King v. Burwell -- More than Tax Credits

As the Obama administration nervously waits for a Supreme Court decision in King v. Burwell, there is another aspect to the case that has nothing to do with ObamaCare or tax subsidies. King v. Burwell tells the story of a president who overstepped the limits of his authority by unilaterally changing key provisions of the law without Congressional approval. It’s also a story of an administration’s repeated efforts to interfere in Congressional inquiries to determine whether IRS and Treasury officials were pressured into promulgating rules that are contrary to statutory text and favorable to the administration’s political objectives. 

The issues raised in King v. Burwell weren’t created in a vacuum -- they are the consequence of a poorly written law that was hastily passed through the reconciliation process. A Supreme Court ruling in favor of plaintiffs would be a strong rebuke for President Obama, who repeatedly altered key provisions of the law. Even if the Supreme Court rules against plaintiffs, the story does not end, for there are other rules that are also contrary to the plain language of the law.

Almost immediately after Obamacare was signed into law, the Obama administration began to eliminate, postpone, and alter key provisions without Congressional approval. The first to go was the CLASS Act, a provision that the Congressional Budget Office relied on to justify the cost of the law. Next were the SHOPs, which were supposed to level the playing field for small business owners by expanding their options to purchase affordable and quality healthcare plans for employees. Next, and with no prior warning, President Obama delayed implementation of the Employer Mandate, but he did not do the same for the Individual Mandate. Other provisions, including COOPs and the Navigator program, fell to the wayside.  

Once the rulemaking process began, some members of Congress became concerned that department officials were not interpreting the law’s plain meaning. When the IRS issued its proposed rule for the tax credits in 2011, it was met with strong opposition from Congressional members including Senator Orrin Hatch, then the ranking member of the Senate Finance Committee. Hatch questioned the legality of the proposed rule and in December 2011 sent a letter to the Department of the Treasury asking for all of the documents related to the development of the rule and the reasoning behind it. To date, the IRS and the Treasury Department have not responded to Hatch’s request. 

In September 2014, Darrell Issa, then Chairman of the House Oversight Committee, issued a Congressional subpoena to the IRS and Treasury requesting the same documents. The subpoena was ignored. After Issa moved to compel production of the documents, the Obama administration intervened and blocked the request. To date, no documents have been produced. 

A limited number of documents consisting primarily of drafts from the rulemaking process were produced for an in camera review, however, those who were allowed to review the documents were not permitted to make copies, and in some cases, were not even allowed to take pencils and notepads into the room. Despite the roadblocks, information gleaned from the drafts shows that IRS officials initially included the statutory language in Section 36B, the IRS provision at issue in King v. Burwell, that provides recipients of the subsidies must be enrolled through an exchange “established by a state.” (Emphasis added.)  By the time the final rule issued on May 23, 2012, the language had been removed. 

In a recent Washington Post article, Emily McMahon, deputy assistant secretary for tax policy, recounted how in January 2011 she first became aware that there were multiple interpretations to the law’s provision about tax credits after she read a Bloomberg BNA Daily Tax Report. McMahon called a meeting with lawyers to assess whether there was “a glitch in the law we needed to worry about.”  The article does not provide further details about subsequent discussions between McMahon and others that would indicate how and why the language was ultimately removed, however, the article does report that IRS and Treasury officials were concerned about the legal and political aspects of the issue and discouraged public disclosure. It remains unclear exactly what those political concerns were. McMahon is one of three IRS officials who received letters to appear before a Senate Judiciary Subcommittee on Oversight Agency Action, Federal Rights and Federal Courts hearing that was held last week. The stated purpose of the hearing was to investigate whether the IRS and Treasury followed the law or whether they were influenced or instructed by political operatives to disregard the law’s plain meaning. McMahon and the other two IRS officials failed to appear.

Because the administrative record has not been produced, it remains unknown exactly who made key decisions during the rulemaking process and how those decisions were reached. Whether IRS and Treasury officials genuinely believed their interpretation of the statutory text was correct or whether they were responding to political pressure from the White House deserves further investigation and inquiry. The Obama administration’s interference in Congressional attempts to obtain documents and hear testimony that would help to answer these questions is troubling and suggests the administration is trying to hide something.

James Carvin, lead counsel for plaintiffs in King v. Burwell, recently testified that the real issue of the case is whether this is “going to be a nation governed by laws enacted by [Congress] pursuant to Constitutional prerogatives or is it going to be governed by the policy preferences of unelected bureaucrats.” King v. Burwell is about much more than tax subsidies –- it tells a story of how the legislative and rulemaking process can be undermined for political purposes by a president who acts unilaterally, in secrecy, and without accountability. 

Constance Jacobs is a freelance writer living in Oakland, California.

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