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Mortimer Caplin Quoted in Tax Notes, Supreme Court to Consider AIA's Applicability to Healthcare Law

November 21, 2011, Tax Notes

In accepting for consideration five questions regarding the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), the Supreme Court on November 14 granted an hour exclusively for arguments on whether the Anti-Injunction Act (AIA) bars consideration of the constitutionality of the individual mandate.

Section 5000A, added by the PPACA, requires nonexempt individuals to have health insurance starting in 2014. If they fail to buy insurance, a penalty is assessed on their income tax return. The government has the authority to regulate interstate commerce and the authority to tax, but the PPACA says it imposes the penalty under Congress's commerce clause power. (For tax-related excerpts of P.L.111-148, see Doc 2011-4583 or 2011 TNT 43-55.)

The Eleventh Circuit found the mandate unconstitutional under the commerce clause and the taxing power but did not address the AIA, which the district court held did not bar the suit. (For Florida v. U.S. Department of Health and Human Services, Nos. 11-11021, 11-11067 (11th Cir. Aug. 12, 2011), see Doc 2011-17561 or 2011 TNT 158-14. For a petition for certiorari from Florida's attorney general, see Doc 2011-23738 or 2011 TNT 219-14. For a cert petition from the National Federation of Independent Business, see Doc 2011-23735 or 2011 TNT 219-13.)

Although the government changed positions and now agrees with the plaintiffs that the AIA does not prevent federal courts from considering the merits of the healthcare cases, the Supreme Court has an independent obligation to satisfy itself that it has jurisdiction to hear the case.

In its supplemental brief to the Fourth Circuit, the government said that because the individual mandate penalty provision is in chapter 48 of subtitle D, it is not covered by the AIA. (For Liberty University v. Geithner, No. 10-2347 (4th Cir. Sept. 8, 2011), see Doc 2011-19031 or 2011 TNT 175-12. For prior coverage, see Tax Notes, Oct. 3, 2011, p. 17, Doc 2011-20685, or 2011 TNT 190-1.)

Not all observers agree that the AIA is inapplicable on its face. Mortimer M. Caplin, former IRS commissioner under President Kennedy and now with Caplin & Drysdale, said that whether the AIA applies to the individual mandate is a vitally important question. Caplin and Sheldon Cohen, also a former IRS commissioner, submitted an amicus brief to the D.C. Circuit in Seven-Sky v. Holder arguing that the AIA applied. Although the majority did not find it applicable, the court discussed the AIA at length in its opinion. (For the brief, see Doc 2011-20706 or 2011 TNT 190-15. For Seven-Sky v. Holder, No. 11-5047 (D.C. Cir. Nov. 8, 2011), see Doc 2011-23522 or 2011 TNT 217-19.)

Caplin said the statute ‘‘goes to the heart of our whole tax system,'' both as a historical matter — the first income tax was enacted in 1861, and the AIA was adopted in 1867 — and as a practical one. To permit the IRS to handle more than 250 million returns and associated disputes in an orderly fashion, it is essential to prohibit suits before the disputed tax is actually paid or defended against in an enforcement action, he said.

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