States Support Rehearing Request in Ohio’s ACA Tax Fight

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By Christopher Brown

A ruling allowing the federal government to tax the states under the Affordable Care Act’s transitional reinsurance program threatens to upend the balance between federal and state governments and erode traditional protections for states, a group of states told the U.S. Court of Appeals for the Sixth Circuit ( Ohio v. United States , 6th Cir., No. 16-3093, brief in support filed 4/6/17 ).

The Feb. 17 ruling by a three-judge panel conflicts with U.S. Supreme Court and Sixth Circuit precedent that requires Congress to state its intent explicitly to allow for federal taxation of the states, the 16-state group said in a friend-of-the-court brief, which they filed April 6 in support of Ohio’s petition for the full court to rehear the case.

“The amici States have a substantial interest in protecting [the federal-state] balance by ensuring that any decision by the federal government to tax the States directly is made by Congress, expressed unequivocally in the plain language it adopts, and does not undermine the States’ well-established intergovernmental tax immunity,” the brief said.

Kansas took the lead in presenting the brief, and was joined by Arizona, Indiana, Louisiana, Michigan, Montana, Nebraska, Nevada, Oklahoma, South Carolina, South Dakota, Texas, Utah, West Virginia, Wisconsin and Wyoming.

Clear Statement

Ohio’s challenge concerns ACA’s transitional reinsurance program, a taxing mechanism set up under the act to reimburse health insurers for coverage provided to higher-risk patients. Ohio argues the ACA doesn’t support applying the tax to the states.

When Congress takes the “extraordinary step” of taxing a state directly, the Sixth Circuit and the U.S. Supreme Court have said that it must make its intent “unmistakably clear,” the brief said. Yet the panel in its ruling failed to identify any plain language in the ACA that applies the tax to the states, instead relying on inferences from other statutes purporting to demonstrate that Congress must have intended for the tax to apply to the states.

The brief also takes issue with the court’s statutory interpretation, arguing that a straightforward chain of definitional provisions from both the ACA and the Employee Retirement Income Security Act shows that Congress intended to apply the transitional reinsurance tax only to certain “persons,” a category that doesn’t include sovereign states.

Non-Discrimination Test

The court also misread the Sixth Circuit’s own intergovernmental tax immunity holding in Michigan v. U.S., 40 F.3d. 817 (6th Cir. 1994) by holding that all federal taxes that don’t discriminate between the states and private entities may be imposed on the states, the brief said.

“Allowing the federal government to commandeer state treasuries in this manner is no less an affront to state sovereignty than allowing the federal government to commandeer state legislative processes or state executive officials,” the brief said.

To contact the reporter on this story: Christopher Brown in St. Louis at

To contact the editor responsible for this story: Ryan C. Tuck at

For More Information

Text of the states' brief is at

Text of Ohio's petition for rehearing is at

Text of the panel's February ruling is at

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