Supreme Court dismisses challenge to ACA taxes


The Supreme Court on June 17 dismissed the latest challenge to the Affordable Care Act in California v. Texas, ruling in a 7-2 decision that the plaintiffs lack standing.

The plaintiffs had argued that the ACA’s individual mandate became unconstitutional after the penalty amount was lowered to $0 via the Tax Cuts and Jobs Act because it could no longer be classified as a tax. They had further argued that the entire law be struck down, including many significant tax provisions such as the 3.8% tax on net investment income.

The decision holds that while the ACA instructs individuals to obtain health insurance, the IRS can no longer impose a penalty on taxpayers who fail to obtain insurance, meaning the plaintiff individuals in the suit did not show that the law causes any injury. The court also rules that the states that joined also failed to show traceable harm.

Taxpayers who filed protective claims for refunds based on the possibility that the case would strike down tax provisions will not have the opportunity to perfect those claims based on this decision. However, because the court did not rule on the underlying constitutionality or severability issues, it’s possible that future challenges could still be made if plaintiffs can establish standing. The two dissenting justices found standing and would have struck down the entire law, while Justice Thomas suggested in a concurring opinion that standing could be established in future challenges with potential inseverability arguments.




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