Bryan Cohen Dec. 10, 2013, 8:09pm

INDIANAPOLIS (Legal Newsline) - Indiana Attorney General Greg Zoeller announced Monday that an additional 24 school corporations joined a lawsuit filed by the state and 15 schools against the Internal Revenue Service.

The suit challenges the multi-million dollar tax penalties the IRS could potentially impose against local and state governments in 2015 under the employer mandate of the Affordable Care Act. The schools and the state allege the IRS exceeded its legal authority under the ACA when it issued a regulation that would change large financial penalties in all states against large employers who do not offer health insurance to full-time employees working more than 30 hours per week.

The suit alleges the IRS regulations contradict specific ACA wording that authorized the IRS to impose the penalties only in states where state-established health insurance exchanges exist. The federal government runs an exchange for residents of Indiana and 26 other states that opted not to create a state exchange.

"Before being subjected to draconian IRS tax penalties, the state and 39 schools ask the federal court whether they are under federal taxing authority like private-sector employers," Zoeller said. "The objective of this case is to defend fundamental state authority to structure our government workforce to provide services; and individuals' access to health insurance never has been the focus of the suit."

The potential penalty for large employers for non-compliance under the employer mandate is $2,000 per employee. Indiana employs approximately 28,000 executive branch workers.

The lawsuit requests the federal court to issue an injunction to block the IRS and other federal agencies from applying the regulation and penalties against the state and school corporations. The suit also asks the court to issue a declaratory judgment to declare the IRS regulation as unconstitutional and void.

"Our state should be protected as is constitutionally guaranteed from federal government overreach under our American system of federalism, and the participation of so many school corporations in the challenge reflects mutual concern that this principle has been undermined by the IRS's actions," Zoeller said.

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