Recently, the IRS proposed a new regulation that is inconsistent with and actually in direct violation of Congressional law. The IRS was instructed by the Obama Administration to implement the extension of premium assistance tax credits not only for those purchasing through State run exchanges (as provided for in the law) but also for those purchasing through federal exchanges – which is incompatible with what is contained in the Patient Protection and Affordable Care Act (PPACA).
Thankfully, the legality of this regulation is being challenged. If not confronted now, this new regulation will have a crippling effect on the ability of the IRS to function in the years ahead.
An important part of making Obamacare work is providing an insurance product for everyone. They need to have enough healthy people paying into the pool in order to cover those who are unhealthy and uninsurable. The cost of insurance for the core healthy people is high; those who cannot afford to pay the premiums are eligible for individual credits back — which are administered by the IRS — so that they can afford the Obamacare plan.
The way the law is written, that credit is available for people who go on the state run exchanges. This was built on the premise that every state would create its own Obamacare insurance exchange. Only half of the states actually did. Therefore the federal government (as allowed by PPACA) could come in and set up its own exchange.
In this scenario, however, and according to the PPACA, anyone who receives insurance on the federal exchange is ineligible for the insurance credit. What the Obama Administration has done in response is to order the IRS to allow those people on the federal exchanges to get the credit anyway.
There is a pending lawsuit against the federal government by individuals and businesses in six states, who claim that the IRS provision is indeed illegal. Should they prevail against this overreach by the IRS, which they certainly should, a critical new problem unfolds.
Obamacare is supposed to begin in 2014. There is an estimated 18 million people who may receive an annual subsidy, based on the criteria that they make less than $45,000/year or be a part of a small business that buys coverage for workers.
Consider the nightmare scenario that those subsidies received for being a part of the federal exchange are considered incorrect. How would the IRS begin the process of collecting back those credits that were given to taxpayers for their participation in Obamacare? Tens of thousands of people, most barely able to afford their premiums, will then get dunning letters from the IRS for back taxes and interest, and the IRS will have to expend huge manpower in collecting those back taxes. The IRS capability of doing its regular work would be severely hampered.
It is widely known that the IRS is already burden financially from Obamacare. Treasury Department estimates were $881 million for IRS enforcement spent to implement Obamacare from 2010-2013. Former IRS head Doug Shulman asked Congress for an additional $13.1 billion for 2014 alone.
This new IRS provision, being foisted upon the American people, needs to be repealed now before Obamacare even begins. The amount of insurmountable paperwork and backtracking that will ensue when the illegal provision is repealed, as it inevitably must, shows, again, the irresponsibility of the Obama Administration.
As a final note, how can the President continue to insist that the IRS is an independent agency, when he can so blatantly direct them to violate the law?