The Seventh Circuit affirmed the dismissal of a suit objecting to the IRS’s decision to delay imposing the Sec. 4980H employer mandate penalty until 2015 ( Association of American Physicians and Surgeons, Inc., No. 14-2123 (7th Cir. 9/19/14), aff’g No. 13-C-1214 (E.D. Wis. 3/18/14)).
Under Sec. 4980H, an applicable large employer is subject to a
penalty if its employer-sponsored health coverage does not provide
“minimum essential coverage” or is not affordable relative to the
employee’s household income and at least one full-time employee has
been certified as having enrolled in a qualified health plan with
respect to which an applicable premium tax credit or cost-sharing
reduction is allowed or paid with respect to the employee. In Notice
2013-45, the IRS announced that it was postponing enforcement of the
penalty until 2015 to give employers, insurers, and other providers
more time to adapt their health coverage and reporting systems. (The
original effective date was 2014.)
The plaintiffs, a
group of physicians, many of whom do not accept health insurance,
argued that they had standing to challenge the delay in the employer
mandate because they claimed that the delay would affect them
financially by lessening employees’ ability to be able to afford to
purchase medical care from these cash-only doctors. During 2014, they
claimed, these employees will either have to purchase their own
insurance or pay the penalty imposed on uninsured individuals, which
makes them less able to afford to purchase medical care from the
plaintiffs.
In their suit, the plaintiffs asked the courts to enjoin “what they
describe as a violation of the separation of powers ... and the Tenth
Amendment,” but because they were not complaining about their own
taxes, the district court dismissed the suit for lack of standing
(slip op. at p. 2).
In response to the plaintiffs’
argument that the lower demand for their services gave them standing,
the Seventh Circuit pointed out that this logic would give them
standing to challenge any tax policy. If the IRS issued rules
forbidding tax shelters, the plaintiffs could challenge those rules
even if they had not participated in one, claiming that enforcing the
tax shelter rules would leave other taxpayers with less money to buy
the doctors’ services.
The Supreme Court has held that taxpayers do not have standing to litigate the amount of another person’s taxes. “The longer the causal chain, the less appropriate it is to entertain standing, the [Supreme] Court explained” (slip op. at 3, citing Allen v. Wright, 468 U.S. 737 (1984)). Furthermore, the appeals court explained that everything is connected to everything else in our economy “through the price system” and to allow such a long, interconnected chain would virtually eliminate the standing requirement (id.).
The plaintiffs argued that their standing claim was different from the one in Allen because Allen involved an equal protection issue, and the present claim involves the separation of powers and the Tenth Amendment. This difference, however, was not relevant, the court held. A different substantive claim will not affect whether “injury in fact, causation, and redressability, the three elements of constitutional standing to sue” are present (slip op. at 4, citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)).
—
Sally P. Schreiber (
sschreiber@aicpa.org
) is a JofA senior editor.
