Tex. v. United States
340 F. Supp. 3d 579
N.D. Tex.2018Background
- The ACA (2010) included an Individual Mandate (26 U.S.C. §5000A(a)) requiring minimum essential coverage and a distinct shared-responsibility payment (penalty) (§5000A(b)/(c)) enforced via the tax code.
- NFIB v. Sebelius (2012) held the Mandate unconstitutional under the Commerce Clause but upheld §5000A as a tax-based saving construction because the shared-responsibility payment operated like a tax.
- The Tax Cuts and Jobs Act (TCJA, 2017) set the shared-responsibility payment amount to zero effective Jan. 1, 2019, leaving §5000A(a) (the mandate) intact but without an associated revenue-producing exaction.
- Plaintiffs (several states and individuals) sued seeking a declaration that the Mandate, as amended by TCJA, is unconstitutional and that the remainder of the ACA is inseverable.
- The federal government and several state intervenors defended; the court converted the preliminary-injunction briefing into consideration on partial summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing | Individual plaintiffs are directly injured by being subject to an unconstitutional purchase requirement | Defendants did not prevail on standing challenge; amici raised it but court found plaintiffs the object of the law | Plaintiffs (individuals) have Article III standing |
| Tax Power: Can §5000A(a) be upheld under Congress's taxing power after TCJA? | No — TCJA removed the revenue-producing penalty; NFIB's saving construction depended on an exaction that produced revenue | Intervenors: §5000A can still be read as tax-like; some 2018 revenue may be collected later; revenue production not required at every moment | Held: The Mandate can no longer be fairly read as an exercise of the Tax Power once the shared-responsibility payment is zero; unconstitutional on that ground |
| Commerce Clause: Can the Mandate be sustained as regulation of interstate commerce absent the tax? | The Mandate compels purchase and is regulation of inactivity; it is therefore beyond Commerce Clause power | Intervenors: With a $0 tax there is no compulsion and thus no Commerce Clause problem; Mandate does nothing | Held: NFIB controls — Congress cannot compel inactivity into commerce; the Mandate remains unsustainable under the Commerce Clause |
| Severability: If Mandate invalid, is remainder of ACA severable? | The Mandate is "essential" to ACA; §18091 repeatedly ties the mandate "together with the other provisions" and Congress would not have enacted the ACA without it — thus inseverable | Defendants/Intervenors: many ACA provisions stand alone; at least some provisions (e.g., guaranteed-issue/community-rating) are severable from the Mandate | Held: The Individual Mandate is essential and inseverable from the ACA; the remainder of the ACA is invalid as inseverable |
Key Cases Cited
- Nat'l Fed'n of Indep. Business v. Sebelius, 567 U.S. 519 (2012) (held the Mandate not valid under the Commerce Clause but upheld §5000A as a tax-based saving construction)
- King v. Burwell, 576 U.S. 582 (2015) (affirmed that guaranteed-issue and community-rating are intertwined with the coverage requirement; Congress found they would not work without a mandate)
- Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) (establishes judicial duty to say what the law is)
- United States v. Kahriger, 345 U.S. 22 (1953) (noting an essential feature of a tax is that it produces revenue)
- United States v. Ross, 458 F.2d 1144 (5th Cir. 1972) (tax validity tested by whether it operates as revenue-generating measure)