Small business owners want suit over Obamacare IRS rule decided now

By Jessica M. Karmasek | Jun 10, 2013

WASHINGTON (Legal Newsline) -- A group of small business owners, who last month sued the federal government over an IRS regulation imposed under the Patient Protection and Affordable Care Act, are asking a federal court to decide the case now.

Michael Carvin, partner at Jones Day and who represents the plaintiffs in the lawsuit, filed a motion for summary judgment in Halbig, et al. v. Sebelius, et al. in the U.S. District Court for the District of Columbia Thursday.

Carvin argues in the 23-page motion that the matter needs to be decided now -- even before the government responds to the complaint -- because the mandates implicated by the IRS rule take effect Jan. 1, 2014.

"If -- but only if -- the IRS Rule is valid, the individual plaintiffs are subject to the individual mandate and must purchase insurance by the end of December 2013, and the business plaintiffs are subject to penalties under the employer mandate and must make decisions concerning sponsoring health coverage for their employees by that time," wrote Carvin, who co-argued National Federation of Independent Business v. Sebelius before the U.S. Supreme Court last year.

The nation's high court, in its decision last June, upheld the constitutionality of most of the PPACA.

"Thus, Plaintiffs need a determination on the merits far enough in advance of Jan. 1, 2014, to allow them to conform their behavior to the law," he wrote.

"Because the validity of the regulation turns on a purely legal question and the administrative record is closed, Plaintiffs are moving for summary judgment now, and hope thereby to avoid the need to litigate a motion for preliminary injunction or temporary restraining order at the eleventh hour."

Read the plaintiffs' complete motion here.

Plaintiffs Jacqueline Halbig, David Klemencic, Carrie Lowery, Sarah Rumpf, Innovare Health Advocates, GC Restaurants SA LLC, Olde England's Lion & Rose LTD, Olde England's Lion & Rose at Castle Hills LTD, Olde England's Lion & Rose Forum LLC, Olde England's Lion & Rose at Sonterra LTD, Olde England's Lion & Rose at Westlake LLC and Community National Bank filed their complaint in federal court last month.

They contend the IRS regulation will force them to pay exorbitant fines, cut back employees' hours and otherwise severely burden their businesses.

The federal health care law, which was signed into law in 2010, authorizes health insurance subsidies to qualifying individuals in states that created their own health care exchanges.

The plaintiffs argue that last spring, without the authorization of Congress, the IRS vastly expanded those subsidies to cover states that refused to set up such exchanges.

So far, 34 states have declined to establish exchanges.

The plaintiffs contend that under the law, businesses in these nonparticipating states should be free of the employer mandate -- a $2,000/employee penalty -- and the scope of the individual mandate should be reduced as well.

But because of the IRS rule, both mandates will be greatly enlarged in scope, depriving states of the power to protect their residents, they argue.

"As the summary judgment motion makes clear, the IRS rule is illegal, period," said Sam Kazman, general counsel for the Competitive Enterprise Institute, which is coordinating the federal suit.

"It is an unauthorized attempt by the agency to override the decisions of 34 states to stay out of the Obamacare insurance exchange program and to avoid the huge burdens of the employer mandate. But those state decisions are based on a Congressionally-enacted statute, not a bureaucratically contrived rule. That may be unfortunate for the IRS, but it's very fortunate for the rest of us."

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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