• The rest of the story

    Sarah Kliff quoted me on the federal exchange tax issue that’s heating up, but (alas) she didn’t give my full perspective. And I totally disagree with the title to her post.

    Nice to have a blog. My views:

    1.  On the Merits – Section 36B was not well drafted if the goal was to permit tax credits in the federal exchanges.

    2.  The CBO scored it as if they did, which is Abbe Gluck’s best argument in favor of permitting the tax credits in the exchanges.

    3.  IRS has broad regulatory authority, which they exercised in the proposed rule, defining Exchange in a much broader way.

    a.  If I represented a taxpayer who lost benefits from this rule, I’d have the stronger case before the Tax Court.

    b.  Here, the IRS is being more generous than the statute requires.  That’s a more unusual case.

    c.  I’m not sure if the plaintiffs have standing – taxpayer standing is very limited. See Tim Jost’s post for a roadmap to the problems.

    d.  The Anti-Injunction Act clearly applies – pay your tax and sue for a refund in 2015. But will anyone pay any tax under this provision?  I don’t see it.  Plus, there is no ticket to the Tax Court here since the IRS will not issue a Notice of Deficiency.

    4.  Do the Red States really want no federal subsidies in the federal exchanges?  Won’t that encourage more states to form a state exchange?

    @koutterson

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    • The IRS does not have “broad regulatory authority” to rewrite the statute. Chevron is clear on this point: “if Congress has directly spoken to the precise question at issue … the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.”

      No ambiguity in the express language of the statute means the text itself is binding and the IRS has no regulatory authority to interpret that language more broadly.

      And of course someone will pay a tax here: the tax penalty for employers who don’t offer government-approved insurance only kicks in if their employees receive subsidies or tax credits.