Wednesday, December 07, 2011

The "Early-Bird Special" Exception to the Tax Anti-Injunction Act

Neil Siegel

Mike Dorf and I have posted a new paper on SSRN that is forthcoming in The Yale Law Journal Online. We recently previewed the paper in a Verdict column. We argue that, in view of the billions of dollars and enormous effort that might otherwise be wasted, the public interest will be best served if the U.S. Supreme Court decides the merits of the present constitutional challenges to the Patient Protection and Affordable Care Act (ACA) during its October 2011 Term. (In a recent blog post, Mike further discusses why prompt adjudication is the best course.)

Potentially standing in the way, however, is the federal Tax Anti-Injunction Act (TAIA), 26 U.S.C. § 7421(a). This statute bars any “suit for the purpose of restraining the assessment or collection of any tax.”

The dispute to date has turned on the fraught and complex question of whether the ACA’s exaction for being uninsured qualifies as a “tax” for purposes of the TAIA. We argue that the Court need not untangle this knot because the TAIA does not apply for a distinct reason: the present challenges to the ACA’s minimum coverage provision do not have “the purpose” of restraining tax assessment or collection. We so argue because, in order for the TAIA not to bar tax refund suits, the TAIA must be read to bar only suits with the immediate purpose of restraining tax assessment or collection. The present challenges do not have such an immediate purpose because the very authority to assess or collect will not exist until long after the litigation is concluded.

Among other virtues that we discuss in the paper, our proposed resolution of the TAIA question does not predetermine whether the tax power justifies the minimum coverage provision.

In a counsel of caution, we also call on Congress to pass a special-purpose statute stating that the TAIA does not bar pre-enforcement challenges to the minimum coverage provision until the provision goes into effect. There is no dispute about the authority of Congress to pass such a law. Moreover, if the political branches were to turn their attention to the matter, there would be good reason to expect that the bill would pass both chambers and be signed into law by the President.

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