Issa probes talks between White House, IRS on healthcare law

By Sam Baker
08/22/12 04:30 PM ET

The Hill:

Rep. Darrell Issa (R-Calif.) questioned Wednesday whether the White House pushed the IRS to implement President Obama's healthcare law in a way Issa believes is illegal.

Issa, chairman of the House Oversight and Government Reform Committee, believes the IRS is illegally implementing one of the law's crucial features — subsidies to help low-income people buy insurance.

In a letter to the IRS on Wednesday, Issa and Rep. Trey Gowdy (R-S.C.), who chairs the Oversight Committee's health panel, asked for copies of all communication about the policy between the IRS and the Executive Office of the President.


During a hearing on the issue earlier this month, IRS Commissioner Douglas Shulman explicitly denied any political pressure over the rule. The IRS's policy reflects the best interpretation of the agency's lawyers, he said.

But Issa and Gowdy said the IRS's defense of its policy is "flawed and misleading." They also asked for all legal analysis the IRS conducted or reviewed in drafting the regulation.

The Affordable Care Act sets up new insurance exchanges through which people can buy coverage, and it provides tax credits to help low-income people with that purchase. The law says each state should set up its own exchange but also directs the federal government to set one up in any state that does not.

The IRS is planning to provide tax credits in state-based and federally run exchanges. Issa and other conservatives say the subsidies should only be available in state exchanges — not the federal fallback.

The text of the law refers to an exchange "established by the state." Republicans take that phrase literally, while the IRS says Congress intended for the subsidies to function in every state — not just those that set up their own exchanges.

Several Republican governors have said they won't create exchanges because of their opposition to the healthcare law.

"Since there is nothing in the legislative history to support IRS’s rule and IRS ignored the legislative history that suggests the plain text of the statute represented Congressional intent about limiting the tax credits to state Exchanges, IRS’s defense of its rule using 'the relevant legislative history' is flawed and misleading,” Issa said in his letter to the IRS.

The Congressional Budget Office has interpreted the law the same way as the IRS — assuming that subsidies would be available to low-income people buying insurance through an exchange, not just state-run exchanges. Despite the "state exchange" phrasing, the law does not establish separate rules or other procedures for state-based and federal exchanges.