3 minute read:
Here we go again.
Another attack on the Affordable Care Act that will cause employers to think that the law and its Employer Mandate to provide health insurance to employees will be going away soon.
That line of thought has led to some organizations facing millions of dollars in IRS penalties because they did not take the ACA and its annual IRS filing requirement seriously.
The latest ACA diversion is a ruling issued last week from the U.S. District Court for the Northern District of Texas, Fort Worth Division. The district court ruled that the ACA is unconstitutional because the Individual Mandate that requires Americans to purchase health insurance has been made invalid because the Tax Cuts and Jobs Act of 2017 passed by Congress lowered the penalty to $0 for not purchasing insurance, starting in the 2019 tax year. A penalty is still in force for the 2018 tax year.
The court case was prompted by 20 states that filed a lawsuit challenging the constitutionality of the ACA. The argument made by these states was that with the individual tax penalty eliminated for the ACA’s Individual Mandate, while leaving the Individual Mandate language in the ACA, the Individual Mandate had no constitutional basis and is not severable from the remainder of the ACA, which made the entire ACA unconstitutional. The U.S. Supreme Court had previously ruled that the ACA’s Individual Mandate in its prior form was constitutional.
The lawsuit was filed by attorneys general for the states of Wisconsin, Alabama, Arkansas, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Missouri, Nebraska, South Carolina, South Dakota, Tennessee, Utah, West Virginia, Texas, and by the governors of Maine and Mississippi. It has been opposed by attorneys general from the states of California, Connecticut, Delaware, Hawaii, Illinois, Kentucky, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Washington, as well as the District of Columbia.
A series of appeals are expected to challenge the district court ruling, which will keep it from being enacted for the foreseeable future. Legal experts across the political spectrum agree that the reasoning behind this federal judge’s opinion is weak. Jonathan Adler, a fierce ACA critic whose research inspired a prior lawsuit that reached the Supreme Court (King v. Burwell), believes that the U.S. Fifth Circuit Court of Appeals will overturn this court decision in an op-ed in The New York Times. The Wall Street Journal editorial board also predicts that the court decision will be overturned.
As legal appeals move through the U.S. court system, we can expect that a new Democratic majority in the U.S. House of Representatives will also find ways to defend the ACA.
Let’s not get fooled into complacency again after numerous court challenges and Congressional initiatives to repeal and replace the law have failed.
Bottom law, the ACA is not going away.
And while this latest legal challenge to the ACA gains media attention and headlines, employers still face IRS filing deadlines under the ACA, and the tax agency is signaling no plans to let up on enforcement. We see every day how serious the IRS is taking the responsibility of enforcing the ACA.
Now is the time for employers to take the ACA seriously if they have not done so already. Organizations still have time to find problems in past filings and fix them before the IRS sends them a penalty notice for the 2015 or 2016 tax years. To do this, employers should review their past 2015, 2016 and 2017 filings to identify data and process errors that may trigger the IRS to issue Letter 226J penalty notices. Some outside experts may offer to undertake and ACA Penalty Risk Assessment at no cost. Such a review can reap dividends by helping organizations avoid significant IRS ACA penalties.
What are the errors organizations need to look for in their ACA IRS filings? To learn more, click here and click here.
If you have received a Letter 226J, you might want to review our updated infographic on How to Respond to Letter 226J. You can find it in our ACA Resource Center by clicking here.
To make sure you are aware of the IRS filing deadlines for the 2018 tax year, click here.
