A judge of the US District Court for the Northern District of Texas ruled on Friday that when the Tax Cuts and Jobs Act of 2017 reduced the Affordable Care Act’s (ACA) shared-responsibility payment for not obtaining health insurance to $0, the provision ceased being a tax, making it an invalid exercise of Congress’s power to tax.
This does not alter the logic of the Supreme Court’s landmark decision in 2012 that held the ACA’s shared-responsibility payment could be read as a tax. Moreover, the district court submitted to the Supreme Court’s finding that the individual mandate was a valid exercise of Congressional power so long as it triggered a tax.
Because the penalty is adjusted to $0 by the Trump administration’s new tax bill and will technically no longer impose an exaction, however, this led the Northern District of Texas to conclude that “[u]nder the law as it now stands, the Individual Mandate no longer ‘triggers a tax’ beginning in 2019. So long as the shared-responsibility payment is zero…the Individual Mandate cannot be upheld under Congress’s Tax Power.”
The court further held that the tax penalty, section 5000A(b) of the ACA, is separate and distinct from the individual mandate, section 5000A(a). As such, the district court reasoned that the individual mandate standing alone continues to be an unconstitutional use of the Interstate Commerce Clause, as the Supreme Court held in 2012. The rest of the ACA was found to be inseverable and thus also unconstitutional.
The case was filed by 20 Republican attorneys general and governors and two individuals, Neill Hurley and John Nantz. Defendants are the US, the Department of Health and Human Services and its secretary Alex Azar, the IRS and David Kautter in his capacity as its Acting Commissioner. The States of California, Connecticut, Delaware, Hawaii, Illinois, Kentucky, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Washington, and the District of Columbia also intervened as defendants
It is expected that the case will be appealed to the US Court of Appeals for the Fifth Circuit.