ACA document (Photo: Shutterstock)

A U.S. court of appeals has ruled against an employer that sued the IRS over $1.1 million in penalties for not adequately providing insurance coverage for employees. The court ruled that the penalties, called exactions, fell under tax code under a definition provided by an earlier Supreme Court ruling, and therefore is exempt from lawsuits under federal law.

The case, “Optimal Wireless LLC v. IRS,” was before the U.S. Court of Appeals for the District of Columbia after an initial ruling from the U.S. District Court in D.C. found that the exaction penalty was a form of tax, and therefore exempt from lawsuits under the Anti-Injunction Act. The IRS had sent notice to Optimal Wireless in 2019 proposing penalties for the company’s noncompliance regarding health care coverage for employees—coverage that is mandated by the Affordable Care Act (ACA).


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