The Fifth Circuit Court of Appeals has affirmed a district court decision holding that the Affordable Care Act’s (“ACA”) individual mandate is unconstitutional. However, the court remanded the case so that the district court could provide additional analysis of other ACA provisions as they currently exist now in light of the finding regarding the individual mandate.
Background
Under Code Sec. 5000A, if a taxpayer or an individual for whom the taxpayer is liable isn’t covered under minimum essential coverage for one or more months, then, unless an exemption applies, the taxpayer is liable for the individual shared responsibility payment on his return. The amount of a taxpayer’s shared responsibility payment is based, in part, on the number of individuals for whom the taxpayer is responsible, who do not have minimum essential coverage. (Code Sec. 5000A(c)(3)(B), Reg. § 1.5000A-4)
For months beginning after December 31, 2018, the Tax Cuts and Jobs Act (TCJA, P.L. 115-97, 12/22/2017) reduced the amount of the individual mandate to zero (Code Sec. 5000A(c)), effectively repealing the mandate.
After the TCJA was enacted, two individuals and 18 states (plaintiffs) filed a lawsuit in a federal district court in Texas seeking an injunction prohibiting the federal government from enforcing any provision of the ACA or its regulations. The plaintiffs argued that TCJA’s change in the tax law, which eliminated the penalty for not having health insurance, invalidated ACA in its entirety.
District court holding
The district court held that ACA was unconstitutional because Congress, in the TCJA, eliminated the tax penalty under the individual mandate for those who do not maintain health care insurance. (Texas v. U.S., (DC TX 2018) 122 AFTR 2d 2018-6932)
In its decision, the district court sided with an alliance comprised of 20 states that argued that TCJA’s change in tax law, which eliminated the penalty for not having health insurance, invalidated ACA in its entirety.
Fifth Circuit holding.
On appeal, the Fifth Circuit held that the individual mandate was unconstitutional because it could no longer be read as a tax, and there was no other constitutional provision that justified this exercise of congressional power when it enacted ACA. Thus, the circuit court affirmed that part of the district court’s decision.
However, on the issue of severability (i.e., whether other parts of the ACA are still valid even if one part has been declared unconstitutional), the court remanded the case to the district court to provide additional analysis of the ACA provisions as they currently exist now that the individual mandate has been eliminated and ruled unconstitutional.
The Fifth Circuit directed the district court to employ a finer-toothed comb on remand and conduct a more-searching inquiry into which ACA provisions Congress intended to be inseverable from the individual mandate. The rule of law demanded a careful, precise explanation of whether the ACA provisions are affected by the unconstitutionality of the individual mandate, the court said.
To continue your research on the requirement that individuals maintain health insurance, see FTC 2d/FIN ¶A-6400; United States Tax Reporter ¶50,00A4.
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