Lawsuit challenging IRS tax credit rule proceeds in Indiana

August 15

On Tuesday, the U.S. District Court for the Southern District of Indiana rebuffed the federal government’s effort to dismiss another challenge to the IRS regulation purporting to authorize tax credits and cost-sharing subsidies for the purchase of qualifying health insurance in federal exchanges.  This is the fourth case in which federal courts have rejected the federal government’s efforts to avoid addressing the merits of the IRS rule.  Two federal appellate courts, the U.S. Courts of Appeals for the D.C. and Fourth Circuits, issued conflicting decisions earlier this summer, and a fourth case remains pending in Oklahoma.

In Indiana v. IRS, the state of Indiana and over three dozen Indiana school districts are challenging the IRS rule and the applicability of the employer mandate to state and local governments.  Here, as in the other cases challenging the IRS rule, the federal government tried to argue that the plaintiffs lacked standing or were otherwise unable to challenge the IRS rule. Judge William T. Lawrence was no more sympathetic to these claims than other judges have been and rejected the government’s motion to dismiss on these grounds.  The government did not lose on every issue, however, as Lawrence also held that some of the state’s other claims, such as that the employer mandate is unconstitutional on federalism grounds, were barred by res judicata.

The court will hear oral arguments on the merits of the challenge to the IRS tax credit rule in October.

For more background and this and the other suits challenging the IRS tax credit rule, see here.

Jonathan H. Adler teaches courses in constitutional, administrative, and environmental law at the Case Western University School of Law, where he is the inaugural Johan Verheij Memorial Professor of Law and Director of the Center for Business Law and Regulation.
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