Let's talk about the Anti-Injunction Act and the healthcare reform act (PPACA or also, ACA). While the Anti-Injunction Act argument has been dropped by the parties in the latest round of 4th Circuit Court of Appeals healthcare litigation, there are probably still many lawyers out there asking "what is the Anti-Injunction Act?"
So, let's try to make tax law as painless as we possibly can.
The Tax Anti-Injunction Act is sometimes confused with the federal Anti-Injunction Act, so let's first make that distinction. The former is one that is found in 26 U.S.C. Sec. 7421(a) and provides that "no suit for the purposes of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such a person is the person against whom such tax is assessed."
The federal Anti-Injunction Act, however, is somewhat different. This one, codified at 28 U.S.C. Sec. 2283, states:
"A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments."
The one that the Obama Administration was trying to apply (prior to removing the argument from its recent 4th Circuit briefs) was the Tax Anti-Injunction Act.
So, in plain English -- If you want to sue for relief on a tax statute, you need to pay the tax and then sue for refund. At least that's how most tax law practitioners apply it.
As stated in the government's brief:
"The AIA, when applicable, bars any suit seeking relief that 'would necessarily preclude' the assessment or collection of taxes under the Internal Revenue Code, regardless of the plaintiff's professed motivation for the suit."
Thus, if the Anti-Injunction Act were applied against the Obamacare lawsuits, it would deprive the court of jurisdiction to hear a pre-implementation challenge to the minimum coverage provision of the healthcare legislation.
Now, why did the government retract its Anti-Injunction argument in the lawsuits against the healthcare reform act?
According to the brief:
"Unique attributes of the text and structure of the ACA indicate that Congress did not intend to dictate a single pathway to judicial review of Section 5000A-- i.e. failure to maintain minimum essential coverage starting more than two and a half years from now, in January 2014; payment of the tax penalty starting nearly four years from now, in April 2015; and only then, commencement of an action seeking a tax refund."
In looking at congressional intent, the government noted that Congress had anticipated constitutional challenges.
From the appellant brief: "In the unique circumstances of this case, we do not believe that Congress intended a refund suit to be the sole recourse for a constitutional challenge to the minimum coverage protection."
- Obamacare Lawsuits on Their Way to The 6th Circuit (6th Circuit Blog)
- 4th Circuit Asks: 'Is Obamacare Unconstitutional?' (U.S. Fourth Circuit Blog)
- Obamacare Lawsuit: Is Justice Elena Kagan Impartial? (Supreme Court Blog)