A federal district court in Washington, D.C. today “upheld an IRS regulation extending the law’s employer mandate to those “refusenik” states that decided against setting up their own insurance exchanges.”
As my colleague Mario Loyola aptly pointed out, “the Road to Serfdom is traveled in small steps like these:”
Here is what the plaintiffs contend:
Thus, the tax credit to a qualifying individual is tied to the cost of insurance purchased “through an Exchange established by the State under [42 U.S.C. § 18031].” … Plaintiffs contend that by using the phrase “established by the State under [42 U.S.C. § 18031],” as opposed to a phrase like “established under this Act,” see 42 U.S.C. § 18032(d)(3)(D)(i)(II), Congress intended to refer exclusively to state-run Exchanges, as opposed to federally-facilitated Exchanges, and thus to limit the availability of the Section 36B tax credits to persons residing only in the states that have established their own Exchanges.
Here is the court’s initial comment on the plaintiff’s argument:
On its face, the plain language of 26 U.S.C. § 36B(b)-(c), viewed in isolation, appears to support plaintiffs’ interpretation. The federal government, after all, is not a “State,” which is explicitly defined in the Act to mean “each of the 50 States and the District of Columbia.” ACA § 1304(d), codified at 42 U.S.C. § 18024(d). The phrase “Exchange established by the State under [42 U.S.C. § 18031]” therefore, standing alone, could be read to refer only to state-run Exchanges.
Now here’s the good part:
In making the threshold determination under Chevron, however, “a reviewing court should not confine itself to examining a particular statutory provision in isolation. Rather, [t]he meaning – or ambiguity – of certain words or phrases may only become evident when placed in context.”
The court is basically saying here that ‘State’ can’t possibly really mean ‘State,’ because if it did, we wouldn’t like the outcome. Therefore, we think that the meaning of ‘State’ is ambiguous and can now look to other parts of the statute to ‘clarify’ its meaning.