AG: IRS oversteps authority in imposing employer mandate on schools
INDIANAPOLIS – Another 24 school corporations have joined the lawsuit the State of Indiana and 15 schools filed against the Internal Revenue Service, challenging the multi-million-dollar tax penalties the IRS potentially could impose against state and local governments in 2015 under the “employer mandate†of the Affordable Care Act (ACA). Plaintiffs today filed an amended complaint in federal court listing 24 additional schools that joined the lawsuit since the original group of 15 schools and the State filed it October 8.
Reiterating the initial complaint, the total 39 schools and the State allege the IRS exceeded its legal authority under the ACA, the federal healthcare restructuring law that Congress passed in 2010. The IRS this year issued a regulation that has the effect of charging large financial penalties in all states against large employers who do not offer health insurance to those working more than 30 hours per week as full-time employees. The lawsuit alleges the IRS regulation contradicts specific ACA wording Congress passed, which had authorized the IRS to impose employer-mandate penalties only in those states where state-established health-insurance exchanges exist. Indiana is one of 27 states that opted not to create a state exchange, meaning the federal government runs an exchange for Indiana residents.
Under the employer mandate, the potential penalty for large employers for non-compliance is $2,000 per employee for all full-time employees in the organization. The State of Indiana is employer to approximately 28,000 executive branch workers. In the lawsuit, the State is represented by Indiana Attorney General Greg Zoeller’s office.
“Before being subjected to draconian IRS tax penalties, the State and 39 schools ask the federal court whether they are under federal taxing authority like private-sector employers. The objective of this case is to defend fundamental state authority to structure our government workforce to provide services; and individuals’ access to health insurance never has been the focus of the suit,†Zoeller said.
The amended lawsuit asks the federal court to issue an injunction blocking the IRS and other federal agencies from applying the unauthorized regulation and penalties against the school corporations and State as government employers. Plaintiffs also ask the federal court to issue a declaratory judgment finding the IRS regulation as applied to State government and schools is unconstitutional and void under the Tenth Amendment.
“Our State should be protected as is constitutionally guaranteed from federal government overreach under our American system of federalism, and the participation of so many school corporations in the challenge reflects mutual concern that this principle has been undermined by the IRS’s actions,†Zoeller said.
The 24 additional school corporations who joined the lawsuit in the amended complaint filed today are:
- Area 30 Career Center Education Interlocal, Greencastle, Ind.
- Charles A. Beard Memorial School Corporation, Knightstown, Ind.
- Cloverdale Community School Corporation, Cloverdale, Ind.
- Daleville Community Schools, Daleville, Ind.
- Eastern Howard School Corporation, Greentown, Ind.
- East Porter County School Corporation, Kouts, Ind.
- Eminence Community School Corporation, Eminence, Ind.
- Fayette County School Corporation, Connersville, Ind.
- Greencastle Community School Corporation, Greencastle, Ind.
- Monroe Central School Corporation, Parker City, Ind.
- Nettle Creek School Corporation, Hagerstown, Ind.
- Northeastern Wayne School Corporation, Fountain City, Ind.
- North Putnam Community School Corporation, Bainbridge, Ind.
- Northwestern School Corporation, Kokomo, Ind.
- North West Hendricks School Corporation, Lizton, Ind.
- Old National Trail Special Services Cooperative, Greencastle, Ind.
- Salem Community Schools, Salem, Ind.
- Shelby Eastern School Corporation, Fairland, Ind.
- South Gibson School Corporation, Fort Branch, Ind.
- South Putnam Community School Corporation, Greencastle, Ind.
- Taylor Community School Corporation, Kokomo, Ind.
- Union School Corporation, Modoc, Ind.
- Western School Corporation, Russiaville, Ind.
- Western Wayne Schools, Pershing, Ind.
The original15 school corporations who were plaintiffs along with the State in the initial complaint October 8 are:
- Metropolitan School District of Martinsville, Martinsville, Ind.
- Perry Central Community Schools, Leopold, Ind.
- Benton Community School Corporation, Fowler, Ind.
- Community School Corporation of Eastern Hancock County, Charlottesville, Ind.
- John Glenn School Corporation, Walkerton, Ind.
- Monroe-Gregg School District, Monrovia, Ind.
- Mooresville Consolidated School Corporation, Mooresville, Ind.
- North Lawrence Community Schools, Bedford, Ind.
- Northwestern Consolidated School District of Shelby County, Fairland, Ind.
- Shelbyville Central Schools, Shelbyville, Ind.
- Southwest Parke Community School Corporation, Montezuma, Ind.
- Vincennes Community School Corporation, Vincennes, Ind.
- Madison Consolidated Schools, Madison, Ind.
- South Henry School Corporation, Straughn, Ind.
- Southwestern Jefferson County Consolidated School Corporation, Hanover, Ind.
The 39 school corporations are represented by Bose McKinney & Evans LLP, while the State is represented by the Attorney General’s Office.
No court dates have been scheduled yet in U.S. District Court for the Southern District of Indiana. No response has been filed yet by the federal defendants, which include the IRS and its acting commissioner Daniel Werfel, the U.S. Department of Health and Human Services and HHS Secretary Kathleen Sebelius, the U.S. Department of Treasury and Secretary of the Treasury Jacob Lew, and the U.S. Department of Labor and Labor Secretary Thomas Perez.
NOTE: The amended complaint in State et al v. IRS et al is at this link.
A recent opinion piece by Indiana Attorney General Greg Zoeller on the lawsuit is at this link.
More information about the State et al v. IRS et al lawsuit is at this link.
