Thursday, April 1, 2010

Is the Health Insurance Mandate Really a "Mandate"?

Several blogs, including Tax Prof Blog, recently analyzed a statement by the Joint Committee on Taxation (a nonpartisan committee that advises Congress on tax matters) which declares that the IRS lacks the power to enforce the individual mandate.  The new healthcare legislation imposes a penalty, presumably collectible by the IRS, upon people who fail to purchase health insurance (and who do not fall into an exempted category).  According to the Joint Committee on Taxation however, the legislation does not give IRS the authority to collect the penalty, even if this is what Congress intended:
The penalty applies to any period the individual does not maintain minimum essential coverage and is determined monthly. The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.
In an updated post on TaxProf Blog, Theodore Seto and Bryan Camp, two tax law professors, have argued that the IRS still has the power to enforce the penalty. They concede that the legislation appears to deny IRS the power to collect the penalty by levying wages. Nevertheless, both professors argue that IRS could still deduct the penalty from any refund to which the taxpayer is entitled. Camp argues additionally that the IRS has the power to place liens on private property and to foreclose those liens in order to collect the penalty.

Although it is just a tiny part of the healthcare reform statute, the mandate has been the source of a lot of political commentary. Also, several states have filed lawsuits contesting the constitutionality of the mandate. Most legal analysts have predicted that those suits will fail.

Note: Thanks to reader Josh for this news tip.

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