Kokomo Tribune; Kokomo, Indiana

Breaking News

Opinion

October 18, 2013

GREG ZOELLER: Can IRS tax state gov't?

That's the question Indiana's lawsuit asks.

Can the IRS require Indiana’s state government to pay a tax penalty, just like any other employer? The answer will set a precedent that goes to the fundamental relationship between states and the federal government. Much confusion exists over the lawsuit my office recently filed against the IRS, similar to the confusion over the Affordable Care Act (ACA) itself. Simply put, our lawsuit seeks a declaration by the court as to what the law means and how it affects state government.

We raise these questions respectfully, but since litigation is adversarial by nature, some view this as an extension of political arguments in Washington, D.C., regarding the ACA. Our case is part of the constitutional process by which new laws are tested and our judicial branch interprets their meaning. Obtaining a conclusive answer from the judiciary is important so that as the state’s lawyer, I can provide proper legal advice to my government clients.

State government does not pay federal income taxes, and the federal government does not pay state income taxes. This is called intergovernmental tax immunity, part of dual sovereignty and a bedrock of our constitutional system. As an employer, state government withholds taxes from the compensation we pay our employees, who owe state and federal taxes. But state government itself does not fill out an IRS income tax form. So when the U.S. Supreme Court ruled that the ACA was constitutional under Congress’ authority to impose taxes, it naturally raised the question whether states also would be subjected to the ACA employer mandate’s tax penalties. The IRS now seeks to impose tax authority over state government. If that occurs, it would significantly alter the relationship between the federal government and states in a negative way.

My office does not represent individuals or private sector employers but rather the sovereign authority of Indiana. When we realized state government could face tens of millions of dollars in IRS tax penalties if even one part-time state employee was misclassified in his benefits-eligibility category, I decided to proactively bring this question to the courts, rather than wait for the state to be hit with an enormous tax bill — a penalty that would only serve to transfer state and local tax dollars to the federal IRS. We seek relief from the employer mandate for state government and schools; but it will be up to the court to structure a remedy. Our lawsuit does not challenge the ability of citizens to shop for insurance coverage using the new federal exchange or to insure young people on their parents’ plans to age 26; it asks whether the IRS is correctly interpreting the ACA statute Congress passed.

As attorney general, my obligation is to defend our state’s authority and the decisions of our state’s policymakers. Usually this means defending the state when it is sued by plaintiffs. But from time to time the state must initiate its own lawsuits challenging federal actions that infringe upon our state’s authority. This is one of those rare occasions.

Greg Zoeller is attorney general of Indiana.

1
Text Only | Photo Reprints
Opinion
  • Rob Burgess House of Burgess: Bush presents 'The Art of Leadership'

    On April 5, “The Art of Leadership: A President’s Personal Diplomacy,” opened at the George W. Bush Presidential Library and Museum on the campus of Southern Methodist University. The display, which runs through June 3, boasts “portraits of more than two dozen world leaders” painted by Bush, according to the official literature.

    April 16, 2014 1 Photo

  • Bohanon: ‘Economics is fun’ in Vegas or in Bible study

    I am writing this on an airplane to Las Vegas. I’ll be attending the annual conference of the Association of Private Enterprise Education along with two of my colleagues and six of my students.

    April 16, 2014

  • Letters to the Editor: April 16, 2014

    At the time the agenda for the April 7 commissioner meeting came out, I was happy to see that the neglected commissioner board appointments were finally going to be addressed. These appointments had been in limbo for months on end.

    April 16, 2014

  • Hayden: Want better teacher ratings? Ask the kids

    The state may be back where it started, encumbered with a flawed teacher grading system, a year after implementing what were meant to be tough new standards.
    That was the general consensus of the State Board of Education days after teacher evaluation data were released last week.

    April 15, 2014

  • Letters to the Editor: April 15, 2014

    In a recent “public eye” article written by KT columnist Scott Smith about the proposed industrial wind turbine project; mention was made of the “new deal” brokered by Howard County Commissioners with E.ON.

    April 15, 2014

  • BRIAN HOWEY: Mike Pence for president in 2016? Stay tuned Mike Pence for president? The swirl of 2016 national ticket talk surrounding Gov. Pence intensified over the past few weeks. I sat down with the governor in his office on Tuesday to find out what he's really thinking. A few hours prior, the Weekly S

    April 14, 2014

  • DICK WOLFSIE: Such a thing as too much My wife and I went on a binge last week. If you think I'm talking about an eating binge, you've never seen how thin we both are. If you think I mean a shopping binge, you don't know how cheap we are. And if you think it was a cleaning binge, you've n

    April 14, 2014

  • April 14, 2014: Letters to the editor Watch for bicyclists on roadways, drivers When you ride a bike near a semi, there are at least four blind spots where the driver can't see you. We need to be careful when we ride near trucks. If we get hit by a semi, it's usually our fault. But we ne

    April 14, 2014

  • April 14, 2014: Weekly wrap FEMA no friend to hardship Many government officials ... across the state are likely asking themselves if the winter of 2014 will ever end. Sure, the snow has long since melted, but the bills from plowing snow, treating roads and hauling away the whi

    April 14, 2014

  • Immunize your child Pertussis is a communicable disease Americans just don't worry about today. Health professionals begin immunizing infants against pertussis, diphtheria and tetanus with the DTaP vaccine just two months after birth. But pertussis, better known as whoo

    April 13, 2014

Featured Ads
Only on our website
AP Video
Raw: Ferry Sinks Off South Korean Coast Town, Victims Remember Texas Blast Freeze Leaves Florida Panhandle With Dead Trees At Boston Marathon, a Chance to Finally Finish Are School Dress Codes Too Strict? Raw: Fatal Ferry Boat Accident Suspicious Bags Found Near Marathon Finish Line Boston Marks the 1st Anniversary of Bombing NYPD Ends Muslim Surveillance Program 8-year-old Boy Gets His Wish: Fly Like Iron Man Sex Offenders Arrested in Slayings of CA Women India's Transgenders Celebrate Historic Ruling Tributes Mark Boston Bombing Anniversary Raw: Kan. Shooting Suspect Faces Judge
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Obituaries
Poll