PUBLISHED

UNI TED STATES COURT OF APPEALS
FOR THE FOURTH CI RCUI T


No. 14-1158


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,

Def endant s – Appel l ees,

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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,
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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.


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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
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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
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“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.
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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.
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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
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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
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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
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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
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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) .
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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
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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,
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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.
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§ 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
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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
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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 m“such 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
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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
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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:
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( 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
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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
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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
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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) .
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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
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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) .
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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. ”
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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
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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.
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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
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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
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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) .
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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
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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
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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
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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) ) .
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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
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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
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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 ”
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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
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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
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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.
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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
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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

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