The Patient Protection and Affordable Care Act (PPACA) provides tax credits and subsidies for the purchase of qualifying health insurance plans on state-run insurance exchanges. Contrary to expectations, many states are refusing or otherwise failing to create such exchanges. An Internal Revenue Service (IRS) rule purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own. This rule lacks statutory authority. The text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges. The IRS rule is contrary to congressional intent and cannot be justified on other legal grounds. Because the granting of tax credits can trigger the imposition of fines on millions of individuals and employers, the IRS rule is likely to be challenged in court.


health care, health insurance, Affordable Care Act, health insurance exchanges, tax credits, administrative law, Internal Revenue Service

Publication Date


Document Type


Place of Original Publication

Health Matrix: Journal of Law-Medicine

Publication Information

23 Health Matrix: Journal of Law-Medicine 119 (2013)


COinS Jonathan H. Adler Faculty Bio