Jacqueline Halbig v. Sylvia Mathews Burwell
411 U.S. App. D.C. 199
D.C. Cir.2014Background
- Section 36B of the Internal Revenue Code (added by the ACA) authorizes refundable premium tax credits for "qualified health plans ... enrolled in through an Exchange established by the State under section 1311."
- The ACA (section 1311) contemplates state-run Exchanges but authorizes HHS under section 1321 to establish and operate an Exchange in a state that does not set one up.
- The IRS promulgated a regulation (26 C.F.R. § 1.36B‑2) treating Exchanges established by HHS as equivalent to state-established Exchanges and allowing tax credits on federally‑facilitated Exchanges.
- Appellants (individuals and employers in states that did not establish Exchanges) sued under the APA seeking to invalidate the IRS rule, arguing the statute limits credits to Exchanges "established by the State."
- The district court upheld the IRS regulation; the D.C. Circuit reversed, holding § 36B unambiguously limits credits to state‑established Exchanges, vacated the regulation, and found one appellant had standing and an APA cause of action.
Issues
| Issue | Appellants' Argument | Government's Argument | Held |
|---|---|---|---|
| Standing | Klemencic: IRS rule forces him to choose subsidized coverage or pay mandate penalty — a concrete economic injury. | Rule is ideological; no concrete injury. | Held: Klemencic has standing; even small, imminent economic harm suffices. |
| APA Cause of Action | APA review proper; plaintiff seeks prospective relief invalidating the rule. | Adequate alternative remedy exists via tax refund suit; APA is thus unavailable. | Held: APA remedy is available because refund suit is backward‑looking and unlikely to provide prospective relief (e.g., certificate of exemption). |
| Statutory Interpretation of §36B | "Exchange established by the State" excludes federally‑established (HHS) Exchanges; plain meaning controls. | §1311/§1321 create functional equivalence; context, purpose, and Chevron deference support IRS/HHS interpretation allowing credits on federal Exchanges. | Held: §36B unambiguously limits credits to state‑established Exchanges; IRS rule is contrary to law and vacated. |
| Chevron Deference / Absurdity & Purpose | Deference unnecessary because statute is unambiguous; legislative purpose does not override plain text. | If ambiguous, agency reading is permissible under Chevron to avoid absurd results that would destabilize the ACA. | Held: No Chevron step two inquiry required because the statute is clear; purposive/absurdity arguments insufficient to overcome plain text. |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) (framework for agency deference when statute is ambiguous)
- Nat’l Fed’n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566 (2012) (context on ACA purposes and structure)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (standing requirements)
- Abbott Labs. v. Gardner, 387 U.S. 136 (1967) (presumption of judicial review under the APA and adequacy of alternative remedies)
- Util. Air Regulatory Grp. v. EPA, 134 S. Ct. 2427 (2014) (agency may not rewrite clear statutory terms)
- Iselin v. United States, 270 U.S. 245 (1926) (courts may not supply omissions or enlarge statutes)