Small Businesses Sue Over IRS Rule


By Hadley Heath

This week a group of small businesses from six different states filed a suit over ObamaCare's IRS Rule.

As a brief synopsis, the "IRS Rule" is shorthand for a change made after the passage of the law by the Obama Administration (via the IRS) to deliver subsidies and tax credits to health exchanges operated by the federal government.  Remember, each state has a choice to establish or not establish its own exchange, and states that refuse default to a federally operated exchange.

The original intent and letter of the ObamaCare law prohibited the flow of money to consituents in federal exchanges, as an incentive to get state leaders to establish exchanges.  When more than half of the states refused, the Administration had to change the IRS rules governing these subsidies and tax credits so that the law would function more like it was intended.

The functional importantance of the exchange subsidies and tax credits cannot be overstated.  They trigger the employer and individual mandates in the law, vital to ObamaCare's strategy to force everyone into insurance coverage.  

Thus employers, like the small businesses suing, have standing to challenge this IRS powergrab.  Laws aren't supposed to be rewritten by administrative agencies after they are passed.

The State of Oklahoma's case (Pruitt vs. Sebelius) also includes a challenge to the IRS rule.

The small-businesses suit is being coordinated by the Competitive Enterprise Institute, and was filed in the federal District of Columbia on May 2.


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