As you’re probably well aware, last year the Supreme Court held that Congress has the power to use its “taxation” authority under Article I, Section 8 of the Constitution to impose the individual coverage mandate under the Patient Protection and Affordable Care Act of 2010 (or PPACA). National Federation of Independent Businesses v. Sebelius. In the wake of that decision, plaintiffs still wishing to challenge the constitutionality of PPACA have looked to new theories on which to challenge the legislation. A series of recent cases have focused the Constitutionality discussion on the first clause of Article I, Section 7 of the Constitution (more commonly referred to as the “Origination Clause”), which generally requires that “ all revenue raising bills (e.g., tax bills) originate in the House of Representatives”.
The Origination Clause carries two kinds of prohibitions. First, the Senate may not originate any measure that includes a provision for raising revenue, and second, the Senate may not propose any amendment that would raise revenue to a non-revenue measure. The Senate, however, may generally amend a House-originated revenue measure as it sees fit. These prohibitions can be enforced in either the House or the Senate, and there are ample precedents for both. As with many provisions of the Constitution, the precise meaning and application of these few words has been refined through practice and precedent since it was first ratified.
The House passed a version of health care reform on November 7, 2009, and sent it to the Senate. Unhappy with this version, a group of senators wanted to produce their own bill. The Origination Clause, however, requires that all bills for raising revenue must begin in the House, and health care reform included many new taxes/revenue raisers, including the individual mandate. To solve this problem, the Senate amended another tax bill that the House had recently passed: H.R. 3590. This House bill originally changed the tax rules for servicemen and women buying new homes. The Senate struck out the text of the existing bill, and inserted its new proposal as an amendment (i.e., it used a “shell bill”). This modified version of H.R. 3590 passed the Senate by a vote of 60-39.
The plaintiffs in Hotze v. Sebelius (filed at the beginning of May in the Southern District of Texas) and Pacific Legal Foundation v. Salazar (filed late March in the Eastern District of California) have both challenged PPACA based on this Origination Clause argument. The plaintiffs in each case have contended that PPACA violates the Origination Clause because the Senate replaced the language of the “Service Members Home Ownership Tax Act of 2009” (H.R. 3590) – a non-revenue raising bill which purported to modify a first-time homebuyer’s taxcredit by waiving recapture of the credit for members of the armed forces ordered to extended duty service overseas – after it had passed the House with the text of the Affordable Care Act and renamed the bill PPACA. Thus, they claim, PPACA – a revenue raising bill – did not actually originate in the House as required by the Origination Clause.
Some commentators are skeptical of the Origination Clause argument and point to the internal congressional mechanisms by which the House may “return” an improper Senate bill. The House’s primary method for enforcement of the Origination Clause is through a process known as “blue-slipping.” As described in a Congressional Research Service report, “[b]lue-slipping is the term applied to the act of returning to the Senate a measure that the House has determined violates its prerogatives as defined by the Origination Clause.” [As an FYI – this process is called blue-slipping because historically the resolution returning the offending bill to the Senate has been printed on blue paper.]
Historically, the judicial role in enforcing the Origination Clause has been limited. Typically, Justices have been reluctant to look behind a bill as enrolled to determine its validity. The Court primarily limits its role to determining whether a given measure fits the definition of a bill for raising revenue. When questions of origination have been involved, the Court has looked to the measure’s designation as a House or Senate bill, but not examined the journals of the House or Senate to determine in which house a specific revenue provision may actually have originated.
Still, commentators assert that if ever there was an act could be deemed to violate the Origination Clause, it would seem to be PPACA. Of particular relevance to this assertion is Chief Justice Roberts’ majority opinion where he states in no uncertain terms that PPACA establishes a federal tax (rather than a mandate). As with other provisions of the Constitution, if the Court were to find that a revenue bill had been passed in violation of the Origination Clause, the consequence would be for the statute or provision to be held invalid. If it is decided that the bill did indeed begin in the Senate, there may be serious ramifications.
Hotze and Pacific Legal Foundation are not the first direct challenges to the constitutionality under the Origination Clause. In fact, at the end of last month, a D.C. District Court dismissed a similar claim brought by Sissel v. United States Department of Health and Human Services (also brought by the Pacific Legal Foundation), the plaintiff claimed that the minimum coverage provision / individual mandate was unconstitutional because (i) Congress lacked the power to enact it under the Commerce Clause and (ii) it was passed in violation of the Origination Clause. The Court, in dismissing Sissel’s complaint, found in regards to the Original Clause that Sissel’s complaint failed to meet both of the requirements for an Original Clause claim: (i) the bill at issue is a “bill for raising revenue” and (ii) the bill at issue must not have originated in the House of Representatives. Even though the Court recognized that the individual mandate would raise revenues through shared responsibility payments, it stated that any revenue created was “incidental” to the primary goal of expanding insurance coverage (and, thus, the mandate was not a bill for raising revenue). Additionally, as the individual mandate was an amendment to a bill originated in the House (i.e., H.R. 3590), the complaint could not meet the second prong of an Origination Clause claim. Earlier this month, an appeal was filed in the D.C. Circuit Court of Appeals.
The Origination Clause has also been raised by a number of plaintiffs as after-the-fact arguments. Take, for example, AAPS v. Sebelius, filed in the U.S. District Court of the District of Columbia in 2010 and decided by the district court in 2012. In dismissing the plaintiffs’’ lawsuit in AAPS v. Sebelius, the district court declined to address the Origination Clause claim as the plaintiffs did not properly plead the issue in their complaint or response to the motion to dismiss, but instead only in a supplemental brief. The plaintiffs’ appeal of the district court’s decision is currently pending before the D.C. Circuit. Similarly, the Court of the Appeals for the 4th Circuit just recently in Liberty University v. Lew waived plaintiff’s Origination Clause on appeal of a lower court decision because the plaintiffs “had the opportunity to raise these arguments in the district court and in the original briefing in this case but did not do so.” There is clearly some hesitance in reviewing the Origination Clause argument, outside of the Sissel Court’s decision.
In the National Federation of Independent Businesses dissent, Justice Scalia alluded to the Origination Clause argument against PPACA stating, “[t]axes have never been popular . . . and in part for that reason, the Constitution requires tax increases to originate in the House of Representatives . . . Imposing a tax through judicial legislation inverts the constitutional scheme, and places the power to tax in the branch of government least accountable to the citizenry.” From this it can be inferred that there is concern among the dissenting Justices regarding the procedural mechanisms the Constitution puts into place.
However, a 1914 Supreme Court decision in Rainey v. United States, gives support for the affirmation of PPACA. In that case, the majority allowed the Senate to add an excise tax to a House revenue measure where there was no connection between the two at all other than the fact that both provisions were taxes. With regards to a revenue raising act, the Rainey Court observed that “the section was proposed by the Senate as an amendment to a bill for raising revenue which originated in the House. That is sufficient. Having become an enrolled and duly authenticated act of Congress, it is not for this court to determine whether the amendment was or was not outside the purposes of the original bill.”
The Constitution does not provide specific guidelines as to what constitutes a bill for raising revenue. Not surprisingly, the meaning of a “bill for raising revenue” is therefore a question of interpretation. In most instances in which the courts have ruled with regard to Origination Clause matters, it has been as to whether a particular measure was a revenue bill within the meaning of the clause, not as to the question of its origin. Deference is typically given to the House to determine whether the Origination Clause applies in a given case. Still, that determination may be subject of judicial review if the Supreme Court so chooses. The interested parties have aligned in a predictable way and despite the ruling in National Federation of Independent Businesses, it is evident that the challenges to PPACA are far from over.
A special thanks to our summer associate, Alejandro Montenegro, for his valuable assistance in drafting this blog entry.