Amicus Curiae Brief — King v. Burwell, 135 S. Ct. 475 (2014) (No. 14-114)

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No. 14-114

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IN THE

Supreme Court of the United States

DAVID KING; DOUGLAS HURST;

BRENDA LEVY, ROSE LUCK,

Petitioners,

SYLVIA MATHEWS BURWELL, as U.S. Secretary of

Health and Human Services; UNITED STATES

DEPARTMENT OF HEALTH AND HUMAN SERVICES;

JACOB LEW, as U.S. Secretary of the Treasury;

UNITED STATES DEPARTMENT OF THE TREASURY;

INTERNAL REVENUE SERVICE; and JOHN KOSKINEN,

as Commissioner of Internal Revenue,

Respondents.

ON A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF OF AMICI CURIAE

ADMINISTRATIVE & CONSTITUTIONAL LAW PROFESSORS

IN SUPPORT OF PETITIONERS

ROBERT A. DESTRO

Counsel of Record

MARSHALL J. BREGER

3600 John McCormack Road, N.E.

Washington, D.C. 20064

(202) 905-6064

robertdestro@outlook.com

Attorneys for Amici Curiae

TABLE OF CONTENTS

Il. THE IRS RULE VIOLATES THE

APPROPRIATIONS CLAUSE OF ARTICLE I. ................. 6

PPACA is an Appropriations Act. .................

The IRS has no Statutory Authority “To

Lay ... Taxes” or “To Allow” Credits. ............

The IRS Rule is a “Revision” of Section

36B not an “Interpretation” ...........................

The IRS Rule is Unconstitutional

Il. VOIDING THE IRS REGULATION DOES NOT

LEAD TO ABSURD RESULTS OR TO

FRUSTRATION OF CONGRESSIONAL DESIGN

Congress Authorized and Encouraged the

States and the District of Columbia to

Create Fiftv-One (51), Independent

“American Health Benefit Exchanges” .........

Congress Sought to Partner with the

States to Create, Finance, and Sustain a

Vast Social, Economic, and Medical

III ceikovuccicsiscsussannosnniidintiicaminibcdmabidiaaie:

. The Text of PPACA Presupposes

“Voluntary” Participation by the States

as the Primary Means by which to Create

Viable, State-specific Insurance Pools

Large Enough to Cover the Uninsured.........

1. Medicaid Expansion: Insuring the

MEINE <<a; nuhadicdeniiedeandeieemiakendtinsadbinds buiece

senbi 6

_ 7

om 5 |

2. Expanding the Pool: Subsidies and

Mandates in “American Health Benefit

E. The Legal Fiction that the Federal

Government “Acts on Behalf of the State”

Violates PPACA and other Federal Laws........ 28

F. There is no “Ambiguity” in the Tax

Credit “Allowed” by Congress ...............cc0cceeee+ 32

Ill. CHEVRON DEFERENCE IS INAPPROPRIATE IN

it anes aeasaseueuaes 34

A. Under Chevron, the Court Decides, as a

Matter of Law, whether there is

Te SER eR eens dae 35

B. Congress has directly addressed the

precise question at issue in this case............... 35

1. Respondents’ Claim for Chevron

Deference is Overbroad. ..................cccceeeceeeese 36

2. IRS Discretion under Chevron is

Congruent with its Authority to

Administer the Tax Laws...............cccccceeceeee es 37

CIT vialnivintsiuaeanandehign sauiseaiiueieccubiadduindecniniee 40

TABLE OF AUTHORITIES

Cases

Austin v. United States, 155 U. S. 417 (1894) ......... 13

Cincinnati Soap Co. v. United States, 301 U. S. 308

(EOE TENE PE DIET 34

Doe v. Matthews, 420 F. Supp. 865 (D. N. J. 1976) .16

Hart v. United States, 118 U. S. 62 (1868) .............. 13

Iselin v. United States, 270 U.S. 245, 251 (1926) ....33

Knote v. United States, 95 U. S. 149 (1877)............. 13

MetroPCS Cal., LLC v. FCC, 644 F.3d 410 (D.C. Cir.

BREE TO ciennansasnnicdsnnnensiaheerombsnnennenenpuentiaendsiaieanen 32

Michigan v. Bay Mills Indian Community, 134 S.Ct.

BI acon cuinsccceanencnsidaonecqpsicsivpaepuciansaesnubesaieabanibiatnies 34

Nat'l Fed'n of Indep. Bus. v. Sebelius, 132 S.Ct. 2566

SI cs ns coussnisissdceneidiiniiapnaisaalaiastabmsinneiiaaarbs 4, 12, 22, 25

Office of Pers. Mgmt. v. Richmond, 496 U.S. 414,

427. 1110S. Ct. 2465, 2473 (1990).................... 14,17

Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S.

RR WE Sah es te Peete Reda a a SOE RE asa SES 32

Reeside v. Walker, 52 U. S. (11 How.) 623 (1850)...13.

14, 15

Skinner v. Mid-America Pipeline Co., 490 U.S. 212

CRI << casintisseespaencbicieisietamcqebsineedisienioncenniinbenoninremmanationan 8

South Dakota v. Dole, 483 U.S. 203 (1987).............. 24

Spaulding v. Douglas Aircraft Co., Inc., 60 F. Supp.

Oe Th i ieaeade 16

Stitzel-Weller Distillery v. Wickard, 118 F. 2d 19

(aR ier reba hs SE Che ise wer: 16

United States v. Lovett, 328 U. S. 303 (1946)...13, 16,

Utility Air Regulatory Grp. v. EPA, 124 S.Ct. 2427

GED vecsnccisccsivessecscccsescviicevnssvcnssscrswecacsctesstaceossepnsnees 32

Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S.

coc heat RITES SOR SATE TER 2

Statutes

26 U.S.C. § eae a age Nee aed Rr 36

26 U.S.C. § NE one YE Sk 3

26 U.S.C. § 4980H(a-b) oo... cococcccceceeeeeceseeecc 11

26 U.S.C. § 6201 (2014) o.oo. oeccccccocecccceeceeee cee. 35

Ln eae 36

GB WIG. § BIBI. .ocsesccnesesesevevceseveceesesesseeees...... 22, 25

42 USC § 18051 (2012) ooo. 18, 19, 25

TN siisiciienidhciiatiphntnisaedecinasaysilisadenetrdnpesmiies oo. passim

PPACA §§ 1501(C-D) (codified as amended at 42

GP ©) BOE SUID vsnaccessnscnseincsnesnsivbisisinsiascsee. 23

PPACA §§ 2001(a-b), codified as amended at 42

reise SAU COI ccc ciossicisceiniclonsiceisssecsneeseccsc.: 22

Pub.L. No. 112-240, 126 Stat. 2313. §642 (January 2,

PUR telinicasntbitinaadasiehacentinidocobsibiersmmbitemsinesies aise ic 31

Pub.L. No. 112-56, 125 Stat. 111 (2011)... 31

Pub.L. No. 112-9, 125 Stat. 36 (2011)..........000..0....... 31

NN MER Rioidinnecc cs passim

nL _, BEELER aCe aan ane ee 32, 33

Section 1321(c)(1)(A-B), 42 U.S.C. §18041(c)(1)(A-B)

TN Pa isiutninndauiitamnbiiecdipintsnvnnssnuiitsnisaemiaens ot 26

Other Authorities

Congressional Budget Office, “Updated Estimates of

the Effect of the Insurance Coverage Provisions of

the Affordable Care Act, April 2014.” 00.00 ooo....... 2,8

General Accounting Office, Office of th. General

Counsel, “The Augmentation Concept”, 6 GAO-RB

pt. E, §1 (G.A.O.), 2006 WL 6179178 (February,

I hase cae ice a 29

Jim Golden, “Innovating on the Obamacare Data

Platform,” FORBES (July a 2012) at

http://www.forbes.com/sites/jimgolden/2012/07/01/i

nnovating-on-the-obamacare-data-platform/

IS TR, BO I aon coccen svacsneradadecesicatesiideeaes 20

John Cannan, A Legislative History of the Affordable

Care Act: How Legislative Procedure Shapes

Legislative History, 105 LAW LIBRARY J. 131, 159

BN iececsicsdeinn secs etatenasinians cones egaaiareaeusee aciean 40

Joint Staff Report, U.S. House of Representatives,

113% Cong., “Administration Undertook Flawed

Analysis of Key Issues Prior to Expanding Health

Law's Taxes and Subsidies” (Feb. 5, 2014) 4 at

http://oversight.house.gov/wp-

content/uploads/2014/02/IRS-Rule-OGR-WM-Staff-

Report-Final1l.pdf (accessed Dec. 23, 2014).......... 27

Kaiser Commission on Medicaid and the Uninsured,

A Historical Review of How States Have Responded

to the Availability of Federal Funds for Health

Coverage (August 2012) at http://kaiserfamily

foundation.files.wordpress.com/2013/01/8349. pdf

I Bk PII ic ccavnnsaddececnucdabseinentcnicteats 24

Kelly Kennedy, “Analysis of Huge Data Sets will

Reshape Health Care,” USA Today (Nov. 24, 2013)

at http://www.usatoday.com/story/news/nation

/2013/11/24/big-data-health-care/3631211/

II T, 21

Ken Congdon, Editorial, “Obamacare’s Big Data

Opportunity”, HEALTH IT OUTCOMES (May 1, 2013)

at http://www.healthitoutcomes.com/doc/

obamacare-s-big-data-opportunity-0001 (accessed

Is es es os cataeaioencemdeionisindanten 21

Scott Vorse, “Beyond Gruber: How HHS Flip-Flopped

on Federal Exchange Subsidies,” (Competitive

Enterprise Institute WEBMEMO 28, Nov.20, 2014)

at https://cei.org/content/beyond-gruber-how-hhs-

flip-flopped-federal-exchange-subsidies (accessed

ER SAE i els SELES ON SA ABE SA 27

Law Reviews & Treatises

J. Story, 2 COMMENTARIES ON THE CONSTITUTION OF

THE UNITED STATES § 1348 (3d ed. 1858).............. 14

Rena I. Steinzor, Devolution and the Public Health,

24 HARV. ENVTL. L. REV. 351, 383 n. 127 (2000)...25

Ronald D. Rotunda & John E. Nowak, TREATISE ON

CONSTITUTIONAL LAW: SUBSTANCE AND PROCEDURE

(West Pub. Co. 5th ed. 2013), vol. 1, §§ 5.7(a)fiv) &

ee Oe I a iar osccccedesceasosencsonnatbcasen 14

Regulations

Health Insurance Premium Tax Credit, 77 Fed. Reg.

kM kU Ue, 33

Constitutional Provisions

a ccgrvad Salat tad asonnmsenauninnanied 2

BW cee ieaeticidicidassasavconianindslsucenconacoosvievendd 237

Rr oc ecicss chdadieiarenenemesen sbenicumsnein 2, 33

INTEREST OF THE AMICI CURIAE!

The amici curiae are professors of law who teach

in the fields of Administrative Law § and

Constitutional Law, including Separation of Powers.

They include Dr. John S. Baker, Professor Emeritus,

Louisiana State University; Professor Marshall J.

Breger, Columbus School of Law, The Catholic

University of America; Professor Robert J.

Delahunty, University of St. Thomas School of Law:

Professor Antonio F. Perez, Columbus School of Law,

The Catholic University of America: Professor

Ronald D. Rotunda, Doy and Dee Henley Chair and

Distinguished Professor of Jurisprudence, Chapman

University Dale E. Fowler School of Law.

By filing this brief, your Amici curiae wish to

highlight the critical role that this Court plays when

it elaborates, maintains, and _ reinforces. the

separation of powers boundaries that protect the

liberties and voting rights of American citizens. By

their very nature, the s*udy of separation of powers

focuses on the relationship between the law-making

powers of Congress, the powers of the Executive, and

the Judicial Power of the United States at the points

where there may be “concurrent authority, or in

! No counsel for a party authored this brief in whole or in part.

and no such counsel or party made a monetary contribution

intended to fund the preparation or submission of this brief. No

person other than amici curiae or their counsel made a

monetary contribution to its preparation or submission. Letters

from the parties consenting to the filing of this brief are on file

with the clerk. and counsel of record gave each party’s attorney

at least ten davs’ notice of their intent to file this brief.

which its distribution is uncertain.” See Youngstown

Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 637 (1952)

(Jackson, J., concurring) (proposing a judicial

approach for defining the boundary between the

President and Congress based on a rigorous analysis

of the applicable statutory frameworks).

SUMMARY OF ARGUMENT

Article I, Section 1 of the Constitution vests “{a]]l

legislative powers herein granted to a Congress of

the United States”. . Three of those exclusive

legislative powers are implicated in this case: “to lay

and collect taxes”, Art. I §8 cl.1; to authorize and

appropriate funds drawn from or owing to the

Treasury, Art. I §9, cl. 7 and “to dispose of and make

all needful rules and regulations respecting ...

property belonging to the United States.” Art. IV §3,

cl. 4.

At issue in this case is the exclusive power of

Congress to determine how over $855 billion in tax

funds will be collected, allocated, and spent. PPACA

includes $726 billion in direct outlays and a

reduction in revenues of $129 billion for the

“premium assistance tax credits” at issue here.

"Patient Protection and Affordable Care Act, Pub L.

111-148, 124 Stat 119, (2010). Congressional Budget

Office, “Updated Estimates of the Effect of the

Insurance Coverage Provisions of the Affordable

Care Act, April 2014”, at9 & n. 14. fhereafter CBO

April 2014 Estimates].

The central issue in this case is the locus of power

to define a taxpayer’s eligibility to participate in the

“premium assistance credit amount” calculated

under 26 U.S.C. § 36(B)(b)(2-3), and hence, control

over approximately the approximately $129 billion

the CBO estimates is the cost in revenue foregone as

a result of that credit. This Court must choose:

Either Congress defines eligibility, or the Executive

Branch does.

The Fourth Circuit held that the only reasonable

construction of PPACA is that Congress necessarily

gave the IRS the power to open the Treasury's

funding spigots wide enough to “ensur[e] that this

essential component [the tax credit] exists on a

sufficiently large scale” to fund the national health

insurance subsidy program envisioned by the

Respondents. King v. Burwell, 759 F.3d 358, 375 (4th

Cir. 2014) [hereafter “King”]. Because “Congress’

central purpose in enacting the Act [was] to radically

restructure the American health care market with

‘the most expansive social legislation enacted in

decades|[,]” ... “[Petitioners’] ‘literal reading’ of the

premium tax credits calculation subprovision”

renders the _ entire Congressional scheme

nonsensical. Cf. Maj. Op. at 372.” Id., 759 F.3d at

378-379 (Davis, J. concurring).

Your Amici, by contrast, argue that the eligibility

criteria Congress provided in Section 1311 (42 U.S.C.

§ 18031) for “premium assistance tax credits” are

both clear and tightly-integrated into the fabric of

the cooperative State/federal program that became

PPACA. If the credit is administered as Congress

wrote it, the amounts flowing from the Treasury will

necessarily be smaller than Respondents might

prefer, but only because fewer States exercised the

options that Congress gave them in PPACA. This is

neither “absurd” nor “nonsensical”. It’s the law

Congress wrote.

If, by contrast, the Respondents are permitted to

administer the tax credit as the IRS rewrote it,

PPACA “as administered” looks a lot more like the

“national” health insurance program that Congress

rejected. The IRS is given authority to administer

the Code, not to rewrite it. So, even if the Fourth

Circuit is correct that there is a “tension” between

what Congress wrote and what Respondents believe

it must have “intended”, the scope of IRS interpretive

authority cannot extend to altering eligibility criteria

for the “premium assistance credit amount”. IRS

authority extends to interpretations in aid of its

power to make “inquiries, determinations, and

assessments” of the taxes Congress “imposes” and

the credits it “allows”

The language and structure of PPACA confirm

that Congress used its power to reduce the federal

share of the costs. It did so by enacting 1) grants to

induce states to create and administer “American

Health Benefit Exchanges”, 2) tax credits and

Medicaid expansion to induce participation by those

who could not otherwise afford to participate in the

Exchanges (the “unable”); 3) “shared responsibility”

tax payments to ensure that “unwilling” individuals

and employers participate; and 4) penalty provisions

to induce States to participate in the Medicaid

expansion. Nat7 Fed’n of Indep. Bus. v. Sebelius, —

U.S. -, 132 S.Ct. 2566, 2614-15 (2012) (Ginsburg,

Breyer, Sotomayor & Kagan, JJ, concurring and

dissenting) (referencing “the large number of U.S.

residents who are unable or unwilling to obtain

health insurance.”) [hereafter NFIB].

Your Amici respectfully submit that no provision

of the Internal Revenue Code delegates the power to

grant or withhold tax credits under any

circumstances. For the IRS to arrogate that power to

itself and then claim Chevron deference to that

power-grab violates Congress’ power over the purse

and allocation of monies due and owing the

Treasury. Congress alone has the power to decide

what taxes will be imposed, what credits will be

allowed and for whom, how they will be calculated

and collected, and the uses to which tax revenues

will be put.

ARGUMENT

I. THEIRS RULE VIOLATES THE APPROPRIATIONS

CLAUSE OF ARTICLE I.

Article I, Section 9, Clause 7, provides:

No Money shall be drawn from the

Treasury, but in Consequence of

Appropriations made by Law; and a

regular Statement and Account of the

Receipts and Expenditures of all

public Money shall be published from

time to time.

This language is plain and has been faithfully

observed since 1787. Until the IRS unilaterally

decided to extend tax credits to taxpayers ineligible

to receive them, the Appropriations Clause has

governed the conduct of our government and serves

as the clearest of the boundaries between the powers

of the legislative branch and those vested in the

executive and judicial branches.

A. PPACA is an Appropriations Act.

By its own terms, PPACA appropriates money.

Like many other appropriations acts, it says in so

many words what it is appropriating money for and

what it is not appropriating money for. In explicit

terms it says that “there shall be allowed as a credit

against the tax imposed by this subtitle for any

taxable year an amount equal to the premium

assistance credit amount of the taxpayer for the

taxable year.” 26 U.S.C. § 36B(a). It limits eligibility

for that premium assistance credit to taxpayers who

are “enrolled in through an Exchange established by

the State under [section] 1311 of the Patient

Protection and Affordable Care Act” 26 U.S.C. §

36B(b)(2).

The IRS response to commentary that its decision

to extend tax credits to Exchanges that were not

“established by the State under [section] 1311” was

illegal concedes that the disputed credits were not

explicitly authorized by this appropriation language:

The statutory language of section 36B and

other provisions of the Affordable Care Act

support the interpretation that credits are

available to taxpayers who obtain coverage

through a State Exchange, regional

Exchange, subsidiary Exchange, and the

Federally-facilitated Exchange. Moreover,

the relevant legislative history does not

demonstrate that Congress intended to

limit the premium tax credit to State

Exchanges. Accordingly, the final

regulations maintain the rule in the

proposed regulations because it is

consistent with the language, purpose, and

structure of section 36B and_ the

Affordable Care Act as a whole.

77 Fed.Reg. at 30,378 (emphasis added).

B. The IRS has no Statutory Authority “To

Lay ... Taxes” or “To Allow” Credits.

26 U.S.C. § 6201 (2014), embodies’ the

fundamental distinction between the power to “lay

and collect taxes”, which belongs only to Congress.

and the administrative power to “assess” them once

the necessary inquiries and calculations have been

made: “The Secretary is authorized and required to

make the inquiries, determinations, and assessments

of all taxes ... imposed by this title ....” (emphasis

added).

The Fourth Circuit “permits the IRS to decide

whether the tax credits [will] be available on federal

Exchanges.” King, 759 F.3d at 373. The IRS justifies

its rule on the theory that “the relevant legislative

history does not demonstrate that Congress intended

to limit the premium tax credit to State Exchanges.”

77 Fed.Reg. at 30,378.

Both the panel and the IRS are asking the wrong

question. The issue is not “whether Congress

intended to limit the premium tax credit to State

Exchanges”, but whether Congress has delegated

power to grant or withhold tax credits to the

Executive Branch here. Your Amici submit that it

has not done so.

By “deferring” to an action that finds no support

in any section of the Internal Revenue Code, the

Fourth Circuit has validated the IRS’ naked

assertion of congressional power to spend the

approximately $36 billion necessary to fund the tax

credits it has authorized. See CBO April 2014

Estimates, supra. Compare, Skinner v. Mid-

America Pipeline Co., 490 U.S. 212, 109 S.Ct. 1726

(1989).

There can be no dispute that the regulation

promulgated by the IRS draws money from the

Treasury, and expands the pool of taxpayers subject

to the individual mandate to include those who are

eligible to participate in the Medicaid expansion. It

thus revises how taxes are collected under PPACA.

That it appropriates money “by Law”, however, is a

proposition that must be denied. “By Law” refers to

the legislative power, all of which is vested by Article

I, Section 1, in the Congress. The IRS regulation is

not, of course, an appropriations bill and therefore

cannot constitutionally draw money from the

Treasury, determine from whom taxes will be

collected, or determine how they will be calculated.

C. The IRS Rule is a “Revision” of Section

36B not an “Interpretation”

The position of the Fourth Circuit can be

paraphrased thus:

Congress appropriated the money to

subsidize tax credits payable to citizens

“enrolled in one or more qualified health

plans through an Exchange

established by the State under [section]

1311” It also anticipated that the

States might not cooperate, and so

authorized the Secretary of HHS to

create Exchanges on their behalf.

Because the Executive views the

subsidies as an essential part of the

national program PPACA was intended

to create, “it makes sense to read” the

Act to authorize the tax expenditures,

759 F.3d at 369. and thereby to trigger

the individual and employer mandates

in those States.

The appropriation already made by

Congress for Exchanges “established by

the State under section 1311” now

operates without the _ restrictions

embedded in PPACA, funds enrollees

who are not eligible, and imposes the

mandate on citizens whose States

refused to set up Exchanges.

To call the IRS rationale for its rule “an

interpretation” stretches the meaning of the term.

Congress has many ways to expresses its “intent”

concerning the source, amounts, and purposes of

authorized appropriations. Section 1311 of ACA, for

example, explicitly appropriates funds

... to the Secretary, out of any moneys in

the Treasury not otherwise appropriated,

an amount necessary to enable the

Secretary to make awards, not later than

1 year after the date of enactment of this

Act, to States in the amount specified in

paragraph (2) for the uses described in

paragraph (3).

PPACA also withholds Congressional consent by

the use of several exp/icit negatives on expenditures.

E.g., Section 1311 D(S5)(A) (s: “Funding

Limitations.— (A) No Federal Funds For Continued

Operations”); Section 4101(A)(4) (“No funds provided

under a grant awarded under this section shall be

used for expenditures for personnel or to provide

health services.”).

Whether appropriations language is directive or

negative, any actions inconsistent with that

language constitute a drawing from the Treasury. A

directive to spend for a specified purpose cannot be

converted by regulatory “interpretation” into an

authorization to spend for something more or

something different. Nor can a refusal to draw be

made into a mandate to draw by “interpreting” the

condition.

Both the IRS and the Fourth Circuit treat the

eligibility criteria for subsidized health care as

simply one element of a Congressional effort to

subsidize as many people as _ possible. The

appropriations language in PPACA, however, is not

“aspirational”; it sets forth in great detail who is

eligible for a tax credit and who is not. Both the IRS

and the Fourth Circuit panel concede that a literal

reading of Section 1311 limits the appropriation that

subsidizes the insurance of eligible individuals. The

literal reading of Section 1311 is confirmed by the

operational details of the employer mandate, which

is enforced by imposing assessable tax payments on

large employers that have at least one employee

enrolled in a plan, offered through an Exchange, for

which “an applicable premium tax credit ... is

allowed or paid.” See 26 U.S.C. § 4980H{(a-b).

Congress imposed an extremely burdensome tax not

only to recoup its expenditures, but also to ensure

compliance with the mandate itself.

D. The IRS Rule is Unconstitvtional

As written, PPACA authorizes taxation of

individuals and businesses as well as_ the

expenditure of money if, and only if, their elected

representatives agree to participate in the State-

federal experiment that is PPACA. The IRS rule at

issue here is constitutionally defective in three ways:

1) it appropriates 2ud directs the flow of federal

money without authorization; 2) it imposes taxes

that are not authorized by law; and 3) it seeks to

validate regulatory authority not granted by law.

In NFIB, supra, this Court confirmed that the

validity of PPACA’s individual and employer

mandates rests on Congress’ power to tax and spend.

It follows inexorably from this holding that the

manner in which Congress employed those powers in

Sections 1311 and 26 U.S.C. § 4980H(a)-(b) is the

source of whatever “assessment” and regulatory

powers the IRS claims in this case.

The Fourth Circuit’s resort to “Chevron

deference” in an appropriations case is singularly

inappropriate. The inviolable and exclusive power of

the purse is one that touches on everything that

Congress does. To tamper with that exclusive power

is to tamper with the very essence of constitutional,

representative government. Unless Congress is

simply to become a mere bookkeeper or ATM

machine for the Executive Branch, this Court should

reaffirm that such delegation must “explicitly

reflect[] Congress’ intention.” Mid-America Pipeline,

supra, 109 S.Ct. at 1734,

So clearly has this principle been understood that

some of the harshest language ever used to describe

a violation of the separation of powers has been used

with respect to the problem we see here: judicial

deference to an unconstitutional assertion of the

appropriations power reserved for Congress.

In Federalist, No. 68, James Madison emphasized

the scope of the appropriations power:

The House of Representatives cannot

only refuse, but they alone can prapose

the supplies requisite for the support

of government. They, in a word, hold

the purse- ... This power over the

purse may, in fact, be regarded as the

most complete and effectual weapon

with which any constitution can arm

the immediate representatives of the

people, for obtaining a redress of every

grievance, and for carrying into effect

every just and salutary measure.”

THE FEDERALIST No. 58 at 380 (Modern Library ed.)

(J. Madison). In FEDERALIST, No. 78, Hamilton was

equally adamant:

The legislature not only commands the

purse but prescribes the rules by

which the duties and rights of every

citizen are to be regulated. The

judiciary, on the contrary, has no

influence over the sword or the purse;

no direction either of the strength or of

the wealth of the society, and can take

no active resolution whatever.

Id. at 504.

Whenever the issue has been raised, this Court

has concluded that an appropriation by Congress is

required before moneys may be drawn from the

federal Treasury. Knote v. United States, 95 U. S.

149 (1877); Austin v. United States, 155 U. S. 417

(1894); Hart v. United States, 118 U. S. 62 (1868):

Reeside v. Walker, 52 U. S. (11 How.) 623 (1850). See

also Cincinnati Soap Co. v. United States, 301 UV. S.

308 (1937); United States v. Lovett, 328 U. S. 303

(1946). See also Ronald D. Rotunda & John E.

Nowak, TREATISE ON CONSTITUTIONAL LAW:

SUBSTANCE AND PROCEDURE (West Pub. Co. 5th ed.

2013), vol. 1, §§ 5.7(a)(iv) & 7.6(b), and vol. 6, §23.8

The object is apparent upon the slightest

examination. It is to secure regularity,

punctuality, and fidelity, in the disbursements

of the public money. As all the taxes raised

from the people, as well as revenues arising

from other sources, are to be applied to the

discharge of the expenses, and debts, and

other engagements of the government, it is

highly proper, that congress should possess

the power to decide how and when any money

should be applied for these purposes. If it were

otherwise, the executive would possess an

unbounded power over the public purse of the

nation; and might apply all its moneyed

resources at his pleasure. The power to control

and direct the appropriations, constitutes a

most useful and salutary check upon profusion

and extravagance, as well as upon corrupt

influence and public peculation....

J. Story, 2 COMMENTARIES ON THE CONSTITUTION OF

THE UNITED STATES § 1348 (3d ed. 1858), quoted in

Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 427,

110 S. Ct. 2465, 2473 (1990).

In Reeside v. Walker, supra, the estate of James

Reeside sought and won a set-off of its claims agains?

those of the United States. The jury found that the

government was, in fact, indebted in the amount of

$188,496.06. In an attempt “[t]o save future expense

and litigation in [the] case, with a view to obtain[ing]

the desired judgment” this Court articulated the

clear and unambiguous rule that a court may not

order or authorize the Treasury to pay out

unappropriated moneys:

No officer, however high, not even the

President, much less a secretary of the

treasury or treasurer is empowered to pay

debts of the United States generally, when

presented to them. ... It is a well-known

constitutional provision, that no money can be

taken or drawn from the treasury except

under an appropriation by congress. See

Constitution, Art. I, § 9, I Stats. at Large, 15.

However much money may be in the treasury

at any one time, not a dollar of it can be used

in the payment of any thing not thus

previously sanctioned. Any other course would

give to the fiscal officers a most dangerous

discretion.

Hence. the petitioner should have presented

her claim on the United States to congress,

and prayed for an appropriation to pay it. ...

But without such an appropriation it cannot

and should not be paid by the treasury,

whether the claim is by a verdict or judgment,

or without either, and no mandamus or other

remedy lies against any officer of the treasury

department, in a case situated like this, where

no appropriation to pay it has been made. 52

U. S. (11 How.) 626-28 (emphasis by the

Court).

Thus, even in the face of a binding obligation,

judgment, or unconstitutional withholding, no court

may order the funds to be paid where payment is not

authorized by Congress. Stitzel-Weller Distillery v.

Wickard, 118 F. 2d 19 (1941); Collins v. United

States, 15 Ct. Cl. 22 (1878); Doe v. Matthews, 420 F.

Supp. 865 (D. N. J. 1976). See also Cincinnati Soap

Co. v. United States, 301 U. S. 308 (1937); Spaulding

v. Douglas Aircraft Co., Inc., 60 F. Supp. 985 (S. D.

Cal. 1945).

Nor may a court modify a condition attached to

an appropriation. United States v. Lovett, supra, was

a challenge to an appropriations measure that

provided that certain named government employees

not be paid their salaries unless Congress confirmed

their continued employment. The three named

individuals continued to work despite the limitation

and sued for their compensation. The Court of

Claims held that the claimants were entitled to their

money, but did not entertain the illusion that it could

order the Treasury to pay, or the Congress to

appropriate:

Congress, by enacting Section 304, did not

foreclose itself from thereafter appropriating

for the payment of these salaries. Congress

even now may appropriate, and authorize a

selected disbursing agency to pay them.

Claimse.therefor, presented to Congress, may

be satisfied by-a._snpropriation to pay them,

as claims. Judgments, rétewered here, may be

satisfied by any appropriation outorabich the

judgments may be by Act of Congréss,;

payable.”

Lovett v. United States, 66 F. Supp. 142, 147 (Ct. Cl.

1945) affirmed on other grounds, United States v.

Lovett, 328 U. S. 303 (1946). (emphasis supplied).

This Court affirmed, but held the salary prohibition

an unconstitutional bill of attainder, but made no

order to appropriate or pay the funds.

In Office of Personnel Management v. Richmond,

496 U.S. 414, 424, 110 S.Ct. 2465, 2471 (1990), this

Court rejected a federal retiree’s claim for benefits

because “...Congress has appropriated no money for

the payment of the benefits respondent seeks, and

the Constitution prohibits that any money ‘be drawn

from the Treasury to pay them.” Jd, 496 U.S. at 424,

110 S.Ct. at 2471.

In the present case, Respondents argue this Court

should “defer” to their understanding = of

Congressional intent regarding this appropriation.

The Appropriations Clause, Art. I §7, cl. 9, requires

more: namely, an explicit authorization to “allow” the

tax credit authorized in Section 1311 to purchasers

in the federal exchange.

Il. VOIDING THE IRS REGULATION DOES NOT

LEAD TO ABSURD RESULTS OR TO FRUSTRATION

OF CONGRESSIONAL DESIGN

The Fourth Circuit deferred to the IRS because it

agreed that “the economic framework supporting the

Act would crumble if the credits were unavailable on

federal Exchanges”. It worried that “without an

exception to the individual mandate, millions more

Americans unable to purchase insurance without the

credits would be forced to pay a penalty that

Congress never envisioned imposing on them. King,

759 F.3d at 375. It held that Petitioners’ “literal”

construction of Section 1311 would cause “the broad

policy goals of the statute” to be frustrated and

“render{] the entire Congressional scheme

nonsensical.” Jd., 759 F.3d at 373 (panel opinion);

378 (Davis, J., concurring).

A. Congress Authorized and Encouraged the

States and the District of Columbia to

Create Fifty-One (51), Independent

“American Health Benefit Exchanges”

PPACA envisions a health insurance market

where the federal government provides baseline

coverage and access standards, startup grants for

State Exchanges and substantial subsidies for

taxpayers who cannot afford health insurance. The

States, in turn, create and sustain a federally-

approved Exchange in which their citizens can shop,

provide for its long-term financing, regulate the local

insurance market and, most importantly for present

purposes, share the costs of subsidies for the poor.

See, e.g., Section 1332(a)(3) (42 U.S.C. § 18052(a)(3)

(providing for “pass through of funds” directly to the

State in cases where, “due to the structure of the

State plan, individuals and small employers in the

State would not qualify for the premium tax credits,

cost-sharing reductions, or small business credits

under sections 36B of the Internal Revenue Code of

1986)”(emphasis added).

In keeping with the adage that “all politics is

local”, so too are the Exchanges. Citizens cannot

purchase “qualified health plans” interstate unless

their States have entered into a regional compact.

See PPACA §§ 1311(b)(1-2),(f); 1331(c)(3)(A);

1333(a)(1-3). See Patient Protection and Affordable

Care Act, Pub L. 111-148, §§1311(b)(1-2),(), 124 Stat

119, 173-74 (2010) (codified as amended at 42 U.S.C.

§ 18031 (2012)).

At least for now, the economics of each “American

Health Benefits Exchange” turn on the extent to

which each State’s “unable” and “unwilling” citizens

participate in its Exchange, the health and

demographics of the State’s population and its

medical costs.

Each “American Health Benefits Exchange”

stands on its own feet. Each looks inward as it

carries out Congress’ command that “/ejJach State

shall seek to coordinate the administration of, and

provision of benefits under, its program under this

section with the State Medicaid program under title

XIX of the Social Security Act, the State child health

plan under title XXI of such Act, and other State-

administered health programs to maximize the

efficiency of such programs and to improve the

continuity of care.” PPACA §1331(c)(4) (codified as

amended at 42 USC § 18051 (2012)). (emphasis

added). :

Thus, even if the “American Health Benefits

Exchanges” created by 15 States and the District of

Columbia are the only ones operating in the

foreseeable future, nothing that the other 35 States

do will affect their operational success or failure.

B. Congress Sought to Partner with the States

to Create, Finance, and Sustain a Vast

Social, Economic, and Medical Experiment

In operation, PPACA is an ongoing social and

economic experiment. “It is one of the happy

incidents of the federal system that a _ single

courageous State may, if its citizens choose, serve as

a laboratory; and try novel social and economic

experiments without risk to the rest of the country.”

New State Ice Co. v. Liebmann, 285 U.S. 262, 311

(Brandeis & Stone, JJ . dissenting).

It is far too early for anyone — especially a federal

judge — to speculate about the impact that the

operations of the 16 operational, State-created

Exchanges will have on a future Congress and the

legislatures of the remaining 35 States. All we know

for certain is that each “American Health Benefits

Exchange” sits on its own bottom. The operations of

each Exchange will generate exabytes of valuable

economic, social, demographic, and medical data that

must be reported to the Secretary on a regular basis.

See, e.g., Sections 1002 (establishing certain data

collection mechanisms); 1502 (individual coverage

reports); 3015 (establishing a nationwide data

collection framework). See generally. e.g., Jim

Golden, “Innovating on the Obamacare Data

Platform,” FORBES (July 1, 2012) at

http://www.forbes.com/sites/jimgolden/2012/07/01/inn

ovating-on-the-obamacare-data-platform/ (accessed

Dec. 19, 2014); Ken Congdon, Editorial,

“Obamacare’s Big Data Opportunity”, HEALTH IT

OUTCOMES (May 1, 2013) at = http://www.

healthitoutcomes.com/doc/obamacare-s-big-data-

opportunity-0001 (accessed Dec. 20, 2014); Kelly

Kennedy, “Analysis of Huge Data Sets will Reshape

Health Care,” USA Today (Nov. 24, 2013) at

http://www.usatoday.com/story/news/nation/2013/11/

24/big-data-health-care/3631211/ (acvessed Dec. 21,

2014).

C. The Text of PPACA Presupposes

“Voluntary” Participation by the States as

the Primary Means by which to Create

Viable, State-specific Insurance Pools Large

Enough to Cover the Uninsured.

PPACA is structured as a tax and transfer

payments program for a reason. A program of “near-

universal” health insurance requires both voluntary

and involuntary transfers of vast sums of money.

PPACA thus has three key components: 1) Medicaid

expansion to cover those unable to pay for insurance

and penalties for States that were unwilling to

participate in the proposed expansion; 2) individual

and employer mandates for those who can afford

insurance, but who would be unwilling to participate

in the absence of a mandate; and 3) federal and state

subsidies to reduce startup costs and premiums for

lower-income participants.

1. Medicaid Expansion: Insuring’ the

“Unable”

One of the main political problems Congress faced

was how to finance an effort designed to create

“near-universal” coverage. The first component of

that effort was Medicaid expansion. Its goal was

twofold: 1) to ensure that Medicaid (itself a

cooperative State/federal program) offered the

“minimum essential coverage”; and 2) to extend

coverage to persons at or below 133% of the federal

poverty line. PPACA §§ 2001(a-b), codified as

amended at 42 U.S.C. § 1396a (2012). Although

States were given the “option” to participate,

Congress was so concerned that they expand both

eligibility and minimum essential services that it

threatened them with the loss of all Medicaid

funding as the condition for non-participation. 42

U.S.C. § 1398c, held unconstitutional as applied in

NFIB, 132 S.Ct. at 2607.

2. Expanding the Pool: Subsidies and

Mandates in “American Health Benefit

Exchanges”

An “American Health Benefit Exchange’ is “a

governmental agency or nonprofit entity that is

established by a State” that makes “available

qualified health plans to qualified individuals and

qualified employers” PPACA §§ 1311 (b, d). Like the

federal Exchange contemplated under Section

1321lic) and the State-operated Exchanges operating

before January 1, 2010 referenced in Section 1321(e),

an Exchange is also a “mechanism, including an

Internet website, through which a resident of any, or

small business in, State may identify affordable

health insurance coverage options in that State”.

Whether created by a State or the Secretary, an

Exchange “shall, to the extent practicable, provide

ways for residents of, and small businesses in, any

State to receive information on” a detailed list of

coverage options. PPACA §§1103(a)(1-2), 1311(d)(3).

This is where the similarities end. An Exchange

“created by the State under Section 1311” is also a

cost- and power-allocation mechanism. Without this

distribution of power and fiscal responsibility, there

would be no basis on which to justify the use of the

word “Affordable” in the title of PPACA.

a. Cost-sharing & reduction requirements

Section 1311 is, at bottom, a massive attempt to

induce the States and those who are unwilling to

participate in the individual or group markets to

share the cost of near-universal health insurance.

See PPACA §§ 1501(C-D) (codified as amended at 42

USC § 18091 (2012)) (individual and employer

mandates).

Section 1101, for example, conditions a State’s

eligibility to participate in the temporary, federal

high-risk pool: “To be eligible to enter into a contract

with the Secretary under this subsection, a State

shall agree not to reduce the annual amount the State

expended for the operation of one or more State high

risk pools during the year preceding the year in

which such contract is entered into.” Section

1101(b)(3) (codified as amended at 42 U.S.C. § 18001

(2012)) (emphasis added).

Section 1311(d)(3)(B)(i) expressly permits States

to “require that a qualified health plan offered in

such State offer benefits in addition to the essential

health benefits specified under section 1302(b)”, but

requires that any State electing to do so “defray the

cost of any additional benefits described in clause

(i).” Section 1311(d)(3)(B)Gi) (codified as amended at

42 U.S.C. § 18031 (2012)).

Section 1311(d)(5) embodies the same fiscal line-

drawing: “In establishing an Exchange under this

section. the State shall ensure that such Exchange is

self-sustaining beginning on January 1, 2015,

including allowing the Exchange to charge

assessments or user fees to participating health

insurance issuers, or to otherwise generate funding,

to support its operations.”

Congress had a very good reason for making

American Health Benefits Exchanges “created by the

State under Section1311” the only “Exchange” on

which to obtain subsidized health insurance: The

States that create them bear a substantial share of

program and administrative costs.

It is not at all unusual for the federal government

to provide carrots (and sticks) to incentivize State

participation in mew domestic programs or

regulatory efforts. See, e.g., South Dakota v. Dole,

483 U.S. 203 (1987) (grant of federal highway funds

contingent on setting 21 as drinking age). The

original Medicaid program was opened to State

participation in 1965, but seventeen (17) years

elapsed before all the States signed on. Kaiser

Commission on Medicaid and the Uninsured, A

Historical Review of How States Have Responded to

the Availability of Federal Funds for Health Coverage

(August 2012) at http://kaiserfamilyfoundation.files.

wordpress.com/2013/01/8349.pdf (accessed Dec. 12,

2014).

Even when States have been required to respond,

some took years. “The 1987 amendments to Clean

Water Act required states to establish quantitative

Water Quality Criteria for several dozen toxic

pollutants .... Both EPA and the states were slow to

respond to this mandate, and it took until 1992 for

EPA to certify that 43 states had met these

obligations and to promulgate federal standards for

the 14 remaining states.” Rena I. Steinzor,

Devolution and the Public Health, 24 HARV. ENVTL.

L. REV. 351, 383 n. 127 (2000) (citations omitted).

b. Power-allocation

The text and structure of PPACA also bear

witness to congressional efforts to ensure that both

willing and unwilling States would participate in its

efforts to restructure the State insurance markets.

There are commands and “offers that cannot be

refused”. Compare, e.g., Section 1311(b,d), 42 U.S.C.

§ 18031(b,d) (2014) (“Each State shall, not later than

January 1, 2014, establish an American Health

Benefit Exchange ... for the State”) w7th 42 U.S.C. §

1398c (providing for loss of all Medicaid funding as

the condition for non-participation), held

unconstitutional as applied in NFIB, 132 S.Ct. at

2607.

PPACA expressly preempts some State laws and

preserves the validity of others. Compare, e.g.,

Sections 1001(e)(minimum federal standard for

summaries of benefits) and 4206(d)(rule_ of

construction for “State or local law” dealing with

nutrient content disclosures) with, e.g., Sections

1303(c)(1) (preserving State abortion laws);

1311(d)(preserving State laws “that do[] not prevent

the application of the provisions of this title”);

2709(h) (preserving additional State standards

governing clinical trials). Sections 1311(f)(1) and

1331(c)(3)(B) permit State-created exchanges to

operate interstate or regionally if “each State in

which such Exchange operates permits such

operation”, and Sections 13111(f)(3)(A-B) permit

States to sub-contract with qualified entities “to

carry out 1 or more responsibilities of the Exchange.”

Congress also drew careful lines that deal

specifically with the situation presented here. When

a State either does not “elect” to create an “xchange

under Section 1311(b), 42 U.S.C. § 18031(b) , or fails

to meet federal requirements, the Secretary is indeed

authorized to “establish and operate such Exchange

within the State”. Section 1321(c)(1)(A-B), 42 U.S.C.

§18041(c)(1)(A-B) (2014). Her authority in that

context is expressly limited by Section 2736(b) of the

Public Health Services Act, 42 U.S.C. § 300gg-22(b),

which allows her to regulate the conduct of health

insurers “relatling] to the issuance, sale, renewal,

and offering of health insurance coverage in

connection with group health plans or individual

health insurance coverage in such State.”

D. Changing the Rules after the Fact

Contemporaneous agency interpretations of

PPACA also confirm that the Secretary’s authority is

limited to sunning the market-making = and

administrative aspects of an Exchange.

PPACA was signed into law on March 23, 2010.

Respondents HHS and IRS circulated numerous,

contemporaneous, internal memoranda about

implementation. Correspondence referring subsidies

for plans purchased through a federal Exchange

begins to appear in March 2011, when “IRS and

Treasury personnel noticed the lack of statutory

language authorizing tax credits in _ federal

exchanges.” Joint Staff Report, U.S. House of

Representatives, 113 Cong., “Administration

Undertook Flawed Analysis of Key Issues Prior to

Expanding Health Law’s Taxes and Subsidies” (Feb.

5, 2014) 4 at http://oversight.house.gov/wp-

content/uploads/2014/02/IRS-Rule-OGR-WM-°Staff-

Report-Finall.pdf (accessed Dec. 23, 2014) [hereafter

Joint Staff Report).

It was not until November, 2011 that HHS began

to eliminate references to subsidies and State-

operated Exchanges in the “Boilerplate Cooperative

Agreement” prepared by HHS. Indeed Mark Mazur,

Assistant Secretary of the Treasury for Tax Policy

admitted in a letter to House Oversight and

Investigations Committee Chair Daryl Issa that he

“never saw any analysis of the issue prior to Mav

2012.” Joint Staff Report, supra, at 6 at

http://oversight.house.gov/wp-content/uploads/20 1 4/

02/IRS-Rule-OGR-WM-°Staff-Report-Final1.pdf

(accessed Dec. 23, 2014).

Among. other significant’ indicators’ that

Respondents understood that subsidies are not

legally available on the federal Exchange is that

Respondents did not contract for a health care

calculator on HEALTHCARE.GOV until well into

May, 2012. If Respondents really believed that

subsidies would be available, they omitted the

essential tool that participants need to sign up for

subsidies. See Scott Vorse, “Beyond Gruber: How

HHS Flip-Flopped on Federal Exchange Subsidies.”

(Competitive Enterprise Institute WEBMEMO 28,

Nov.20, 2014) at https://cei.org/content/beyond-

gruber-how-hhs-flip-flopped-federal-exchange-

subsidies (accessed Dec. 21, 2014).

This is the problem that the Respondents tried to

“fix” with the regulation at issue here. It is also why

the IRS regulation does far more than “mak[e ...]

rules to fill any gap left, implicitly or explicitly, by

Congress” in PPACA. Chevron U.S.A. Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 843,

104 S.Ct. 2778 (1984).

It is thus fair to assert that the IRS rule at issue

here is not simply a matter of tax administration

designed to fill “gaps” in the Internal Revenue Code

like those in Mayo. Rather, this rule changes a

fundamental feature of a massive tax statute, opens

the Treasury for unappropriated and unauthorized

tax expenditures, and changes the legal obligations

of individuals and employers residing in states that

did not establish their own Exchanges.

In short, Respondents have rewritten the law in a

manner fundamentally at odds with the cooperative

federal-state relationships on which the economics

and politics of PPACA rests. Ur. ier Chevron, this is

fatal.

E. The Legal Fiction that the Federal

Government “Acts on Behalf of the siate”

Violates PPACA and other Federal Laws.

By holding that “the federal government acts on

behalf of the state when it establishes its own

Exchange”, King, 759 F.3d at 369 (emphasis added),

the Fourth Circuit created what it thought was a

useful legal fiction. There is nothing in PPACA,

however, that authorizes Respondents to serve as

fiduciaries “on behalf of” the States that do not

create Exchanges, or authorizes them to serve “in the

shoes of the non-participating States. Under

Chevron, this is fatal.

This fiction also creates two _ possibilities

expressly forbidden by federal law. The first is a

situation in which the federal government would

assume, in perpetuity, the entire range of costs that

would be incurred during the operations of an

“Exchange created by a State under Section 1311”.

Although Section 1311(a)(3) provides for renewable

federal assistance “for activities (including planning

activities) related to establishing an American

Health Benefit Exchange” (emphasis added), Section

1311(d)(5) confirms that “no federal funds for

continued operations” are either authorized or

appropriated “for continued operations”

The Fourth Circuit also implicitly authorizes the

Secretary to embark on a course of conduct that

would illegally “augment [HHS] appropriations.” By

“charg[ing] assessments or user fees to participating

health insurance issuers, [or] otherwise generat[ing]

funding, to support its operations’, the Secretary

would acquire funding source outside congressional

control. See General Accounting Office, Office of the

General Counsel, “The Augmentation Concept”, 6

GAO-RB pt. E, §1 (G.A.O.), 2006 WL 6179178

(February, 2006) (“As a general proposition, an

agency may not augment its appropriations from

outside sources without specific statutory authority

Restated, the objective of the rule against

augmentation of appropriations is to prevent a

government agency from undercutting’ the

congressional power of the purse by circuitously

exceeding the amount Congress has appropriated for

that activity.”).

If State law permits, States or the non-profit

organization they establish to run the Exchange can

make money on operations. Nothing in PPACA

prohibits that result. A State can “offer benefits in

addition to the essential health benefits specified

under section 1302(b)” if it pays for them with its

own money.

The Secretary, however, can do neither of these

things. Federal money is controlled by Congress.

There is nothing in PPACA that authorizes the

federal government to “offer benefits in addition to

the essential health benefits specified under section

1302(b)”, or to impose their cost on the States in

which federal exchanges operate under Section 1321.

The more natural reading of Sections 1311 and

1321(c) — and the reading most consistent with the

“plain language” requirement of Section 1311(e)? — is

that when a State fails to set up an “American

Health Benefits Exchange” or fails to win approval of

the Exchange that it has created, the Secretary must

set up a federal exchange within the boundaries of

that State. Her authority, however, would be limited

2 Sect on 1311(e)(3)(B) is not directly applicable here, but it

does :-yuire an “American Health Benefits Exchange” (i.e. one

“estabiuehed by the State”) to use “plain language” in its

dealings with the public. “Plain language” is defined as

“language that the intended audience, including individuals

with limited English proficiency, can readily understand and

use because that language is concise, well-organized, and

follows other best practices of plain language writing.” The IRS

and Fourth Circuit would have done well to follow this

approach when interpreting PPACA.

to creating and regulating a marketplace “through

which a resident of any. or small business in, State

may identify affordable health insurance coverage

optious in that State” that are consistent with

PPACA, and “provid[ing] ways for residents of, and

small businesses in. [that] State to receive

information” on the options available to them in that

State’s market, Medicaid, Social Security, high-risk

pools (if any), and other possible purchasing or

entitlement options. PPACA = §§1103(a)(1-2),

1311(d)(3). Lest there be any doubt about the limits

on that authority, it is resolved by the reference in

Section 1321(c)(2) to Section 2736(b) of the Public

Health Services Act, 42 U.S.C. § 300gg-22(b), which

limits that power to oversight of “the issuance, sale.

renewal, and offering of health insurance coverage in

connection with group health plans or individual

health insurance coverage in such State.”

Only Congress can “fix” problems such as these.

It has done so in the past’. and should this Court

invalidate the IRS rule, Congress will undoubtedly

respond.

3 Some were technical corrections. see, e.g., Health Care and

Education Reconciliation Act of 2010, Pub.L. No. 111—152, 124

Stat. 1029 (2010), while others were financially unworkable.

See, e.g., Pub.L. No. 112—240, 126 Stat. 2313, §642 (January 2,

2013) (repealing the “CLASS Act”, PPACA §§8001-8002, and

rescinding related spending authority); Pub.L. No. 112-9, 125

Stat. 36 (2011) (repealing the “1099 Mandate”): Pub.L. No. 112-

56, 125 Stat. 111 (2011) (repealing withholding requirement

and amending 26 U.S.C. §36B to change the calculation of

adjusted gross income for determining eligibility for certain

programs).

As this Court observed in Rodriguez v. United

States, 480 U.S. 522, 525-26 (1987) (per curiam):

“Deciding what competing values will or will not be

sacrificed to the achievement of a particular objective

is the very essence of legislative choice—and it

frustrates rather than effectuates legislative intent

simplistically to assume that whatever furthers the

statute's primary objective must be the law.” Accord,

Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S.

633, 646-47 (1990); MetroPCS Cal., LLC v. FCC, 644

F.3d 410, 414 (D.C. Cir. 2011). Certainly “an agency

has no power to “tailor legislation to bureaucratic

policy goals by rewriting unambiguous statutory

terms.” Utility Air Regulatory Grp. v. EPA, 124 S.Ct.

2427, 2445 (2014).

F. There is no “Ambiguity” in the Tax Credit

“Allowed” by Congress

The Fourth Circuit found an “internal tension”

between the text of Sections 1311 and 1321 because

“denying tax credits to individuals shopping on

federal Exchanges would throw a debilitating wrench

into the Act’s internal economic machinery.” King,

759 F.3d at 373-374. It then relied on this “tension”

to suggest that Congress must have delegated power

to confer eligibility for the credit on the IRS: “Given

that Congress defined ‘Exchange’ as an Exchange

established by the state, it makes sense to read

§1321(c)’s directive that HHS establish ‘such

Exchange’ to mean that the federal government acts

on behalf of the state when it establishes its own

Exchange.” King, 759 F.3d at 369 (emphasis added);

id., 759 F.3d at 377 (Davis, J., concurring) (“the

contingency provision” in Section 1321(c) supports

the IRS interpretation).

There is no tension.

A “tension” arises between Sections 1311 and

1321 if, and only if, one assumes that federal tax

credits must be available to persons “enrolled in one

or more qualified health plans through an Exchange

established [by the United States] under ... 1321 of

the Affordable Care Act.” 26 C.F.R. § 1.36B—1(k).

While Amici can understand the political reasons

why Respondents made that assumption, Sections

1311 and Section 1321 do not support it.

From our perspective, Respondents’ claims raise

two fundamental questions:

1) Can expanding the eligibility criteria of a tax

credit validly be characterized as an “interstitial

matter” of tax administration? and

2) Assuming that the IRS regulation can be so

characterized, is the agency's “interpretation”

consistent with the Internal Revenue Code. and

“the language, purpose, and structure of section

36B and the Affordable Care Act as a whole”?

Health Insurance Premium Tax Credit, 77 Fed.

Reg. 30,377, 30,377 (May 23, 2012)

Your Amici respectfully submit that the answer

to both questions is “no.” Because the IRS regulation

rewrites the statute, we conclude this section with

Justice Brandeis’ warning in Iselin v. United States,

270 U.S. 245, 251 (1926): “What the government asks

is not a construction of a statute, but, in effect, an

enlargement of it by the court, so that what was

omitted, presumably by inadvertence, may be

included within its scope. To supply omissions

transcends the judicial function.” Accord, Michigan

uv. Bay Mills Indian Community, 134 S.Ct. 2024,

2034 (2014) (“This Court has no roving license, in

even ordinary cases of statutory interpretation, to

disregard clear language simply on the view that ...

Congress ‘must have intended’ something broader.”).

III. CHEVRON DEFERENCE IS INAPPROPRIATE IN

THIS CASE

Chevron holds that judicial deference to an

agency interpretation is required only when

“Congress has not directly addressed the precise

question at issue” or if “the statue is silent with

respect to the specific issue.” Chevron, U.S.A. vu

Natural Resources Defense Council, Inc. 467U.S. 837,

843 (1984) While the lower courts have not been

consistent in their understanding of the scope of

Chevron deference, all of the Members of this Court

agree that “United States v. Mead Corp. requires

that, for Chevron deference to apply, the agency

must have received Congressional authority to

determine the particular matter adopted. No one

disputes that.” City of Arlington, Texas v. F.C.C., 133

S.Ct. 1863, 1873-74 (2013). All Members of this

Court also agree that “[t]he agency is due no

deference” when “Congress has left no gap for the

agency to fill.” City of Arlington, 133 S.Ct. at 1875

(Breyer, J., concurring); Id., 133 S.Ct. at 1881

(Roberts, C.J., Kennedy & Alito, JJ., dissenting).

A. Under Chevron, the Court Decides, as a

Matter of Law, whether there is Statutory

Ambiguity

The “particular matter at issue” here is eligibility

for the “premium assistance credit”. If Congress has

limited eligibility to taxpayers who enrolled in a

qualified health plan through an Exchange “created

by a State under Section 1311” (42 U.S.C. § 18031)

(emphasis added)”, no further inquiry is needed.

Congress decided.

Because Respondents argued below that PPACA

is ambiguous concerning eligibility, this Court must

decide whether the IRS eligibility rule can validly be

characterized as an “interstitial” legal question that

“t]he Secretary is authorized and required” to

resolve under his authority “to make the inquiries,

determinations, and assessments of all taxes ...

imposed by” the Internal Revenue Code. 26 U.S.C. §

6201 (2014).

If the answer is “no” (and we respectfully submit

that it is), the Court must then ask whether PPACA

delegates Congress’ power to “impose” taxes or to

“allow” credits against taxes otherwise due and

owing the Treasurv of the United States.

B. Congress has directly addressed the

precise question at issue in this case

Congress has allowed the “premium assistance

tax credit” only for taxpayers ...

1) Who are enrolled in a “qualified health plan”

that is

2) “offered in the individual market within a

State”, and

3) whose enrollment was “through an Exchange

established by the State under 1311 of the

Patient Protection and Affordable Care Act’.

26 U.S.C. § 36(B)(b)(2)(A) (emphasis added) .

The panel below rejected the “common sense”

proposition that 26 U.S.C. §36B [hereafter § 36B)

means that “the premium credit amount for

individuals purchasing insurance through a federal

Exchange would always be zero.” King, 759 F.3d at

368-69. PPACA “is ambiguous and subject to at least

two different interpretations, id., 759 F.3d at 372,

not because Congress tried and failed to be clear

about its intentions, but rather because “denying tax

credits to individuals shopping on federal Exchanges

would throw a debilitating wrench into the Act’s

internal economic machinery.” King, 759 F.3d at

373-374.

1. Respondents’ Claim for Chevron

Deference is Overbroad.

In Mayo Foundation for Medical Educ. and

Research v. U.S., supra, , the Chief Justice confirmed

that the “principles underlying ... Chevron apply

with full force in the tax context.” Id., 562 U.S. at

5s BAe oe Tie

The Fourth Circuit held that “[wjhat we must

decide is whether the statute permits the IRS to

decide whether the tax credits would be available on

federal Exchanges.” King, 759 F.3d at 373 (emphasis

added). If so, the pane) reasoned, “[ijt is thus

entirely sensible that the IRS would enact the

regulations it did, making Chevron deference

appropriate.” Id., King, 759 F.3d at 375.

Your Amici respectfully submit that this is the

wrong question. The Chevron question is: Did

Congress grant the IRS the authority to determine

who is eligible to claim a tax credit under PPACA?

The answer is “No.”

2. IRS Discretion under Chevron is Congruent

with its Authority to Administer the Tax

Laws.

Because Chevron requires the reviewing court to

determine whether Congress granted the IRS

“authority to determine the particular matter at

issue in the particular manner adopted”, City of

Arlington, 133 S.Ct. at 1873-74, the analysis of IRS

authority must begin with the powers granted to the

Secretary of the Treasury. 26 U.S.C. §6201(a) (2014)

provides, in relevant part. that:

The Secretary is authorized and required to

make the inquiries, determinations, and

assessments of all taxes (including interest,

additional amounts, additions to the tax, and

assessable penalties) imposed by this title, ... .

... (emphasis added)

Section 6201 distinguishes between the power to

‘lay and collect taxes”, which belongs only to

Congress, and the administrative power of the IRS to

make the “inquiries, determinations and

“assessments” needed to calculate, assess, and collect

the taxes that Congress has imposed. See 26 U.S.C.

§§6202 (assessment), 6301 (collection) (2014).

So too, we submit, should this Court.

In Mayo Foundation, the issue was “whether

doctors who serve as medical residents are properly

viewed as ‘student(s]’ whose service Congress has

exempted from FICA ...”. 131 S.Ct. at 708. Chevron

analysis was applicable — and deference was

warranted — because the “statute does not define the

term, ‘student,’ and does not otherwise attend to the

precise question whether medical residents are

subject to FICA.” Id., 131 S.Ct. at 711. The IRS rule

in question sought to clarify “the ter[m]” “student” as

used in § 3121(b)(10), particularly with respect to

individuals who perform “services that are in the

nature of on the job training.” Mavo, 131 U.S. at 710,

quoting 69 Fed.Reg. 8605 (2004).

Here, there is no such ambiguity. The statute

provides that “there shall be allowed as a credit

against the tax imposed by this subtitle for any

taxable year an amount equal to the premium

assistance credit amount of the taxpayer for the

taxable year.” 26 U.S.C. § 36B(a). It then limits

eligibility for that credit to taxpayers who are

“enrolled in through an Exchange established by the

State under [section] 1311 of the Patient Protection

and Affordable Care Act” 26 U.S.C. § 36B(b)(2).

As noted in Part II(A) above, 16 State Exchanges

are operating and more States will undoubtedly join

the experiment if the 16 are viewed as successful.

This is hardly “nonsensical”. King 759 F.3d at 373

(panel opinion); 378 (Davis, J., concurring). The

Fourth Circuit therefore had no basis to infer

Congressional delegation of interpretive authority to

the Respondents.

The IRS was clearly sensitive to the charge that

extending tax credits to Exchanges that were not

“established by the State under [section] 1311” would

exceed its authority under the Internal Revenue

Code as amended by PPACA. It conceded that this

appropriation language does not explicitly authorize

the disputed credits:

The statutory language of section 36B and

other provisions of the Affordable Care Act

support the interpretation that credits are

available to taxpavers who obtain coverage

through a State Exchange, regional

Exchange, subsidiary Exchange, and the

Federally-facilitated Exchange.

77 Fed.Reg. at 30,378 (emphasis added). It therefore

sought refuge in the legislative history:

Moreover, the relevant legislative history

does not demonstrate that Congress

intended to limit the premium tax credit

to State Exchanges. Accordingly, the final

regulations maintain the rule in the

proposed regulations because it is

consistent with the language, purpose, and

structure of section 36B and_ the

Affordable Care Act as a whole.

Id.

The IRS puts the cart before the horse. Even if

we ignore the fact that legislative history of PPACA

is sparse, and forget that many of its important

provisions were compromises’ struck during

“negotiations [that] were held behind closed doors”.

John Cannan, A Legis/ative History of the Affordable

Care Act: How Legislative Procedure Shapes

Legislative History, 105 LAW LIBRARY J. 131, 159

(2013), Chevron deference is available if — and only if

— Congress has either explicitly or implicitly given

the IRS power to define the class of taxpayers

eligible for the tax credit.

It has not done so.

CONCLUSION

The IRS claim of interpretive authority to

authorize a tax credit for citizens who live in States

that have refused to establish Exchanges is contrary

to law and unconstitutional.

Respactfully submitted,

Cota, he ha-

Counsel of Record

Marshall J. Breger

Attorneys for Amici Curiae

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.