24 more school corps join IRS lawsuit on employer mandate

Twenty-four additional school corporations have joined the lawsuit filed in October by the state of Indiana and 15 school corporations against the Internal Revenue Service challenging the tax penalties that could be imposed in 2015 under the “employer mandate” of the Affordable Care Act.

The lawsuit challenges new IRS regulations implemented under the new health care law and the authority of the federal government to impose the employer mandate on the state and Indiana public school corporations. The mandate declares that applicable large employers are required to offer full-time employees health insurance.

If large employers do not meet that requirement and workers then receive federal subsidies to get health insurance coverage, the employers may be subject to large financial penalties – up to $2,000 per employee for all full-time employees in the organization.

“It is unprecedented in the history of the United States that 39 public schools have joined together in a single lawsuit against the IRS. The significant participation of Indiana public schools in this lawsuit underscores the debilitating impact that the employer penalties are having upon public education,” said Jim Hamilton, an attorney at Bose McKinney & Evans LLP representing the public schools.  “All Indiana public school corporations provide comprehensive health insurance coverage to most of their employees. However, the practical reality is that most Indiana public school corporations do not have the financial resources to provide affordable, minimum value coverage to all employees who work in excess of 30 hours of service per week.”

Indiana Attorney General Greg Zoeller, who represents the state in the lawsuit, called the IRS tax penalties “draconian.”

“The objective of this case is to defend fundamental state authority to structure our government workforce to provide services; and individuals’ access to health insurance never has been the focus of the suit,” Zoeller said. "Our State should be protected as is constitutionally guaranteed from federal government overreach under our American system of federalism, and the participation of so many school corporations in the challenge reflects mutual concern that this principle has been undermined by the IRS’s actions.”

The amended lawsuit seeks an injunction blocking the IRS and other federal agencies from applying the regulation and penalties against the school corporations and the state as government employees. The plaintiffs also want the federal court to issue a declaratory judgment finding the IRS regulations as applied to the state government and schools unconstitutional and void under the 10th Amendment.

The school corporations in the lawsuit come from throughout the state and include the Charles A. Beard Memorial School Corp. in Knightstown; Salem Community Schools in Salem; and Mooresville Consolidated School Corp. in Mooresville.

The lawsuit is pending in U.S. District Court for the Southern District of Indiana. No response has been filed yet by the federal defendants, which include Health and Human Services Secretary Kathleen Sebelius and the U.S. Department of Labor.