The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.
What’s the legal basis for the administration’s decision to delay the employer mandate until 2015? Can the IRS just ignore §1513(d) of the ACA, which says the mandate “shall apply to months beginning after December 31, 2013”? Michael Cannon, among others, thinks not: “the IRS’s unilateral decision to delay the employer mandate is the latest indication that we do not live under a Rule of Law, but under a Rule of Rulers who write and rewrite laws at whim, without legitimate authority, and otherwise compel behavior to suit their ends.”
Strong words. Too strong, as it turns out. The administration hasn’t released its legal justification yet, so I’m speculating here. But the structure of Treasury’s memorandum may provide a clue to its thinking. The memo frames its discussion around Treasury’s delay of the reporting requirements associated with the employer mandate, which are found in §6055 and §6056 of the Internal Revenue Code. Per those requirements, employers must submit tax returns that report on the health-insurance coverage that they do (or don’t) offer their employees. Those returns must be submitted, per §6055 and §6056, “at such time as the Secretary may prescribe.” Delaying the reporting requirements until 2015 is arguably just a specification of the “time” at which the reports must be submitted. (The ACA does contemplate that the reporting requirements would come into force “after December 31, 2013.” But that general effective date should probably give way to the specific instruction that the Secretary can adjust the timeframe.)
So far, so good. Treasury then says that it’d be “impractical” to impose penalties for failing to adhere to the employer mandate because it won’t have the necessary information to do so. Now, that’s not a legal argument. The IRS can’t waive a tax penalty that Congress has imposed on employers just because that penalty is hard to administer. But maybe this is what the Administration has in mind: §1513 of the ACA, which imposes the employer penalty, is part and parcel of a comprehensive administrative scheme that depends on the new reporting requirements. Congress understood that the two go hand-in-glove: how can the IRS impose a penalty if the employer isn’t even obligated to file a tax return with the necessary information? In giving the Treasury Secretary the discretion to specify when those returns will be filed, Congress must also have given him the discretion to delay imposition of the tax penalties until those returns are in fact filed.
That’s a plausible legal argument, especially given the general assumption that Congress intends for agencies to resolve ambiguities in the statutes that they administer. Still, it’s far from airtight. Although the reporting requirements don’t go into effect until the IRS specifies when and in what form the reports should be filed, the ACA nowhere says that the penalty depends on whether employers have submitted reports under §6055 and §6056. Instead, the ACA is blunt that it “hereby impose[s] on the employer an assessable payment” for failing to adhere to the employer mandate. And the effective date of the penalty provision is categorical. The natural inference is that the penalty comes into force on January 1, 2014, whether or not the agency has the reporting machinery in place to administer it. This is probably the most straightforward reading of the statute, even if the competing interpretation is also reasonable.
If the administration has a better argument up its sleeve, I’d like to see it. For now, though, let’s assume for the sake of argument that the waiver is unlawful. So what? Could someone challenge it in court, as Avik Roy suggests might happen? Almost certainly not. A would-be litigant must have standing to go to court, which means that the supposedly unlawful agency action must have injured, or be expected to injure, the litigant. Employers can’t meet that standard: waiving a tax penalty doesn’t harm them (and no, fancy theories that an employer is harmed because his competitor isn’t taxed enough won’t get off the ground). Nor would upset advocacy organizations or members of Congress have standing.
So who’s hurt? It’s possible, even likely, that some workers will lose out on employer-sponsored insurance as a result of the waiver. But any individual worker is going to be hard-pressed to convince a court that her employer would have given her health insurance in 2014 but for waiver of the tax penalty. Under current doctrine, that’s much too speculative a potential injury to support standing. Unless I’m missing something, no one has standing to challenge the waiver—whether it’s legal or not.
