Individual Seeks En Banc Review of D.C. Circuit Healthcare Decision

                       TABLE OF CONTENTS

First, the panel decision conflicts with a number of Supreme Court and Circuit Court precedents. With respect to the Commerce Clause claim, the decision erroneously treats the mandate and the tax as a single provision, contrary to the Supreme Court's analysis in National Federation of Independent Business v. Sebelius (NFIB), 132 S. Ct. 2566 (2012), and several subsequent Circuit Court opinions. On that mistaken premise, the decision upholds both the requirement to buy insurance and the tax for failing to do so under Congress's taxing power, thereby giving no legal effect whatever to the holding of a majority of the NFIB Justices that the individual mandate is unconstitutional under the Commerce Clause.

Moreover, the panel decision rejects Sissel's Origination Clause claim in the only way it could -- by minting a new test that will insulate most revenue-raising bills from Origination Clause challenge, as long as a court can divine a legislative purpose for the enactment other than raising revenues. The panel's "purposive approach" all but guts the Origination Clause by effectively enabling the Senate to originate tax bills that might have some broader social purpose. It also conflicts with the NFIB majority's holding that, for purposes of assessing its constitutionality, the shared responsibility payment must be analyzed under a "functional approach" that looks to what the provision actually does, without regard to congressional labels or purpose.

Second, this appeal involves a question of exceptional importance. In terms of its practical import, the appeal puts at issue one of the Act's central provisions, which undisputedly will affect the healthcare and financial decisions of every American: With the mandate and tax intact, millions of citizens will pay billions annually in taxes to the IRS and into the general Treasury to support general government operations. Without the mandate and tax, the Act cannot stand.¹ In terms of its legal importance, the appeal turns on the interpretation and application of two of the Constitution's structural limitations on the Federal Government: the Commerce Clause and the Origination Clause. Last month, this Court granted rehearing in Halbig v. Burwell, 758 F.3d. 390 (2014), another challenge to the ACA that involves a question of statutory interpretation -- namely, whether the Act authorizes an IRS regulation that provides federal subsidies to individuals in states with federally established (as opposed to state-established) Exchanges.² If a challenge to an ACA regulation is worthy of en banc review, then this case -- a constitutional challenge to a cornerstone provision of the Act -- is a fortiori worthy of the same.

The panel decision raises conflicts on exceptionally important questions surrounding the constitutionality of one of the most significant pieces of federal legislation in recent memory. Sissel's petition should be granted.

In 2010, Sissel challenged the individual mandate, seeking declaratory and injunctive relief. Id. He alleged that section 5000A(a)'s mandate requires him to engage in commerce (by purchasing a good or service) in violation of the Commerce Clause. Id. While his suit was pending, the Supreme Court decided NFIB, in which a majority agreed with Sissel's claim and held that section 5000A(a) -- the individual mandate -- violates the Commerce Clause. NFIB, 132 S.Ct. at 2591 (opn. of Roberts, C.J.); id. at 2644-50 (Scalia, Kennedy, Thomas, Alito, JJ., dissenting). A majority also held that section 5000(b) -- the shared responsibility payment imposed on those who do not buy and maintain minimum essential coverage -- is functionally a tax authorized by Congress's taxing power. Id. at 2593-94.

Thereafter, Sissel amended his complaint to add a second claim: Because the shared responsibility payment is a tax, it must satisfy other constitutional requirements for the tax to be valid -- in particular, the Origination Clause. The claim alleges that the tax violates the Origination Clause, because the ACA -- with all of its taxes -- originated in the Senate, not the House. Moreover, Sissel sought judgment in his favor on his Commerce Clause claim, given the NFIB majority's holding that the mandate to purchase health insurance violates that provision. The district court dismissed the complaint, and a panel of this Court affirmed. Opinion at 2.

Chief Justice Roberts explained that the individual mandate -- defined as the provision that "requires individuals to purchase a health insurance policy," id. at 2577 -- cannot be sustained under the Commerce Clause because it "forces individuals into commerce precisely because they elected to refrain from commercial activity." Id. at 2591. Four Justices agreed with this conclusion, thereby forming a majority position on the Commerce Clause question. Id. at 2644-50 (Scalia, Kennedy, Thomas, Alito, JJ. dissenting).

Because the Commerce Clause does not authorize the individual mandate, the Chief Justice reasoned that the government could prevail only if the Court construed Section 5000A(b) as laying a tax on people who fail to buy health insurance. Id. at 2593-94 (opn. of Roberts, C.J.). But it is imperative to recognize what exactly the NFIB Court sustained under the taxing power. Writing for the Court, the Chief Justice explained in Part III-C that the "exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects." Id. at 2594 (emphasis added). The majority reasoned that the "[s]hared responsibility payment,' as the statute entitles it," bears the hallmarks of a tax, including that it is collected by the IRS, is paid into the Treasury when taxpayers file their returns, does not apply to certain classes of people based on income, and produces revenue for the government to spend on whatever it chooses. Id. Part III-C, which constitutes a majority opinion, concludes that "[t]he Affordable Care Act's requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax." Id. at 2600 (emphasis added). Thus, the Court upheld the shared responsibility payment, found in subsection (b) of section 5000A, because it is based on Congress's authority to require individuals to pay taxes to the government.

The Supreme Court's opinion upholding a "tax on going without health insurance," 132 S. Ct. at 2599, thus rests on the distinction between the individual mandate in subsection (a) -- which could not withstand Commerce Clause scrutiny -- and the shared responsibility payment in subsection (b) -- which survives under the taxing power. Id. Indeed, Chief Justice Roberts highlighted that distinction in the plainest possible terms in Part III-D of his opinion when he said that the "Federal Government does not have the power to order people to buy health insurance," but it "does have the power to impose a tax on those without health insurance." Id. at 2600-01 (Roberts, C.J.). The Supreme Court therefore did not hold that the mandate survives under Congress's power to tax. It determined that the shared responsibility payment is a tax -- and that it and only it is constitutional.

Post-NFIB opinions from this Court's sister Circuits confirm this understanding of NFIB -- namely, that the decision treats subsections (a) and (b) of section 5000A separately, and finds the former unconstitutional under the Commerce Clause and the latter constitutional under the taxing power. The Fourth Circuit concluded, in no uncertain terms, that "[f]ive members of the [Supreme] Court . . . concluded that the individual mandate exceeds Congress's power under the Commerce Clause." Liberty Univ., Inc. v. Lew, 733 F,3d 72, 87 (2013); see also United States v. Rose, 714 F.3d 362, 370-71 (6th Cir. 2013), cert. denied, 134 S.Ct. 272 (2013) (same); United States v. Roszkowski, 700 F.3d 50, 58 (1st Cir. 2012), cert. denied, 133 S.Ct. 1278 (2013) (same). Importantly, the Fourth Circuit distinguished the mandate from the shared responsibility payment, recognizing that "the Commerce Clause does not grant Congress the authority to 'compel' or 'mandate' an individual to enter commerce by purchasing a good or service," Liberty Univ., 733 F.3d at 92, but finding that the "individual mandate exaction" is a tax. Id. at 96 (emphasis added); see also U.S. Citizens Ass'n v. Sebelius, 705 F.3d 588, 597 (6th Cir. 2013) (describing shared responsibility payment as a tax); Kinder v. Geithner, 695 F.3d 772, 775 (8th Cir. 2012) (same). This distinction is the key to the NFIB Court's decision upholding the shared responsibility payment, but that the panel decision rejects.⁴

The shared responsibility payment is not a means for funding or carrying out an Article I program or statute.⁵ Instead, it is an independent exercise of an Article I power -- namely, Congress's taxing power. NFIB, 132 S. Ct. at 2600. As the Court explained, the payment has all the hallmarks of a traditional tax: The tax is paid through a federal income tax return, collected by the IRS, and placed in the Treasury for the Federal Government to spend as it pleases. Id. at 2594 (emphasis added).

Having all the characteristics of a traditional revenue-raising bill, the shared responsibility is subject to -- and violates -- the Origination Clause. Munoz-Flores, 495 U.S. at 398 (A "statute that raises revenue to support Government generally" is a bill for raising revenue.); see also NFIB, 132 S. Ct. at 2598, 2600 ("[A]ny tax must still comply with other requirements in the Constitution."). In September 2009, the House passed a six-page bill, H.R. 3590, entitled the "Service Members Home Ownership Tax Act of 2009" to "amend[ ] the Internal Revenue Code of 1986 to modify [the] first-time homebuyers credit in the case of members of the Armed and certain other Federal employees." Opinion at 11 (citing Sissel complaint). While that bill had nothing to do with healthcare reform, the Senate purported to "amend" it by gutting its contents and replacing it with the 2000+ pages of the ACA -- including the tax on those who do not purchase and maintain health insurance. Id. The Senate's substitute bill is a revenue-raising bill that is unconstitutional, because it did not originate in the House.

The panel decision avoids this inconvenient result -- and the merits of Sissel's Origination Clause claim altogether -- by finding that the tax "was not subject to the Origination Clause" in the first place. Opinion at 11. It crafts a vague "purposive approach" that asks whether revenue-raising is a tax's "primary purpose" -- or only a purpose "incidental" to some other goal that can free the tax from Origination Clause review. Id. at 11-12. Under this approach, the panel decision relies on congressional findings and other subjective factors to conclude that the "substantial revenues" generated by the tax are only incidental to the tax's alleged "primary purpose" of ensuring compliance with the individual mandate. Id. at 12-13.

The panel decision conflicts with relevant Supreme Court precedents. In Munoz-Flores, the Supreme Court articulated the objective rule governing Origination Clause claims, which focuses on how a bill, on its face, functions -- i.e., what the bill does, where its revenues go, and what its revenues fund. The Court said that "a statute that creates a particular governmental program and that raises revenue to support that program, as opposed to a statute that raises revenue to support Government generally, is not a 'Bil[l] for raising Revenue' within the meaning of the Origination Clause." Munoz-Flores, 495 U.S. at 398 (emphasis added). In other words, a tax that raises revenue to support Government generally is a bill for raising revenue within the meaning of that Clause -- period. Id.

The panel decision ignores this rule. Instead, it seizes on the "primary purpose" language in Munoz-Flores, which the Supreme Court used in a very different context. The Munoz-Flores Court concluded that a special assessment was not an Origination Clause tax, because it was designed to fund a particular governmental program in furtherance of an Article I power other than the taxing power -- the Crime Victims Fund; there was no question there that Congress had the authority to compensate federal crime victims separate from its power to tax. Id. at 399. The Court acknowledged that the assessment could also generate "excess" monies that were "to go to the Treasury." Id. But the Court made clear that "[a]ny revenue for the general Treasury that [the special assessment] creates is . . . 'incidenta[l]' to that provision's primary purpose," which was to fund the Crime Victims Fund. Id. In other words, the Court compared the purposes to which the revenues from the assessment actually were put (a specific program versus general government operations). It did not compare the legislative purposes behind the assessment itself (revenue generation versus other non-revenue goals). Id.; see also Twin City, 167 U.S. at 202-03 (categorizing tax on bank notes -- designed to "meet the expenses attending the execution of the act" -- as a "bill[ ] for other purposes which may incidentally create revenue" for general government operations). The distinction is significant. No court has ever used the "primary purpose" analysis to exempt from Origination Clause review a tax that is imposed pursuant to Congress's taxing power and that generates "substantial revenues" into the Treasury for general government operations.⁶ Opinion at 13.

The panel's reliance on subjective purposes to decide whether the shared responsibility payment constitutionally is subject to the Origination Clause also violates NFIB. The NFIB Court used a "functional approach" to decide whether the shared responsibility payment was, as a constitutional matter, a tax authorized by Congress's taxing power. NFIB, 132 S. Ct. at 2595. It considered irrelevant legislative labels and intentions, and looked exclusively to how the payment worked, how it was collected, and what it funded in order to decide whether it was constitutionally a tax. Id. at 2594, The reason is simple: "That constitutional question was not controlled by Congress's choice of label." Id. at 2595.

Using a "functional approach," the NFIB Court concluded that the shared responsibility payment constitutionally is a tax. Yet the panel decision substitutes that approach with its own "purposive approach," taking into account factors that the NFIB Court specifically rejected as irrelevant to a similar constitutional inquiry. Under its approach, the panel found that the shared responsibility payment is, constitutionally, not a revenue-raising bill under the Origination Clause.

The panel's approach endorses a one-way ratchet in favor of the Government: The NFIB Court used the "functional approach" to classify the shared responsibility payment as a "tax" and afford it constitutional cover under Congress's taxing power -- despite legislative intentions to the contrary. Perhaps sensing the danger of applying the "functional approach," the panel used the "purposive approach" to avoid classifying the payment as a "Bill[ ] for raising Revenue" and afford it constitutional cover through an Origination Clause exemption -- precisely because of legislative intentions. This inconsistency in approach should be resolved en banc.

The panel's "purposive approach" is too vague to admit of meaningful enforcement. Not only do legislators often have a variety of "purposes" for the laws they pass, but in the case of an omnibus bill like the ACA, it is impossible to discern any single "primary purpose." Efforts to do so will lead courts into ascribing motives to Congress, which introduces an element of subjectivity not present in the objective approach set out in Munoz-Flores and NFIB. Nor is it clear how deferential a court should be to legislative declarations of purpose. These considerations have led the Supreme Court to emphasize that "[t]he search for legislative purpose is often elusive enough, without a requirement that primacy be ascertained[,]" and "would allow courts to peruse legislative proceedings for subtle emphases supporting subjective impressions and preferences." McGinnis v. Royster, 410 U.S. 263, 276-77 (1973).

Finally, the panel decision all but concedes that its new test -- and the broad exemption from Origination Clause review it creates for many revenue-raising bills -- has never been endorsed by the Supreme Court. The panel's view seems to be that, until the Supreme Court expressly instructs otherwise, courts can continue to presume against applying the the Origination Clause -- even to revenue-raising taxes like the shared responsibility payment. Opinion at 14 ("[N]either the Supreme Court nor this court has held that a statute must be so classifiable [into an exception established by Supreme Court precedent] to avoid the requirements of the Origination Clause."). The panel's method of constitutional interpretation flies in the face of the well-established rule that if a bill "raises revenue to support Government generally," it is presumptively subject to the Origination Clause. Munoz-Flores, 495 U.S. at 398.

DATED: October 6, 2014.

² If the Court grants rehearing in this case, it should consider holding argument together with Halbig in order to conserve judicial resources. If the individual mandate and shared responsibility payment are unconstitutional, then the Act cannot stand, and there will be no need to address whether the Act authorizes the IRS regulation at issue in Halbig.

³ Various exemptions to the individual mandate and tax exist, including for religious objectors, incarcerated individuals, members of Indian tribes, those who cannot afford insurance, and those taxpayers whose income is below the filing threshold for federal income taxes. See id. § 5000A(d)-(e).

⁴ Even this Court concluded, in a Commerce Clause challenge to the individual mandate decided prior to NFIB, that the individual mandate and penalty (i.e., tax) should be viewed independently: "The individual mandate and the shared responsibility payment create different legal obligations, for different categories of people, at different times. The mandate -- described as the 'requirement to maintain minimum essential coverage' in the statute -- imposes a legal obligation on 'applicable individual[s]' to purchase and maintain minimum health care coverage from an insurance company for each month beginning January 2014. . . . By contrast, the penalty provisions are not symmetrical with the mandate. Although some who fail to comply with the individual mandate must pay a penalty (the 'shared responsibility payment') to the IRS, others -- taxpayers who cannot afford coverage, or who fall below the filing threshold, members of Indian tribes, and any applicable individual whom the Secretary of Health and Human Services deems to have suffered a hardship -- do not. Moreover the purchase of health insurance is not to be directed to the Government, as is true of taxes, but rather to private insurers; it is only the penalty that flows to the Government." Seven-Sky v. Holder, 661 F.3d 1, 9 (D.C. Cir. 2011), abrogated by NFIB, 132 S. Ct. 2566 (footnotes omitted).

⁵ The individual mandate (as opposed to the shared responsibility payment) is not authorized by any Article I power.

⁶ This is consistent with the history of the framing of the Origination Clause. The Framers debated a draft version of the Clause that read in relevant part, "Bills for raising money for the purpose of revenue." James Madison, Notes on the Debates in the Federal Convention of 1787, at 442 (New York, Norton & Company, Inc. 1969). The final version dropped the italicized language, lending support to the view that the panel decision's "purposive approach" runs counter to the Origination Clause's language and the precedents that have interpreted it. For a full discussion of the original public meaning of the Origination Clause, see Priscilla H.M. Zotti & Nicholas M. Schmitz, The Origination Clause: Meaning, Precedent, and Theory from the 12th to 21st Century, 3 Brit. J. Am. Legal Stud. 71 (2014).