Letter of Support: CRA Resolution to Overturn IRS Health Care Tax Rule

August 01, 2012 J,

Dear Representatives DesJarlais and Roe and Senator Johnson:

On behalf of more than two million Americans for Prosperity activists in all 50 states, I am writing in strong support of your resolutions, H.J.RES.112 and S.J.RES.48, which would stop the Internal Revenue Service (IRS) from imposing a new tax on employers of up to $3,000 per worker.

Under the Congressional Review Act of 1996, Congress has the authority and responsibility to disapprove of overly burdensome regulations and order that “such rule shall have no force or effect.” The rule recently issued by the IRS to issue tax credits to all individuals purchasing health insurance through an exchange regardless of the exchange’s structure (published on May 23, 2012) is a prime target for CRA disapproval. This rule directly conflicts with the statutory language in the President’s health care law and it would have harmful effects on our nation’s employers.

Under the health care law, states are asked to create health care exchanges. If a state does not do so, then the federal government has the authority to create one in its absence. Individuals that purchase insurance from these exchanges will receive a tax credit if their income is below 400% of the federal poverty level (approximately $89,000 for a family of four). However, according to the explicit language of the law only people enrolled in state-created exchanges—not federal exchanges—are eligible to receive the tax credit. AFP is deeply concerned about regulatory agencies overstepping their statutory authority. The IRS does not have the authority to expand access to a premium tax credit beyond what is clearly written within the healthcare law.

AFP is also concerned about the effects this IRS decision will have on employers. Employers will be taxed up to $3,000 per employee if they do not provide ”affordable” health benefits and if their employees receive tax credits or subsidies to purchase a health insurance plan through a state-based exchange. However, the clear language of the statute shows that employers are not subject to the tax if their employees purchase insurance through a federal exchange. By issuing tax credits to all individuals, regardless of the exchange’s structure, the agency creates a new tax liability on employers that the federal statute does not actually authorize.

Americans for Prosperity is proud to support H.J.Res.112 and S.J.RES.48. I urge your colleagues to support their passage, and I look forward to working with you in the future.


James Valvo
Director of Policy, Americans for Prosperity

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