David King v. Sylvia Burwell, 759 F.3d 358

Plaintiffs are Virginia residents who would qualify for the ACA’s unaffordability exemption absent premium tax credits; Virginia declined to create a state-run Exchange and uses the federal Exchange (HealthCare.gov).
26 U.S.C. § 36B provides premium tax credits for coverage months in which a taxpayer is enrolled in a “qualified health plan ... enrolled in through an Exchange established by the State under [§ 1311].”
HHS § 1321 authorizes the Secretary to “establish and operate such Exchange” where a state fails to establish one; IRS promulgated a regulation (26 C.F.R. § 1.36B-1(k)) making tax credits available to enrollees on both state and federally-facilitated Exchanges.
Plaintiffs sued under the APA seeking declaratory and injunctive relief, arguing the IRS exceeded authority by granting credits for federal Exchange purchases; district court dismissed and the Fourth Circuit affirmed.
Court found plaintiffs had Article III standing and that tax-refund procedures did not bar APA review of final agency action seeking prospective relief.
On the merits the court held § 36B ambiguous about whether credits are limited to state-established Exchanges and, under Chevron step two, deferred to the IRS’s reasonable interpretation to make credits available on federal Exchanges.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standing	No concrete injury because plaintiffs would buy catastrophic plans or otherwise not be harmed	IRS rule causes plaintiffs economic injury by forcing purchase or penalty; they have standing	Plaintiffs have Article III standing (economic injury traceable to IRS Rule)
APA justiciability vs. tax-refund remedy	Plaintiffs must use refund suit under §7422 or Little Tucker Act before APA relief	APA permits pre-enforcement challenge to final agency action; refund suits are not an adequate alternative for equitable relief	APA suit allowed; tax-refund actions do not bar prospective declaratory/injunctive relief here
Meaning of §36B — whether credits limited to state Exchanges (Chevron Step One)	Text limits credits to Exchanges “established by the State under §1311,” so credits unavailable on federal Exchanges	Read §1321 so federal Exchanges are “such Exchange” established on behalf of the State; context and related provisions support nationwide availability	Statute ambiguous; Chevron Step One inconclusive
Chevron deference (Chevron Step Two)	IRS lacks authority; rules conflict with Congress’s intent to incentivize state-run Exchanges	IRS interpretation reasonably advances ACA’s objectives and avoids adverse-selection collapse in states with federal Exchanges	Defer to IRS: regulation permitting credits on federally-facilitated Exchanges is a permissible construction; rule upheld

Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) (framework for judicial deference to agency statutory interpretation)
Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing requirements)
Nat’l Fed’n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566 (2012) (context on ACA’s purposes and individual mandate)
Bowen v. Massachusetts, 487 U.S. 879 (1988) (APA’s purpose to remove obstacles to judicial review)
Scialabba v. Cuellar de Osorio, 134 S. Ct. 2191 (2014) (deference where statute is internally ambiguous and agency’s construction furthers statutory purposes)
Mayo Found. for Medical Educ. & Research v. United States, 562 U.S. 44 (2011) (applying Chevron principles in tax context)
City of Arlington v. F.C.C., 133 S. Ct. 1863 (2013) (Congressional allocation of interpretive authority to agencies)