skip to Main Content

COURT ACTION

King v. Burwell

The Supreme Court recently heard oral arguments in King v. Burwell. Along with the same sex marriage case, this is the most important case the court will decide this year. Depending on the outcome, the court could change the future course of Obamacare.

To quickly review the legal issues, section 36B of the Internal Revenue Code provides a tax credit to certain low income taxpayers “who are enrolled in an exchange established by the state.” The applicable Treasury regulations state that the term “exchange” includes an exchange facilitated by the federal government. A D.C. Court of Appeals three judge panel in Halbig v. Burwell ruled that the plain language of section 36B only refers to an exchange established by the state and therefore no premium credit can be paid (and no penalties assessed) using the federal exchange. The Halbig court invalidated the regulation. The Fourth Circuit Court of Appeals panel reached the opposite result (on the same day no less) in King v. Burwell, holding that an integrated reading of section 36B and the Affordable Care Act (ACA) supports the IRS’s interpretation of “exchange.” The Supreme Court granted certiorari in November 2014 to resolve the issue.

During oral arguments, the justices seemed split along the traditional liberal/conservative lines, with Chief Justice Roberts noticeably quiet during the arguments. Much of the arguments dealt with whether the court should merely look at the discrete statutory provision or whether it should read the statue within a wider context. Justices Breyer and Kagan suggested that when read in context with the rest of the ACA, section 36B may include federal exchanges considering that ACA section 1321 allows the federal government to establish an exchange if a state fails to act. Justice Sotomayor suggested that the plaintiff’s interpretation results in the federal government unconstitutionally coercing states to establish their own exchanges, because otherwise their citizens would not receive tax credits and costs would rise on insurance plans. Justice Scalia suggested that even if a provision constitutes an unconstitutional coercion, the court may not rewrite it if it’s unambiguous. Justice Alito further questioned if Congress did not intend “established by the state” to mean what it says, why would Congress use that language? A decision by the court is expected in late June or early July.

If the regulation is invalidated, all bets are off as to what will happen with Obamacare. Just to be clear, within the alliantNational family we have a divide, with Zerbe taking the Scalia approach and Miller believing that the regulations (that he signed while at the IRS) are valid. Time will tell.

GET STARTED

Contact our team today with any tax controversy concern you’re facing. We fight every day to protect the interests of the taxpayer, and we look forward to putting you in the best tax situation possible.

GET STARTED

Contact our team today with any tax controversy concern you’re facing. We fight every day to protect the interests of the taxpayer, and we look forward to putting you in the best tax situation possible.

Back To Top
×Close search
Search