Appeals court dismisses challenges to health reform law

A federal appeals court in Virginia on Thursday rejected two conservative challenges to President Obama’s healthcare law, ruling that the legal dispute over the mandate to have insurance cannot be decided by judges until after 2014 when the tax penalty takes effect.

The first decision overruled a Virginia judge, who was the first to declare the healthcare law unconstitutional, and it threw out the suit brought by Virginia Atty. Gen. Kenneth Cuccinelli on the grounds that he had no standing to sue in the first place.

But the second decision could change the brewing legal battle over the healthcare law, which appears headed for a Supreme Court showdown early next year.

Chief Judge Diana Gribbon Motz of the U.S. 4th Circuit Court of Appeals pointed to the heretofore ignored federal law known as the Anti-Injunction Act, which forbids taxpayers from challenging taxes in court prior to paying the tax.

Beginning in 2014, a taxpayer who has a taxable income but does not have health insurance will be assessed a penalty of $95. The penalty would rise to $325 in 2015 and $695 in 2016. Lawyers for Liberty University in Lynchburg, Va., filed suit the day Obama signed the healthcare overhaul into law, contending the mandate to have insurance was unconstitutional.

But Motz said the law barred her and other judges from ruling on the issue before the tax takes effect.

“Because this suit constitutes a pre-enforcement action seeking to restrain the assessment of a tax, the Anti-Injunction Act strips us of jurisdiction,” she said in Liberty University vs. Geithner. “By its terms the AIA bars suits seeking to restrain the assessment or collection of a tax. ... A taxpayer can always pay an assessment, seek a refund directly from the IRS, and then bring a refund action in federal court,” she said.

Before Thursday’s decision, the federal appeals courts had split on the constitutional issue. The 6th Circuit Court of Appeals in Ohio upheld the law in a 2-1 decision, and the 11th Circuit in Atlanta struck it down in a 2-1 decision.

The challengers in the Ohio case have already filed an appeal with the Supreme Court urging the justices to decide the question.

The 4th Circuit ruling could complicate the matter by raising doubt as to whether any judges, including the high court, have jurisdiction until the tax penalty takes effect in three years.

david.savage@latimes.com