. Courts look at the
112
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aggregated impact of an activity, not the impact of individuals; the Commerce Clause authorizes the regulation of an entire
class, regardless of the de minimis character of individual instances. Id. We are to put aside the mechanical application of legal formulas and look instead to the actual effects of the activity in question upon interstate commerce. Wickard, 317 U.S. at 120, 124. Indeed, it bears repeating, our task in
deciding Commerce Clause challenges is a modest one in which we ask only whether a rational basis exists for Congress to find a substantial effect on interstate commerce. Id. at 22. Considering that hospitals are required to provide certain care to the uninsured, that illness and accidents are nothing if not unpredictable, and that the costs of medical care are often catastrophic, I have no hesitation in concluding the Congress rationally determined that addressing the $43 billion annual
cost-shifting from the uninsured to the insured could only be done via regulation before the uninsured are in need of
emergency medical treatment. Wickard and Raich teach that we are to take the that longer view of legislators; it is difficult to
imagine
Commerce
Clause
analysis
would
aggregate
individuals and allow regulation of entire classes but then, when legislators confront a problem requiring a remedy before emergencies permit them (and to their adopt ever-growing the costs) occur, refuse to enact to a
time-horizon 113
necessary
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solution.
Accord
Florida,
---
F.3d
at
----,
2011
WL
at
*93
(Marcus, J., dissenting). Thus, as Congress in the rationally found virtually market not universal over the an
participation course of
interstate lifetimes,
health the Act
care does
residents
present
issue of congressional regulation of inactivity. Accord Thomas More, --- F.3d at ----, 2011 WL at *15 (Martin, J.); id. at *2730 (Sutton, J.); Florida, --- F.3d at ----, 2011 WL at *93-*94 (Marcus, J., dissenting). Rather, courts are asked to pass on regulation of voluntary participation in the interstate health care market that, to be effective, must be preemptive. As it is clear that the regulated behavior substantially affects
interstate commerce and appellants bring no other challenge to Congresss authority under the Commerce Clause, I would hold the Act to be a proper exercise of congressional power. V. Regulating Inactivity But even if I were to assume that the uninsured are, in appellants phrase, inactive in commerce, I would be bound to uphold Commerce the Act. Despite is not appellants offended several by the arguments, regulation the of
Clause
inactivity or, in proper circumstances, by a purchase mandate. Appellants urge that the Act is an unprecedented attempt to force private citizens who have decided not to participate in commerce to engage in commerce by mandating that they purchase . 114
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. . health insurance . . . . Appellants Br. 3. This argument presents authority citizens two distinct the questions: Commerce in (1) [w]hether to and Congress a has
under
Clause
regulate (2)
private such
inactivity
commerce;
whether
regulation can include forc[ing] [a] citizen to participate in commerce by mandating that she purchase a [commodity] . . . or pay a penalty for noncompliance. Id. at 1. I consider these questions in turn. A. Regulating Inactivity in Commerce Appellants decision privately not to characterize purchase her own Mss. Waddells insurance as and to Merrills otherwise in
health
and
manage
healthcare
inactivity
commerce, which they claim is beyond the reach of the Commerce Clause. Id. at 1. As the following brief review of the case law will show, this broader Commerce Clause challengewhether inactiv[e] it in
reaches
non-market
participants
(those
commerce)has already been litigated. The Supreme Courts case law firmly establishes that Congress may regulate those who have opted not to participate in in the a market when their self-
provisioning,
considered
aggregate,
substantially
affect[s] an interstate market. Raich, 545 U.S. at 17. After explaining why appellants broader challenge is foreclosed, I consider the far narrower challenge to the Act that survives. 1. Regulating Non-Market Participants 115
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Nearly seventy years ago, in the famous case of Wickard v. Filburn, the Supreme Court upheld Congresss power under the Commerce Clause to regulate Mr. Filburns private, noncommercial production of wheat. The Court squarely confronted the question: it began its discussion by noting that [t]he question would merit little consideration . . . except for the fact that this Act extends federal regulation to production not intended in any part for commerce but wholly for consumption on the farm. 317 U.S. at 118. Just six years ago, the Court reaffirmed Wickards vitality in Raich, explaining, Our case law firmly establishes Congress power to regulate purely local activities that are part of an economic class of activities that have a substantial effect on interstate commerce. As we stated in Wickard, even if appellees activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce. Raich, 545 U.S. at 17 (quoting Wickard, 317 U.S. at 125)
(emphasis added). The Raich Court made clear that Congress can regulate purely in intrastate that it is activity not that is for not sale, itself if it
commercial,
produced
concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that
commodity. Id. at 18. Applying this principle, the Court upheld the regulation of individuals is, it 116 who grew marijuana Congress solely to for
home
consumptionthat
allowed
regulate
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individuals commerce. Id.
who
deliberately
chose
not
to
participate
in
Thus, appellants true quarrel with the Act is more limited than their language sometimes suggests. With subheadings like Wickard does not support the district courts conclusion that private economic decisions can be regulated under the Commerce Clause, appellants briefs muddy their real point. Appellants Br. 20. As just described, it is well settled that Congress may regulate the private, noncommercial economic activities of nonmarket participants when their self-provisioning (growing wheat or marijuana for themselves) substantially affects an interstate market. Commerce Appellants Clause contend Raich, that 545 this U.S. firmly at 17, establishe[d] is inapplicable
law,
because Wickard and Raich involved voluntary activity, whereas the Act regulates voluntary inactivity. Appellants Br. 19. To the extent that voluntary inactivity again suggests deliberate non-participation in the market, this fails to distinguish
Raich; yet appellants also seem to be raising a different point. [I]t was the fact that Mr. Filburn actively grew wheat beyond the quota, even if for personal use, that was significant in Wickard, as it was that activity that constituted economic activity. By contrast, [appellants] have exerted no effort and used no resources. Id. at 21. It is this distinction between activity and inactivity, id. at 19absolute inactivity, not
117
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just inactivity (non-participation) in commercethat carries the true thrust of appellants argument. 2. Regulating the Inactive Before I can consider this narrower argument, I must be sure I understand exactly what appellants mean by it. Appellants say that Mr. Filburn actively grew wheat beyond the quota, even if for personal use while Ms. Waddell and Mrs. Merrill have exerted no effort and used no resources. Appellants Br. 21. But appellants have expressly voluntarily state and that Miss Waddell decided and not Mrs. to
Merrill
deliberately
purchase health insurance, but to instead save for and privately manage health care. Id. at 10 (emphasis added). It is not clear why sav[ing] of for and privately call manag[ing] health care, a
species
what
economists
self-insurance, 11
requires
neither effort nor resourcesin fact, one would imagine that sav[ing] requires resources (namely, money) and that
Cf. 42 U.S.C. 18091(a)(2)(A) ("In the absence of the [individual mandate], some individuals would make an economic and financial decision to forego health insurance coverage and attempt to self-insure . . . ."). Because individuals who selfinsure are unable to shift risk in the way that market insurance does, self-insurance is far more common among collectives or businesses, where it may be efficient. See generally M. Moshe Porat, Uri Spiegel, Uzi Yaari, Uri Ben Zion, Market Insurance Versus Self Insurance: The Tax-Differential Treatment and Its Social Cost, 58 J. Risk & Ins. 657 (1991); Patrick L. Brockett, Samuel H. Cox, Jr., and Robert C. Witt, Insurance Versus SelfInsurance: A Risk Management Perspective, 53 J. Risk & Ins. 242 (1986); Isaac Ehrlich, Gary S. Becker, Market Insurance, SelfInsurance, and Self-Protection, 80 J. Pol. Econ. 623 (1972). 118
11
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manag[ing]
requires
some
effort.
Id.
at
10,
21.
Though,
unlike wheat and marijuana, insurance is intangible, appellants do not suggest that interstate markets in intangible goods or services are less subject to regulation under the Commerce
Clause than markets in tangible goods; thus, it is difficult to see why the legal import of the appellants sav[ing] and
manag[ing] should differ from that of Mr. Filburns sowing and harvesting. But even if appellants had said nothing about saving and managing and I accepted that Ms. Waddell and Mrs. Merrill had truly exerted no effort and used no resources with respect to health insurancethat is, that they had taken no steps to selfinsureit is difficult to make out the legal relevance of this point. Mr. Filburn and Ms. Raich deliberately chose to meet
their own needs rather than enter commerce and purchase goods on the market and thus they, too, exerted no effort and used no resources in connection to the relevant markets; why are they more susceptible to Commerce Clause regulation than appellants simply because they privately exerted effort and expended
resources for a noncommercial end? Appellants have provided no express answer, but one is
implicit in their arguments: in choosing to act, even privately, with notice of regulation, one can be said to consent or at least submit to that regulation. Under this view, Wickard and 119
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Raich domains
are
distinguishable individuals some
because
they
concerned entered appellants
regulated upon the
which of
voluntarily Thus,
commencement
activity.
complaint
that appellants in Raich could avoid Congress reach by not manufacturing or possessing marijuana, but here the Appellants cannot avoid Congress reach Br. about even if they are not doing concern regulate
anything. throughout
Appellants their brief
19.
Appellants
express to
allowing
Congress
[people] because they are legal citizens who merely exist, id. at 20; 12 likewise, the Eleventh Circuit majority worries that [i]ndividuals subjected to this economic mandate have not made a voluntary choice to enter the stream of commerce . . . . Florida, --- F.3d at ---, 2011 WL at *48. So I will consider the Commerce Clause ramifications of regulating everyone. 3. Federalism & Regulations Affecting Everyone I am aware of no substantial effect case, in more than a century of Commerce Clause jurisprudence, that looks beyond the class of activities regulated to the class of persons affected. And this is unsurprising, as the dispositive question is whether the object of regulation substantially affects interstate
commerce; what the affected persons have done to consent (or not) to the regulation is obviously irrelevant to that inquiry.
It is no coincidence that voluntary or voluntarily appears twenty-eight times in appellants briefs. 120
12
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Appellants claim that their liberty concern springs from the principles Clause law. of federalism these rather than black-letter to Commerce state
Though
principles
serve
protect
sovereignty and the resulting division of power helps to secure our liberty, federalism is not an independent font of individual rights. As Justice Kennedy explained in his concurrence in Lopez, it was the insight of the Framers that freedom was enhanced by the creation of two governments, not one, as power could be split between state and federal governments even before each governments executive, [s]tate powers were further separated 514 end among U.S. in at legislative, 576. Thus,
and
judicial is
departments. not just an
sovereignty
itself:
Rather,
federalism secures to citizens the liberties that derive from the diffusion of sovereign power. New York v. United States, 505 U.S. 144, 181 (1992) (quoting Coleman v. Thompson, 501 U.S. 722, 759 (1991) (Blackmun, J., dissenting)). Federalism
enhance[s] our liberty by disaggregating power; it helps to secure all our individual rights, but it does not create new ones. The Supreme Courts recent decision in Bond v. United
States, which granted an individual criminal defendant standing to challenge a federal statute on the grounds that it usurped powers reserved to the states and which discussed at length the ways in which federalism protects individual liberty, is not to 121
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the contrary. 564 U.S. ---, ---, 131 S. Ct. 2355, 2364 (2011). Appellants provide no support for their suggestion that some novel, heretofore unknown, individual right can spring from the principles of federalism. Federalism was properly invoked in Lopez and Morrison,
where, to police the division of authority between state and federal governments, the Court struck down federal regulation of noneconomic enforcement activity or within where areas States such as criminal have law been
education
historically
sovereign. Lopez, 514 U.S. at 564; see Morrison, 529 U.S. at 599. Lopez and Morrisons areas concern about the loss to of state states federal
authority implicates
within the and
traditionally of power to the
reserved
the and
division thus
between very
state of not.
governments Appellants suggest that
goes
core do all
federalism. Appellants residents,
individual allowing
liberty the Act
concerns to touch
U.S.
whether or not they have voluntarily entered a regulated domain, threatens . . . the bedrock concept[] of . . . individual freedom. Appellants Br. 11-12. Federalism does not speak to this issue. Nor rhetoric does any recognized suggests a individual generalized right. right Appellants to be left
sometimes
alone; but outside of a limited right to privacy concerning the most intimate and personal choices 122 a person may make in a
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lifetime, including
choices those
central
to
personal to
dignity marriage, child
and
autonomy,
relating
procreation, rearing, and
contraception,
family
relationships,
education, Planned Parenthood of Se. Penn. v. Casey, 505 U.S. 833, 851 (1992), no such right exists. And any such right
springing from substantive due process would bind the states under the Fourteenth Amendment as well as the federal government under the Fifth, placing universal regulation outside the reach of any government. Moreover, an extensive body of federal laws, many passed pursuant to the Commerce Clause, targets all U.S. residents: federal criminal law. Indeed, Raich itself concerned the
Controlled Substances Act and the noncommercial production and consumption of marijuana; nowhere in Raich did the Court
intimate concern that the federal government was regulating the drug use of everyone . . . just for being alive and residing in the United States. Bondi, --- F. Supp. 2d. at ---, 2011 WL 285683, at *20. Though penalties do not attach until someone has violated the statute, the same is true of the Acts regulation. Of course, appellants suggest that compelling action is less legitimate under the Commerce Clause than prohibiting action. I take up that question next. VI. Compelling Action
123
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Having established that the regulation of inactivity in commerce whether citizen purchase does not offend the Commerce can by or Clause, properly mandating pay a I consider [a] she for
federal to a
commerce
regulation in . commerce . .
force that
participate [commodity]
penalty
noncompliance. Appellants Br. 1. As I explained at length above, the Supreme Court has
taught that an enactment is authorized by the Commerce Clause where Congress could rationally affects the conclude that the object of
regulation inquiry
substantially only at
interstate between the
commerce. the object of
This of the
looks and
relation commerce;
regulation
interstate
content
regulationwhat it compels or prohibitsis irrelevant. Indeed, it has long been recognized that [t]he power of Congress over interstate commerce is plenary and complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than are prescribed in the Constitution. Wickard, 317 U.S. at 124 (quoting United States v. Wrightwood Dairy Co., 315 U.S. 110, 119 (1942)); cf. Raich, 545 U.S. at 29 ([S]tate
action cannot circumscribe Congress plenary commerce power.). The Necessary and Proper Clause makes clear that we are to defer to Congress with respect to the means it employs to effectuate legitimate ends. U.S. Const. art. I, 8, cl. 18. In combination with the Commerce Clause, it empowers Congress to take all 124
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measures necessary or appropriate to the effective regulation of the interstate market. Raich, 545 U.S. at 38 (Scalia, J., concurring) (quoting Shreveport Rate Cases, 234 U.S. 342, 353 (1914)). But even if it were appropriate to review the method of regulation Congress has chosen to employ, I would find that the individual mandate fits well within the range of acceptable
commercial regulations. A. The Act Does Not Compel Citizens to Enter Commerce I first note that the Act does not force any citizen to enter commerce. Appellants Br. 1. Instead, residents are given a choice between obtaining health insurance (by market purchase or otherwise) and paying a non-punitive tax penalty that, by law, is capped at the national average premium for qualified health plans which have a bronze level of coverage. 26 U.S.C. 5000A(c)(1)(B); see id. at 5000A(b)(1). As the average cost of providing the most basic insurance, this amount should roughly approximate the expected costs to the regulatory scheme (in the form of higher premiums) occasioned by an individuals failure to procure insurance. Because the uninsured effectively force the rest of the nation to insure them with respect to basic, stabilizing care, this penalty is something like a premium paid into the federal government, which bears a large share of the shifted costs as the largest insurer in the nation. 125
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B. History of Compelled Purchases Even if the individual mandate were properly characterized as compelling residents to enter the market, this has long been an acceptable form of regulation under the Commerce Clause. For instance, the Federal Motor Carrier Safety Administration,
acting pursuant to the Motor Carrier Act of 1980, requires that motor carriers purchase either liability insurance or a surety bond in order to ensure that they are able to pay for damage they may cause. See 49 C.F.R. 387. And the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) requires that the owner of property contaminated by a hazardous substance provide removal or remedial actionlikely requiring resort to the marketon pain of liability for punitive damages, even where for the owner bears no[] and culpability is or
responsibility
the
contamination
indeed
entirely
passiv[e]. 42 U.S.C. 9607(c)(3); Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 846-47 (4th Cir. 1992). CERCLA has survived all Commerce Clause challenges, and it was
expressly held a proper exercise of Congresss Commerce Clause power by the Second Circuit Court of Appeals. See Freier v. Westinghouse Elec. Corp., 303 F.3d 176, 203 (2d Cir. 2002),
cert. denied, 538 U.S. 998 (2003); cf. United States v. Olin Corp., 107 F.3d 1506, 1511 (11th Cir. 1997) (holding CERCLA
126
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constitutional appellants). Wickard
Commerce
Clause
legislation
as
applied
to
itself
suggests
that
compelled
purchases
are
permissible. The Court explained: It is said, however, that this Act, forcing some farmers into the market to buy what they could provide for themselves, is an unfair promotion of the markets and prices of specializing wheat growers. It is of the essence of regulating that it lays a restraining hand on the selfinterest of the regulated and that advantages from the regulation commonly fall to others. . . . And with the wisdom, workability, or fairness, of the plan of regulation we have nothing to do. 317 U.S. at 129 wheat (emphasis production added). When describing for how
noncommercial
decreased
demand
market
wheat, the Court explained that it forestall[ed] resort to the market and supplies a need of the man who grew it which would otherwise be reflected by purchases in the open market. Id. at 127, 128. Though Wickard did not involve an express purchase mandate, the Court understood that Mr. Filburn was effectively being forc[ed] . . . into the market to buy wheat when it rejected his Commerce Clause challenge. Id. at 129. C. Compelled Purchases as Governments Core Function Finally, I pause to consider why purchase mandateswhether they be for health insurance or broccolioccasion such fear of federal aggrandizement. Cf. Thomas More, --- F.3d at ----, 2011 WL at *32 (conveying authors lingering intuitionshared by
127
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most Americans, I suspectthat Congress should not be able to compel citizens to buy productions they do not want) (Sutton, J). Compelled purchases are the most fundamental function of government of any sort, and the fact that the government here allowed its residents additional freedom of choice over these purchases should diminish, not exacerbate, anxieties about
federal tyranny. Governments exist, most fundamentally, to solve collective action problems. Core governmental functions, like the provision of domestic peace, enforceable property rights, national
defense, and infrastructure, are assigned to government because the market fails to produce optimal levels of such public
goods. 13 Since public goods are enjoyed by all, most individuals refuse to purchase them themselves, hoping instead that they can free-ride when someone else does. By forcibly collecting tax revenue and using it to purchase public goods, governments are able to solve this collective action problem. Thus, at root,
See generally R.H. Coase, The Lighthouse in Economics, 17 J.L. & Econ. 357, 357-360 (1974); Paul A. Samuelson, The Pure Theory of Public Expenditure, 36 Rev. Econ. & Statistics 387 (1954). Public goods are goods that are "non-rival" and "nonexcludable." "Non-rival" means that enjoyment of the good by one citizen does not reduce the enjoyment by another; "nonexcludable" means that all citizens will enjoy the good once it is producednone can be excluded. See, e.g., John P. Conley & Christopher S. Yoo, Nonrivalry and Price Discrimination in Copyright Economics, 157 U. Pa. L. Rev. 1801, 1805-11 (2009). 128
13
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governments are formed precisely to compel purchases of public goods. Because hospitals are required to stabilize the uninsured, the uninsured are able to pass along much of the cost of their health care to the insured. 14 Solving this problem, as the Act attempts to do, creates a public good: lower prices for health services for all citizens. Thus, the Act compels the purchase of a public good, just as the federal government does when it
collects taxes and uses it to fund national defense. Indeed, it is undisputed that Congress would have had the power under the Taxing and Spending Clause to raise taxes and use increased revenues to purchase and distribute health
insurance for all. It seems quite odd that Congresss attempt to enhance individual freedom by allowing citizens to make their own purchase decisions would give rise to such bloated concerns about a federal power grab. Cf. Thomas More, --- F.3d at ----, 2011 WL at *31 (Sutton, J.) (Few doubt that Congress could pass an equally coercive law under its taxing power . . . .). As for the broccoli mandate appellants fear, I have
explained at several points why nothing I have written would authorize it. But I note that mandating the purchase (but not the consumption,
14
which
would
raise
serious
constitutional
In the language of economics, the failure to obtain insurance has "negative externalities"negative effects on those not responsible for the decision. 129
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issues)
of
broccoli
in
order
to
bolster
the
broccoli
market
would, in practical effect, be nothing new. Since the time of the Founding Fathers, when Alexander Hamilton called for federal subsidies for domestic manufacturers, the federal government has used tax revenues to subsidize various industries. See Algonquin SNG, Inc. v. Federal Energy Administration, 518 F.2d 1051, 1061 (D.C. Cir. 1975) (From earliest days, the tariff authority
given Congress by the Constitution has been understood to apply to the protective tariff sponsored by Alexander Hamilton, a measure focused . . . on the non-revenue purpose of protecting domestic industry against foreign competition.), revd by
Federal Energy Administration v. Algonquin SNG, Inc., 426 U.S. 548 (1976). Though centralized subsidies are far more efficient than purchase mandateswhich is why a broccoli mandate is purely fantasticalthey are, in effect, the same. Since they, too, are clearly within Congresss power under the Taxing and Spending Clause, allowing broccoli purchase mandates would not increase federal power. For these reasons, I find appellants fears to be unfounded. I would reject their novel and unsupported suggestion that Commerce Clause jurisprudence ought to discriminate among regulated persons according to the amount of effort or resources they years have of expended in a given it economic is as arena. that or Under the seventy behavior
well-settled (whether
law,
enough
regulated
characterized 130
activity
inactivity)
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substantially affects interstate commerce. Appellants can cite neither case nor constitutional text for their proposed
activity/inactivity distinction. They can explain neither why it ought to be relevant to my Commerce Clause analysis nor why it ought to impel courts to ignore seventy-year-old law that takes a wholly different approach. And they cannot even provide a
sufficiently concrete definition of activity and inactivity to allow courts to reliably apply their distinction. Because I find the individual mandate to be within the bounds of
Congresss commerce power defined by Wickard, Lopez, Morrison, and Raich, I would reject appellants Commerce Clause challenge. VII. Employer Mandate Appellants also challenge the Affordable Care Acts
employer mandate, arguing that it is not a proper exercise of Congresss power under the Commerce Clause. I disagree. It is well under settled the that Congress Clause. may See regulate United terms States of v.
employment
Commerce
Darby, 312 U.S. 100 (1941) (upholding minimum wage and overtime provisions of the Fair Labor Standards Act); NLRB v. Jones & Laughlin Labor Steel Corp., Act 301 of U.S. 1935, 1 (1937) which (upholding National labor
Relations
forbid
unfair
practices); cf. Employee Retirement Income Security Act of 1974, 29 U.S.C. 1001 et seq. (regulating employer retirement plans and preempting state regulations under the Commerce Clause); id. 131
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at
1082
et
seq.
(setting plans).
minimum This is
funding true,
standards of course,
for of
employer
retirement
employers engaged [solely] in intrastate commerce, so long as Congress could reasonably find that their intrastate activities (considered in the aggregate) substantially affect interstate
commerce. Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 537 (1985); accord Darby, 312 U.S. at 118-119; Jones & Laughlin, 301 U.S. at 36-38. Appellants do not challenge Congresss finding that
employers who do not offer health insurance to their workers gain an unfair economic advantage relative to those employers who do provide coverage and contribute to a negative feedback loop in which uninsured workers turn to emergency rooms for health care which in turn increases costs for employers and
families with health insurance, making it more difficult for employers to insure their employees. H.R. Rep. No. 111-443(II), at 985-86 (2010). Nor do appellants dispute the fact that this amounts to a substantial effect on interstate commerce. Instead, they attempt to distinguish the employer mandate from the wage and overtime provisions in Darby and the fair labor practices in Jones & Laughlin and argue that the mandate compels private employers [to] enter into a contract with other private parties for a particular product. Appellants Br. 25.
132
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These
arguments
fail.
Appellants
cannot
convincingly
distinguish Darby or Jones & Laughlin. They repeatedly suggest that regulated but, employers as must be involved it is well in interstate that
commerce;
explained
above,
settled
employers who conduct only intrastate business may be regulated under the Commerce Clause so long as their economic activities, considered in the aggregate, substantially affect interstate
commerce. Appellants emphasize the Courts observation in Jones & Laughlin that the National Labor Relations Act does not
compel agreements between employers and employees. Id. at 27 (quoting Jones & Laughlin, 301 U.S. at 31). Neither does the employer mandate: like the minimum wage and overtime provisions upheld in Darby, it merely requires that employment agreements contain certain terms (or that the employer pay a penalty). Appellants attempt to distinguish Darby by arguing that
the wage and hour provisions in Darby . . . did not prescribe what must be contained within the employment contract, other than setting a floor for wages and a ceiling for hours.
Appellants Br. 28. But the employer mandate, too, only set[s] a floor: it requires employers to offer employees the
opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, but employers are free to
select any plan (or create their own) and provide any level of
133
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coverage
above
the
minimum
essential
level,
the
mandates
floor. 26 U.S.C. 4980H(a)(1). Appellants only other objection to the employer mandate is that it allegedly forces employers to contract with third
parties. This is untrue: employers are free to self-insure, and many do. See Employee Benefit vs. Research Inst., Health Plan
Differences:
Fully-Insured
Self-Insured
(2009)
(reporting
that 55% of employees with health insurance were enrolled in self-insured plans in 2008); Christina H. Park, Div. of Health Care Statistics at the Natl Ctr. for Health Statistics, Ctrs. for Disease Control and Prevention, Prevalence of Employer SelfInsured Health Benefits: National and State Variation, 57 Med. Care Res. & Rev. 340, 352 (2000) (finding that 21% of all
private-sector employers who offered health benefits offered a self-insured health plan in 1993; 49% of employees were enrolled in self-insured the plans). to Even if employers health were compelled to
enter
market
purchase
insurance,
appellants
objection would fail for the very reasons I would reject their similar challenge to the individual mandate. VIII. Religious Exemptions Appellants Clause, the also allege violations of the Act Free of Exercise the
Religious
Freedom
Restoration
1993,
Establishment Clause, and equal protection. The Act makes two religious exemptions: a religious 134 conscience exemption and a
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health-care sharing ministry exemption. 26 U.S.C. 5000A(d)(2). The former exempts members of a recognized religious sect in existence since December 31, 1950 who are conscientiously
opposed to acceptance of the benefits of any private or public insurance which makes payments in the event of death,
disability, old-age, or retirement or makes payments toward the cost of, or provides services for, medical care. Id.
1402(g)(1). The latter exempts members of a health care sharing ministrya non-profit organization in existence since December 31, 1999 with members who share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs and without regard to the State in which a member resides or is employed. Id.
5000A(d)(2)(B)(ii). Appellants claim that these exemptions are religious
gerrymanders demonstrating that the Act itself is hostile to certain religions, Appellants are Br. 45, and further that the the
exemptions
themselves
unconstitutional
under
Establishment and Equal Protection Clauses. For the following reasons, I reject these arguments. A. Free Exercise Clause Appellants their sincerely allege held that the Act compels them to violate
religious funding,
beliefs or
against
facilitating, and
subsidizing,
easing,
supporting
abortions
135
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prohibits the University from providing health care choices for employees that do not conflict with the mission of the
University and the core Christian values under which it and its employees order their day to day lives. Second Am. Compl. 142; Pls. Oppn 36. This argument is unavailing. [T]he right of free exercise does not relieve an
individual of the obligation to comply with a valid and neutral law of general applicability on the ground that the law
proscribes (or prescribes) conduct that his religion prescribes (or proscribes). Dept. of Human Res. of Or. v. Smith, 494 U.S. 872, 879 (1990). Appellants claim that the Act is not neutral because its religious exemptions are the type of religious gerrymanders that the Supreme Court warned against in Lukumi. Appellants Br. 45 (quoting Church of Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520, 534 (1993)). They are not. In Lukumi, the Supreme Court struck down city ordinances after
finding that [t]he record in this case compels the conclusion that the suppression of the central element of the Santeria
worship service was the object of the ordinances. 508 U.S. at 534. Here appellants never allege that the object of [the Act] [wa]s to infringe upon or restrict practices because of their religious motivation. Id. The Act is a neutral law of general applicability and so does not violate the Free Exercise Clause. B. Religious Freedom Restoration Act 136
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I also reject the claim that application of the individual mandate to appellants would run afoul of the Religious Freedom Restoration Act of 1993 (RFRA). The RFRA directs that the
Government shall not substantially burden a persons exercise of religion even if the burden results from a rule of general applicability, unless the Government demonstrates that
application of the burden to the person (1) is in furtherance of a compelling governmental of interest; that and (2) is the least
restrictive
means
furthering
compelling
governmental
interest. 42 U.S.C. 2000bb-1. If appellants had plead sufficient facts to demonstrate a substantial burden to their exercise of religion, I would be forced to consider the relevance of the RFRA to a subsequent act of Congress. Cf. Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal, 546 U.S. 418 (2006) (applying RFRA to enforcement of pre-RFRA provisions of the Controlled Substances Act). But
appellants have not. To survive the Governments must 12(b)(6) the motion grounds to of dismiss, [their]
appellants
complaint
provide
entitlement to relief, which requires more than labels and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted). [C]onclusory
allegations are not entitled to be assumed true. Ashcroft v. Iqbal, --- U.S. ---, ---, 129 S. Ct. 1937, 1951 (2009). Unless 137
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appellants allegations nudge[] their claims across the line from conceivable to plausible, their complaint must be
dismissed. Twombly, 550 U.S. at 570. Here appellants merely alleged that the individual mandate will force them to violate their sincerely held religious
beliefs against facilitating, subsidizing, easing, funding, or supporting abortions. Second Am. Compl. 142. Nowhere does the complaint explain how the Act would do this. The Act contains provisions to ensure that federal funds are not used for
abortions (except in cases of rape or incest, or when the life of the woman would be endangered), see Affordable Care Act 1303; see also Exec. Order No. 13,535 of Mar. 24, 2010, 75 Fed. Reg. 15,599 (implementing Section 1303s abortion restrictions), and that each states health benefit exchange will include at least one plan that does not cover (non-excepted) abortions, see Affordable Care Act 1334(a)(6). Without additional or more particularized allegations, I cannot say that appellants
complaint makes it plausible that the Act substantially burdens [their] exercise of religion. 42 U.S.C. 2000bb-1(b). C. Establishment Clause and Equal Protection Appellants also challenge the Acts religious exemptions
themselves, claiming that they violate the Establishment Clause and equal protection because they grant preferred status only to certain religious adherents. Appellants Br. 45. I disagree. 138
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Like
the
permissible
legislative
accommodation
of
religion
upheld by the Supreme Court in Cutter v. Wilkinson, the Acts exemptions religious alleviate exercise, government-created do[] not override burdens other on private
significant
interests, and neither confer[] . . . privileged status on any particular religious sect, [nor] single[] out [any] bona fide faith (2005). The religious conscience exemption simply incorporates the exemption created by section 1402(g)(1), which has survived for disadvantageous treatment. 544 U.S. 709, 719-23
every Establishment Clause challenge to it over the last forty years. See, e.g., Droz v. Commr, 48 F.3d 1120, 1124 (9th Cir. 1995); Hatcher v. Commr, 688 F.2d 82, 83-84 (10th Cir. 1979); Jaggard v. Commr, 582 F.2d 1189, 1190 (8th Cir. 1978); Palmer v. Commr, 52 T.C. 310, 314-15 (1969). For the reasons set out by our sister courts in these cases, I would reject appellants Establishment Clause challenge to the Acts exemptions. The exemptions easily survive appellants equal protection challenge as well. Legislation comports with equal protection requirements so long as it employs a rational means to serve a legitimate end. City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 442 (1985). And where individuals in the group
affected by a law have distinguishing characteristics relevant to interests the [legislature] has the authority to implement, 139
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the courts have been very reluctant . . . to closely scrutinize legislative choices as to whether, how, and to what extent those interests should be pursued. Id. at 441-42. Here Congress could have reasonably believed that members of groups that provide health care to their members are less likely to require public medical care, and thus less likely to produce the externalities the Act was designed to diminish. And Congress could have
reasonably believed that if it did not limit these exemptions to groups formed prior to a pre-enactment date, individuals who simply wished to avoid the individual mandate would form groups that insincerely claimed the required religious beliefs. Thus the distinctions Congress drew in the Acts religious exemptions accord all equal protection under the law. IX. Conclusion For the foregoing reasons, I would hold that the AIA does not deprive federal courts of jurisdiction to adjudicate the constitutionality of the Affordable Care Act. I would further hold that each of appellants challenges to the Act lacks merit and that, specifically, muster as both the individual exercises and of employer Congresss
mandates
pass
legitimate
commerce power. Regrettably, my fine colleagues in the majority perceive a jurisdictional bar in this case that simply is not there.
Accordingly, I respectfully dissent. 140

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Appeal: 10-2347

Date Filed: 09/08/2011

PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Date Filed: 09/08/2011

Date Filed: 09/08/2011

Date Filed: 09/08/2011

May 10, 2011

Before MOTZ, DAVIS, and WYNN, Circuit Judges.

Date Filed: 09/08/2011

Date Filed: 09/08/2011

Date Filed: 09/08/2011

enjoin, of Care the

Internal Revenue Code by adding:

(1) a penalty payable to the

instructions to dismiss for lack of jurisdiction.

I. A. On March 23, 2010, the President signed into law the

Date Filed: 09/08/2011

care in the United States.

See Pub. L. No. 111-148.

applicable 2013, the

The individual mandate lists a number of

A taxpayer must include the penalty

Date Filed: 09/08/2011

The taxpayer owes the penalty only if he fails

dependent, as defined in 152 of the Code.

5000A(c)(1). 5000A(g)(1) authorizes the Secretary of the

Date Filed: 09/08/2011

Affordable Care Act.

Date Filed: 09/08/2011

insurance coverage to its employees. offer adequate coverage is to its

If the employer fails to full-time by employees, the

enforcing the Act. following facts.

In their complaint, plaintiffs allege the

Date Filed: 09/08/2011

services as she uses them.

significant penalties. They seek to enjoin the Secretary from assessing or

mandate assesses a direct tax that is not apportioned according 12

Date Filed: 09/08/2011

violation of Congresss Taxing Power. be free from improper taxation

Accordingly, they ask to is likely to cause

significant financial hardships. individual mandate exceeds

They also contend that the authority under the

Commerce Clause of the Constitution. Liberty, a private Christian university located in

rights to be free from improper taxation.

Liberty also asserts

declaration that the Act is unconstitutional and assert that

Date Filed: 09/08/2011

After rejecting the AIA argument and the

specifically declining to attack the district courts threshold 14

Date Filed: 09/08/2011

first those offered by

Date Filed: 09/08/2011

subject-matter jurisdiction. 500, 514 (2006). overlook or elect

See Arbaugh v. Y&H Corp., 546 U.S.

subject-matter jurisdiction. so held.

The Supreme Court has explicitly

See Enochs v. Williams Packing & Navigation Co., 370

Date Filed: 09/08/2011

primary goal of regulation.

United States v. Sanchez, 340 U.S. Thus, See

Date Filed: 09/08/2011

Thus, an exaction constitutes a tax for

Date Filed: 09/08/2011

taxes under the Constitution.