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Oklahoma Wins Lawsuit Challenging IRS Subsidies

| Labor & Workplace

On Tuesday, Oklahoma was victorious in its lawsuit challenging the implementation of the Affordable Care Act. In September 2012, Oklahoma was the first to challenge the legality of an IRS rule that caused billions in subsidies to be paid out, despite Congress having never authorized those payments.

Oklahoma’s lawsuit challenges an IRS rule from May 2012 that called for 1) tax subsidies to be issued in states like Oklahoma without a state-based health care exchange and 2) assessed “large employer” penalties in states that did not establish state health care exchanges. Both parts of the rule contradict the language of the ACA, which plainly states that tax subsidies can only be issued and tax penalties are only to be assessed in states that established state-based health care exchanges.


The Eastern District Court of Oklahoma’s ruling in favor of the state’s lawsuit challenging that IRS rule sets an important precedent for North Carolina, which like Oklahoma, does not have a state-based health care exchange. This is an important ruling as many states have also challenged the IRS subsidies in other jurisdictions.

Click here for the judge’s order.