Opinion ID: 223249
Heading Depth: 3
Heading Rank: 3

Heading: Legislative History of the Individual Mandate

Text: Even if the text were unclearalthough it is notand we were to resort to an examination of the legislative history, we would still find more of the same thing: Congress intended to impose a penalty for the failure to maintain health insurance. Prior to the passage of the Act, earlier bills in both houses of Congress proposed an individual mandate accompanied by a tax, as the district court noted. See Florida v. HHS, 716 F.Supp.2d at 1134. Thus, for example, Section 401 of the America's Affordable Choices Act of 2009, H.R. 3200, 111th Cong. (2009), which was introduced in the House of Representatives on July 14, 2009, provided that there is hereby imposed a tax on any individual who does not meet the requirements of [maintaining minimum health insurance coverage] at any time during the taxable year. A later version of the House bill, the Affordable Health Care for America Act, H.R. 3962, 111th Cong. § 501 (2009), passed the House of Representatives on November 7, 2009, and similarly referred to the individual mandate's enforcement mechanism as a tax. On the Senate side, the America's Healthy Future Act, a precursor to the Act, also used the term tax. See S. 1796, 111th Cong. § 1301 (2009) (If an applicable individual fails to [maintain minimum health insurance coverage] there is hereby imposed a tax . . . .). Notably, however, the final version of the Act abandoned the term tax in favor of the term penalty. This is no mere semantic distinction, as [f]ew principles of statutory construction are more compelling than the proposition that Congress does not intend sub silentio to enact statutory language that it has earlier discarded in favor of other language.  INS v. Cardoza-Fonseca, 480 U.S. 421, 442-43, 107 S.Ct. 1207, 1218, 94 L.Ed.2d 434 (1987) (emphasis added) (quotation marks omitted). The government relies on different pieces of the legislative history, particularly the statements of individual legislators, speaking both for and against the Act, who at various times referred to the individual mandate as a tax. See Government's Opening Br. at 54 (citing 156 Cong. Rec. H1854, H1882 (daily ed. Mar. 21, 2010) (statement of Rep. Miller); 156 Cong. Rec. H1824, H1826 (daily ed. Mar. 21, 2010) (statement of Rep. Slaughter); 155 Cong. Rec. S13,751, S13,753 (daily ed. Dec. 22, 2009) (statement of Sen. Leahy); 155 Cong. Rec. S13,558, S13,581-82 (daily ed. Dec. 20, 2009) (statement of Sen. Baucus); 155 Cong. Rec. S12,768 (daily ed. Dec. 9, 2009) (statement of Sen. Grassley)). These assorted statements of individual legislators are of precious little value, because they are in conflict with the plain text of the statute and with more reliable indicators of congressional intent. See Huff v. DeKalb Cnty., Ga., 516 F.3d 1273, 1280 (11th Cir.2008) (`The best evidence of [legislative] purpose is the statutory text adopted by both Houses of Congress and submitted to the President. Where that contains a phrase that is unambiguousthat has a clearly accepted meaning in both legislative and judicial practicewe do not permit it to be expanded or contracted by the statements of individual legislators or committees during the course of the enactment process.' (alteration in original) (quoting W. Va. Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 98-99, 111 S.Ct. 1138, 1147, 113 L.Ed.2d 68 (1991))). The government argues nevertheless that the individual mandate is still a tax in both administration and effect. Government's Opening Br. at 54. It claims that in passing on the constitutionality of a tax law, we should be concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it. Id. (quoting Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 363, 61 S.Ct. 586, 588, 85 L.Ed. 888 (1941)). That the individual mandate will produce some revenue and will be enforced by the Internal Revenue Service is enough, they say, to transmute the individual mandate's penalty provision into a tax. We remain unpersuaded. Even on the government's own terms, the individual mandate does not in practical operation act as a tax. See Nelson, 312 U.S. at 363, 61 S.Ct. at 588. The government specifically claims that the individual mandate has the character of a tax because it will produce revenue. This argumentwhich relies on undisputed projections by the CBO that the individual mandate will generate some four to five billion dollars in annual revenue by the end of this decade [131] does little to address the distinction between a penalty and a tax. This is because [c]riminal fines, civil penalties, civil forfeitures, and taxes all share certain features: They generate government revenues, impose fiscal burdens on individuals, and deter certain behavior. Kurth Ranch, 511 U.S. at 778, 114 S.Ct. at 1945. The Supreme Court has thus recognized, as indeed we must, that in our world of less than perfect compliance, penalties generate revenue just as surely as taxes. Nor does the amount of projected revenue that will be collected under the individual mandatea significant sum, to be surerender the mandate a tax. The Supreme Court has never understood the amount of revenue generated by a statutory provision to have definitional value. In Sonzinsky, the Court considered a converse of the situation we face here, where a provision imposing a $200 annual license tax on firearms dealers was challenged as not a true tax, but a penalty imposed for the purpose of suppressing traffic in a certain noxious type of firearms. 300 U.S. at 511-12, 57 S.Ct. at 554-55. The tax was productive of some revenue, but not much. Id. at 514 & n. 1, 57 S.Ct. at 556 & n. 1 (observing that 27 dealers paid the tax in 1934, and 22 paid in 1935). That did not stop the Supreme Court from upholding the provision as a tax. The Supreme Court later interpreted Sonzinsky as standing for the proposition that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed, and that proposition applies even though the revenue obtained is obviously negligible . Sanchez, 340 U.S. at 44, 71 S.Ct. at 110 (emphasis added). While the government views these cases as supportive of its argument, because they demonstrate the breadth of Congress's taxing power, the cases merely hold that an Act of Congress which on its face purports to be an exercise of the taxing power is not any the less so because the tax is burdensome or tends to restrict or suppress the thing taxed. Sonzinsky, 300 U.S. at 513, 57 S.Ct. at 556 (emphasis added). Thus, once Congress has expressly and unmistakably indicated that a provision is a tax, courts will not [i]nquir[e] into the hidden motives which may move Congress to exercise a power constitutionally conferred upon it. Id. at 513-14, 57 S.Ct. at 556. But that is not this case. Here we confront a statute that is not on its face a tax, but rather a penalty. What's more, the district court correctly noted that the government lacks any case precedent squarely on point. Florida v. HHS, 716 F.Supp.2d at 1140. Even ignoring Congress's deliberate choice of the term penalty, the individual mandate on its face imposes a monetary sanction on an individual who fails to meet the requirement to maintain minimum essential coverage. 26 U.S.C. § 5000A(b)(1). As we see it, such an exaction appears in every important respect to be punishment for an unlawful act or omission, which defines the very concept of penalty. CF & I Fabricators, 518 U.S. at 224, 116 S.Ct. at 2113; see also Virginia v. Sebelius, 728 F.Supp.2d at 786 (The only revenue generated under the [individual mandate] is incidental to a citizen's failure to obey the law by requiring the minimum level of insurance coverage. The resulting revenue is `extraneous to any tax need.' (quoting Kahriger, 345 U.S. at 31, 73 S.Ct. at 515)). The government also suggests that the individual mandate operates as a tax because it is housed in the Internal Revenue Code and is collected through taxpayers' annual returns. It is true that the individual mandate is located under the section of the Code titled Miscellaneous Excise Taxes. Yet the Code itself makes clear that Congress's choice of where to place a provision in the Internal Revenue Code has no interpretive value: No inference, implication, or presumption of legislative construction shall be drawn or made by reason of the location or grouping of any particular section or provision or portion of this title. . . . 26 U.S.C. § 7806(b); see also Florida v. HHS, 716 F.Supp.2d at 1137 (citing same). More significantly, not every provision in the Internal Revenue Code is a tax. Indeed, Congress placed in Chapter 68 of the Internal Revenue Code a panoply of civil penalties, running the gamut from broadly applicable (filing frivolous tax returns [132] or making unreasonable erroneous claims for a tax refund or credit [133] ) to highly industry-specific (tampering with or failing to maintain security requirements for mechanical dye injection systems, [134] or selling or reselling adulterated diesel fuel that violates environmental standards [135] ). In addition, the mandate's penalty is not treated like a tax because, as noted above, the IRS may not place liens, or levy or initiate criminal prosecution or impose any interest or criminal sanctions. All the IRS, practically speaking, may do is to offset the penalty against a tax refund. 26 U.S.C. § 5000A(g)(2)(A)-(B). Although it is irrelevant for our purposes precisely where in the Internal Revenue Code Congress decided to place the individual mandate, id. § 7806(b), we observe that other chapters of the Internal Revenue Code include penalty provisions as well. See, e.g., id. § 5761(a) (imposing a penalty of $1,000 on any personprimarily manufacturers, importers, and retailerswho willfully fails to comply with a variety of statutory duties and taxes under Chapter 52 of the Internal Revenue Code related to tobacco products and cigarettes). And Chapter 75 of the Internal Revenue Code sets forth criminal penalties, which permit courts to impose substantial fines. Id. § 7206 (providing that those who commit tax fraud in a variety of ways shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution). While the entire list of penalties in the Internal Revenue Code is far too long to exhaust here, it is apparent that the placement of the individual mandate in the Internal Revenue Code is far from sufficient to convert the individual mandate into a tax and has limited value, if any at all, in determining whether the individual mandate is a tax or a penalty. After careful review of the statute, we conclude that the individual mandate is a civil regulatory penalty and not a tax. As a regulatory penalty, the individual mandate must therefore find justification in a different enumerated power. See Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 393, 60 S.Ct. 907, 912, 84 L.Ed. 1263 (1940) (Congress may impose penalties in aid of the exercise of any of its enumerated powers.); Virginia v. Sebelius, 728 F.Supp.2d at 788; Florida v. HHS, 716 F.Supp.2d at 1143-44. The individual mandate as written cannot be supported by the tax power.