Zoeller, Schools Sue IRS About ACA

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October 8, 2013 — 15 Indiana plaintiff schools and the State’s attorney general are suing the federal Internal Revenue Service today.

They say they are suing the IRS to block the impact of employer mandate requirements of the Affordable Care Act, the nation’s healthcare law.

Attorney General Greg Zoeller says the IRS exceeded its authority with a new regulation that imposes the employer mandates.  He says the move “contravened law Congress passed.”

So, the State of Indiana and 15 school corporations filed a lawsuit today against the Internal Revenue Service, challenging its regulation that enforces “employer mandate” requirements of the Affordable Care Act onto state and local governments.

Zoeller’s office says the plaintiffs want court judgments and injunctions to, “prevent the IRS from financially penalizing the State and its political subdivisions.”  They contend the Affordable Care Act, or ACA as passed by Congress does not allow financial penalties in states that did not create their own health insurance exchanges; and that the financial penalties based on the total number of employees cannot be applied to government employers.

Zoeller says, “This case is about the fundamental relationship between the State and federal government.  We respect the United States Supreme Court’s ruling last year upholding the individual mandate to buy health insurance; but it did not address the recent IRS regulations extending the reach of the ACA’s employer mandate.  We contend the ACA improperly regulates sovereign states and does not authorize the IRS to do what it is doing in treating the State as a taxable entity.  We are raising this respectful challenge for the federal courts to decide these questions.”

Zoeller’s office filed the lawsuit today in U.S. District Court, along with the following co-plaintiffs:

• Metropolitan School District of Martinsville, Martinsville

• Perry Central Community Schools, Leopold

• Benton Community School Corporation, Fowler

• Community School Corporation of Eastern Hancock County, Charlottesville

• John Glenn School Corporation, Walkerton

• Monroe-Gregg School District, Monrovia

• Mooresville Consolidated School Corporation, Mooresville

• North Lawrence Community Schools, Bedford

• Northwestern Consolidated School District of Shelby County, Fairland

• Shelbyville Central Schools, Shelbyville

• Southwest Parke Community School Corporation, Montezuma

• Vincennes Community School Corporation, Vincennes

• Madison Consolidated Schools, Madison

• South Henry School Corporation, Straughn

• Southwestern Jefferson County Consolidated School Corporation, Hanover

The plaintiffs say that as political subdivisions of the State, school corporations are considering reducing the hours of their part-time employees to avoid the financial penalties of the IRS regulation under the employer mandate.

MSD of Martinsville Assistant Superintendent Randy Taylor says, “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. We always strive to be good stewards of tax dollars in educating our community’s students, but our school corporation’s efforts are undermined by the IRS overstepping its bounds that Congress set.  As public servants who revere the Constitution, we join with the State in asking the federal court to correct the IRS’s overreach.”

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