Paul L. Caron

Wednesday, July 18, 2012

Adler & Cannon: The Illegal IRS Rule to Expand Tax Credits Under ObamaCare

Following up on my previous post, If ObamaCare Survives, IRS's Authority to Issue Tax Credits to Face Challenge (June 27, 2012):  Jonathan H. Adler (Case Western) & Michael F. Cannon (Cato Institute), Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA, 22 Health Matrix ___ (2012):

The Patient Protection and Affordable Care Act (PPACA) provides tax credits and subsidies for the purchase of qualifying health insurance plans on state-run insurance exchanges. Contrary to expectations, many states are refusing or otherwise failing to create such exchanges. An IRS rule purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own. This rule lacks statutory authority. The text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges. The IRS rule is contrary to congressional intent and cannot be justified on other legal grounds. Because the granting of tax credits can trigger the imposition of fines on employers, the IRS rule is likely to be challenged in court.

Wall Street Journal, Health Law Opponents Challenge Tax Credit:

Two scholars—Michael Cannon of the libertarian Cato Institute think-tank and Jonathan Adler, a law professor at Case Western Reserve University—wrote in a paper published Monday that the IRS rule leaves the agency open to legal action. "The IRS's rule has no basis in law," they wrote. "This supposed fix is actually an effort to rewrite the law and provide for something Congress never enacted."

Scholarship, Tax | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Adler & Cannon: The Illegal IRS Rule to Expand Tax Credits Under ObamaCare:


Allowing Congress to set the priorities of the Nation by crafting laws is so 39-seconds ago.

Posted by: AD-RtR/OS! | Jul 18, 2012 9:10:25 AM

Who would have standing to challenge the IRS rule (that is, who would be entitled to sue to invalidate this rule)? Taxpayer standing is ordinarily quite limited.

Posted by: Mark Scarberry | Jul 18, 2012 8:35:51 AM

Not a surprise.

We also have that going on in the environmental area, where rules are being written to lessen the impact of what would be the "plain meaning" of the statutory language. In that case, the Administration (and EPA bureaucrats, who want the power) know that applying the statute as written would lead to chaos and, eventually, repeal - which would cost them the power they so dearly want.

Posted by: BD57 | Jul 18, 2012 5:52:44 AM