[00:00:00] Speaker 00: Phase number 22-5121, optimal one or less LLC at balance versus internal revenue service at L. Mr. Freeman for the at-balance, Ms. [00:00:10] Speaker 00: Dalsol for the at-lease. [00:00:13] Speaker 02: Good morning, Council. [00:00:14] Speaker 02: Mr. Freeman, please proceed when you're ready. [00:00:22] Speaker 06: Thank you, Your Honor. [00:00:23] Speaker 06: I'm going to place the court. [00:00:26] Speaker 06: We're here to discuss what this case is about. [00:00:28] Speaker 06: But I first want to be clear what it is not about. [00:00:32] Speaker 06: It is not a challenge to the Affordable Care Act. [00:00:37] Speaker 06: We are asking that the ACA be applied as it was written by the Congress that enacted it. [00:00:46] Speaker 06: We're not here to upset the apple cart. [00:00:48] Speaker 06: Our position would actually strengthen the Affordable Care Act. [00:00:53] Speaker 06: It would insulate it from inevitable challenges that come from characterizing [00:00:58] Speaker 06: as a tax, such as challenges as a direct tax. [00:01:02] Speaker 06: And more acutely, it would insulate it from the consequences of the government's position here that would open it up, at least would open every prior assessment of the employer mandate up to a challenge for a failure to issue a notice of deficiency. [00:01:20] Speaker 06: So at base, Your Honors, the government's position is fundamentally flawed. [00:01:26] Speaker 06: Either these action is a penalty [00:01:28] Speaker 06: in which case the Anti-Injunction Act does not apply? [00:01:31] Speaker 06: Or is it a tax that clearly required a notice of deficiency, in which case the Anti-Injunction Act does not apply? [00:01:42] Speaker 03: Couldn't it be a penalty that Congress called a tax? [00:01:45] Speaker 03: And the question we're asking is, what did Congress call it? [00:01:48] Speaker 03: I mean, Congress can call it a penalty of tax if it wants, and that's the question before us, isn't it? [00:01:56] Speaker 06: Your Honor, it is true that an NFIB... It's not a constitutional case. [00:02:01] Speaker 03: We're just trying to interpret a statute. [00:02:03] Speaker 03: The question is, what did Congress intend here? [00:02:06] Speaker 03: It called it a tax three times. [00:02:08] Speaker 03: And, you know, maybe you can make a good argument that it's a penalty, but Congress called it a tax. [00:02:15] Speaker 05: You're correct, Your Honor. [00:02:16] Speaker 05: It did call it a tax, several isolated. [00:02:20] Speaker 03: You can call them isolated, but it's part of the statute. [00:02:23] Speaker 05: Certainly. [00:02:24] Speaker 03: That's the only thing we have to go on is the language of the statute. [00:02:27] Speaker 03: And every provision of a statute is, I suppose, isolated from every other one. [00:02:32] Speaker 03: But there are three times when it calls it a tax. [00:02:35] Speaker 03: And even if I thought you were right that, look, it really does look like a penalty, Congress called it a tax. [00:02:43] Speaker 06: You're correct. [00:02:44] Speaker 06: And in FIB, the Supreme Court certainly said that generally the best evidence we're going to have is the statutory tenancy. [00:02:53] Speaker 06: I will tell you, we don't ride on a clean slate. [00:02:58] Speaker 06: That's for sure. [00:02:59] Speaker 06: So in addressing your position, I'll give it kind of the context that helps flesh that out. [00:03:08] Speaker 06: Our position aligns with the Supreme Court's decision in NFIB. [00:03:12] Speaker 06: It held there that the individual mandate was not a tax for purposes of the Anti-Injunction Act. [00:03:21] Speaker 06: It's so held, despite the fact that the Joint Committee of Taxation had described it as a tax, that it is located in the Internal Revenue Code, refers to the payor as a taxpayer, requires payment with the taxpayer's tax return, is computed on the basis of gross income and exclusively tax concepts, and was not even owed if a tax return was not required to be filed. [00:03:48] Speaker 06: Our position, though, to your question, Your Honor, is also entirely consistent with, and I would argue compelled by, the text. [00:03:56] Speaker 06: So the government's position gives talismanic effect to two, arguably three, isolated uses of the word text. [00:04:07] Speaker 06: The Supreme Court's admonition in NFIB is that the best evidence of congressional intent [00:04:13] Speaker 06: is statutory text, not an isolated label. [00:04:16] Speaker 03: But that is statutory text. [00:04:19] Speaker 03: Here, section, okay, Title 42, Section 1808, 1F2A. [00:04:28] Speaker 03: It says, you know what it says. [00:04:37] Speaker 03: It says, the secretary shall establish a separate appeals process for employers who are notified [00:04:43] Speaker 03: that the employer may be liable for a tax imposed by Section 4980H. [00:04:51] Speaker 03: That's the statute. [00:04:57] Speaker 03: It says 4980H is a tax. [00:05:04] Speaker 06: Your Honor, I agree that language is in there. [00:05:08] Speaker 06: I would note two things. [00:05:09] Speaker 03: So your argument is that it's isolated? [00:05:11] Speaker 03: Is that the point? [00:05:13] Speaker 06: My argument is, in context, it is isolated. [00:05:16] Speaker 03: What does that mean? [00:05:17] Speaker 06: Well, I use that language because, for one thing, Congress initially and predominantly used the word assess payment. [00:05:30] Speaker 06: It used it seven times throughout, and it also utilized the word penalty. [00:05:35] Speaker 06: In fact, in F2B of the same statutory provision you're referring to, it then went on to refer to it as penalty. [00:05:43] Speaker 06: And I would also note that in F2A of the provision you've referred to, the appeals process that is contemplated or directed there by Congress was never, ever established. [00:05:54] Speaker 02: So can we start with accessible payment? [00:05:56] Speaker 02: So there's two alternate formulations. [00:05:59] Speaker 02: One is accessible payment. [00:06:00] Speaker 02: There's three in the case. [00:06:01] Speaker 02: One is tax. [00:06:02] Speaker 02: One is penalty. [00:06:03] Speaker 02: One is accessible payment. [00:06:06] Speaker 02: And I think it's one thing to argue that they're all hermetically sealed. [00:06:10] Speaker 02: from one another so that they're mutually exclusive. [00:06:12] Speaker 02: So it has to be one or the other or the other. [00:06:15] Speaker 02: That can't possibly be right because 4980H just doesn't work. [00:06:18] Speaker 02: If you look at it that way, 4980H uses the term accessible penalty and then uses both the term penalty and tax to describe the accessible penalty. [00:06:27] Speaker 02: It just seems to me from the structure of 4980H, we already know that the first term accessible payment, sorry, I said accessible penalty, I meant to say accessible payment. [00:06:36] Speaker 02: I think it also does say accessible penalty. [00:06:38] Speaker 04: It does. [00:06:38] Speaker 02: But let's just take accessible payment. [00:06:41] Speaker 02: So if we take accessible payment, that could encompass both a tax and a penalty. [00:06:48] Speaker 02: Just descriptively, it just seems to me to be pretty self-evident that an accessible payment includes, descriptively, a tax. [00:06:57] Speaker 02: which is assessed and which is paid. [00:06:59] Speaker 02: And it also could include a penalty, which can be assessed and which can be paid. [00:07:04] Speaker 02: So the term assessable payment doesn't seem to me to do a lot of work in deciding whether this exaction counts as a tax for purposes of the Anti-Injunction Act, because assessable payment can encompass a tax. [00:07:19] Speaker 06: I would disagree, Your Honor, respectfully on several grounds. [00:07:23] Speaker 02: Um, first, you disagree that an assessable payment can include a tax, um, for certain limited purposes or if Congress were to clearly state that I certainly agree that it you just think as a matter of ordinary English that assessable payment that attack could be considered an assessable payment. [00:07:43] Speaker 06: I don't know. [00:07:44] Speaker 06: I believe in context here and I believe I'll point out one thing at the beginning. [00:07:49] Speaker 06: I I recognize this. [00:07:50] Speaker 06: I think we probably all do that. [00:07:52] Speaker 06: This [00:07:52] Speaker 06: Provisions we're dealing with are not a model of clarity, and we wouldn't be here if they were. [00:07:58] Speaker 06: But we don't, again, ride on a blank slate, and we have to look at this through a burden framework, burden framework. [00:08:07] Speaker 06: Now, the government offers literally a talismanic incantation framework. [00:08:13] Speaker 06: The word tax was used there, even if the context doesn't indicate that that's what it was intended, that it is a magic word that leads to an anti-injunction act application. [00:08:24] Speaker 06: We offer a burden that is consistent with and I believe compelled with by [00:08:29] Speaker 06: the are by read Elsevier line of of cases. [00:08:33] Speaker 02: So can we just let's just assume I have your argument on that and and but let's just assume we take that part of the case and put it to the side that we're not talking about an extra burden to show that something constitutes a tax because I do think there's a lot of force to the government submission [00:08:49] Speaker 02: that the burden is to determine whether the statute speaks clearly enough in saying that the particular element of the issue is a jurisdictional one. [00:08:57] Speaker 02: And the anti-injection act already does that. [00:08:59] Speaker 02: It shows that it's jurisdictional. [00:09:00] Speaker 02: It doesn't mean that in determining whether something implicates that jurisdictional consequence, that also has to be clear. [00:09:07] Speaker 02: I think a [00:09:08] Speaker 02: I think there's some force to that submission. [00:09:10] Speaker 02: I know you'd resist that, but let's just put that to one side. [00:09:14] Speaker 02: Just on the text, if we just say that there's no burden that is unduly encumbering one side or the other, just on the text, it just seems to me from the structure of 4980H, it does use the term accessible payment. [00:09:28] Speaker 02: As a matter of ordinary English, it seems to me a tax can be a form of accessible payment. [00:09:33] Speaker 02: And the structure 4980H, [00:09:35] Speaker 02: seems to do that because it says assessable payment throughout, but then it also says sometimes that the particular assessable payment we're talking about is a tax. [00:09:44] Speaker 06: So to your point, your honor, page 546 of the opinion in the NFIB. [00:09:51] Speaker 06: There the court analyzes, specifically I'm talking about the two paragraphs where it analyzed section 6201. [00:09:57] Speaker 06: The Supreme Court there, if you've got a Westlaw printoff, it's on the top right-hand corner. [00:10:02] Speaker 06: Right there, the Supreme Court expressly stated that you can't read the text in isolation. [00:10:07] Speaker 06: So it was analyzing Section 6201, and it expressly rejected the argument that assessable penalties are taxes. [00:10:16] Speaker 06: I believe that portion of that analysis dismantles the government's entire harmonization argument and goes directly to your point, which is a good one, but I believe the Supreme Court has spoken on it. [00:10:29] Speaker 06: I would also make two other points on this, Your Honor. [00:10:32] Speaker 02: The Supreme Court also made- So that's accessible penalty, not accessible payment. [00:10:37] Speaker 02: Correct. [00:10:37] Speaker 02: But the same logic. [00:10:39] Speaker 02: I don't think so. [00:10:40] Speaker 02: I think there's a separate question about tax and penalty, which needs to be addressed and we can get to that. [00:10:45] Speaker 02: But just in terms of accessible payment, why isn't a tax unassessable? [00:10:50] Speaker 02: Just by every ordinary definition I'm aware of, it is assessed and it's a payment. [00:10:56] Speaker 02: So point two, I think we'll address that directly on point. [00:11:02] Speaker 06: So, Your Honor, Section 49 A.H.D.1, it provides that accessible payments shall be assessed and collected in the same manner as an accessible penalty under subchapter B. As the Supreme Court in NFIB observed expressly, it said the fact that the code requires there that accessible penalties [00:11:29] Speaker 06: should be assessed and collected in the same manner as taxes quote makes little sense if assessable penalties are themselves taxes that pretty. [00:11:39] Speaker 06: That critique from the Supreme Court is magnified here, where the code provides that assessable payments should be assessed and collected in the same manner as assessable penalties, which are in turn assessed and collected in the same manner as taxes. [00:11:53] Speaker 02: So then does the upshot of your argument, so the Supreme Court wasn't looking at this provision, because it seems to me that something that counters all of that is a provision that actually uses the term tax. [00:12:03] Speaker 02: It just uses it. [00:12:06] Speaker 02: The upshot of your position, then, that in the multiple references, I count four references to this as a tax, that those are just mistakes. [00:12:17] Speaker 06: First, the predicate to the question, Your Honor, the Supreme Court there and that portion of NFIB was interpreting it very closely, almost exactly parallel provision that dealt with how the employer mandate would be assessed and collected. [00:12:35] Speaker 06: So I think a close reading of that portion of the statute will show that it is on all fours. [00:12:42] Speaker 02: The provision is 6201? [00:12:44] Speaker 06: Not the provision of 6201. [00:12:47] Speaker 06: That one also is relevant. [00:12:48] Speaker 06: The reason I've led with that. [00:12:50] Speaker 06: 4980? [00:12:51] Speaker 06: 4980 HD1. [00:12:54] Speaker 06: Yes, Your Honor. [00:12:55] Speaker 06: And hence the reason I believe the logic carries through in exact parallel here. [00:13:02] Speaker 02: If I could, your question again, your honor, so I can make sure. [00:13:07] Speaker 02: So this one says tax is your multiple times, three times in 4988 itself. [00:13:14] Speaker 02: It's referred to as a tax. [00:13:16] Speaker 02: Are those just mistakes? [00:13:18] Speaker 06: I believe it's two times in 4988, but I don't want to quibble about that because your point, I think, is the same either way. [00:13:25] Speaker 02: Yeah, just for the accounting purpose, I'm counting the title, too, because the title says tax. [00:13:30] Speaker 02: non-deductible, and then it says for denial of deduction for the tax. [00:13:34] Speaker 06: So I won't go so far to say that it's a mistake, but we have to also ask, what does accessible penalty mean? [00:13:43] Speaker 06: That's an unnatural phrase that has never been used before in the Internal Revenue Code. [00:13:50] Speaker 06: Accessible payment. [00:13:52] Speaker 06: Accessible payment, yes, Your Honor. [00:13:55] Speaker 06: We've researched that. [00:13:56] Speaker 06: I believe that is correct. [00:13:57] Speaker 06: It's not. [00:13:58] Speaker 06: But it is most certainly an unnatural phrase, where I think the default go-to language of the English language would have been tax, or not even thinking about the AIA. [00:14:10] Speaker 06: Just that would be the natural thing to say there, especially if you thought. [00:14:14] Speaker 06: So the fact that you deviate from that says something. [00:14:19] Speaker 02: But you don't, because you also say tax. [00:14:21] Speaker 06: I won't say that, but I won't say it's a mistake, but each provision does have an explanation that does harmonize the provisions. [00:14:30] Speaker 06: So for example, we've pointed out in our brief that one use of the word tax parallels with section 275, which denies certain taxes, which by the way, deductibility of certain taxes, which by the way are not all federal taxes. [00:14:47] Speaker 06: So not all taxes within the meaning of the Anti-Injunction Act. [00:14:51] Speaker 06: There's a very, there's an explanation for that provision, but I do go back and much of my remit does hinge on the fact that I do believe that the Reed Elsevier line of cases does provide the appropriate framework. [00:15:06] Speaker 06: And I think if you look at the Supreme Court's decision in, I believe it's, [00:15:12] Speaker 06: national marketing, the opinion by Justice Thomas, he does expressly look to that line of cases as supporting a narrow interpretation of a provision there. [00:15:26] Speaker 06: It was the Tax Injunction Act. [00:15:27] Speaker 06: But as you're probably aware, it's interpreted completely in parallel. [00:15:32] Speaker 06: And so he did look to that as part of the analytical structure for whether or not that applied. [00:15:40] Speaker 06: But I think you do have to have a framework here. [00:15:44] Speaker 06: It can't be a magic word because we all know, and this statute is a great example, we all know how these things get written. [00:15:52] Speaker 06: And there are a lot of hands in there. [00:15:54] Speaker 06: And we're ultimately looking at Congress as a body, what was its institutional intention [00:16:04] Speaker 06: And we're working against the framework that requires that if you're going to do this extraordinary thing and keep people out of court, you need to speak clearly on it. [00:16:13] Speaker 03: But also, by the way, assume that that's not right. [00:16:16] Speaker 03: That this is the reasons the chief judge Trinivasan said. [00:16:22] Speaker 03: Just assume that's not right for me. [00:16:24] Speaker 03: We're just looking at the language of the statute and trying to make the best judgment we can about what this is, right? [00:16:32] Speaker 03: Yes. [00:16:33] Speaker 03: So what's your best argument? [00:16:36] Speaker 03: Setting aside your argument about burden, what's your best argument if you just look at the statute? [00:16:41] Speaker 05: Well, if we just look at the statute. [00:16:42] Speaker 03: Nothing else. [00:16:42] Speaker 03: Just plain old statute. [00:16:44] Speaker 03: What did Congress say in this? [00:16:46] Speaker 03: You know, an assessable payment can be a tax. [00:16:49] Speaker 03: And they've said three times it's a tax. [00:16:51] Speaker 05: So if I accept your premise that it is a tax, [00:16:56] Speaker 03: No, no, no, no. [00:16:57] Speaker 03: Don't accept my premise that it's a tax. [00:16:59] Speaker 03: That's the issue. [00:17:00] Speaker 03: I mean, I'm happy to have you do it, but I don't want to do that. [00:17:03] Speaker 03: It's actually not. [00:17:04] Speaker 03: Except my premise that this is just a straightforward question of statutory interpretation. [00:17:09] Speaker 03: You said it extremely well a minute or two ago. [00:17:12] Speaker 03: This is a messy statute. [00:17:15] Speaker 03: There were lots of hands in it. [00:17:17] Speaker 03: It's not at all. [00:17:17] Speaker 03: If Congress spoke clearly, it wouldn't be here. [00:17:19] Speaker 03: But the fact is, we have to do the best we can. [00:17:22] Speaker 03: And without any additional burdens or anything like that, [00:17:26] Speaker 03: I want to know what your best argument is that this accessible payment, which they call a tax, is in fact not. [00:17:37] Speaker 06: Your honor, if I said it well, could we just have it read back? [00:17:41] Speaker 06: So your honor, section 74. [00:17:44] Speaker 03: I only ask the question because you keep going back to your burden. [00:17:48] Speaker 06: I do, and I won't this time. [00:17:51] Speaker 06: It's clear I should not. [00:17:53] Speaker 06: Section 7421 provides that, and there is an important preparatory language there, except as provided in ellipses 6212A and 6213A. [00:18:06] Speaker 06: No suit for the purpose of restraining or enjoining shall be brought. [00:18:14] Speaker 06: and 6213 both require that if for the government to impose and assess a tax, it must issue a notice of deficiency. [00:18:24] Speaker 06: So that, for one thing, is a very important statutory provision that indicates that, well, if this is a tax, everything that's been assessed to date was wrong. [00:18:38] Speaker 06: We've blown up the whole system, everything. [00:18:42] Speaker 06: If it's not a tax, [00:18:45] Speaker 06: And we've got the ability. [00:18:46] Speaker 06: And I maintain it's not. [00:18:48] Speaker 06: I don't think Congress would have done something. [00:18:51] Speaker 06: If it's not a tax, well, then we're not barred by the anti-injunction act. [00:18:57] Speaker 06: I think that is probably, quite honestly, the best argument out there as to why this is not a tax. [00:19:04] Speaker 06: And it does save the employer mandate. [00:19:07] Speaker 06: Was that argument made to the district court? [00:19:09] Speaker 06: Uh, your honor, it is it is part and parcel of what we've been arguing, um, throughout. [00:19:15] Speaker 06: So I would argue not not voice or not expressed exactly the way that I did. [00:19:20] Speaker 06: But we did, um, we did address, uh, literally all, you know, these issues and notice efficiency issues, but it was not expressed in that band. [00:19:34] Speaker 04: So deficiency [00:19:36] Speaker 04: In 6211A says that it applies to income, estate, and gift taxes imposed by subtitles A and B, and excise taxes imposed by chapters 41, 42, and 43. [00:20:04] Speaker 04: This obviously you're not arguing that this is an income estate or gift tax. [00:20:10] Speaker 04: So you're saying it's in the state, it's an excise tax imposed by chapter 41, 42, 43 or 44. [00:20:18] Speaker 06: It does appear in chapter 43. [00:20:24] Speaker 06: that's where it's housed or codified. [00:20:27] Speaker 06: To be clear, I'm accepting a premise that I don't actually believe it is a tax, but this is an argument in favor of our proposed interpretation that, well, if this is a tax, as I believe the government myopically argues, the consequence of that, and I don't mean that against counsel, I just mean that [00:20:51] Speaker 06: This is, I believe, an unforeseen consequence of that position, is that, well, then you are clearly required to issue a notice of deficiency. [00:21:03] Speaker 06: And that is truly, that will bring on the swell of cases that will challenge this. [00:21:10] Speaker 06: And that is an issue that will disrupt, if not dismantle, this entire statutory framework. [00:21:18] Speaker 04: I think the other thing is that our concern [00:21:21] Speaker 04: I mean, Congress makes their bed and they lie in it. [00:21:26] Speaker 04: That's a policy concern for them, not us. [00:21:29] Speaker 06: Agreed. [00:21:30] Speaker 06: I think that end policy concern, I don't think that can be a state of reason for it, but I do think that is relevant. [00:21:42] Speaker 06: I mean, it is an accepted [00:21:44] Speaker 06: or modality of textual interpretation to look at, well, what would the consequences of this be? [00:21:51] Speaker 06: Not for that in and of itself, but in terms of getting inside the head of the institution of Congress and their intention, and when they have intended that, I don't believe so. [00:22:03] Speaker 06: And so I do believe that is a relevant consideration. [00:22:08] Speaker 02: As I understand the government's argument, they don't accept that. [00:22:12] Speaker 02: that provision that notice a deficiency provision actually relates to the 49 88 H section, but we can hear from the government on that. [00:22:20] Speaker 02: And, um, unless my colleagues have further questions, we'll give you some time for a bottle. [00:22:24] Speaker 06: Can I speak to that that particular point very briefly? [00:22:27] Speaker 06: Very briefly. [00:22:28] Speaker 06: Your honor. [00:22:29] Speaker 06: So I believe they're dead wrong on that. [00:22:31] Speaker 06: Section 301.6211-1A, that's the Treasury regulation that deals with this, specifically deals with taxes under Chapter 43 among others, and specifically deals with situations where there's not a tax return to be filed or filed, and does, by regulation, define deficiency here. [00:22:55] Speaker 06: And so that would be my position on that. [00:22:57] Speaker 06: Okay. [00:22:58] Speaker 02: Thank you, Council. [00:22:59] Speaker 02: Thank you, Your Honor. [00:23:00] Speaker 02: Miss Del Sol. [00:23:14] Speaker 01: Good morning, your honor. [00:23:15] Speaker 01: May it please the court, Ellen Del Sol for the government. [00:23:17] Speaker 01: We believe the statute here clearly does label this exaction as a tax in 4988. [00:23:25] Speaker 01: And as I'll just admit, the deficiency procedures under 6211 through 6013 are not applicable here. [00:23:32] Speaker 01: And no exception to the Anti-Injunction Act was raised below, so that wasn't flushed out below. [00:23:38] Speaker 01: I'd like to talk first about the statutory text. [00:23:41] Speaker 01: As Your Honor pointed out, as you pointed out, the term assessable payment is [00:23:48] Speaker 01: used throughout the statute, and that could theoretically, you know, it probably could be a tax because the tax is assessed and paid. [00:23:54] Speaker 01: But I think section B2, paragraph B2 is particularly enlightening on this because paragraph A and B, E1 oppose the tax and call it an assessable payment. [00:24:05] Speaker 01: And then in B2, it says the tax imposed by the previous paragraph. [00:24:09] Speaker 01: And so I think by saying it's the tax imposed by the, [00:24:14] Speaker 01: previous paragraph, Congress clearly said, accessible, equated, accessible payment with tax. [00:24:20] Speaker 02: Um, so that, that, that instance, I think you're talking about the language of B two, the aggregate amount of tax determined under paragraph one. [00:24:27] Speaker 02: Yeah. [00:24:28] Speaker 01: Yeah. [00:24:28] Speaker 01: So, and then paragraph one imposes the tax. [00:24:31] Speaker 01: So when you're looking at those two statutes together, it's certainly, or these paragraphs together, it certainly indicates [00:24:36] Speaker 01: that the assessable payment is a paragraph one calls in an assessable payment that is correct and then to two calls that assessable payment in one and then two says the tax imposed by the previous or determined by the previous sector and two is the cap on the assessable payment in one. [00:24:54] Speaker 01: So I think that linkage of the term tax with an accessible payment is very telling about Congress's label here. [00:25:01] Speaker 01: And secondly, in C7, which the Fourth Circuit really discounted in the Liberty University case that goes the other way, in C7, it's called a tax. [00:25:12] Speaker 01: And then Congress specifically points to Section 275, which is the non-deductibility provision for taxes. [00:25:20] Speaker 01: And in Section 162, which deals with business expenses, [00:25:23] Speaker 01: section 162 s provides the penalties deductible and I think it doesn't make sense that Congress would have said it's a tax and it's not deductible under 275 which is the provision that deals with the ability of taxes. [00:25:36] Speaker 01: If they really meant it was a penalty, they would have then called it a penalty and then pointed to the section that deals with it. [00:25:42] Speaker 02: Well isn't it a penalty too? [00:25:45] Speaker 01: I'm sorry your honor. [00:25:46] Speaker 02: Isn't it also a penalty? [00:25:48] Speaker 01: Well, you know, I think the important thing for the entire Junction Act purposes is whether it is labeled as a tax. [00:25:56] Speaker 01: And I think these two things are two very clear signs it's labeled as a tax. [00:25:59] Speaker 02: But isn't it also labeled a penalty? [00:26:01] Speaker 01: The only point at which it's labeled a penalty in the Internal Revenue Code, which is, I think, the relevant statutory provision for [00:26:10] Speaker 01: looking at Congress's intent with respect to the Injunction Act is in a heading and section seven seventy eight of six of the code specifically says no inferences are to be drawn from headings and it's also in the section called excise taxes. [00:26:23] Speaker 02: So if you're going to draw from headings, they really thought it was also in the text of it's in the heading and forty nine eighty H following this through forty nine eighty H C [00:26:37] Speaker 02: to D, where it says application of employer size to assessable penalties. [00:26:44] Speaker 01: I'm sorry. [00:26:45] Speaker 01: So C to D. That applies, right? [00:26:53] Speaker 02: That's in the heading, but it says application of employer size to assessable penalties. [00:27:02] Speaker 01: In the heading, yes. [00:27:03] Speaker 01: But I'm sorry, I don't see it in the text. [00:27:05] Speaker 02: Then it's in the text of 18081. [00:27:07] Speaker 01: Oh, yes, it does say. [00:27:11] Speaker 01: And we did miss that when we were briefing it. [00:27:13] Speaker 01: In 1081, it calls it both a tax and a penalty. [00:27:16] Speaker 01: Right. [00:27:16] Speaker 01: But that is not in the Internal Revenue Code. [00:27:18] Speaker 02: OK, but that's Congress speaking to this particular. [00:27:20] Speaker 01: That is Congress speaking. [00:27:21] Speaker 01: But I think in the first instance in F, it's talking about the imposition of the tax. [00:27:27] Speaker 01: The second one is more talking about confidentiality provisions. [00:27:32] Speaker 01: And I think less speaking to the type of the exaction. [00:27:37] Speaker 02: But it says it's subject to the penalty under Section 49, ADH of Title 26. [00:27:43] Speaker 01: That is true. [00:27:44] Speaker 02: Pretty direct. [00:27:45] Speaker 01: Yeah. [00:27:45] Speaker 01: But at the same time, I think to the extent that that doesn't really help figuring out what the internal revenue code means because you have two conflicting statements. [00:27:55] Speaker 02: Well, that's what I'm wondering. [00:27:56] Speaker 02: Are they conflicting? [00:27:57] Speaker 02: Because it sounds to me like you're [00:28:00] Speaker 02: you think the reference to it as a penalty was wrong? [00:28:03] Speaker 01: Well, your honor, I think there are instances where penalties are treated as taxes, but I think NFIB takes the, you know, it says just because this is a penalty, it's not necessarily treated as a tax. [00:28:15] Speaker 01: But maybe it could be a penalty and a tax. [00:28:18] Speaker 02: That's what I'm wondering is what your position, because it seems to me one way to square all this is to say there's accessible payment. [00:28:24] Speaker 02: An accessible payment can be either a tax or a penalty or both. [00:28:28] Speaker 02: In this situation, Congress referred to this accessible payment in some circumstances as a tax and in some circumstances as a penalty. [00:28:37] Speaker 02: So it's just both. [00:28:39] Speaker 01: Well, to the extent that it's a tax at all, [00:28:42] Speaker 01: Um, certainly the anti-induction act applies and provides a very clear jurisdictional bar as this court. [00:28:47] Speaker 02: Right. [00:28:47] Speaker 02: So what I'm asking is the references to this exaction as a penalty. [00:28:51] Speaker 02: There are references in the U.S. [00:28:53] Speaker 02: code to this exaction as a penalty. [00:28:55] Speaker 01: That is correct. [00:28:56] Speaker 02: Yeah. [00:28:56] Speaker 02: And so are those, are those mistakes or are they totally fine because this exaction can be both a tax and a penalty? [00:29:06] Speaker 01: Um. [00:29:06] Speaker 02: It seems to me it has to be one or the other. [00:29:08] Speaker 02: if there's a third alternative. [00:29:10] Speaker 01: I don't know that I know the answer to that because I would have to be able to figure out what Congress meant by that. [00:29:15] Speaker 02: But what's the government's theory? [00:29:16] Speaker 02: Is the government's theory that the references to this exaction as a penalty are just Scrivener's error or mistakes? [00:29:24] Speaker 02: Or is it that no, they refer to as a penalty, which is OK, because something can be both a penalty and a tax. [00:29:30] Speaker 01: I don't think the possibility is something that is both a penalty and a tax. [00:29:34] Speaker 01: for purposes of the Anti-Injunction Act is something that is something that couldn't happen. [00:29:38] Speaker 01: In subchapter B of chapter 68, there are a whole group of penalties that are treated as taxes and are taxes for Anti-Injunction Act purposes. [00:29:45] Speaker 01: So I think that is a viable theory, Your Honor. [00:29:50] Speaker 02: So I think that's a viable one. [00:29:51] Speaker 02: And is that your theory? [00:29:53] Speaker 02: What would you have us do? [00:29:54] Speaker 01: I think that makes sense, Your Honor. [00:29:56] Speaker 02: But does it make the most sense? [00:29:57] Speaker 02: I mean, we have to write an opinion that wrestles with the fact that the statute refers to this as a penalty. [00:30:04] Speaker 02: It just does. [00:30:05] Speaker 02: Yes, it does. [00:30:06] Speaker 02: And so then the question is, what do we do with that? [00:30:08] Speaker 02: We can't ignore it. [00:30:09] Speaker 02: We can't just pretend like it doesn't exist. [00:30:11] Speaker 02: So what would the government urge us to do with the references in the code? [00:30:19] Speaker 02: And I'm counting Title 42 as part of the code, not just the internal code. [00:30:22] Speaker 02: The US code to this 4980H accessible payment as a penalty. [00:30:27] Speaker 01: Well, I think you could say that it is a tax and a penalty, but I think for an Injunction Act purposes, the references in the Internal Revenue Coup as a tax or what should... Right, I get that. [00:30:37] Speaker 02: I get the conclusion because you need that one. [00:30:39] Speaker 02: But when you say you could say it's both, I'm just asking you, what would you have us say if you controlled it? [00:30:46] Speaker 02: You don't. [00:30:47] Speaker 02: We get to make our decision, but we also often ask... I don't see a problem with saying that, Your Honor. [00:30:51] Speaker 02: I don't see a problem with it, but I'm sorry to be picky on this, but it actually matters. [00:30:56] Speaker 02: You're OK with it, but I'm asking you, the government. [00:30:58] Speaker 02: I'm just asking the government, what's the government's theory so that we have the benefit of knowing what the government thinks we should do? [00:31:05] Speaker 02: We should do, not what we could do, what we should do with the fact that the US code refers to this as a penalty. [00:31:12] Speaker 01: Well, I think it certainly could be a penalty for purposes under the HSIS provisions, and that would certainly [00:31:19] Speaker 01: makes sense for it to be treated as a penalty for some purposes, but for purposes of the tax code. [00:31:24] Speaker 02: And is that what you think we should do with the reference? [00:31:27] Speaker 01: I think that's a reasonable thing to do with the reference, Your Honor. [00:31:30] Speaker 01: But I think the important thing here is that do you think it's also reasonable? [00:31:34] Speaker 02: I'm sorry to quibble on this, but it actually matters to me. [00:31:37] Speaker 02: Do you think it's also reasonable to say that the references to it as a penalty were mistakes? [00:31:42] Speaker 01: I don't know the answer to that. [00:31:44] Speaker 01: I'm sorry, I'm not familiar enough with the HHS side of things to be able to answer the question about whether it could be a penalty under those provisions. [00:31:55] Speaker 01: And I think for tax code purposes, it is clearly, it has the wording of the tax, which is positive for anti-injunction purposes. [00:32:05] Speaker 01: I see my time's running out. [00:32:08] Speaker 03: Would it be fair to say, just to pursue this line of questioning, [00:32:13] Speaker 03: You don't know whether it's a mistake or not, but if it's not a mistake, and if Congress meant to say penalty, a penalty can still be a tax. [00:32:21] Speaker 01: I think that's true. [00:32:21] Speaker 01: That's your position. [00:32:24] Speaker 01: Yeah. [00:32:25] Speaker 01: the problems that we run into is that in an FIB where it was a penalty for anti-injunction act purposes, Congress declined to read that as moving it into the kinds of penalties that are expressly treated as tax under the anti-injunction act. [00:32:40] Speaker 02: So I think- Because on that one, it was never referred to as a tax. [00:32:43] Speaker 01: Right. [00:32:44] Speaker 01: But here, the anti-injunction, it is referred to as a tax. [00:32:47] Speaker 01: So I mean, to us, as I said, I haven't got a phone up [00:32:53] Speaker 01: picture of whether in non-tax context, that might be a penalty for some reasons. [00:32:57] Speaker 02: But I think for the... But it's meant to be a friendly question because I'm assuming that you win on the conclusion that because the statute refers to it as a tax, it counts as a tax on it for anti-injunction act purposes. [00:33:10] Speaker 02: Then the question becomes, well, okay, but it also refers to it as a penalty. [00:33:12] Speaker 02: So what do we do with that? [00:33:13] Speaker 01: Yeah. [00:33:16] Speaker 01: they rely on is no deficiency argument. [00:33:21] Speaker 01: And I think it's important to recognize that the deficiency procedures only apply to taxes that are reported on a term where you have to report a tax liability. [00:33:30] Speaker 01: The definition of deficiency in 6211 is a term of art that has that limitation. [00:33:35] Speaker 01: And there are lots of taxes, including this one. [00:33:37] Speaker 01: that are not reported on a return. [00:33:39] Speaker 01: There is a return file under 656 that they point to, but that doesn't report the amount of tax. [00:33:45] Speaker 01: That just reports if the employer is providing health insurance. [00:33:48] Speaker 02: I see. [00:33:49] Speaker 02: So your theory is the notice of deficiency language applies when you have to report it on a return. [00:33:53] Speaker 01: That's correct. [00:33:54] Speaker 01: And the presumption, if you read the regulation as a whole when it talks about what the taxpayer is deemed to have reported on his return, it assumes there's a return of court-reporting tax. [00:34:04] Speaker 01: So the assuming it's zero, [00:34:07] Speaker 01: approach that they argue that the regulation calls for, assuming that they reported zero in their return, if there's no return, is not correct. [00:34:14] Speaker 01: There has to be a return that reports tax for the deficiency procedures to kick in. [00:34:19] Speaker 02: And it's also your position that this argument wasn't raised. [00:34:21] Speaker 01: It was not raised below and no exception to the Anti-Injunction Act was raised low at all, Your Honor. [00:34:28] Speaker 02: Make sure there's no further questions. [00:34:30] Speaker 01: Thank you very much. [00:34:31] Speaker 01: Thank you, Council. [00:34:34] Speaker 02: Mr. Freeman, we'll give you two minutes for rebuttal. [00:34:42] Speaker 06: Thank you. [00:34:44] Speaker 06: I will note, I think it's a it's a big thing to come to a conclusion that Congress made a mistake. [00:34:50] Speaker 06: And so every cannon out there of construction would would lead me to try to avoid that if possible. [00:34:58] Speaker 02: Sure, which equally applies to the fact that they use the term tax. [00:35:02] Speaker 06: Yes, granted, which I don't know that that helps my position. [00:35:07] Speaker 06: But that's how I would candidly approach it. [00:35:11] Speaker 06: It doesn't mean that I'm not going to be right. [00:35:14] Speaker 06: But it does mean I recognize that's not the best thing for my position. [00:35:18] Speaker 06: But it does seem very highly unlikely to me that Congress meant to signal. [00:35:23] Speaker 06: And again, we don't write on a blank slate. [00:35:25] Speaker 06: We write in light of NFIB and the fact that the individual mandate is not a test. [00:35:32] Speaker 06: for AIA purposes. [00:35:34] Speaker 06: It seems highly unlikely that Congress meant the signal with these as I maintain isolated references to tax, mistake or not, that the mandates here should be treated differently for anti-injunction purposes. [00:35:48] Speaker 06: That seems highly unlikely. [00:35:49] Speaker 06: I would point out that in NFIV, it's really not a groundbreaking proposition there that the best evidence would be the statutory tax. [00:36:01] Speaker 06: And granted, they [00:36:02] Speaker 06: They wrote in a position where the label, at least, was not all over the place like it is here. [00:36:10] Speaker 06: So that makes it definitely the best evidence. [00:36:12] Speaker 06: And best there could mean that's what we would love to be hanging our hat on. [00:36:17] Speaker 06: But where it's equivocal as it is here, it doesn't foreclose. [00:36:22] Speaker 06: NFIB doesn't in any way foreclose, resort to the normal analytical tools to interpret. [00:36:29] Speaker 06: And I would know the structure of the ACA is important here. [00:36:33] Speaker 06: So the employer mandate, it falls under Title I entitled Quality Affordable Health Care for America. [00:36:40] Speaker 06: The final title, Title IX, is titled Revenue Provisions. [00:36:45] Speaker 06: It enacts multiple express taxes. [00:36:49] Speaker 06: Sections, for example, 9008, 9009, 9010, impose fees that are, quote, treated as excise taxes. [00:36:57] Speaker 06: and that are specifically and expressly made subject to the Anti-Injunction Act. [00:37:02] Speaker 06: And on multiple occasions, for example, Section 30084, 30072, 3008A, Congress expressly removed judicial review just as it would with the Anti-Injunction Act. [00:37:19] Speaker 06: I want to note that with respect to this this argument of waiver. [00:37:25] Speaker 06: It's case law. [00:37:26] Speaker 06: This is clear and is left primarily to the discretion of the appellate courts. [00:37:32] Speaker 06: particularly where novel, important and recurring questions of federal law, particularly those that relate to threshold issues like jurisdiction, that this court routinely takes those up, especially where they are legal issues. [00:37:48] Speaker 06: And that's really what we have here. [00:37:49] Speaker 06: This really elaborates on the two sides of the same exact point, just a different emphasis for us. [00:37:57] Speaker 06: But we have a novel, important recurring issue here related to a threshold question. [00:38:03] Speaker 06: One last point, Your Honor. [00:38:07] Speaker 06: Ultimately, I think the government here asks the court to rewrite the statute in the name of harmony. [00:38:13] Speaker 06: But the question is, did Congress, through the text that it actually enacted, did it clearly state an intention that this is jurisdictional? [00:38:23] Speaker 06: And if it did not, [00:38:25] Speaker 06: the statutory text is already in harmony. [00:38:30] Speaker 06: Thank you. [00:38:30] Speaker 02: Thank you, counsel. [00:38:31] Speaker 02: Thank you to both counsel. [00:38:32] Speaker 02: We'll take this case under submission.