The Fourth District Court of Appeals has upheld the use of insurance subsidies in states that did not operate their own exchanges under the federal healthcare law.
The Fourth District Court of Appeals has upheld the use of insurance subsidies in states that did not operate their own exchanges under the federal healthcare law.
The Fourth District Court of Appeals has upheld the use of insurance subsidies in states that did not operate their own exchanges under the federal healthcare law.
DAVI D KI NG; DOUGLAS HURST; BRENDA LEVY; ROSE LUCK,
Pl ai nt i f f s - Appel l ant s,
v.
SYLVI A MATTHEWS BURWELL, i n her of f i ci al capaci t y as U. S. Secr et ar y of Heal t h and Human Ser vi ces; UNI TED STATES DEPARTMENT OF HEALTH & HUMAN SERVI CES; J ACOB LEW, i n hi s of f i ci al capaci t y as U. S. Secr et ar y of t he Tr easur y; UNI TED STATES DEPARTMENT OF THE TREASURY; I NTERNAL REVENUE SERVI CE; J OHN KOSKI NEN, i n hi s of f i ci al capaci t y as Commi ssi oner of I nt er nal Revenue,
SENATOR J OHN CORNYN; SENATOR TED CRUZ; SENATOR ORRI N HATCH; SENATOR MI KE LEE; SENATOR ROB PORTMAN; SENATOR MARCO RUBI O; CONGRESSMAN DARRELL I SSA; PACI FI C RESEARCH I NSTI TUTE; THE CATO I NSTI TUTE; THE AMERI CAN CI VI L RI GHTS UNI ON; J ONATHAN H. ADLER; MI CHAEL F. CANNON; STATE OF OKLAHOMA; STATE OF ALABAMA; STATE OF GEORGI A; STATE OF WEST VI RGI NI A; STATE OF NEBRASKA; STATE OF SOUTH CAROLI NA; CONSUMERS RESEARCH; STATE OF KANSAS; THE GALEN I NSTI TUTE,
Ami ci Suppor t i ng Appel l ant s,
COMMONWEALTH OF VI RGI NI A; AMERI CA S HEALTH I NSURANCE PLANS; AMERI CAN CANCER SOCI ETY; AMERI CAN CANCER SOCI ETY CANCER ACTI ON NETWORK; AMERI CAN DI ABETES ASSOCI ATI ON; AMERI CAN HEART ASSOCI ATI ON; PUBLI C HEALTH DEANS, CHAI RS, AND FACULTY; MEMBERS OF CONGRESS AND STATE LEGI SLATURES; AMERI CAN HOSPI TAL ASSOCI ATI ON; ECONOMI C SCHOLARS; FAMI LI ES USA; AARP; NATI ONAL HEALTH LAWPROGRAM,
Ami ci Suppor t i ng Appel l ees. Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 1 of 46 2
Appeal f r om t he Uni t ed St at es Di st r i ct Cour t f or t he East er n Di st r i ct of Vi r gi ni a, at Ri chmond. J ames R. Spencer , Seni or Di st r i ct J udge. ( 3: 13- cv- 00630- J RS)
Ar gued: May 14, 2014 Deci ded: J ul y 22, 2014
Bef or e GREGORY and THACKER, Ci r cui t J udges, and DAVI S, Seni or Ci r cui t J udge.
Af f i r med by publ i shed opi ni on. J udge Gr egor y wr ot e t he opi ni on, i n whi ch J udge Thacker and Seni or J udge Davi s j oi ned. J udge Davi s wr ot e a concur r i ng opi ni on.
ARGUED: Mi chael Ant hony Car vi n, J ONES DAY, Washi ngt on, D. C. , f or Appel l ant s. St uar t F. Del er y, UNI TED STATES DEPARTMENT OF J USTI CE, Washi ngt on, D. C. , f or Appel l ees. St uar t Al an Raphael , OFFI CE OF THE ATTORNEY GENERAL OF VI RGI NI A, Ri chmond, Vi r gi ni a, f or Ami cus Commonweal t h of Vi r gi ni a. ON BRIEF: Yaakov M. Rot h, J onat han Ber r y, J ONES DAY, Washi ngt on, D. C. , f or Appel l ant s. Dana J . Boent e, Uni t ed St at es At t or ney, OFFI CE OF THE UNI TED STATES ATTORNEY, Al exandr i a, Vi r gi ni a; Bet h S. Br i nkmann, Deput y Assi st ant At t or ney Gener al , Mar k B. St er n, Al i sa B. Kl ei n, Ci vi l Di vi si on, UNI TED STATES DEPARTMENT OF J USTI CE, Washi ngt on, D. C. , f or Appel l ees. Mi chael E. Rosman, CENTER FOR I NDI VI DUAL RI GHTS, Washi ngt on, D. C. ; Car r i e Sever i no, THE J UDI CI AL EDUCATI ON PROJ ECT, Washi ngt on, D. C. ; Char l es J . Cooper , Davi d H. Thompson, Howar d C. Ni el son, J r . , Br i an W. Bar nes, COOPER & KI RK, PLLC, f or Ami ci Senat or J ohn Cor nyn, Senat or Ted Cr uz, Senat or Or r i n Hat ch, Senat or Mi ke Lee, Senat or Rob Por t man, Senat or Mar co Rubi o, and Congr essman Dar r el l I ssa. C. Dean McGr at h, J r . , MCGRATH & ASSOCI ATES, Washi ngt on, D. C. ; I l ya Shapi r o, CATO I NSTI TUTE, Washi ngt on, D. C. ; Ber t W. Rei n, Wi l l i am S. Consovoy, J . Mi chael Connol l y, WI LEY REI N LLP, Washi ngt on, D. C. , f or Ami ci Paci f i c Resear ch I nst i t ut e, The Cat o I nst i t ut e, and The Amer i can Ci vi l Ri ght s Uni on. Andr ew M. Gr ossman, BAKER HOSTETLER, Washi ngt on, D. C. , f or Ami ci J onat han H. Adl er and Mi chael F. Cannon. E. Scot t Pr ui t t , At t or ney Gener al , Pat r i ck R. Wyr i ck, Sol i ci t or Gener al , OFFI CE OF THE ATTORNEY GENERAL OF OKLAHOMA, Okl ahoma Ci t y, Okl ahoma; Lut her St r ange, At t or ney Gener al , OFFI CE OF THE ATTORNEY GENERAL OF ALABAMA, Mont gomer y, Al abama; Sam Ol ens, At t or ney Gener al , Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 2 of 46 3
OFFI CE OF THE ATTORNEY GENERAL OF GEORGI A, At l ant a, Geor gi a; Pat r i ck Mor r i sey, At t or ney Gener al , OFFI CE OF THE ATTORNEY GENERAL OF WEST VI RGI NI A, Char l est on, West Vi r gi ni a; J on Br uni ng, At t or ney Gener al , Kat i e Spohn, Deput y At t or ney Gener al , OFFI CE OF THE ATTORNEY GENERAL OF NEBRASKA, Li ncol n, Nebr aska; Al an Wi l son, At t or ney Gener al , OFFI CE OF THE ATTORNEY GENERAL OF SOUTH CAROLI NA, Col umbi a, Sout h Car ol i na, f or Ami ci St at e of Okl ahoma, St at e of Al abama, St at e of Geor gi a, St at e of West Vi r gi ni a, St at e of Nebr aska, and St at e of Sout h Car ol i na. Rebecca A. Beynon, KELLOGG, HUBER, HANSEN, TODD, EVANS & FI GEL, P. L. L. C. , Washi ngt on, D. C. , f or Ami cus Consumer s Resear ch. Der ek Schmi dt , At t or ney Gener al , J ef f r ey A. Chanay, Deput y At t or ney Gener al , St ephen R. McAl l i st er , Sol i ci t or Gener al , Br yan C. Cl ar k, Assi st ant Sol i ci t or Gener al , OFFI CE OF THE ATTORNEY GENERAL OF KANSAS, Topeka, Kansas; J on Br uni ng, At t or ney Gener al , OFFI CE OF THE ATTORNEY GENERAL OF NEBRASKA, Li ncol n, Nebr aska, f or Ami ci St at e of Kansas and St at e of Nebr aska. C. Boyden Gr ay, Adam J . Whi t e, Adam R. F. Gust af son, BOYDEN GRAY & ASSOCI ATES, Washi ngt on, D. C. , f or Ami cus The Gal en I nst i t ut e. Mar k R. Her r i ng, At t or ney Gener al , Cynt hi a E. Hudson, Chi ef Deput y At t or ney Gener al , Tr evor S. Cox, Deput y Sol i ci t or Gener al , OFFI CE OF THE ATTORNEY GENERAL OF VI RGI NI A, Ri chmond, Vi r gi ni a, f or Ami cus Commonweal t h of Vi r gi ni a. J oseph Mi l l er , J ul i e Si mon Mi l l er , AMERI CA S HEALTH I NSURANCE PLANS, Washi ngt on, D. C. ; Andr ew J . Pi ncus, Br i an D. Net t er , MAYER BROWN LLP, Washi ngt on, D. C. , f or Ami cus Amer i ca s Heal t h I nsur ance Pl ans. Mar y P. Rouvel as, AMERI CAN CANCER SOCI ETY CANCER ACTI ON NETWORK, Washi ngt on, D. C. ; Br i an G. Eber l e, SHERMAN & HOWARD L. L. C. , Denver , Col or ado, f or Ami ci Amer i can Cancer Soci et y, Amer i can Cancer Soci et y Cancer Act i on Net wor k, Amer i can Di abet es Associ at i on, and Amer i can Hear t Associ at i on. Cl i nt A. Car pent er , H. Guy Col l i er , Ankur J . Goel , Cat hy Z. Schei neson, Laur en A. D' Agost i no, MCDERMOTT WI LL & EMERY LLP, Washi ngt on, D. C. , f or Ami cus Publ i c Heal t h Deans, Chai r s, and Facul t y. El i zabet h B. Wydr a, Dougl as T. Kendal l , Si mon Lazar us, Br i anne J . Gor od, CONSTI TUTI ONAL ACCOUNTABI LI TY CENTER, Washi ngt on, D. C. , f or Ami cus Member s of Congr ess and St at e Legi sl at or s. Mel i nda Rei d Hat t on, Maur een Mudr on, AMERI CAN HOSPI TAL ASSOCI ATI ON, Washi ngt on, D. C. ; Domi ni c F. Per el l a, Sean Mar ot t a, HOGAN LOVELLS US LLP, Washi ngt on, D. C. , f or Ami cus Amer i can Hospi t al Associ at i on. Mat t hew S. Hel l man, Mat t hew E. Pr i ce, J ul i e St r aus Har r i s, Pr evi n War r en, J ENNER & BLOCK LLP, Washi ngt on, D. C. , f or Ami cus Economi c Schol ar s. Rober t N. Wei ner , Mi chael Tye, ARNOLD & PORTER LLP, Washi ngt on, D. C. , f or Ami cus Fami l i es USA. St uar t R. Cohen, Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 3 of 46 4
Mi chael Schust er , AARP FOUNDATI ON LI TI GATI ON, Washi ngt on, D. C. ; Mar t ha J ane Per ki ns, NATI ONAL HEALTH LAW PROGRAM, Car r bor o, Nor t h Car ol i na, f or Ami ci AARP and Nat i onal Heal t h Law Pr ogr am.
GREGORY, Ci r cui t J udge: The pl ai nt i f f s- appel l ant s br i ng t hi s sui t chal l engi ng t he val i di t y of an I nt er nal Revenue Ser vi ce ( I RS) f i nal r ul e i mpl ement i ng t he pr emi um t ax cr edi t pr ovi si on of t he Pat i ent Pr ot ect i on and Af f or dabl e Car e Act ( t he ACA or Act ) . The f i nal r ul e i nt er pr et s t he ACA as aut hor i zi ng t he I RS t o gr ant t ax cr edi t s t o i ndi vi dual s who pur chase heal t h i nsur ance on bot h st at e- r un i nsur ance Exchanges and f eder al l y- f aci l i t at ed Exchanges cr eat ed and oper at ed by t he Depar t ment of Heal t h and Human Ser vi ces ( HHS) . The pl ai nt i f f s cont end t hat t he I RS s i nt er pr et at i on i s cont r ar y t o t he l anguage of t he st at ut e, whi ch, t hey asser t , aut hor i zes t ax cr edi t s onl y f or i ndi vi dual s who pur chase i nsur ance on st at e- r un Exchanges. For r easons expl ai ned bel ow, we f i nd t hat t he appl i cabl e st at ut or y l anguage i s ambi guous and subj ect t o mul t i pl e i nt er pr et at i ons. Appl yi ng def er ence t o t he I RS s det er mi nat i on, however , we uphol d t he r ul e as a per mi ssi bl e exer ci se of t he agency s di scr et i on. We t hus af f i r mt he j udgment of t he di st r i ct cour t .
I. I n Mar ch of 2010, Congr ess passed t he ACA t o i ncr ease t he number of Amer i cans cover ed by heal t h i nsur ance and decr ease t he cost of heal t h car e. Nat l Fed n of I ndep. Bus. v. Sebel i us, 132 S. Ct . 2566, 2580 ( 2012) ( NFI B) . To i ncr ease t he Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 5 of 46 6
avai l abi l i t y of af f or dabl e i nsur ance pl ans, t he Act pr ovi des f or t he est abl i shment of Exchanges, t hr ough whi ch i ndi vi dual s can pur chase compet i t i vel y- pr i ced heal t h car e cover age. See ACA 1311, 1321. Cr i t i cal l y, t he Act pr ovi des a f eder al t ax cr edi t t o mi l l i ons of l ow- and mi ddl e- i ncome Amer i cans t o of f set t he cost of i nsur ance pol i ci es pur chased on t he Exchanges. See 26 U. S. C. 36B. The Exchanges f aci l i t at e t hi s pr ocess by advanci ng an i ndi vi dual s el i gi bl e t ax cr edi t dol l ar s di r ect l y t o heal t h i nsur ance pr ovi der s as a means of r educi ng t he up- f r ont cost of pl ans t o consumer s. Sect i on 1311 of t he Act pr ovi des t hat [ e] ach St at e shal l , not l at er t han J anuar y 1, 2014, est abl i sh an Amer i can Heal t h Benef i t Exchange. ACA 1311( b) ( 1) . However , 1321 of t he Act cl ar i f i es t hat a st at e may el ect t o est abl i sh an Exchange. Sect i on 1321( c) f ur t her pr ovi des t hat i f a st at e does not el ect t o est abl i sh an Exchange by J anuar y 1, 2014, or f ai l s t o meet cer t ai n f eder al r equi r ement s f or t he Exchanges, t he Secr et ar y [ of HHS] shal l . . . est abl i sh and oper at e such exchange wi t hi n t he St at e . . . . ACA 1321( c) ( 1) . Onl y si xt een st at es pl us t he Di st r i ct of Col umbi a have el ect ed t o set up t hei r own Exchanges; t he r emai ni ng t hi r t y- f our st at es r el y on f eder al l y- f aci l i t at ed Exchanges. El i gi bi l i t y f or t he pr emi um t ax cr edi t s i s cal cul at ed accor di ng t o 26 U. S. C. 36B. Thi s sect i on def i nes t he annual Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 6 of 46 7
pr emi um assi st ance cr edi t amount as t he sum of t he mont hl y pr emi um assi st ance amount s f or al l cover age mont hs of t he t axpayer occur r i ng dur i ng t he t axabl e year . I d. 36B( b) ( 1) . A cover age mont h i s one i n whi ch t he t axpayer i s enr ol l ed i n a heal t h pl an t hr ough an Exchange est abl i shed by t he St at e under sect i on 1311. I d. 36B( c) ( 2) ( A) ( i ) ; see al so i d. 36B( b) ( 2) ( A) - ( B) ( cal cul at i ng t he pr emi um assi st ance amount i n r el at i on t o t he pr i ce of pr emi ums avai l abl e and enr ol l ed i n t hr ough an Exchange est abl i shed by t he St at e under [ ] 1311) . I n addi t i on t o t he t ax cr edi t s, t he Act r equi r es most Amer i cans t o obt ai n mi ni mum essent i al cover age or pay a t ax penal t y i mposed by t he I RS. I d. 5000A; NFI B, 132 S. Ct . at 2580. However , t he Act i ncl udes an unaf f or dabi l i t y exempt i on t hat excuses l ow- i ncome i ndi vi dual s f or whom t he annual cost of heal t h cover age exceeds ei ght per cent of t hei r pr oj ect ed househol d i ncome. 26 U. S. C. 5000A( e) ( 1) ( A) . The cost of cover age i s cal cul at ed as t he annual pr emi um f or t he l east expensi ve i nsur ance pl an avai l abl e on an Exchange of f er ed i n a consumer s st at e, mi nus t he t ax cr edi t descr i bed above. I d. 5000A( e) ( 1) ( B) ( i i ) . The t ax cr edi t s t her eby r educe t he number of i ndi vi dual s exempt f r om t he mi ni mum cover age r equi r ement , and i n t ur n i ncr ease t he number of i ndi vi dual s who must ei t her pur chase heal t h i nsur ance cover age, al bei t at a di scount ed r at e, or pay a penal t y. Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 7 of 46 8
The I RS has pr omul gat ed r egul at i ons maki ng t he pr emi um t ax cr edi t s avai l abl e t o qual i f yi ng i ndi vi dual s who pur chase heal t h i nsur ance on bot h st at e- r un and f eder al l y- f aci l i t at ed Exchanges. See 26 C. F. R. 1. 36B- 1( k) ; Heal t h I nsur ance Pr emi um Tax 7 Cr edi t , 77 Fed. Reg. 30, 377, 30, 378 ( May 23, 2012) ( col l ect i vel y t he I RS Rul e) . The I RS Rul e pr ovi des t hat t he cr edi t s shal l be avai l abl e t o anyone enr ol l ed i n one or mor e qual i f i ed heal t h pl ans t hr ough an Exchange, and t hen adopt s by cr oss- r ef er ence an HHS def i ni t i on of Exchange t hat i ncl udes any Exchange, r egar dl ess of whet her t he Exchange i s est abl i shed and oper at ed by a St at e . . . or by HHS. 26 C. F. R. 1. 36B- 2; 45 C. F. R. 155. 20. I ndi vi dual s who pur chase i nsur ance t hr ough f eder al l y- f aci l i t at ed Exchanges ar e t hus el i gi bl e f or t he pr emi um t ax cr edi t s under t he I RS Rul e. I n r esponse t o comment ar y t hat t hi s i nt er pr et at i on mi ght conf l i ct wi t h t he t ext of t he st at ut e, t he I RS i ssued t he f ol l owi ng expl anat i on: The st at ut or y l anguage of sect i on 36B and ot her pr ovi si ons of t he Af f or dabl e Car e Act suppor t t he i nt er pr et at i on t hat cr edi t s ar e avai l abl e t o t axpayer s who obt ai n cover age t hr ough a St at e Exchange, r egi onal Exchange, subsi di ar y Exchange, and t he Feder al l y- f aci l i t at ed Exchange. Mor eover , t he r el evant l egi sl at i ve hi st or y does not demonst r at e t hat Congr ess i nt ended t o l i mi t t he pr emi um t ax cr edi t t o St at e Exchanges. Accor di ngl y, t he f i nal r egul at i ons mai nt ai n t he r ul e i n t he pr oposed r egul at i ons because i t i s consi st ent wi t h t he l anguage, pur pose, and st r uct ur e of sect i on 36B and t he Af f or dabl e Car e Act as a whol e. 77 Fed. Reg. at 30, 378. Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 8 of 46 9
The pl ai nt i f f s i n t hi s case ar e Vi r gi ni a r esi dent s who do not want t o pur chase compr ehensi ve heal t h i nsur ance. Vi r gi ni a has decl i ned t o est abl i sh a st at e- r un Exchange and i s t her ef or e ser ved by t he pr omi nent f eder al l y- f aci l i t at ed Exchange known as Heal t hCar e. gov. Wi t hout t he pr emi um t ax cr edi t s, t he pl ai nt i f f s woul d be exempt f r om t he i ndi vi dual mandat e under t he unaf f or dabi l i t y exempt i on. Wi t h t he cr edi t s, however , t he r educed cost s of t he pol i ci es avai l abl e t o t he pl ai nt i f f s subj ect t hem t o t he mi ni mum cover age penal t y. Accor di ng t o t he pl ai nt i f f s, t hen, as a r esul t of t he I RS Rul e, t hey wi l l i ncur some f i nanci al cost because t hey wi l l be f or ced ei t her t o pur chase i nsur ance or pay t he i ndi vi dual mandat e penal t y. The pl ai nt i f f s compl ai nt al l eges t hat t he I RS Rul e exceeds t he agency s st at ut or y aut hor i t y, i s ar bi t r ar y and capr i ci ous, and i s cont r ar y t o l aw i n vi ol at i on of t he Admi ni st r at i ve Pr ocedur e Act ( APA) , 5 U. S. C. 706. The pl ai nt i f f s cont end t hat t he st at ut or y l anguage cal cul at i ng t he amount of pr emi um t ax cr edi t s accor di ng t o t he cost of t he i nsur ance pol i cy t hat t he t axpayer enr ol l ed i n t hr ough an Exchange est abl i shed by t he St at e under [ 1311] pr ecl udes t he I RS s i nt er pr et at i on t hat t he cr edi t s ar e al so avai l abl e on nat i onal Exchanges. 26 U. S. C. 36B( b) ( 2) ( A) , ( c) ( 2) ( A) ( i ) ( emphasi s added) . The di st r i ct cour t di sagr eed, f i ndi ng t hat t he st at ut e as a whol e cl ear l y evi nced Congr ess s i nt ent t o make t he t ax cr edi t s avai l abl e Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 9 of 46 10
nat i onwi de. The di st r i ct cour t gr ant ed t he def endant s mot i on t o di smi ss, and t he pl ai nt i f f s t i mel y appeal ed.
II. We must f i r st addr ess whet her t he pl ai nt i f f s cl ai ms ar e j ust i ci abl e. The def endant s make t wo ar gument s on t hi s poi nt : ( 1) t hat t he pl ai nt i f f s l ack st andi ng; and ( 2) t hat t he avai l abi l i t y of a t ax- r ef und act i on act s as an i ndependent bar t o t he pl ai nt i f f s cl ai ms under t he APA. A. We r evi ew de novo t he l egal quest i on of whet her pl ai nt i f f s have st andi ng t o sue. Wi l son v. Dol l ar Gener al Cor p. , 717 F. 3d 337, 342 ( 4t h Ci r . 2013) . Ar t i cl e I I I st andi ng r equi r es a l i t i gant t o demonst r at e an i nvasi on of a l egal l y pr ot ect ed i nt er est t hat i s concr et e and par t i cul ar i zed and act ual or i mmi nent . Luj an v. Def ender s of Wi l dl i f e, 504 U. S. 555, 560 ( 1992) ( quot i ng Whi t mor e v. Ar kansas, 495 U. S. 149, 155 ( 1990) ) . The pl ai nt i f f s pr emi se t hei r st andi ng on t he cl ai mt hat , i f t hey wer e not el i gi bl e f or t he pr emi um t ax cr edi t s, t hey woul d qual i f y f or t he unaf f or dabi l i t y exempt i on i n 26 U. S. C. 5000A and woul d t her ef or e not be subj ect t o t he t ax penal t y f or f ai l i ng t o mai nt ai n mi ni mum essent i al cover age. Thus, because of t he cr edi t s, t he pl ai nt i f f s ar gue t hat t hey f ace a di r ect Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 10 of 46 11
f i nanci al bur den because t hey ar e f or ced ei t her t o pur chase i nsur ance or pay t he penal t y. We agr ee t hat t hi s r epr esent s a concr et e economi c i nj ur y t hat i s di r ect l y t r aceabl e t o t he I RS Rul e. The I RS Rul e f or ces t he pl ai nt i f f s t o pur chase a pr oduct t hey ot her wi se woul d not , at an expense t o t hem, or t o pay t he t ax penal t y f or f ai l i ng t o compl y wi t h t he i ndi vi dual mandat e, al so subj ect i ng t hem t o some f i nanci al cost . Al t hough i t i s count er i nt ui t i ve, t he t ax cr edi t s, wor ki ng i n t andem wi t h t he Act s i ndi vi dual mandat e, i mpose a f i nanci al bur den on t he pl ai nt i f f s. The def endant s ar gument agai nst st andi ng i s pr emi sed on t he cl ai m t hat t he pl ai nt i f f s want t o pur chase cat ast r ophi c i nsur ance cover age, whi ch i n some cases i s mor e expensi ve t han subsi di zed compr ehensi ve cover age r equi r ed by t he Act . The def endant s t hus cl ai m t hat t he pl ai nt i f f s have acknowl edged t hey woul d act ual l y expend mor e money on a separ at e pol i cy even i f t hey wer e el i gi bl e f or t he cr edi t s. Regar dl ess of t he vi abi l i t y of t hi s ar gument , i t r est s on an i ncor r ect pr emi se. The def endant s mi sr ead t he pl ai nt i f f s compl ai nt , whi ch, whi l e ment i oni ng t he possi bi l i t y t hat sever al of t he pl ai nt i f f s wi sh t o pur chase cat ast r ophi c cover age, al so cl ear l y al l eges t hat each pl ai nt i f f does not want t o buy compr ehensi ve, ACA- compl i ant cover age and i s har med by havi ng t o do so or pay a penal t y. The har m i n t hi s case i s havi ng t o choose bet ween ACA- compl i ant Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 11 of 46 12
cover age and t he penal t y, bot h of whi ch r epr esent a f i nanci al cost t o t he pl ai nt i f f s. That har mi s act ual or i mmi nent , and i s di r ect l y t r aceabl e t o t he I RS Rul e. The pl ai nt i f f s t hus have st andi ng t o pr esent t hei r cl ai ms. B. The def endant s al so ar gue t hat t he avai l abi l i t y of a t ax- r ef und act i on bar s t he pl ai nt i f f s cl ai ms under t he APA. The def endant s asser t t hat t he pr oper cour se of act i on f or t he pl ai nt i f f s i s t o pay t he t ax penal t y and t hen pr esent t hei r l egal ar gument s agai nst t he I RS Rul e as par t of a t ax- r ef und act i on br ought under ei t her 26 U. S. C. 7422( a) ( No sui t or pr oceedi ng shal l be mai nt ai ned i n any cour t f or t he r ecover y of any i nt er nal r evenue t ax al l eged t o have been er r oneousl y or i l l egal l y assessed or col l ect ed, . . . unt i l a cl ai m f or r ef und or cr edi t has been dul y f i l ed . . . . ) , or t he Li t t l e Tucker Act , 28 U. S. C. 1346 ( gr ant i ng di st r i ct cour t s j ur i sdi ct i on t o hear [ a] ny ci vi l act i on agai nst t he Uni t ed St at es f or t he r ecover y of any i nt er nal - r evenue t ax al l eged t o have been er r oneousl y or i l l egal l y assessed or col l ect ed, or any penal t y cl ai med t o have been col l ect ed wi t hout aut hor i t y or any sum al l eged t o have been excessi ve or i n any manner wr ongf ul l y Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 12 of 46 13
col l ect ed under t he i nt er nal - r evenue l aws) . 1 The def endant s do not , nor coul d t hey, asser t t hi s as a j ur i sdi ct i onal bar , but i nst ead poi nt t o gener al equi t abl e pr i nci pl es di sf avor i ng t he i ssuance of f eder al i nj unct i ons agai nst t axes, absent cl ear pr oof t hat avai l abl e r emedi es at l aw [ ar e] i nadequat e. Bob J ones Uni v. v. Si mon, 416 U. S. 725, 742 n. 16 ( 1974) . The def endant s ar gue t hat a t ax r ef und act i on pr esent s an adequat e r emedy t hat t he pl ai nt i f f s must f i r st pur sue bef or e chal l engi ng t he I RS Rul e di r ect l y under t he APA. See 5 U. S. C. 704 ( Agency act i on made r evi ewabl e by st at ut e and f i nal agency act i on f or whi ch t her e i s no ot her adequat e r emedy i n a cour t ar e subj ect t o j udi ci al r evi ew. ) . The def endant s ar gument s ar e not per suasi ve. Fi r st , t hey f ai l t o poi nt t o a si ngl e case i n whi ch a cour t has r ef used t o ent er t ai n a si mi l ar sui t on t he gr ounds t hat t he par t i es wer e r equi r ed t o f i r st pur sue a t ax- r ef und act i on under 26 U. S. C. 7422( a) or 28 U. S. C. 1346. Mor eover , t he pl ai nt i f f s ar e not seeki ng a t ax r ef und; t hey ask f or no monet ar y r el i ef , al l egi ng i nst ead cl ai ms f or decl ar at or y and i nj unct i ve r el i ef i n an at t empt t o f or est al l t he l ose- l ose choi ce ( i n t hei r mi nds) of
1 Al t hough 26 U. S. C. 7422( a) does not appear t o speci f i cal l y aut hor i ze sui t s, 6532 speaks of r ef und sui t s f i l ed under 7422( a) . See al so Cohen v. Uni t ed St at es, 650 F. 3d 717, 731, n. 11 ( D. C. Ci r . 2011) ( en banc) . Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 13 of 46 14
pur chasi ng a pr oduct t hey do not want or payi ng t he penal t y. Sect i on 7422( a) does not al l ow f or pr ospect i ve r el i ef . I nst ead, i t bar s sui t f or t he r ecover y of any i nt er nal r evenue t ax al l eged t o have been er r oneousl y or i l l egal l y assessed or col l ect ed. 26 U. S. C. 7422( a) ( emphasi s added) ; see al so Cohen, 650 F. 3d at 732 ( [ Sect i on 7422( a) ] does not , at l east expl i ci t l y, al l ow f or pr ospect i ve r el i ef . ) . Si mi l ar l y, [ t ] he Li t t l e Tucker Act does not aut hor i ze cl ai ms t hat seek pr i mar i l y equi t abl e r el i ef . Ber man v. Uni t ed St at es, 264 F. 3d 16, 21 ( 1st Ci r . 2001) ( ci t i ng Ri char dson v. Mor r i s, 409 U. S. 464, 465 ( 1973) ; Bobul a v. Uni t ed St at es Dep t of J ust i ce, 970 F. 2d 854, 858- 59 ( Fed. Ci r . 1992) ) . I t i s cl ear , t hen, t hat t he al t er nat i ve f or ms of r el i ef suggest ed by t he def endant s woul d not af f or d t he pl ai nt i f f s t he compl et e r el i ef t hey seek. Thi s i s si mpl y not a t ypi cal t ax r ef und act i on i n whi ch an i ndi vi dual t axpayer compl ai ns of t he manner i n whi ch a t ax was assessed or col l ect ed and seeks r ei mbur sement f or wr ongl y pai d sums. The pl ai nt i f f s her e chal l enge t he l egal i t y of a f i nal agency act i on, whi ch i s consi st ent wi t h t he APA s under l yi ng pur pose of r emov[ i ng] obst acl es t o j udi ci al r evi ew of agency act i on. Bowen v. Massachuset t s, 487 U. S. 879, 904 ( 1988) . Requi r i ng t he pl ai nt i f f s t o choose bet ween pur chasi ng i nsur ance and t her eby wai vi ng t hei r cl ai ms or payi ng t he t ax and chal l engi ng t he I RS Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 14 of 46 15
Rul e af t er t he f act cr eat es j ust such an obst acl e. We t her ef or e f i nd t hat t he pl ai nt i f f s sui t i s not bar r ed under t he APA.
III. Tur ni ng t o t he mer i t s, we r evi ew quest i ons of st at ut or y const r uct i on de novo. Or quer a v. Ashcr of t , 357 F. 3d 413, 418 ( 4t h Ci r . 2003) . Because t hi s case concer ns a chal l enge t o an agency s const r uct i on of a st at ut e, we appl y t he f ami l i ar t wo- st ep anal yt i c f r amewor k set f or t h i n Chevr on U. S. A. , I nc. v. Nat ur al Res. Def . Counci l , I nc. , 467 U. S. 837 ( 1984) . At Chevr on s f i r st st ep, a cour t l ooks t o t he pl ai n meani ng of t he st at ut e t o det er mi ne i f t he r egul at i on r esponds t o i t . Chevr on, 467 U. S. at 842- 43. I f i t does, t hat i s t he end of t he i nqui r y and t he r egul at i on st ands. I d. However , i f t he st at ut e i s suscept i bl e t o mul t i pl e i nt er pr et at i ons, t he cour t t hen moves t o Chevr on s second st ep and def er s t o t he agency s i nt er pr et at i on so l ong as i t i s based on a per mi ssi bl e const r uct i on of t he st at ut e. I d. at 843. A. At st ep one, [ i ] f t he st at ut e i s cl ear and unambi guous t hat i s t he end of t he mat t er , f or t he cour t , as wel l as t he agency, must gi ve ef f ect t o t he unambi guousl y expr essed i nt ent of Congr ess. Bd. of Gover nor s of t he Fed. Reser ve Sys. v. Di mensi on Fi n. Cor p. , 474 U. S. 361, 368 ( 1986) ( quot i ng Chevr on, Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 15 of 46 16
467 U. S. at 842- 43) . A st at ut e i s ambi guous onl y i f t he di sput ed l anguage i s r easonabl y suscept i bl e of di f f er ent i nt er pr et at i ons. Nat l R. R. Passenger Cor p. v. At chi son Topeka & Sant a Fe Ry. Co. , 470 U. S. 451, 473 n. 27 ( 1985) . The obj ect i ve of Chevr on st ep one i s not t o i nt er pr et and appl y t he st at ut e t o r esol ve a cl ai m, but t o det er mi ne whet her Congr ess s i nt ent i n enact i ng i t was so cl ear as t o f or ecl ose any ot her i nt er pr et at i on. Gr apevi ne I mpor t s, Lt d. v. Uni t ed St at es, 636 F. 3d 1367, 1377 ( Fed. Ci r . 2011) . Cour t s shoul d empl oy al l t he t r adi t i onal t ool s of st at ut or y const r uct i on i n det er mi ni ng whet her Congr ess has cl ear l y expr essed i t s i nt ent r egar di ng t he i ssue i n quest i on. Chevr on, 467 U. S. at 843 n. 9; Nat l El ec. Mf r s. Ass n v. U. S. Dep t of Ener gy, 654 F. 3d 496, 504 ( 4t h Ci r . 2011) . 1. I n const r ui ng a st at ut e s meani ng, t he cour t begi n[ s] , as al ways, wi t h t he l anguage of t he st at ut e. Duncan v. Wal ker , 533 U. S. 167, 172 ( 2001) . As descr i bed above, 26 U. S. C. 36B pr ovi des t hat t he pr emi um assi st ance amount i s t he sum of t he mont hl y pr emi um assi st ance amount s f or al l cover age mont hs f or whi ch t he t axpayer i s cover ed dur i ng a year . A cover age mont h i s one i n whi ch t he t axpayer . . . i s cover ed by a qual i f i ed heal t h pl an . . . enr ol l ed i n t hr ough an Exchange est abl i shed by t he St at e under [ ] 1311 of t he [ Act ] . 26 U. S. C. Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 16 of 46 17
36B( b) ( 2) ( A) . Si mi l ar l y, t he st at ut e cal cul at es an i ndi vi dual s t ax cr edi t by t ot al i ng t he pr emi um assi st ance amount s f or al l cover age mont hs i n a gi ven year . I d. 36B( b) ( 1) . The pr emi um assi st ance amount i s based i n par t on t he cost of t he mont hl y pr emi um f or t he heal t h pl an t hat t he t axpayer pur chased t hr ough an Exchange est abl i shed by t he St at e under [ ] 1311. I d. 36B( b) ( 2) . The pl ai nt i f f s asser t t hat t he pl ai n l anguage of bot h r el evant subsect i ons i n 36B i s det er mi nat i ve. They cont end t hat i n def i ni ng t he t er ms cover age mont hs and pr emi um assi st ance amount by r ef er ence t o Exchanges t hat ar e est abl i shed by t he St at e under [ ] 1311, Congr ess l i mi t ed t he avai l abi l i t y of t ax cr edi t s t o i ndi vi dual s pur chasi ng i nsur ance on st at e Exchanges. Under t he pl ai nt i f f s const r uct i on, t he pr emi um cr edi t amount f or i ndi vi dual s pur chasi ng i nsur ance t hr ough a f eder al Exchange woul d al ways be zer o. The pl ai nt i f f s pr i mar y r at i onal e f or t hei r i nt er pr et at i on i s t hat t he l anguage says what i t says, and t hat i t cl ear l y ment i ons st at e- r un Exchanges under 1311. I f Congr ess meant t o i ncl ude f eder al l y- r un Exchanges, i t woul d not have speci f i cal l y chosen t he wor d st at e or r ef er enced 1311. The f eder al gover nment i s not a St at e, and so t he phr ase Exchange est abl i shed by t he St at e under [ ] 1311, st andi ng al one, suppor t s t he not i on t hat cr edi t s ar e unavai l abl e t o consumer s on Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 17 of 46 18
f eder al Exchanges. Fur t her , t he pl ai nt i f f s asser t t hat because st at e and f eder al Exchanges ar e r ef er r ed t o separ at el y i n 1311 and 1321, t he omi ssi on i n 26 U. S. C. 36B of any r ef er ence t o f eder al Exchanges est abl i shed under 1321 r epr esent s an i nt ent i onal choi ce on behal f of Congr ess t o excl ude f eder al Exchanges and i ncl ude onl y st at e Exchanges est abl i shed under 1311. Ther e can be no quest i on t hat t her e i s a cer t ai n sense t o t he pl ai nt i f f s posi t i on. I f Congr ess di d i n f act i nt end t o make t he t ax cr edi t s avai l abl e t o consumer s on bot h st at e and f eder al Exchanges, i t woul d have been easy t o wr i t e i n br oader l anguage, as i t di d i n ot her pl aces i n t he st at ut e. See 42 U. S. C. 18032( d) ( 3) ( D) ( i ) ( I I ) ( r ef er enci ng Exchanges est abl i shed under t hi s Act ) . However , when conduct i ng st at ut or y anal ysi s, a r evi ewi ng cour t shoul d not conf i ne i t sel f t o exami ni ng a par t i cul ar st at ut or y pr ovi si on i n i sol at i on. Rat her , [ t ] he meani ng or ambi gui t y of cer t ai n wor ds or phr ases may onl y become evi dent when pl aced i n cont ext . Nat l Ass n of Home Bui l der s v. Def ender s of Wi l dl i f e, 551 U. S. 644, 666 ( 2007) ( i nt er nal ci t at i on and quot at i on mar ks omi t t ed) . Wi t h t hi s i n mi nd, t he def endant s pr i mar y count er ar gument poi nt s t o ACA 1311 and 1321, whi ch, when r ead i n t andem wi t h 26 U. S. C. 36B, pr ovi de an equal l y pl ausi bl e under st andi ng of t he st at ut e, and one t hat Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 18 of 46 19
compor t s wi t h t he I RS s i nt er pr et at i on t hat cr edi t s ar e avai l abl e nat i onwi de. As not ed, 1311 pr ovi des t hat [ e] ach St at e shal l , not l at er t han J anuar y 1, 2014, est abl i sh an Amer i can Heal t h Benef i t Exchange ( r ef er r ed t o i n t hi s t i t l e as an Exchange) [ . ] I t goes on t o say t hat [ a] n Exchange shal l be a gover nment al agency or nonpr of i t ent i t y t hat i s est abl i shed by a St at e, appar ent l y nar r owi ng t he def i ni t i on of Exchange t o encompass onl y st at e- cr eat ed Exchanges. ACA 1311( d) ( 1) . Si mi l ar l y, t he def i ni t i ons sect i on of t he Act , 1563( b) , pr ovi des t hat [ t ] he t er m Exchange means an Amer i can Heal t h Benef i t Exchange est abl i shed under [ ] 1311, f ur t her suppor t i ng t he not i on t hat al l Exchanges shoul d be consi der ed as i f t hey wer e est abl i shed by a St at e. Of cour se, 1311 s di r ect i ve t hat each St at e est abl i sh an Exchange cannot be under st ood l i t er al l y i n l i ght of 1321, whi ch pr ovi des t hat a st at e may el ect t o do so. Sect i on 1321( c) pr ovi des t hat i f a st at e f ai l s t o est abl i sh an Exchange by J anuar y 1, 2014, t he Secr et ar y shal l . . . est abl i sh and oper at e such Exchange wi t hi n t he St at e and t he Secr et ar y shal l t ake such act i ons as ar e necessar y t o i mpl ement such ot her r equi r ement s. ( emphasi s added) . The def endant s posi t i on i s t hat t he t er msuch Exchange r ef er s t o a st at e Exchange t hat i s set up and oper at ed by HHS. I n ot her wor ds, t he st at ut e Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 19 of 46 20
mandat es t he exi st ence of st at e Exchanges, but di r ect s HHS t o est abl i sh such Exchanges when t he st at es f ai l t o do so t hemsel ves. I n t he absence of st at e act i on, t he f eder al gover nment i s r equi r ed t o st ep i n and cr eat e, by def i ni t i on, an Amer i can Heal t h Benef i t Exchange est abl i shed under [ ] 1311 on behal f of t he st at e. Havi ng t hus expl ai ned t he par t i es compet i ng pr i mar y ar gument s, t he cour t i s of t he opi ni on t hat t he def endant s have t he st r onger posi t i on, al t hough onl y sl i ght l y. Gi ven t hat Congr ess def i ned Exchange as an Exchange est abl i shed by t he st at e, i t makes sense t o r ead 1321( c) s di r ect i ve t hat HHS est abl i sh such Exchange t o mean t hat t he f eder al gover nment act s on behal f of t he st at e when i t est abl i shes i t s own Exchange. However , t he cour t cannot i gnor e t he common- sense appeal of t he pl ai nt i f f s ar gument ; a l i t er al r eadi ng of t he st at ut e undoubt edl y accor ds mor e cl osel y wi t h t hei r posi t i on. As such, based sol el y on t he l anguage and cont ext of t he most r el evant st at ut or y pr ovi si ons, t he cour t cannot say t hat Congr ess s i nt ent i s so cl ear and unambi guous t hat i t f or ecl ose[ s] any ot her i nt er pr et at i on. Gr apevi ne I mpor t s, 636 F. 3d at 1377. 2. We next exami ne t wo ot her , l ess di r ect l y r el evant pr ovi si ons of t he Act t o see i f t hey shed any mor e l i ght on Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 20 of 46 21
Congr ess s i nt ent . Food and Dr ug Admi n. v. Br own & Wi l l i amson Tobacco Cor p. , 529 U. S. 120, 132- 33 ( 2000) ( A cour t must . . . i nt er pr et t he st at ut e as a symmet r i cal and coher ent r egul at or y scheme, and f i t , i f possi bl e, al l par t s i nt o a har moni ous whol e. ) ( ci t at i on and i nt er nal quot at i on mar ks omi t t ed) . Fi r st , t he def endant s ar gue t hat r epor t i ng pr ovi si ons i n 36B( f ) conf l i ct wi t h t he pl ai nt i f f s i nt er pr et at i on and conf i r m t hat t he pr emi um t ax cr edi t s must be avai l abl e on f eder al l y- r un Exchanges. Sect i on 36B( f ) t i t l ed Reconci l i at i on of cr edi t and advance cr edi t r equi r es t he I RS t o r educe t he amount of a t axpayer s end- of - year pr emi um t ax cr edi t by t he amount of any advance payment of such cr edi t . See 26 U. S. C. 36B( f ) ( 1) ( The amount of t he cr edi t al l owed under t hi s sect i on f or any t axabl e year shal l be r educed ( but not bel ow zer o) by t he amount of any advance payment of such cr edi t [ . ] ) . To enabl e t he I RS t o t r ack t hese advance payment s, t he st at ut e r equi r es [ e] ach Exchange ( or any per son car r yi ng out 1 or mor e r esponsi bi l i t i es of an Exchange under sect i on 1311( f ) ( 3) or 1321( c) of t he [ Act ] ) t o pr ovi de cer t ai n i nf or mat i on t o t he Depar t ment of t he Tr easur y. I d. 36B( f ) ( 3) ( emphasi s added) . Ther e i s no di sput e t hat t he r epor t i ng r equi r ement s appl y r egar dl ess of whet her an Exchange was est abl i shed by a st at e or HHS. The Exchanges ar e r equi r ed t o r epor t t he f ol l owi ng i nf or mat i on: Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 21 of 46 22
( A) The l evel of cover age descr i bed i n sect i on 1302( d) of t he Pat i ent Pr ot ect i on and Af f or dabl e Car e Act and t he per i od such cover age was i n ef f ect . ( B) The t ot al pr emi um f or t he cover age wi t hout r egar d t o t he cr edi t under t hi s sect i on or cost - shar i ng r educt i ons under sect i on 1402 of such Act . ( C) The aggr egat e amount of any advance payment of such cr edi t or r educt i ons under sect i on 1412 of such Act . ( D) The name, addr ess, and TI N of t he pr i mar y i nsur ed and t he name and TI N of each ot her i ndi vi dual obt ai ni ng cover age under t he pol i cy. ( E) Any i nf or mat i on pr ovi ded t o t he Exchange, i ncl udi ng any change of ci r cumst ances, necessar y t o det er mi ne el i gi bi l i t y f or , and t he amount of , such cr edi t . ( F) I nf or mat i on necessar y t o det er mi ne whet her a t axpayer has r ecei ved excess advance payment s. I d. The def endant s ar gue, sensi bl y, t hat i f pr emi um t ax cr edi t s wer e not avai l abl e on f eder al l y- r un Exchanges, t her e woul d be no r eason t o r equi r e such Exchanges t o r epor t t he i nf or mat i on f ound i n subsect i ons ( C) , ( E) , and ( F) . I t i s t her ef or e possi bl e t o i nf er f r om t he r epor t i ng r equi r ement s t hat Congr ess i nt ended t he t ax cr edi t s t o be avai l abl e on bot h st at e- and f eder al l y- f aci l i t at ed Exchanges. The pl ai nt i f f s acknowl edge t hat some of t he r epor t i ng r equi r ement s ar e ext r aneous f or f eder al l y- r un Exchanges, but not e t hat t he ot her cat egor i es of r epor t abl e i nf or mat i on, i . e. , subsect i ons ( A) , ( B) , and ( D) , r emai n r el evant even i n t he absence of cr edi t s. The pl ai nt i f f s suggest Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 22 of 46 23
t hat Congr ess was si mpl y savi ng i t sel f t he t r oubl e of wr i t i ng t wo separ at e subsect i ons, one f or each t ype of Exchange, by i ncl udi ng a si ngl e compr ehensi ve l i st . The second sour ce of pot ent i al l y i r r econci l abl e l anguage of f er ed by t he def endant s concer ns t he qual i f i ed i ndi vi dual s pr ovi si on under ACA 1312. That sect i on set s f or t h pr ovi si ons r egar di ng whi ch i ndi vi dual s may pur chase i nsur ance f r om t he Exchanges. I t pr ovi des t hat onl y qual i f i ed i ndi vi dual s may pur chase heal t h pl ans i n t he i ndi vi dual mar ket s of f er ed t hr ough t he Exchanges, and expl ai ns t hat a qual i f i ed i ndi vi dual i s a per son who r esi des i n t he St at e t hat est abl i shed t he Exchange. ACA 1312. The def endant s ar gue t hat unl ess t hei r r eadi ng of 1321 i s adopt ed and under st ood t o mean t hat t he f eder al gover nment st ands i n t he shoes of t he st at e f or pur poses of est abl i shi ng an Exchange, t her e woul d be no qual i f i ed i ndi vi dual s exi st i ng i n t he t hi r t y- f our st at es wi t h f eder al l y- f aci l i t at ed Exchanges because none of t hose st at es i s a St at e t hat est abl i shed t he Exchange. Thi s woul d l eave t he f eder al Exchanges wi t h no el i gi bl e cust omer s, a r esul t Congr ess coul d not possi bl y have i nt ended. The pl ai nt i f f s acknowl edge t hat t hi s woul d be unt enabl e, and suggest t hat t he r esi dency r equi r ement i s onl y appl i cabl e t o st at e- cr eat ed Exchanges. They not e t hat 1312 st at es t hat a qual i f i ed i ndi vi dual wi t h r espect t o an Exchange i s one Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 23 of 46 24
who r esi des i n t he St at e t hat est abl i shed t he Exchange. ACA 1312( f ) ( 1) ( A) ( emphasi s added) . Accor di ngl y, because Exchange i s def i ned as an Exchange est abl i shed under 1311, i . e. , t he pr ovi si on di r ect i ng st at es t o est abl i sh Exchanges, t he r esi dency r equi r ement onl y l i mi t s enr ol l ment on st at e Exchanges. Havi ng consi der ed t he par t i es compet i ng ar gument s on bot h of t he above- r ef er enced sect i ons, we r emai n unper suaded by ei t her si de. Agai n, whi l e we t hi nk t he def endant s make t he bet t er of t he t wo cases, we ar e not convi nced t hat ei t her of t he pur por t ed st at ut or y conf l i ct s r ender Congr ess s i nt ent cl ear . Bot h par t i es of f er r easonabl e ar gument s and count er ar gument s t hat make di scer ni ng Congr ess s i nt ent di f f i cul t . Addi t i onal l y, we not e t hat t he Supr eme Cour t has r ecent l y r ei t er at ed t he admoni t i on t hat cour t s avoi d r evi si ng ambi guousl y dr af t ed l egi sl at i on out of an ef f or t t o avoi d appar ent anomal [ i es] wi t hi n a st at ut e. Mi chi gan v. Bay Mi l l s I ndi an Cmt y. , No. 12- 515, 572 U. S. ___, ___, sl i p op. at 10 ( May 27, 2014) . I t i s not especi al l y sur pr i si ng t hat i n a bi l l of t hi s si ze 10 t i t l es st r et ch[ i ng] over 900 pages and cont ai n[ i ng] hundr eds of pr ovi si ons, NFI B, 132 S. Ct . at 2580, t her e woul d be one or mor e conf l i ct i ng pr ovi si ons. See Bay Mi l l s, at 10- 11 ( Tr ut h be t ol d, such anomal i es of t en ar i se f r om st at ut es, i f f or no ot her r eason t han t hat Congr ess t ypi cal l y l egi sl at es by par t s . . . . ) . War y of gr ant i ng excessi ve anal yt i cal wei ght t o Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 24 of 46 25
r el at i vel y mi nor conf l i ct s wi t hi n a st at ut e of t hi s si ze, we decl i ne t o accept t he def endant s ar gument s as di sposi t i ve of Congr ess s i nt ent . 3. The Act s l egi sl at i ve hi st or y i s al so not par t i cul ar l y i l l umi nat i ng on t he i ssue of t ax cr edi t s. See Phi l i p Mor r i s USA, I nc. v. Vi l sack, 736 F. 3d 284, 289 ( 4t h Ci r . 2013) ( consi der i ng l egi sl at i ve hi st or y at Chevr on st ep one) . But see Nat l El ec. Mf r s. Ass n, 654 F. 3d at 505 ( not i ng t hat , i n consul t i ng l egi sl at i ve hi st or y at st ep one of Chevr on, we have ut i l i zed such hi st or y onl y f or l i mi t ed pur poses, and onl y af t er exhaust i ng mor e r el i abl e t ool s of const r uct i on) . As bot h par t i es concede, t he l egi sl at i ve hi st or y of t he Act i s somewhat l acki ng, par t i cul ar l y f or a bi l l of t hi s si ze. 2 Sever al f l oor st at ement s f r om Senat or s suppor t t he not i on t hat i t was wel l under st ood t hat t ax cr edi t s woul d be avai l abl e f or l ow- and mi ddl e- i ncome Amer i cans nat i onwi de. For exampl e, Senat or Baucus st at ed t hat t he t ax cr edi t s wi l l hel p t o ensur e al l Amer i cans
2 As anot her cour t consi der i ng a si mi l ar chal l enge t o t he I RS Rul e r ecent l y not ed, [ b] ecause t he House and Senat e ver si ons of t he Act wer e synt hesi zed t hr ough a r econci l i at i on pr ocess, r at her t han t he st andar d conf er ence commi t t ee pr ocess, no conf er ence r epor t was i ssued f or t he Act , and t her e i s a l i mi t ed l egi sl at i ve r ecor d r el at i ng t o t he f i nal ver si on of t he bi l l . Hal bi g v. Sebel i us, No. 13- 623, 2014 WL 129023, at *17 n. 13 ( D. D. C. J an. 15, 2014) . Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 25 of 46 26
can af f or d qual i t y heal t h i nsur ance. 155 Cong. Rec. S11, 964 ( Nov. 21, 2009) . He l at er est i mat ed t hat 60 per cent of t hose who ar e get t i ng i nsur ance i n t he i ndi vi dual mar ket on t he exchange wi l l get t ax cr edi t s . . . . 155 Cong. Rec. S12, 764 ( Dec. 9, 2009) . Si mi l ar l y, Senat or Dur bi n st at ed t hat hal f of t he 30 mi l l i on Amer i cans t oday who have no heal t h i nsur ance . . . wi l l qual i f y f or . . . t ax cr edi t s t o hel p t hem pay t hei r pr emi ums so t hey can have and af f or d heal t h i nsur ance. 155 Cong. Rec. S13, 559 ( Dec. 20, 2009) . These f i gur es onl y make sense i f al l f i nanci al l y el i gi bl e Amer i cans ar e under st ood t o have access t o t he cr edi t s. However , i t i s possi bl e t hat such st at ement s wer e made under t he assumpt i on t hat ever y st at e woul d i n f act est abl i sh i t s own Exchange. As t he di st r i ct cour t st at ed, Congr ess di d not expect t he st at es t o t ur n down f eder al f unds and f ai l t o cr eat e and r un t hei r own Exchanges. Ki ng v. Sebel i us, No. 3: 13- cv- 630, 2014 WL 637365, at *14 ( E. D. Va. Feb. 18, 2014) . The Senat or s st at ement s t her ef or e do not necessar i l y addr ess t he quest i on of whet her t he cr edi t s woul d r emai n avai l abl e i n t he absence of st at e- cr eat ed Exchanges. The pl ai nt i f f s ar gue ext ensi vel y t hat Congr ess coul d not have ant i ci pat ed t hat so f ew st at es woul d est abl i sh t hei r own Exchanges. I ndeed, t hey ar gue t hat Congr ess at t empt ed t o coer ce t he st at es i nt o est abl i shi ng Exchanges by condi t i oni ng t he avai l abi l i t y of t he cr edi t s on t he Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 26 of 46 27
pr esence of st at e Exchanges. The pl ai nt i f f s cont end t hat Congr ess st r uck an i nt er nal bar gai n i n whi ch i t deci ded t o f avor st at e- r un Exchanges by i ncent i vi zi ng t hei r cr eat i on wi t h bi l l i ons of dol l ar s of t ax cr edi t s. Accor di ng t o t he pl ai nt i f f s, however , Congr ess s pl an backf i r ed when a maj or i t y of st at es r ef used t o est abl i sh t hei r own Exchanges, i n spi t e of t he i ncent i ves. The pl ai nt i f f s t hus acknowl edge t hat t he l ack of wi del y avai l abl e t ax cr edi t s i s count er t o Congr ess s or i gi nal i nt ent i ons, but consi der t hi s t he pr oduct of a Congr essi onal mi scal cul at i on t hat t he cour t s have no busi ness cor r ect i ng. Al t hough t he pl ai nt i f f s of f er no compel l i ng suppor t i n t he l egi sl at i ve r ecor d f or t hei r ar gument , 3 i t i s at l east pl ausi bl e t hat Congr ess woul d have want ed t o ensur e st at e i nvol vement i n t he cr eat i on and oper at i on of t he Exchanges. Such an appr oach woul d cer t ai nl y compor t wi t h a l i t er al r eadi ng of 26 U. S. C. 36B s t ext . I n any event , i t i s cer t ai nl y possi bl e t hat t he Senat or s quot ed above wer e speaki ng under t he assumpt i on t hat
3 The pl ai nt i f f s t ake an i sol at ed, st r ay comment f r om Senat or Baucus dur i ng a Senat e Fi nance Commi t t ee hear i ng wel l out of cont ext , see J . A. 285- 87, and si mi l ar l y pl ace t oo much emphasi s on a dr af t bi l l f r om t he Senat e Heal t h, Educat i on, Labor , and Pensi ons Commi t t ee t hat woul d have condi t i oned subsi di es f or a st at e s r esi dent s on t he st at e s adopt i on of cer t ai n i nsur ance r ef or m pr ovi si ons, see S. 1679, 3104( a) , ( d) ( 2) , 111t h Cong. ( 2009) . Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 27 of 46 28
each st at e woul d est abl i sh i t s own Exchange, and t hat t hey coul d not have envi si oned t he i ssue cur r ent l y bei ng l i t i gat ed. Al t hough Congr ess i ncl uded a f al l back pr ovi si on i n t he event t he st at es f ai l ed t o act , i t i s not cl ear f r om t he l egi sl at i ve r ecor d how l ar ge a r ol e Congr ess expect ed t he f eder al Exchanges t o pl ay i n admi ni st er i ng t he Act . We ar e t hus of t he opi ni on t hat not hi ng i n t he l egi sl at i ve hi st or y of t he Act pr ovi des compel l i ng suppor t f or ei t her si de s posi t i on. Havi ng exami ned t he pl ai n l anguage and cont ext of t he most r el evant st at ut or y sect i ons, t he cont ext and st r uct ur e of r el at ed pr ovi si ons, and t he l egi sl at i ve hi st or y of t he Act , we ar e unabl e t o say def i ni t i vel y t hat Congr ess l i mi t ed t he pr emi um t ax cr edi t s t o i ndi vi dual s l i vi ng i n st at es wi t h st at e- r un Exchanges. We not e agai n t hat , on t he whol e, t he def endant s have t he bet t er of t he st at ut or y const r uct i on ar gument s, but t hat t hey f ai l t o car r y t he day. Si mpl y put , t he st at ut e i s ambi guous and subj ect t o at l east t wo di f f er ent i nt er pr et at i ons. As a r esul t , we ar e unabl e t o r esol ve t he case i n ei t her par t y s f avor at t he f i r st st ep of t he Chevr on anal ysi s. B. Fi ndi ng t hat Congr ess has not di r ect l y spoken t o t he pr eci se quest i on at i ssue, we move t o Chevr on s second st ep. 467 U. S. at 842. At st ep t wo, we ask whet her t he agency s [ act i on] i s based on a per mi ssi bl e const r uct i on of t he st at ut e. Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 28 of 46 29
I d. at 843. We wi l l not usur p an agency s i nt er pr et i ve aut hor i t y by suppl ant i ng i t s const r uct i on wi t h our own, so l ong as t he i nt er pr et at i on i s not ar bi t r ar y, capr i ci ous, or mani f est l y cont r ar y t o t he st at ut e. A const r uct i on meet s t hi s st andar d i f i t r epr esent s a r easonabl e accommodat i on of conf l i ct i ng pol i ci es t hat wer e commi t t ed t o t he agency s car e by t he st at ut e. Phi l i p Mor r i s, 736 F. 3d at 290 ( quot i ng Chevr on, 467 U. S. at 844, 845) . We have been cl ear t hat [ r ] evi ew under t hi s st andar d i s hi ghl y def er ent i al , wi t h a pr esumpt i on i n f avor of f i ndi ng t he agency act i on val i d. Ohi o Val l . Envt l Coal i t i on v. Ar acoma Coal Co. , 556 F. 3d 177, 192 ( 4t h Ci r . 2009) . As expl ai ned, we cannot di scer n whet her Congr ess i nt ended one way or anot her t o make t he t ax cr edi t s avai l abl e on HHS- f aci l i t at ed Exchanges. The r el evant st at ut or y sect i ons appear t o conf l i ct wi t h one anot her , yi el di ng di f f er ent possi bl e i nt er pr et at i ons. I n l i ght of t hi s uncer t ai nt y, t hi s i s a sui t abl e case i n whi ch t o appl y t he pr i nci pl es of def er ence cal l ed f or by Chevr on. See Sci al abba v. Cuel l ar de Osor i o, No. 12- 930, 573 U. S. ___, ___, sl i p op. at 14 ( J une 9, 2014) ( [ I ] nt er nal t ensi on [ i n a st at ut e] makes possi bl e al t er nat i ve r easonabl e const r uct i ons, br i ngi ng i nt o cor r espondence i n one way or anot her t he sect i on s di f f er ent par t s. And when t hat i s so, Chevr on di ct at es t hat a cour t def er t o t he agency s choi ce Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 29 of 46 30
. . . . ) ( pl ur al i t y opi ni on) ; Nat l El ec. Mf r s. Ass n, 654 F. 3d at 505 ( [ W] e have r eached Chevr on s second st ep af t er descr i bi ng st at ut or y l anguage as suscept i bl e t o mor e pr eci se def i ni t i on and open t o var yi ng const r uct i ons. ) ( quot i ng Md. Dep t of Heal t h and Ment al Hygi ene v. Cent er s f or Medi car e and Medi cai d Ser vs. , 542 F. 3d 424, 434 ( 4t h Ci r . 2008) ) . 4
What we must deci de i s whet her t he st at ut e per mi t s t he I RS t o deci de whet her t he t ax cr edi t s woul d be avai l abl e on f eder al Exchanges. I n answer i ng t hi s quest i on i n t he af f i r mat i ve we ar e pr i mar i l y per suaded by t he I RS Rul e s advancement of t he br oad
4 We r ecogni ze t hat not ever y ambi gui t y i n a st at ut e gi ves r i se t o Chevr on def er ence. Of t en, but not al ways, cour t s wi l l yi el d t o an agency s i nt er pr et at i on onl y when t he ambi gui t y cr eat es some di scr et i onar y aut hor i t y f or t he agency t o f ul f i l l . See Chamber of Commer ce of U. S. v. N. L. R. B. , 721 F. 3d 152, 161 ( 4t h Ci r . 2013) ( Mer e ambi gui t y i n a st at ut e i s not evi dence of congr essi onal del egat i on of aut hor i t y. Rat her , [ t ] he ambi gui t y must be such as t o make i t appear t hat Congr ess ei t her expl i ci t l y or i mpl i ci t l y del egat ed aut hor i t y t o cur e t hat ambi gui t y. ) ( quot i ng Am. Bar Ass n v. F. T. C. , 430 F. 3d 457, 469 ( D. C. Ci r . 2005) ) ( al t er at i on i n or i gi nal ) . However , gi ven t he i mpor t ance of t he t ax cr edi t s t o t he over al l st at ut or y scheme, i t i s r easonabl e t o assume t hat Congr ess cr eat ed t he ambi gui t y i n t hi s case wi t h at l east some degr ee of i nt ent i onal i t y. See Ci t y of Ar l i ngt on v. F. C. C. , 133 S. Ct . 1863, 1868 ( 2013) ( Congr ess knows t o speak i n pl ai n t er ms when i t wi shes t o ci r cumscr i be, and i n capaci ous t er ms when i t wi shes t o enl ar ge, agency di scr et i on. ) . Ther e ar e sever al possi bl e r easons f or l eavi ng an ambi gui t y of t hi s sor t : Congr ess per haps mi ght not have want ed t o r esol ve a pol i t i cal l y sensi t i ve i ssue; addi t i onal l y, i t mi ght have i nt ended t o see how l ar ge a r ol e t he st at es wer e wi l l i ng t o adopt on t hei r own bef or e havi ng t he agency r espond wi t h r ul es t hat coul d best ef f ect uat e t he pur pose of t he Act i n l i ght of t he act ual ci r cumst ances pr esent sever al year s af t er t he bi l l s passage. Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 30 of 46 31
pol i cy goal s of t he Act . See Vi l l . of Bar r i ngt on v. Sur f ace Tr ansp. Bd. , 636 F. 3d 650, 666 ( D. C. Ci r . 2011) ( [ W] hen an agency i nt er pr et s ambi gui t i es i n i t s or gani c st at ut e, i t i s ent i r el y appr opr i at e f or t hat agency t o consi der . . . pol i cy ar gument s t hat ar e r at i onal l y r el at ed t o t he [ st at ut e s] goal s. ( i nt er nal quot at i on mar ks and ci t at i on omi t t ed) ) ; Ar i z. Pub. Ser v. Co. v. EPA, 211 F. 3d 1280, 1287 ( D. C. Ci r . 2000) ( [ A] s l ong as t he agency st ays wi t hi n [ Congr ess s] del egat i on, i t i s f r ee t o make pol i cy choi ces i n i nt er pr et i ng t he st at ut e, and such i nt er pr et at i ons ar e ent i t l ed t o def er ence. ) ( quot at i on mar ks omi t t ed) . Ther e i s no quest i on t hat t he Act was i nt ended as a maj or over haul of t he nat i on s ent i r e heal t h i nsur ance mar ket . The Supr eme Cour t has r ecogni zed t he br oad pol i cy goal s of t he Act : t o i ncr ease t he number of Amer i cans cover ed by heal t h i nsur ance and decr ease t he cost of heal t h car e. NFI B, 132 S. Ct . at 2580. Si mi l ar l y, Ti t l e I of t he ACA i s t i t l ed Qual i t y, Af f or dabl e Heal t h Car e f or Al l Amer i cans ( emphasi s added) . Sever al pr ovi si ons of t he Act ar e necessar y t o achi evi ng t hese goal s. To begi n wi t h, t he i ndi vi dual mandat e r equi r es near l y al l Amer i cans t o have heal t h i nsur ance or pay a f i ne. I ncr easi ng t he pool of i nsur ed i ndi vi dual s has t he i nt ended si de- ef f ect of i ncr easi ng r evenue f or i nsur ance pr ovi der s. The i ncr eased r evenue, i n t ur n, suppor t s sever al mor e speci f i c Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 31 of 46 32
pol i cy goal s cont ai ned i n t he Act . The most pr omi nent of t hese ar e t he guar ant eed- i ssue and communi t y- r at i ng pr ovi si ons. I n shor t , t hese pr ovi si ons bar i nsur er s f r om denyi ng cover age or char gi ng hi gher pr emi ums because of an i ndi vi dual s heal t h st at us. See ACA 1201. However , t hese r equi r ement s, st andi ng al one, woul d r esul t i n an adver se sel ect i on scenar i o wher eby i ndi vi dual s di spr opor t i onat el y l i kel y t o ut i l i ze heal t h car e woul d dr i ve up t he cost s of pol i ci es avai l abl e on t he Exchanges. Congr ess under st ood t hat one way t o avoi d such pr i ce i ncr eases was t o r equi r e near - uni ver sal par t i ci pat i on i n t he i nsur ance mar ket pl ace vi a t he i ndi vi dual mandat e. I n combi nat i on wi t h t he i ndi vi dual mandat e, Congr ess aut hor i zed br oad i ncent i ves - t ot al i ng hundr eds of bi l l i ons of dol l ar s t o f ur t her i ncr ease mar ket par t i ci pat i on among l ow- and mi ddl e- i ncome i ndi vi dual s. A Congr essi onal Budget Of f i ce r epor t i ssued whi l e t he Act was under consi der at i on i nf or med Congr ess t hat t her e woul d be an an i nf l ux of enr ol l ees wi t h bel ow- aver age spendi ng f or heal t h car e, who woul d pur chase cover age because of t he new subsi di es t o be pr ovi ded and t he i ndi vi dual mandat e t o be i mposed. J . A. 95. The r epor t f ur t her advi sed Congr ess t hat [ t ] he subst ant i al pr emi um subsi di es avai l abl e i n t he exchanges woul d encour age t he enr ol l ment of a br oad r ange of peopl e; and t hat t he st r uct ur e of t he pr emi um t ax cr edi t s, under whi ch f eder al subsi di es i ncr ease i f pr emi ums r i se, woul d dampen t he Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 32 of 46 33
chances t hat a cycl e of r i si ng pr emi ums and decl i ni ng enr ol l ment woul d ensue. J . A. 108- 109. As t he def endant s f ur t her expl ai n, denyi ng t ax cr edi t s t o i ndi vi dual s shoppi ng on f eder al Exchanges woul d t hr ow a debi l i t at i ng wr ench i nt o t he Act s i nt er nal economi c machi ner y: I nsur er s i n St at es wi t h f eder al l y- r un Exchanges woul d st i l l be r equi r ed t o compl y wi t h guar ant eed- i ssue and communi t y- r at i ng r ul es, but , wi t hout pr emi um t ax subsi di es t o encour age br oad par t i ci pat i on, i nsur er s woul d be depr i ved of t he br oad pol i cy- hol der base r equi r ed t o make t hose r ef or ms vi abl e. Adver se sel ect i on woul d cause pr emi ums t o r i se, f ur t her di scour agi ng mar ket par t i ci pat i on, and t he ul t i mat e r esul t woul d be an adver se- sel ect i on deat h spi r al i n t he i ndi vi dual i nsur ance mar ket s i n St at es wi t h f eder al l y- r un Exchanges. Br . of Appel l ees, at 35; see al so Ami cus Br . of Amer i ca s Heal t h I nsur ance Pl ans, at 3- 6; Ami cus Br . f or Economi c Schol ar s, at 3- 6. 5
I t i s t her ef or e cl ear t hat wi del y avai l abl e t ax cr edi t s ar e essent i al t o f ul f i l l i ng t he Act s pr i mar y goal s and t hat Congr ess was awar e of t hei r i mpor t ance when dr af t i ng t he bi l l . The I RS Rul e advances t hi s under st andi ng by ensur i ng t hat t hi s
5 Li kewi se, f our Supr eme Cour t J ust i ces have r emar ked on t he i mpor t ance of t he t ax cr edi t syst em: Wi t hout t he f eder al subsi di es, i ndi vi dual s woul d l ose t he mai n i ncent i ve t o pur chase i nsur ance i nsi de t he exchanges, and some i nsur er s may be unwi l l i ng t o of f er i nsur ance i nsi de of exchanges. Wi t h f ewer buyer s and even f ewer sel l er s, t he exchanges woul d not oper at e as Congr ess i nt ended and may not oper at e at al l . NFI B, 132 S. Ct . at 2674 ( Scal i a, Kennedy, Thomas, and Al i t o, J J . , di ssent i ng) . Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 33 of 46 34
essent i al component exi st s on a suf f i ci ent l y l ar ge scal e. The I RS Rul e became al l t he mor e i mpor t ant once a si gni f i cant number of st at es i ndi cat ed t hei r i nt ent t o f or go est abl i shi ng Exchanges. Wi t h onl y si xt een st at e- r un Exchanges cur r ent l y i n pl ace, t he economi c f r amewor k suppor t i ng t he Act woul d cr umbl e i f t he cr edi t s wer e unavai l abl e on f eder al Exchanges. Fur t her mor e, wi t hout an except i on t o t he i ndi vi dual mandat e, mi l l i ons mor e Amer i cans unabl e t o pur chase i nsur ance wi t hout t he cr edi t s woul d be f or ced t o pay a penal t y t hat Congr ess never envi si oned i mposi ng on t hem. The I RS Rul e avoi ds bot h t hese unf or eseen and undesi r abl e consequences and t her eby advances t he t r ue pur pose and means of t he Act . I t i s t hus ent i r el y sensi bl e t hat t he I RS woul d enact t he r egul at i ons i t di d, maki ng Chevr on def er ence appr opr i at e. Conf r ont ed wi t h t he Act s ambi gui t y, t he I RS cr af t ed a r ul e ensur i ng t he cr edi t s br oad avai l abi l i t y and f ur t her i ng t he goal s of t he l aw. I n t he f ace of t hi s per mi ssi bl e const r uct i on, we must def er t o t he I RS Rul e. See Sci al abba, at 33 ( What ever Congr ess mi ght have meant i n enact i ng [ t he st at ut e] , i t f ai l ed t o speak cl ear l y. Conf r ont ed wi t h a sel f - cont r adi ct or y, ambi guous pr ovi si on i n a compl ex st at ut or y scheme, t he Boar d chose a t ext ual l y r easonabl e const r uct i on consonant wi t h i t s vi ew of t he pur poses and pol i ci es under l yi ng i mmi gr at i on l aw. Wer e we t o over t ur n t he Boar d i n t hat ci r cumst ance, we woul d Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 34 of 46 35
assume as our own t he r esponsi bl e and exper t agency s r ol e. ) ; Nat l El ec. Mf r s. Ass n, 654 F. 3d at 505 ( [ W] e def er at [ Chevr on s] st ep t wo t o t he agency s i nt er pr et at i on so l ong as t he const r uct i on i s a r easonabl e pol i cy choi ce f or t he agency t o make. ) ( second al t er at i on i n or i gi nal ) . Tel l i ngl y, t he pl ai nt i f f s do not di sput e t hat t he pr emi um t ax cr edi t s ar e an essent i al component of t he Act s vi abi l i t y. I nst ead, as expl ai ned above, t hey concede t hat Congr ess pr obabl y want ed t o make subsi di es avai l abl e t hr oughout t he count r y, but ar gue t hat Congr ess was equal l y concer ned wi t h ensur i ng t hat t he st at es pl ay a l eadi ng r ol e i n admi ni st er i ng t he Act , and t hus condi t i oned t he avai l abi l i t y of t he cr edi t s on t he cr eat i on of st at e Exchanges. The pl ai nt i f f s ar gue t hat t he I RS Rul e exceeds t he agency s aut hor i t y because i t i r r econci l abl y conf l i ct s wi t h Congr ess s goal of ensur i ng st at e l eader shi p. For t he r easons expl ai ned above, however , we ar e not per suaded by t he pl ai nt i f f s coer ci on ar gument and do not consi der i t a val i d basi s f or ci r cumscr i bi ng t he agency s aut hor i t y t o i mpl ement t he Act i n an ef f i caci ous manner . The pl ai nt i f f s al so at t empt t o aver t Chevr on def er ence by ar gui ng t hat ACA 1311 and 1321 ar e admi ni st er ed by HHS and not t he I RS, and t hat as a r esul t t he I RS had no aut hor i t y t o enact i t s f i nal r ul e. However , t he r el evant st at ut or y l anguage i s f ound i n 26 U. S. C. 36B, whi ch i s par t of t he I nt er nal Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 35 of 46 36
Revenue Code and subj ect t o i nt er pr et at i on by t he I RS. See 77 Fed. Reg. at 30, 378 ( descr i bi ng t he I RS Rul e as a val i d i nt er pr et at i on of 26 U. S. C. 36B) . Al t hough t he I RS Rul e adopt s by cr oss- r ef er ence an HHS def i ni t i on of Exchange, 26 C. F. R. 1. 36B- 1( k) , t he Act cl ear l y gi ves t o t he I RS aut hor i t y t o r esol ve ambi gui t i es i n 26 U. S. C. 38B ( The Secr et ar y shal l pr escr i be such r egul at i ons as may be necessar y t o car r y out t he pr ovi si ons of t hi s sect i on) . Thi s cl ear del egat i on of aut hor i t y t o t he I RS r el i eves us of any possi bl e doubt r egar di ng t he pr opr i et y of r el yi ng on one agency s i nt er pr et at i on of a si ngl e pi ece of a j oi nt l y- admi ni st er ed st at ut e. Fi nal l y, t he pl ai nt i f f s cont end t hat a r ul e of st at ut or y const r uct i on t hat r equi r es t ax exempt i ons and cr edi t s t o be const r ued nar r owl y di spl aces Chevr on def er ence i n t hi s case. However , whi l e t he Supr eme Cour t has st at ed t hat t ax cr edi t s must be expr essed i n cl ear and unambi guous t er ms, Yazoo & Mi ss. Val l ey R. R. Co. v. Thomas, 132 U. S. 174, 183 ( 1889) , t he Supr eme Cour t has never suggest ed t hat t hi s pr i nci pl e di spl aces Chevr on def er ence, and i n f act has made i t qui t e cl ear t hat i t does not . See Mayo Found. f or Medi cal Educ. and Resear ch v. Uni t ed St at es, 131 S. Ct . 704, 713 ( 2011) ( [ T] he pr i nci pl es under l yi ng our deci si on i n Chevr on appl y wi t h f ul l f or ce i n t he t ax cont ext . ) ; see al so i d. at 712 ( col l ect i ng cases i n whi ch Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 36 of 46 37
t he Supr eme Cour t has appl i ed Chevr on def er ence i nt er pr et i ng I RS r egul at i ons) . Rej ect i ng al l of t he pl ai nt i f f s ar gument s as t o why Chevr on def er ence i s i nappr opr i at e i n t hi s case, f or t he r easons expl ai ned above we ar e sat i sf i ed t hat t he I RS Rul e i s a per mi ssi bl e const r uct i on of t he st at ut or y l anguage. We must t her ef or e appl y Chevr on def er ence and uphol d t he I RS Rul e. 6
Accor di ngl y, t he j udgment of t he di st r i ct cour t i s af f i r med.
AFFI RMED
6 The Commonweal t h of Vi r gi ni a, act i ng as ami cus on behal f of t he def endant s, ar gues t hat t he pl ai nt i f f s const r uct i on of t he st at ut e vi ol at es t he Const i t ut i on s Spendi ng Cl ause by f ai l i ng t o pr ovi de Vi r gi ni a wi t h cl ear not i ce t hat r ecei pt of bi l l i ons of dol l ar s i n t ax cr edi t s f or i t s l ow- and mi ddl e- i ncome ci t i zens was cont i ngent on est abl i shi ng an Exchange. The Commonweal t h s ar gument der i ves f r om Pennhur st St at e School & Hospi t al v. Hal der man, i n whi ch t he Supr eme Cour t st at ed t hat i f Congr ess i nt ends t o i mpose a condi t i on on t he gr ant of f eder al moneys, i t must do so unambi guousl y. By i nsi st i ng t hat Congr ess speak wi t h a cl ear voi ce, we enabl e t he St at es t o exer ci se t hei r choi ce knowi ngl y, cogni zant of t he consequences of t hei r par t i ci pat i on. 451 U. S. 1, 17 ( 1981) ( i nt er nal ci t at i ons omi t t ed) . Al t hough abl y advanced, we have no r eason t o r each t he Commonweal t h s const i t ut i onal ar gument because we f i nd t he I RS Rul e t o be an appr opr i at e exer ci se of t he agency s aut hor i t y under Chevr on. See Nor f ol k S. Ry. Co. v. Ci t y of Al exandr i a, 608 F. 3d 150, 157 ( 4t h Ci r . 2010) ( The pr i nci pl e of const i t ut i onal avoi dance . . . r equi r es t he f eder al cour t s t o avoi d r ender i ng const i t ut i onal r ul i ngs unl ess absol ut el y necessar y. ) ( ci t i ng Ashwander v. Tenn. Val l ey Aut h. , 297 U. S. 288, 347 ( 1936) ( Br andei s, J . , concur r i ng) ) . Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 37 of 46 38
DAVI S, Seni or Ci r cui t J udge, concur r i ng:
I am pl eased t o j oi n i n f ul l t he maj or i t y s hol di ng t hat t he Pat i ent Pr ot ect i on and Af f or dabl e Car e Act ( t he Act ) per mi t s t he I nt er nal Revenue Ser vi ce t o deci de whet her pr emi um t ax cr edi t s shoul d be avai l abl e t o consumer s who pur chase heal t h i nsur ance cover age on f eder al l y- r un Exchanges. Maj . Op. at 30. But I am al so per suaded t hat , even i f one t akes t he vi ew t hat t he Act i s not ambi guous i n t he manner and f or t he r easons descr i bed, t he necessar y out come of t hi s case i s pr eci sel y t he same. That i s, I woul d hol d t hat Congr ess has mandat ed i n t he Act t hat t he I RS pr ovi de t ax cr edi t s t o al l consumer s r egar dl ess of whet her t he Exchange on whi ch t hey pur chased t hei r heal t h i nsur ance cover age i s a cr eat ur e of t he st at e or t he f eder al bur eaucr acy. Accor di ngl y, at Chevr on St ep One, t he I RS Rul e maki ng t he t ax cr edi t s avai l abl e t o al l consumer s of Exchange- pur chased heal t h i nsur ance cover age, 26 C. F. R. 1. 36B- 1( k) , 77 Fed. Reg. 30, 377, 30, 378 ( May 23, 2012) , i s t he cor r ect i nt er pr et at i on of t he Act and i s r equi r ed as a mat t er of l aw. Chevr on U. S. A. , I nc. v. Nat ur al Resour ces Def ense Counci l , I nc. , 467 U. S. 837, 842- 43 ( 1984) . Al t hough t he Act expr essl y cont empl at es st at e- r un Exchanges, ACA 1311( b) ( 1) , Congr ess cr eat ed a cont i ngency pr ovi si on t hat per mi t s t he f eder al gover nment , vi a t he Secr et ar y of Heal t h and Human Ser vi ces, t o est abl i sh and oper at e such Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 38 of 46 39
Exchange wi t hi n t he St at e and . . . t ake such act i ons as ar e necessar y t o i mpl ement such ot her r equi r ement s. I d. 1321( c) ( 1) . Thi s cont i ngency pr ovi si on i s t r i gger ed when a st at e el ect s not t o set up an Exchange, when a st at e i s del ayed i n set t i ng up an Exchange, or when a st at e Exchange f ai l s t o meet cer t ai n st at ut or y and r egul at or y r equi r ement s. I d. 1321( c) ( 1) . Ent er t he pr emi um t ax cr edi t s, essent i al l y a t ax subsi dy f or t he pur chase of heal t h i nsur ance. The amended t ax code, 26 U. S. C. 36B( b) , set s f or t h t he f or mul a f or cal cul at i ng t he amount of a consumer s pr emi um t ax cr edi t . I n gener al , t he cr edi t i s equal t o t he l esser of t wo amount s: t he mont hl y pr emi um f or a qual i f i ed heal t h pl an enr ol l ed i n t hr ough an Exchange est abl i shed by t he St at e, or t he excess of t he adj ust ed mont hl y pr emi um f or a cer t ai n t ype of heal t h pl an over a per cent age of t he t axpayer s househol d i ncome. I d. 36B( b) ( 2) . Appel l ant s cont end t hat t he l anguage enr ol l ed i n t hr ough an Exchange est abl i shed by t he St at e pr ecl udes t he I RS f r om pr ovi di ng pr emi um t ax cr edi t s t o consumer s who pur chase heal t h i nsur ance cover age on f eder al Exchanges. To t hem, est abl i shed by t he St at e i n t he pr emi um t ax cr edi t s cal cul at i on subpr ovi si on i s t he si ne qua non of t hi s case. An Exchange est abl i shed by t he St at e i s not an Exchange est abl i shed by t he f eder al gover nment , t hey ar gue; t hus, t he equat i on f or Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 39 of 46 40
cal cul at i ng t he amount of t he pr emi um t ax cr edi t i s whol l y i nappl i cabl e t o al l consumer s who pur chase heal t h i nsur ance cover age on f eder al l y- r un Exchanges ( t he amount woul d be zer o, accor di ng t o Appel l ant s) . I am not per suaded and f or a si mpl e r eason: [ E] st abl i shed by t he St at e i ndeed means est abl i shed by t he st at e - except when i t does not , i . e. , except when a st at e has f ai l ed t o est abl i sh an Exchange and when t he Secr et ar y, char ged wi t h act i ng pur suant t o a cont i ngency f or whi ch Congr ess pl anned, i d. 1321( c) , est abl i shes and oper at es t he Exchange i n pl ace of t he st at e. When a st at e el ect s not t o est abl i sh an Exchange, t he cont i ngency pr ovi si on aut hor i zes f eder al of f i ci al s t o est abl i sh and oper at e such Exchange and t o t ake any act i on adj unct t o doi ng so. That di sposes of t he Appel l ant s cont ent i on. Thi s i s not a case t hat cal l s up t he decades- l ong cl ashes bet ween t ext ual i st s, pur posi vi st s, and ot her school s of st at ut or y i nt er pr et at i on. See Abbe Gl uck, The St at es As Labor at or i es of St at ut or y I nt er pr et at i on: Met hodol ogi cal Consensus and t he New Modi f i ed Text ual i sm, 119 Yal e L. J . 1750, 1762- 63 ( 2010) . The case can be r esol ved t hr ough a cont ext ual r eadi ng of a f ew di f f er ent subsect i ons of t he st at ut e. I f t her e wer e any r emai ni ng doubt over t hi s const r uct i on, t he bi l l s st r uct ur e di spel s i t : The cont i ngency pr ovi si on at 1321( c) ( 1) i s set f or t h i n Par t I I I Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 40 of 46 41
of t he bi l l , t i t l ed St at e Fl exi bi l i t y Rel at i ng t o Exchanges, a sect i on t hat appear s af t er t he sect i on t hat cr eat es t he Exchanges and mandat es t hat t hey be oper at ed by st at e gover nment s, ACA 1311( b) . What s mor e, t he cont i ngency pr ovi si on does not cr eat e t wo- t i er s of Exchanges; t her e i s no i ndi cat i on t hat Congr ess i nt ended t he f eder al l y- oper at ed Exchanges t o be l esser Exchanges and f or consumer s who ut i l i ze t hemt o be l ess ent i t l ed t o i mpor t ant benef i t s. Thus, I concl ude t hat a hol i st i c r eadi ng of t he Act s t ext and pr oper at t ent i on t o i t s st r uct ur e l ead t o onl y one sensi bl e concl usi on: The pr emi um t ax cr edi t s must be avai l abl e t o consumer s who pur chase heal t h i nsur ance cover age t hr ough t hei r desi gnat ed Exchange r egar dl ess of whet her t he Exchange i s st at e- or f eder al l y- oper at ed. The maj or i t y opi ni on under st andabl y engages wi t h t he Appel l ant s and r espect f ul l y posi t s t hey coul d be per cei ved t o advance a pl ausi bl e const r uct i on of t he Act , i . e. , t hat Congr ess may have sought t o r est r i ct t he scope of t he cont i ngency pr ovi si on when i t used t he phr ase est abl i shed by t he St at e i n t he pr emi um t ax cr edi t s cal cul at i on subpr ovi si on. But as t he maj or i t y opi ni on def t l y i l l ust r at es, a st r ai ght f or war d r eadi ng of t he Act st r i ps away any and al l possi bl e expl anat i ons f or why Congr ess woul d have i nt ended t o excl ude consumer s who pur chase heal t h i nsur ance cover age on f eder al l y- r un Exchanges f r om Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 41 of 46 42
qual i f yi ng f or pr emi um t ax cr edi t s. ( The best Appel l ant s can come up wi t h seems t o be some non- exi st ent Congr essi onal desi r e f or st at e l eader shi p ( what ever t hat means) i n ef f ect i ng a compr ehensi ve over haul of t he nat i on s heal t h i nsur ance mar ket pl aces and r el at ed heal t h car e mar ket s. ) Such a r eadi ng, t he maj or i t y opi ni on per suasi vel y expl ai ns, i s not suppor t ed by t he l egi sl at i ve hi st or y or by t he over al l st r uct ur e of t he Act . Maj . Op. at 27, 24. Mor eover , t he maj or i t y car ef ul l y and cogent l y expl ai ns how wi del y avai l abl e t ax cr edi t s ar e essent i al t o f ul f i l l i ng t he Act s pr i mar y goal s and [ how] Congr ess was awar e of t hei r i mpor t ance when dr af t i ng t he bi l l . Maj . Op. at 33. Thus, t he maj or i t y cor r ect l y hol ds t hat Congr ess di d not i nt end a r eadi ng t hat has no l egi sl at i ve hi st or y t o suppor t i t and r uns cont r ar y t o t he Act s t ext , st r uct ur e, and goal s. Appel l ant s l i t er al r eadi ng of t he pr emi um t ax cr edi t s cal cul at i on subpr ovi si on r ender s t he ent i r e Congr essi onal scheme nonsensi cal . Cf . Maj . Op. at 27. I n f act , Appel l ant s r eadi ng i s not l i t er al ; i t s cr amped. No case st ands f or t he pr oposi t i on t hat l i t er al r eadi ngs shoul d t ake pl ace i n a vacuum, acont ext ual l y, and unt et her ed f r om ot her par t s of t he oper at i ve t ext ; i ndeed, t he case l aw i ndi cat es t he opposi t e. Nat i onal Associ at i on of Home Bui l der s v. Def ender s of Wi l dl i f e, 551 U. S. 644, 666 ( 2007) . So does common sense: I f I ask f or pi zza f r om Pi zza Hut f or l unch but cl ar i f y t hat I woul d Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 42 of 46 43
be f i ne wi t h a pi zza f r om Domi no s, and I t hen speci f y t hat I want hamand pepper oni on my pi zza f r omPi zza Hut , my f r i end who r et ur ns f r om Domi no s wi t h a ham and pepper oni pi zza has st i l l compl i ed wi t h a l i t er al const r uct i on of my l unch or der . That i s t hi s case: Congr ess speci f i ed t hat Exchanges shoul d be est abl i shed and r un by t he st at es, but t he cont i ngency pr ovi si on per mi t s f eder al of f i ci al s t o act i n pl ace of t he st at e when i t f ai l s t o est abl i sh an Exchange. The pr emi um t ax cr edi t cal cul at i on subpr ovi si on l at er speci f i es cer t ai n condi t i ons r egar di ng st at e- r un Exchanges, but t hat does not mean t hat a l i t er al r eadi ng of t hat pr ovi si on somehow pr ecl udes i t s appl i cabi l i t y t o subst i t ut e f eder al l y- r un Exchanges or er ases t he cont i ngency pr ovi si on out of t he st at ut e. That Congr ess somet i mes speci f i ed st at e and f eder al Exchanges i n t he bi l l i s as unr emar kabl e as i t i s unr eveal i ng. Thi s was, af t er al l , a 900- page bi l l t hat pur por t ed t o r est r uct ur e t he means of pr ovi di ng heal t h car e i n t hi s count r y. Nei t her t he canons of const r uct i on nor any empi r i cal anal ysi s suggest s t hat congr essi onal dr af t i ng i s a per f ect l y har moni ous, symmet r i cal , and el egant endeavor . See gener al l y Abbe Gl uck & Li sa Schul t z Br essman, St at ut or y I nt er pr et at i on f r om t he I nsi de: An Empi r i cal St udy of Congr essi onal Dr af t i ng, Del egat i on, and t he Canons: Par t I , 65 St an. L. Rev. 901 ( 2013) . Sausage- maker s ar e i ndeed of f ended when t hei r cr af t i s l i nked t o l egi sl at i ng. Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 43 of 46 44
Rober t Pear , I f Onl y Laws Wer e Li ke Sausages, N. Y. Ti mes, Dec. 5, 2010, at WK3. At wor st , t he dr af t er s per cei ved i nconsi st enci es ( i f t hat i s what t hey ar e at al l ) ar e f ar l ess pr obat i ve of Congr ess i nt ent t han t he unqual i f i ed and br oad cont i ngency pr ovi si on. Appel l ant s i nsi st t hat t he use of est abl i shed by t he St at e i n t he pr emi um t ax cr edi t s cal cul at i on subpr ovi si on i s evi dence of Congr ess i nt ent t o l i mi t t he avai l abi l i t y of t ax cr edi t s t o consumer s of st at e Exchange- pur chased heal t h i nsur ance cover age. Thei r r eadi ng bespeaks a deepl y f l awed ef f or t t o squeeze t he pr over bi al el ephant i nt o t he pr over bi al mousehol e. Whi t man v. Amer i can Tr ucki ng Associ at i ons, 531 U. S. 457, 468 ( 2001) . I f Congr ess want ed t o cr eat e a t wo- t i er ed Exchange syst em, i t woul d have done so expr essl y i n t he sect i on of t he Act t hat aut hor i zes t he cr eat i on of cont i ngent , f eder al l y- r un Exchanges. I f Congr ess want ed t o l i mi t t he avai l abi l i t y of pr emi um t ax cr edi t s t o consumer s who pur chase heal t h cover age on st at e- r un Exchanges, i t woul d have sai d so r at her t han t i nker i ng wi t h t he f or mul a i n a subpr ovi si on gover ni ng how t o cal cul at e t he amount of t he cr edi t . The r eal danger i n t he Appel l ant s pr oposed i nt er pr et at i on of t he Act i s t hat i t mi sses t he f or est f or t he t r ees by el i di ng Congr ess cent r al pur pose i n enact i ng t he Act : t o r adi cal l y r est r uct ur e t he Amer i can heal t h car e mar ket wi t h t he most Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 44 of 46 45
expansi ve soci al l egi sl at i on enact ed i n decades. Sher yl Gay St ol ber g & Rober t Pear , Obama Si gns Heal t h Car e Over haul I nt o Law, Wi t h a Fl our i sh, N. Y. Ti mes, Mar ch 24, 2010, at A19. The wi despr ead avai l abi l i t y of pr emi um t ax cr edi t s was i nt ended as a cr i t i cal par t of t he bi l l , a poi nt t he Pr esi dent hi ghl i ght ed at t he bi l l si gni ng. Tr anscr i pt of Remar ks by t he Pr esi dent and Vi ce Pr esi dent at Si gni ng of t he Heal t h I nsur ance Ref or m Bi l l , Mar ch 23, 2010 ( And when t hi s exchange i s up and r unni ng, mi l l i ons of peopl e wi l l get t ax br eaks t o hel p t hem af f or d cover age, whi ch r epr esent s t he l ar gest mi ddl e- cl ass t ax cut f or heal t h car e i n hi st or y. That ' s what t hi s r ef or m i s about . ) . Appel l ant s appr oach woul d ef f ect i vel y dest r oy t he st at ut e by pr omul gat i ng a new r ul e t hat makes pr emi um t ax cr edi t s unavai l abl e t o consumer s who pur chased heal t h cover age on f eder al Exchanges. But of cour se, as t hei r counsel l ar gel y conceded at or al ar gument , t hat i s t hei r not so t r anspar ent pur pose. Appel l ant s, ci t i zens of t he Commonweal t h of Vi r gi ni a, do not wi sh t o buy heal t h i nsur ance. Most assur edl y, t hey have t he r i ght , but not t he unf et t er ed r i ght , Nat l Fed n of I ndep. Bus. v. Sebel i us, 132 S. Ct . 2566 ( 2012) , t o decl i ne t o do so. They have a cl ear choi ce, one af f or ded by t he admi t t edl y l ess- t han- per f ect r epr esent at i ve pr ocess or dai ned by our const i t ut i onal st r uct ur e: t hey can ei t her pay t he r el at i vel y mi ni mal amount s Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 45 of 46 46
needed t o obt ai n heal t h car e i nsur ance as pr ovi ded by t he Act , or t hey can r ef use t o pay and r un t he r i sk of i ncur r i ng a t i ny t ax penal t y. I d. What t hey may not do i s r el y on our hel p t o deny t o mi l l i ons of Amer i cans desper at el y- needed heal t h i nsur ance t hr ough a t or t ur ed, nonsensi cal const r uct i on of a f eder al st at ut e whose mani f est pur pose, as r eveal ed by t he whol eness and coher ence of i t s t ext and st r uct ur e, coul d not be mor e cl ear . As el abor at ed i n t hi s separ at e opi ni on, I am pl eased t o concur i n f ul l i n J udge Gr egor y s car ef ul l y r easoned opi ni on f or t he panel . Appeal: 14-1158 Doc: 83 Filed: 07/22/2014 Pg: 46 of 46