Ohio Seeks Rehearing in ACA Tax Challenge

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Christopher Brown

The state of Ohio filed a petition March 29 asking a federal appeals court to rehear its lawsuit challenging the Affordable Care Act’s transitional reinsurance program, a taxing mechanism set up to reimburse some health insurers for coverage provided to higher risk patients ( Ohio v. U.S. , 6th Cir., 16-3093, petition for rehearing en banc 3/29/17 ).

Ohio’s March 29 request for the entire U.S. Court of Appeals for the Sixth Circuit to rehear the case comes after a three-judge panel of the court rejected the state’s argument that tax provisions of the transitional reinsurance program should be construed to apply to private employers only.

A three-judge panel of the court held Feb. 17 that the text of ACA showed Congress’ intent to subject governmental employers to the tax, and that the program didn’t amount to a commandeering of Ohio’s regulatory apparatus because its provisions required the state to comply with a federal regulatory program rather than to implement one.

Ohio was joined in the lawsuit by several public entities inside the state. The case also attracted friend-of-the-court briefs filed by 13 other states.

Express Statement

In its petition for rehearing, Ohio claims that the panel’s ruling had turned the court’s previous approach to federal taxation of state activities on its head. Where before the court insisted that federal taxation of state activities may be allowed only where Congress has explicitly stated its intention to do so, now the panel holds that federal taxation may apply where Congress has failed to explicitly exempt state activity from the tax, the petition said.

The state also argues in the petition that the panel’s ruling gives federal authorities “unprecedented scope to hide behind state taxing power” in funding federal projects. It also disregards the U.S. Supreme Court’s concerns about accountability shifting that are given substance in the anti-commandeering doctrine and the intergovernmental-tax immunity doctrine.

To contact the reporter on this story: Christopher Brown in St. Louis at ChrisBrown@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of the petition for rehearing, which includes the panel's Feb. 17 ruling as an appendix, is at http://src.bna.com/ntj.

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