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The U.S. Supreme Court on Monday showed clear signs that it is ready to tackle the contentious issue of the constitutionality of the Affordable Care Act sooner rather than later. On the first of three days of historic oral arguments on the health care law, the justices considered what could have been a show-stopping issue: whether the Court has jurisdiction to consider the issue now at all, or whether it has to wait until 2015, when the first taxpayer who refuses to buy health insurance under the so-called “individual mandate” is required to pay a penalty to the IRS. For 90 minutes, the Court debated whether that penalty is a tax that would trigger the Anti-Injunction Act (AIA), an 1867 law that requires individuals to pay their tax before they can challenge the law that created the tax. But none of the justices seemed to embrace that argument, indicating that they believe either that the penalty is not a tax or that, even if it is, the AIA is not a jurisdictional bar that prevents them from proceeding to the merits of the case. The justices will hear the merits arguments on Tuesday and Wednesday. “Congress has nowhere used the word ‘tax’ ” in the health care law, said Justice Stephen Breyer at one point. “ What it says is ‘penalty.’ ” Justice Sonia Sotomayor said later, “ Isn’t the fairer statement that Congress has accepted the argument that in the extraordinary case, we will hear the case” in spite jurisdictional concerns. “Most of the justices seem skeptical of the claim that the mandate and penalty are a tax,” said Georgetown University Law Center professor Randy Barnett, a key strategist in the challenges to the health care law. “They seem ready, willing and able to reach the merit of the commerce clause claim.” Alan Morrison, who pressed the jurisdictional issue in the lower courts as well as in the Supreme Court, said after the arguments, “It looks like all nine justices would like to reach the merits, but they seem to be having trouble figuring out to do it without setting a bad precedent or unleashing unacceptable consequences.” Morrison is an associate dean at George Washington University Law School. The courtroom was full for the occasion, with members of the Supreme Court bar crowding the 76 seats in the front section, and about 150 seats for the public toward the rear. Attorney General Eric Holder Jr. was spotted sitting in the public section, and Sen. Jeff Sessions (R-Ala.) was also on hand. More members of Congress and other VIPs may attend Tuesday for the two hours of argument on the core issue of the individual mandate. During the early stages of the litigation over the massive health law passed in 2010, the Obama administration argued that the AIA applied, hoping to put off the challenges that threaten to scuttle all or part of the statute. But then it backed off that argument, instead asking for resolution of the dispute now. The 26 states and private parties that sued to overturn the law also say the AIA does not apply. But the high court wanted the issue aired anyway and appointed Covington & Burling partner Robert Long to argue in favor of the jurisdictional bar. Saddled with an orphaned argument, Long stressed the importance of the AIA as “central to federal tax assessment and collection.” It was passed to protect the orderly operation of the tax system from litigation aimed at postponing payment. If the AIA does not apply, Long said, “the taxpayer will be able to go to court at any time without exhausting administrative remedies.” Justice Antonin Scalia rejected any “parade of horribles,” suggesting that any wave of anti-tax litigation could be managed by “intelligent” federal judges. Long appeared not to gain traction with other justices, either. At the end of the argument, Chief Justice John Roberts Jr. thanked Long for ably carrying out the task the Court asked him to do. Solicitor General Donald Verrilli Jr. had better success with a middle-ground argument asserting that the AIA is a jurisdictional bar crucial to protecting the tax system—#8212;but that it does not apply to the health care law, because the penalty at issue is not a tax. “This case presents issues of great moment, and the Anti-Injunction Act does not bar the consideration of those issues,” Verrilli said. That, he said, is because Congress did not label the holdout penalty as a tax. But Justice Samuel Alito Jr. quickly challenged a seeming inconsistency in Verrilli’s position, in light of the fact that the Obama administration is also arguing that the taxing power of Congress is one of the justifications that makes the health care law constitutional. “General Verrilli, today you are arguing that the penalty is not a tax,” said Alito. “Tomorrow you are going to be back and you will be arguing that the penalty is a tax.” Verrilli responded that “the nature of the inquiry that we will conduct tomorrow is different,” and that the taxing power can be invoked even when a penalty is involved. Later in the argument Verrilli did not help himself when, more than once, he inadvertently called the penalty a tax in response to a question from Justice Elena Kagan. “Why do you keep saying tax?” Breyer asked. Verrilli switched to the phrase “tax penalty,” and said, “Thank you, Justice Breyer.” Arguing for the challengers to the law, Jones Day partner Gregory Katsas offered a different rationale for not allowing the AIA to block consideration of the merits of the health care law. He argued that the target of the challenges was not the penalty, whatever it is called, but rather the individual mandate requiring purchase of health insurance. “That requirement itself is not a tax,” Katsas said. “And for that reason alone, we think the Anti-Injunction Act does not apply.” But Roberts said that separating the mandate from the penalty “doesn’t seem to make much sense,” because without the penalty, the insurance requirement would be “completely toothless.” Tony Mauro can be contacted at tmauro@alm.com.

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