Kansas Suing Federal Government Over Affordable Care Act Taxes

The following press release was sent from the Kansas Attorney General’s office.

Kansas Attorney General Derek Schmidt asked for help from the Kansas congressional delegation to repeal two taxes he says are unlawfully imposed on the State of Kansas by the Affordable Care Act (ACA) and to obtain a refund of the state’s payments made to date.

Kansas has sued the federal government over the Health Insurance Provider Fee, which is one of the two taxes. That case, State of Texas, et al. v. United States of America, et al., remains pending in federal district court in Texas. To date, the State of Kansas has paid $90,065,692 in taxes to the federal government. Kansas also has led a 13-state coalition objecting to the “transitional reinsurance program,” which was designed to apply a tax on state government health plans like that of Kansas. That case, State of Ohio, et al., v. United States of America, et al., is currently pending decision in the U.S. Court of Appeals for the 6th Circuit. To date, Kansas has paid $9,130,700 in transitional reinsurance taxes.

“Kansas maintains that these attempts by the federal government to commandeer state taxing power – in effect, to tax the states – is both unlawful and unconstitutional,” Schmidt wrote in the letter to the state’s congressional delegation. “I am prepared to continue to litigate these cases to their conclusion, and if we are successful, to recover the funds Kansas was unlawfully compelled to pay. However, because Congress is preparing to reconsider portions of the ACA, a preferable outcome would be for Congress to require a full refund of the funds paid under [the two taxes] by Kansas and others that have challenged the taxes.”

The total amount paid so far to the federal government by Kansas under these two taxes is $99,196,392.14. Schmidt said the first priority for Congress should be to end future collection of these taxes before the State of Kansas is required to make any further payments. The next state payment of the transitional reinsurance tax is due November 17, 2017, and the next Health Insurance Provider Fee payment will come due in 2018.

“Kansas has important state-level priorities for which our citizens pay state taxes,” Schmidt said. “State taxes are not intended to fund the operations of the federal government, but that is what has happened with these two unlawful taxes imposed on Kansas by the ACA. We’re asking for that to end, and we’re asking for help in getting the state’s money back.”

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