Today's Supreme Court arguments on the Affordable Care Act centered around whether or not the penalty for failure to obtain health insurance is a tax, and if it is a tax, whether the parties have standing to sue over it before it has been assessed. The full transcript is here (PDF).
Since the requirement to obtain health insurance is not effective until 2014, the earliest date anyone would be paying a penalty for not obtaining it would be sometime in 2015.
There are two prongs to the argument for why the AIA would apply: First, if it did not apply to the penalties, that opens the gate for every other tax penalty to be litigated before it's assessed. Second, Congress specified that the penalty should be assessed and collected in the same manner as a tax, even though it's a penalty.
The justices actively questioned Robert Long, the attorney appointed to argue that the Anti-Injunction Act (AIA) applies in this case. His argument centered around the idea that the penalty in the Affordable Care Act is paid via tax return, and the AIA applies to tax penalties and taxes alike. He pointed out that Congress directed that the penalty should be assessed and collected in the same manner as taxes, that the penalties were included in taxes, and that the penalty has the same properties as a tax because the statute says the penalty "shall be assessed and collected in the same manner as taxes."
Legal arguments aside for a moment, I found some humor in this comment by Justice Scalia:
If it's not jurisdictional, what's going to happen is you are going to have an intelligent federal court deciding whether you are going to make an exception. And there will be no parade of horribles because all federal courts are intelligent.
This post from SCOTUSblog summarizes Mr. Long's entire argument:
The Court talked about three different ways by which it might conclude that it had the power to rule, despite the 1867′s law flat language against any lawsuit that would seem to interrupt the collection of federal tax revenues. The first was to conclude that the AIA was not a court-closing law at all — that is, it did not take away a court’s jurisdiction to rule. The second was that the Act was intended to close the courts, but not to every kind of tax challenge. And the third was that it need not decide the jurisdictional question at all, since AIA does not even apply to a provision like the mandate and its attached financial penalty for not obtaining health insurance by the year 2014.
My sense is that the third will apply, because of the differences between the language in the ACA for penalty assessment and collection and other assessments. The language is "shall be assessed and collected in the same manner as taxes", but Congress called it a penalty and attached it to a health care requirement, not a tax. Furthermore, the Obama administration and those bringing the lawsuits do not want this to fall under the jurisdiction of the AIA because it's in the best interests of everyone to settle this question now, not in 2016 or so when the law has taken effect.
One of the difficult issues involved in today's argument is the position it places the government in, as articulated by Justice Alito:
GENERAL VERRILLI: ...Congress has authority under the taxing power to enact a measure not labeled as a tax, and it did so when it put section 5000A into the Internal Revenue Code. But for purposes of the Anti-Injunction Act, the precise language Congress used is determinative. And there is no language in the Anti-Injunction Act -- excuse me, no language in section 5000A of the Affordable Care Act or in the Internal Revenue Code generally that provides a textual instruction that -
JUSTICE ALITO: General Verrilli, today you are arguing that the penalty is not a tax. Tomorrow you are going to be back and you will be arguing that the penalty is a tax. Has the Court ever held that something that is a tax for purposes of the taxing power under the Constitution is not a tax under the Anti-Injunction Act?
Yes, this is a bit of a thorny issue, which Mr. Verrilli danced around by saying that the issue today is not the same as the issue tomorrow. The question tomorrow will touch on Congress' ability to regulate interstate commerce and to tax, so it was important for Mr. Verrilli to separate the issues in this question from the issues arising tomorrow. Later on in the argument he had a little dance with Justice Breyer over the term "tax" versus "penalty":
JUSTICE KAGAN: And that's because -
GENERAL VERRILLI: That if they don't pay the tax, they violated a federal law.
JUSTICE KAGAN: But as long as they pay the penalty -
GENERAL VERRILLI: If they pay the tax, then they are in compliance with the law.
JUSTICE BREYER: Why do you keep saying tax?
GENERAL VERRILLI: If they pay the tax penalty, they're in compliance with the law.
JUSTICE BREYER: Thank you.
GENERAL VERRILLI: Thank you, Justice Breyer.
JUSTICE BREYER: The penalty.
GENERAL VERRILLI: Right. That's right.
Here's the bottom line on this: Both lawyers were looking for the court to determine that AIA doesn't apply, and from the nature of the questions, it seems the justices were inclined in that direction as well.
Mr. Katsas, arguing for the plaintiffs, gave us a preview of what's coming from his side which I will summarize in a different post previewing Day Two arguments.