Court Opinion

ID: 9554255
Source: CourtListenerOpinion
Date Created: 2023-08-08 15:01:10.503499+00
Date Added: 2024-06-11T15:25:59.166145
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 9, 2023               Decided August 8, 2023

                        No. 22-5121

                  OPTIMAL WIRELESS LLC,
                       APPELLANT

                              v.

            INTERNAL REVENUE SERVICE, ET AL.,
                       APPELLEES

        Appeal from the United States District Court
                for the District of Columbia
                    (No. 1:20-cv-02297)

    Jason B. Freeman argued the cause and filed the briefs for
appellant. Kodie P. Bennion and Glen E. Frost entered
appearances.

    Ellen P. DelSole, Attorney, U.S. Department of Justice,
argued the cause for appellees. With her on the brief were
Francesca Ugolini and Geoffrey J. Klimas, Attorneys.

    Before: SRINIVASAN, Chief Judge, WILKINS, Circuit
Judge, and TATEL, Senior Circuit Judge.

    Opinion for the Court filed by Chief Judge SRINIVASAN.
                              2
    SRINIVASAN, Chief Judge: The Affordable Care Act
obligates large employers to provide their full-time employees
with health insurance coverage meeting certain requirements.
If an employer fails to provide coverage or provides
noncomplying coverage, it is liable for an exaction under 26
U.S.C. § 4980H.

     In 2019, the Internal Revenue Service sent two letters
proposing exactions under Section 4980H to appellant Optimal
Wireless, a wireless communications company. Optimal then
filed an action against the IRS and the Department of Health
and Human Services, claiming that the agencies had failed to
satisfy certain procedural requirements before imposing the
proposed exactions. Optimal sought a declaratory judgment
and an injunction barring the IRS from collecting any money
without complying with those procedures.

     The district court dismissed Optimal’s suit for lack of
jurisdiction. The court held that an exaction under Section
4980H is a “tax” for purposes of the Anti-Injunction Act, which
strips courts of jurisdiction over suits having the “purpose of
restraining the assessment or collection of any tax.” 26 U.S.C.
§ 7421(a). We agree with the district court.

                              I.

                              A.

    The Patient Protection and Affordable Care Act (ACA)
“aims to increase the number of Americans covered by health
insurance and decrease the cost of health care.” Nat’l Fed’n of
Indep. Bus. v. Sebelius, 567 U.S. 519, 538 (2012) (NFIB). The
ACA contains both an individual mandate and an employer
mandate.
                               3
     The individual mandate “requires most Americans to
maintain ‘minimum essential’ health insurance coverage.” Id.
at 539 (quoting 26 U.S.C. § 5000A). Many people obtain the
required coverage through their employer. Id. A person who
does not comply with the individual mandate must pay a
“[s]hared responsibility payment” to the federal government.
Id. (alteration in original) (quoting 26 U.S.C. § 5000A(b)). The
Supreme Court upheld the individual mandate in NFIB as a
constitutional exercise of Congress’s power to tax. Id. at 574.
Congress, though, later “effectively nullified the penalty by
setting its amount at $0.” California v. Texas, 141 S. Ct. 2104,
2112 (2021) (citing 26 U.S.C. § 5000A(c)).

     To facilitate compliance with the individual mandate’s
requirement for Americans to obtain health insurance, the ACA
also imposes obligations upon employers. The employer
mandate, which is at issue in this case, requires “large
employer[s]” to give full-time employees “the opportunity to
enroll in minimum essential coverage under an eligible
employer-sponsored plan.”          26 U.S.C. § 4980H(a)(1),
(b)(1)(A). A “large” employer is an employer that had an
average of at least fifty full-time employees in the preceding
year. Id. § 4980H(c)(2)(A).

     The employer mandate is backed by exactions imposed
against noncomplying employers. Id. § 4980H(a)–(b). To
avoid incurring an exaction, employers must do more than just
offer minimum essential coverage. First, they must provide an
“affordable” health care option, defined by reference to the
applicable taxpayer’s household income.                See id.
§ 36B(c)(2)(C)(i)(II). Second, they must offer a plan providing
“minimum value,” defined as a plan covering 60 percent or
more of the total allowed costs. See id. § 36B(c)(2)(C)(ii).
                                 4
     If an employer fails to provide coverage meeting those
requirements (or fails to provide coverage altogether), its
employees may be eligible to receive a premium tax credit or
cost-sharing reduction, mechanisms the ACA established to
defray the costs of health insurance and health care. See id.
§ 36B (premium tax credits); 42 U.S.C. § 18071 (cost-sharing
reduction). And if an employee claims a premium tax credit or
cost-sharing reduction, thus denoting a failure by her employer
to provide the requisite coverage, her employer is subject to
one of two exactions imposed by subsections (a) and (b) of
Section 4980H.

    First, under Section 4980H(a), an employer is liable for an
exaction if it “fails to offer to its full-time employees (and their
dependents) the opportunity to enroll in minimum essential
coverage under an eligible employer-sponsored plan . . . for
any month.” 26 U.S.C. § 4980H(a)(1). Under that provision,
an employer is subject to “an assessable payment equal to the
product of the applicable payment amount [of 1/12 of $2,000]
and the number of individuals employed . . . as full-time
employees during such month.” Id. § 4980H(a), (c)(1).

     Second, under Section 4980H(b), an employer is liable for
an exaction if it does “offer[] to its full-time employees (and
their dependents) the opportunity to enroll in minimum
essential coverage” but an employee is still certified as having
received a premium tax credit or cost-sharing reduction. Id.
§ 4980H(b). (That can occur if the offered coverage is
unaffordable or inadequate in value.) In that case, an employer
is subject to “an assessable payment equal to the product of the
number of full-time employees” having received such
certification “and an amount equal to 1/12 of $3,000.” Id.
§ 4980H(b)(1). The statute also provides that an exaction
under Section 4980H(b) cannot exceed the maximum possible
exaction under Section 4980H(a). See id. § 4980H(b)(2).
                                5

     Section 4980H(a) thus differs from Section 4980H(b) in
two ways. First, Section 4980H(a) applies when an employer
does not provide minimum essential coverage at all, whereas
Section 4980H(b) applies when the employer offers coverage
but that coverage fails to qualify as affordable or as providing
minimum value. Second, Section 4980H(a)’s exaction amount
is a function of the employer’s total number of full-time
employees, whereas Section 4980H(b)’s exaction amount is a
function of only the number of employees certified as having
received a premium tax credit or cost-sharing reduction.

                                B.

    Because the district court resolved this case on a motion to
dismiss the complaint, we take as true the factual allegations in
Optimal’s complaint. Sparrow v. United Air Lines, Inc., 216
F.3d 1111, 1113 (D.C. Cir. 2000).

     Optimal provides wireless communications services and
products in Texas, New Mexico, Oklahoma, and Louisiana. In
2019, the IRS sent letters to Optimal certifying that, for at least
one month in 2016 and 2017, one or more of Optimal’s
employees had been enrolled in a qualified health plan for
which a premium tax credit was allowed. As a result, the IRS’s
letters explained, Optimal owed the IRS exactions under
Section 4980H equaling $395,640 for 2016 and $736,383 for
2017.

     Optimal then filed an action in district court against the
IRS and the Department of Health and Human Services (HHS).
Optimal argued that the applicable regulations require HHS
(rather than the IRS) to issue the certification concerning an
employee’s receipt of a premium tax credit or cost-sharing
reduction, but HHS had not done so. See 42 U.S.C.
                               6
§ 18081(e)(4)(B)(iii); 45 C.F.R. § 155.310(h). Optimal further
contended that HHS had not provided it with an appeals
process as required by 42 U.S.C. § 18081(f)(2)(A). Finally,
Optimal submitted that neither the IRS nor HHS had complied
with 26 U.S.C. § 6751(b), which requires the immediate
supervisor of the person making the determination to give
written approval of an assessment.

     Optimal sought attorneys’ fees, declaratory relief, and an
injunction barring the assessment and collection of the Section
4980H exactions absent compliance with the procedural
requirements alleged to have been infringed. The government
moved to dismiss Optimal’s suit on various grounds, including
that the Anti-Injunction Act divests the district court of
jurisdiction over the action.

     The district court granted the government’s motion to
dismiss for lack of jurisdiction. See Optimal Wireless LLC v.
IRS, No. 1:20-cv-02297, 2022 WL 1462325 (D.D.C. Mar. 8,
2022). The court held that an exaction under Section 4980H is
a “tax” for purposes of the Anti-Injunction Act’s jurisdictional
bar against a court maintaining any suit seeking to “restrain[]
the assessment or collection of any tax.” 26 U.S.C. § 7421(a).

                              II.

    The Anti-Injunction Act provides that, with certain
exceptions, “no suit for the purpose of restraining the
assessment or collection of any tax shall be maintained in any
court by any person, whether or not such person is the person
against whom such tax was assessed.” 26 U.S.C. § 7421(a).
The Act “protects the Government’s ability to collect a
consistent stream of revenue, by barring litigation to enjoin or
otherwise obstruct the collection of taxes.” NFIB, 567 U.S. at
543. Because of the Act’s general prohibition against suits
                                7
seeking to restrain the assessment or collection of a tax, “taxes
can ordinarily be challenged only after they are paid, by suing
for a refund.” Id.

     In this case, Optimal plainly seeks to “restrain[] the
assessment or collection” of an exaction under Section
4980H. 26 U.S.C. § 7421(a). “The Anti-Injunction Act kicks
in when the target of a requested injunction is a tax obligation,”
and courts determine the target of a suit by looking at the “face
of the taxpayer’s complaint.” CIC Servs., LLC v. IRS, 141 S.
Ct. 1582, 1589–90 (2021). The face of Optimal’s complaint
requests the district court to “enjoin the IRS from assessing and
collecting the assessable payment under 26 U.S.C. § 4980H
against Optimal Wireless.” Compl. ¶ F, J.A. 12. And while
Optimal also requested declaratory relief to that same end, see
id. ¶¶ A–E, J.A. 11–12, that request, for purposes of the Anti-
Injunction Act, rises or falls with its request for injunctive
relief, see Cohen v. United States, 650 F.3d 717, 727–28 (D.C.
Cir. 2011) (en banc).

     Because Optimal’s complaint seeks to “restrain[] the
assessment or collection” of a Section 4980H exaction, 26
U.S.C. § 7421(a), the pivotal question for purposes of the Anti-
Injunction Act is whether that exaction is a “tax” within the
meaning of the Act. If so, the Act deprives a court of
jurisdiction over Optimal’s suit. Our fellow circuits have
disagreed on whether a Section 4980H exaction is a “tax” for
purposes of the Act’s jurisdictional bar. Compare Hotze v.
Burwell, 784 F.3d 984, 996–99 (5th Cir. 2015) (Section 4980H
exaction is a tax), with Liberty Univ., Inc. v. Lew, 733 F.3d 72,
87–89 (4th Cir. 2013) (Section 4980H exaction is not a tax);
see also Korte v. Sebelius, 735 F.3d 654, 671 (7th Cir. 2013)
(indicating that Section 4980H exaction would not constitute a
tax). We hold that an exaction under Section 4980H is a “tax”
within the meaning of the Anti-Injunction Act.
                                8

     Optimal contends as a threshold matter that, for us to reach
that conclusion, Section 4980H must contain a clear statement
that its exactions constitute a “tax.” Optimal relies on decisions
requiring a party to “clear a high bar to establish that a
statute . . . is jurisdictional,” given the “harsh consequences”
attending such a reading. United States v. Wong, 575 U.S. 402,
409 (2015); see Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S.
145, 153 (2013). The statute subject to that “high bar,”
however, is the Anti-Injunction Act, not Section 4980H. And
there is no dispute that the Anti-Injunction Act is
jurisdictional—i.e., that it “deprive[s] the District Court of
jurisdiction” when it applies. Bob Jones Univ. v. Simon, 416
U.S. 725, 749 (1974). The question of whether another statute
is best read to implicate the Anti-Injunction Act’s jurisdictional
bar—which here turns on whether Section 4980H imposes a
“tax”—is governed by ordinary principles of statutory
interpretation, not by any clear-statement rule.

     In NFIB, accordingly, the Supreme Court assessed
whether the ACA’s individual mandate imposed a “tax” for
purposes of the Anti-Injunction Act’s jurisdictional bar without
invoking any clear-statement rule. See 567 U.S. at 543–45.
The Court explained that, because the “Anti-Injunction Act and
the Affordable Care Act . . . are creatures of Congress’s own
creation,” “[h]ow they relate to each other is up to Congress.”
Id. at 544. And “the best evidence of Congress’s intent” in that
regard “is the statutory text.” Id. The Court concluded that
because Congress repeatedly described the exaction for
noncompliance with the individual mandate as “a ‘penalty’
rather than a ‘tax,’” the Anti-Injunction Act’s jurisdictional bar
did not apply. Id. at 543–44 (quoting 26 U.S.C. § 5000A(b),
(g)(2)); see id. at 546.
                                9
     Applying that same approach to Section 4980H’s exaction
yields the opposite conclusion. Whereas Congress consistently
labeled the exaction associated with the individual mandate a
“penalty” and never once referred to it as a “tax,” Congress
described the Section 4980H exaction as a “tax” four different
times.

     Of those four references, three are found in Section 4980H
itself. First, subsection (b)(2) of that provision, which pertains
to employers who offer coverage that is unaffordable or
inadequate in value, states that the “aggregate amount of tax
determined under [subsection (b)(1)] . . . shall not exceed the
product of the applicable payment amount and the number of
individuals employed by the employer as full-time employees
during such month.” 26 U.S.C. § 4980H(b)(2) (emphasis
added). Second, subsection (c)(7) provides that, “[f]or denial
of deduction for the tax imposed by this section, see section
275(a)(6).” Id. § 4980H(c)(7) (emphasis added). Third, that
same subsection is titled “Tax nondeductible.” Id. (emphasis
added). Fourth, beyond the multiple references in the terms of
Section 4980H itself, another provision directs the Secretary of
Health and Human Services to “establish a separate appeals
process for employers who are notified” that they “may be
liable for a tax imposed by section 4980H of Title 26.” 42
U.S.C. § 18081(f)(2)(A) (emphasis added).

     As the Supreme Court explained in NFIB, “[i]t is up to
Congress whether to apply the Anti-Injunction Act to any
particular statute, so it makes sense to be guided by Congress’s
choice of label on that question.” 567 U.S. at 564; see id. at
544. The multiple statutory references to Section 4980H’s
exaction as a “tax” thus render it a tax for purposes of the Anti-
Injunction Act. Indeed, the Supreme Court has “applied the
Anti-Injunction Act to statutorily described ‘taxes’ even where
that label was inaccurate” (in that the relevant payment
                               10
obligation fell outside of Congress’s tax power). Id. at 544
(citing Bailey v. George, 259 U.S. 16 (1922)). If that is so, the
Anti-Injunction Act necessarily applies to the “statutorily
described ‘taxes’” imposed by Section 4980H.

     Optimal attempts to explain why, for reasons apart from
the Anti-Injunction Act, Congress might have wanted to
describe Section 4980H’s exaction as a “tax” in two of the
aforementioned provisions, 26 U.S.C. § 4980H(c)(7) and 42
U.S.C. § 18081(f)(2)(A). But even if Congress’s choice to use
the label “tax” has consequences beyond the Anti-Injunction
Act, Optimal does not explain why we should disregard the
implications of that choice for purposes of the Anti-Injunction
Act, too. To the contrary, insofar as the decision to invoke the
term “tax” carries multiple implications, we generally assume
that “Congress said what it meant and meant what it said”
throughout. Loughrin v. United States, 573 U.S. 351, 360
(2014). There is no reason to assume otherwise here.

     Notably, Optimal offers no alternate explanation for the
use of the term “tax” in Section 4980H(b)(2)’s reference to the
“aggregate amount of tax determined under [Section
4980H(b)(1)].” 26 U.S.C. § 4980H(b)(2). True, Optimal
incurred its penalty under Section 4980H(a) rather than Section
4980H(b), as it failed to provide minimum essential coverage
altogether (as opposed to providing coverage that was
unaffordable or inadequate in value). But Congress repeatedly
referred to the exaction imposed by Section 4980H as a “tax”
without distinguishing between subsections (a) and (b), and
Optimal provides no plausible reason that Congress would
have intended to treat the subsections differently under the
Anti-Injunction Act. See id. § 4980H(c)(7) (referring to the
“tax imposed by this section”); 42 U.S.C. § 18081(f)(2)(A)
(referring to the “tax imposed by section 4980H of Title 26”).
                               11
     Optimal emphasizes that, in addition to describing the
exaction imposed by Section 4980H as a “tax” in multiple
provisions, Congress also labeled the same exaction an
“assessable payment” or a “penalty.” Congress’s use of those
additional labels, though, does not dissuade us from concluding
that its repeated references to the exaction as a “tax” require
treating it as one for purposes of the Anti-Injunction Act.

     First, Section 4980H uses the phrase “assessable payment”
seven times to describe the provision’s exaction. See 26 U.S.C.
§ 4980H(a) (imposing “assessable payment” for failure to
provide minimum essential coverage); id. § 4980H(b)(1) (same
for failure to provide coverage that is affordable or adequate in
value); id. § 4980H(c)(2)(D)(i)(I) (providing instructions on
determining employer size “for purposes of calculating . . . the
assessable payment under subsection (a)”); id. § 4980H(d)(1)
(stating that “[a]ny assessable payment provided by this section
shall be paid upon notice and demand by the Secretary”); id.
§ 4980H(d)(2) (stating that the “Secretary may provide for the
payment of any assessable payment provided by this section on
an annual, monthly, or other periodic basis”); id. § 4980H(d)(3)
(directing the Secretary to “prescribe rules, regulations, or
guidance for the repayment of any assessable payment” when
certain conditions are met and “the assessable payment would
not have been required to be made but for” those conditions).

     Congress’s use of the phrase “assessable payment” does
not conflict with—or otherwise detract from the import of—its
choice to label the Section 4980H exaction a “tax” in multiple
provisions. The terms are not mutually exclusive. To the
contrary, a tax is one species of assessable payment: it is
“assessable,” and its assessment calls for a “payment.” Indeed,
the terms of the Anti-Injunction Act refer to the “assessment”
of a “tax” as well as its “collection” (i.e., its payment). Id.
§ 7421(a). If Congress had only used the more general term
                               12
“assessable payment” to describe an exaction under Section
4980H, it might be unclear whether the exaction qualifies as a
“tax” for purposes of the Anti-Injunction Act. But because
Congress also used the more specific term “tax” to describe the
same exaction (and did so repeatedly), it thereby established
the applicability of the Anti-Injunction Act.

     The same is true of Congress’s more occasional use of the
word “penalty” to describe the Section 4980H exaction. One
previously mentioned provision that labels that exaction a “tax”
in one subsection also describes it as a “penalty” in a
neighboring subsection. Compare 42 U.S.C. § 18081(f)(2)(B)
(referring to the “penalty under section 4980H of Title 26”),
with id. § 18081(f)(2)(A) (referring to the “tax imposed by
section 4980H of Title 26”). And one already mentioned
provision in Section 4980H that uses the term “assessable
payment” also uses the term “assessable penalt[y]” in its title.
26 U.S.C. § 4980H(c)(2)(D) (titled “Application of employer
size to assessable penalties”); see id. § 4980H(c)(2)(D)(i)(I)
(referring to “the assessable payment under subsection (a)”).

     As is the case with the phrase “assessable payment,” the
term “penalty” is not inconsistent with the term “tax.” Rather,
an exaction can be described as both a “tax” and a “penalty.”
Compare Tax, Black’s Law Dictionary (11th ed. 2019) (“A
charge, usu. monetary, imposed by the government on persons,
entities, transactions, or property to yield public revenue.”),
with Penalty, Black’s Law Dictionary (11th ed. 2019)
(“Punishment imposed on a wrongdoer, usu. in the form of
imprisonment or fine; esp., a sum of money exacted as
punishment for either a wrong to the state or a civil
wrong . . . .”). After all, “taxes that seek to influence conduct
are nothing new.” NFIB, 567 U.S. at 567. And such taxes,
even if they are “designed mainly to influence private conduct,
rather than to raise revenue,” do not receive a “special pass
                               13
from the Anti-Injunction Act” by virtue of their regulatory
nature. CIC Servs., 141 S. Ct. at 1593.

     To be sure, when examining whether an exaction lies
within Congress’s tax power as a constitutional matter, the
Supreme Court generally uses the term “penalty” to describe
exactions whose characteristics take them outside the tax
power. See, e.g., NFIB, 567 U.S. at 565–68 (citing United
States v. Reorganized CF & I Fabricators of Utah, Inc., 518
U.S. 213, 224 (1996); United States v. La Franca, 282 U.S.
568, 572 (1931)). In that light, “Congress cannot change
whether an exaction is a tax or a penalty for constitutional
purposes simply by describing it as one or the other.” Id. at
544. But even if (permissible) taxes and (impermissible)
penalties fall into separate categories as a descriptive matter
when courts discuss the constitutionality of Congress’s
exercise of the tax power, “Congress can, of course, describe
something as a penalty but direct that it nonetheless be treated
as a tax for purposes of the Anti-Injunction Act.” Id. A telltale
way for Congress to do so would be to expressly label the
exaction a “tax,” as Congress repeatedly did for the exaction
under Section 4980H. See CIC Servs., 141 S. Ct. at 1587
(describing a statute that “deem[s]” penalties “to be ‘tax[es]’
for purposes of the . . . Anti-Injunction Act”).

    Because Congress repeatedly called the Section 4980H
exaction a tax, Optimal’s suit is barred by the Anti-Injunction
Act. That conclusion, contrary to Optimal’s contention, is not
foreclosed by our decision in Halbig v. Burwell, 758 F.3d 390
(D.C. Cir. 2014), reh’g en banc granted and judgment vacated,
No. 14-5018, 2014 WL 4627181 (D.C. Cir. Sept. 4, 2014),
appeal dismissed, No. 14-5018, 2015 WL 5209629 (D.C. Cir.
July 9, 2015). Optimal attempts to glean from that case’s
complicated history an implicit conclusion by our court that the
Anti-Injunction Act does not apply to challenges to exactions
                               14
under Section 4980H. But whatever else may be true of our
decision in that case, it “d[id] not reach the issue” of “our
jurisdiction over” the employers’ challenge, meaning that it
necessarily did not address the applicability of the Anti-
Injunction Act. Id. at 396. Our decision thus has no
precedential effect with respect to that issue. Cf. Steel Co. v.
Citizens for a Better Env’t, 523 U.S. 83, 91 (1998).

     In concluding that Optimal’s suit falls within the Anti-
Injunction Act’s jurisdictional bar, we necessarily do not reach
the merits of Optimal’s challenge to the imposition against it of
exactions under Section 4980H. As the government suggests,
Optimal may still be able to obtain judicial review of its
challenge by bringing a refund suit after it pays any assessed
exactions. See Gov’t Br. 61–62, 63–66; see also 26 U.S.C.
§ 7422(a); Fla. Bankers Ass’n v. U.S. Dep’t of the Treasury,
799 F.3d 1065, 1067 (D.C. Cir. 2015).

      Nor do we reach Optimal’s argument, raised for the first
time on appeal, that its suit falls within certain enumerated
exceptions to the Anti-Injunction Act. The Act prohibits suits
to restrain the assessment or collection of any tax “[e]xcept as
provided in” a list of provisions, including Sections 6212(a)
and 6213(a) of Title 26. See 26 U.S.C. § 7421(a). Optimal
maintains that those provisions prescribe a specific collection
process for certain deficiency payments that fall outside the
Act’s reach, and that exactions under Section 4980H are one
such deficiency payment. The government disagrees. Because
Optimal did not raise that argument to the district court in the
first instance, we decline to consider it on appeal. See Potter
v. Dist. of Columbia, 558 F.3d 542, 550 (D.C. Cir. 2009).
                             15
                     *   *   *    *   *

    For the foregoing reasons, we affirm the district court’s
grant of dismissal for lack of jurisdiction.

                                                 So ordered.