Chesterton Tribune

 

 

Indiana schools sue over IRS health overhaul rules

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RICK CALLAHAN

Associated Press

INDIANAPOLIS (AP) - The state of Indiana and 15 of its public school districts filed a lawsuit Tuesday against the Internal Revenue Service over rules it imposed to implement the federal health care overhaul.

In the lawsuit filed in U.S. District Court in Indianapolis, the state and districts contend the federal health care law does not allow financial penalties in states that didn’t create their own online marketplaces where people can buy insurance. Such states instead ceded that task to the federal government.

The lawsuit also contends that the IRS can’t impose the “employer mandate” requirements of the law on state and local governments.

Attorney General Greg Zoeller said in a statement that a key issue is whether the federal government, through the IRS, can treat the state and its political entities “as taxable entities like private businesses.” The plaintiffs contend IRS can’t do that and that the agency’s rules violate both the Constitution’s 10th Amendment and the federal Administrative Procedure Act.

The suit says the IRS rules will force state and local governments, including school districts, to reduce some part-time employees’ hours to avoid tax penalties.

“It’s very unfortunate that by unconstitutionally interfering with our state personnel policy, the IRS has caused hardship not only to the State but to a number of our state employees who will see their hours reduced through no fault of their own,” Zoeller said in a statement.

The state’s suit also contends that when Indiana elected not to create its own state-run health care exchange and instead allowed the federal government to design a system where Hoosiers could buy coverage, the expected result was that those individuals would not get government subsidies.

Those Hoosiers’ employers, in turn, should not have to face tax penalties for not providing “minimum essential coverage” to all of their employees working 30 or more hours per week, it states. But the IRS rule means that people buying health coverage on the federal health exchange “are entitled to the same subsidies as citizens who purchase from a State Exchange.”

Randy Taylor, assistant superintendent of the Metropolitan School District of Martinsville, said the IRS is “overstepping” the boundaries Congress created in the health care overhaul and that the agency’s rules will harm the district, which is one of the plaintiffs in the suit.

“The costly and burdensome employer mandate the IRS wrongly applies to government employers such as our school corporation interferes with our ability to efficiently manage our workforce,” he said in a statement.

A message was left Tuesday seeking comment from the IRS’ media relations office in Washington, but that office’s voicemail carried a message saying the office would be closed until the partial federal government shutdown ends.

The state’s suit asks the federal court to issue an injunction blocking the IRS regulations and any resulting tax penalties from being imposed on the state and school corporations.

The plaintiffs also want the federal court to issue a declaratory judgment that finds the IRS regulations and related tax reporting and other requirements unconstitutional and void.

 

 

Posted 10/9/2013