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