                            PUBLISHED

                 UNITED STATES COURT OF APPEALS
                     FOR THE FOURTH CIRCUIT


                           No. 14-1158


DAVID KING; DOUGLAS HURST; BRENDA LEVY; ROSE LUCK,

               Plaintiffs - Appellants,

          v.

SYLVIA MATTHEWS BURWELL, in her official capacity as U.S.
Secretary of Health and Human Services; UNITED STATES
DEPARTMENT OF HEALTH & HUMAN SERVICES; JACOB LEW, in his
official capacity as U.S. Secretary of the Treasury; UNITED
STATES DEPARTMENT OF THE TREASURY; INTERNAL REVENUE SERVICE;
JOHN KOSKINEN, in his official capacity as Commissioner of
Internal Revenue,

               Defendants – Appellees,

------------------------------

SENATOR JOHN CORNYN; SENATOR TED CRUZ; SENATOR ORRIN HATCH;
SENATOR MIKE LEE; SENATOR ROB PORTMAN; SENATOR MARCO RUBIO;
CONGRESSMAN DARRELL ISSA; PACIFIC RESEARCH INSTITUTE; THE
CATO   INSTITUTE;   THE   AMERICAN   CIVIL    RIGHTS UNION;
JONATHAN H. ADLER; MICHAEL F. CANNON; STATE OF OKLAHOMA;
STATE OF ALABAMA; STATE OF GEORGIA; STATE OF WEST VIRGINIA;
STATE OF NEBRASKA; STATE OF SOUTH CAROLINA; CONSUMERS’
RESEARCH; STATE OF KANSAS; THE GALEN INSTITUTE,

               Amici Supporting Appellants,

COMMONWEALTH OF VIRGINIA; AMERICA’S HEALTH INSURANCE PLANS;
AMERICAN CANCER SOCIETY; AMERICAN CANCER SOCIETY CANCER
ACTION NETWORK; AMERICAN DIABETES ASSOCIATION; AMERICAN
HEART ASSOCIATION; PUBLIC HEALTH DEANS, CHAIRS, AND FACULTY;
MEMBERS OF CONGRESS AND STATE LEGISLATURES; AMERICAN
HOSPITAL ASSOCIATION; ECONOMIC SCHOLARS; FAMILIES USA; AARP;
NATIONAL HEALTH LAW PROGRAM,

               Amici Supporting Appellees.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond.   James R. Spencer, Senior
District Judge. (3:13-cv-00630-JRS)


Argued:   May 14, 2014                    Decided:   July 22, 2014


Before GREGORY and THACKER, Circuit Judges, and DAVIS, Senior
Circuit Judge.


Affirmed by published opinion. Judge Gregory wrote the opinion,
in which Judge Thacker and Senior Judge Davis joined.     Judge
Davis wrote a concurring opinion.


ARGUED: Michael Anthony Carvin, JONES DAY, Washington, D.C., for
Appellants.     Stuart F. Delery, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Appellees.      Stuart Alan Raphael,
OFFICE OF THE ATTORNEY GENERAL OF VIRGINIA, Richmond, Virginia,
for Amicus Commonwealth of Virginia. ON BRIEF: Yaakov M. Roth,
Jonathan Berry, JONES DAY, Washington, D.C., for Appellants.
Dana J. Boente, United States Attorney, OFFICE OF THE UNITED
STATES ATTORNEY, Alexandria, Virginia; Beth S. Brinkmann, Deputy
Assistant Attorney General, Mark B. Stern, Alisa B. Klein, Civil
Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.,
for Appellees. Michael E. Rosman, CENTER FOR INDIVIDUAL RIGHTS,
Washington, D.C.; Carrie Severino, THE JUDICIAL EDUCATION
PROJECT, Washington, D.C.; Charles J. Cooper, David H. Thompson,
Howard C. Nielson, Jr., Brian W. Barnes, COOPER & KIRK, PLLC,
for   Amici     Senator    John    Cornyn,    Senator    Ted  Cruz,
Senator Orrin Hatch, Senator Mike Lee, Senator Rob Portman,
Senator    Marco    Rubio,    and    Congressman    Darrell   Issa.
C. Dean McGrath, Jr., MCGRATH & ASSOCIATES, Washington, D.C.;
Ilya Shapiro, CATO INSTITUTE, Washington, D.C.; Bert W. Rein,
William S. Consovoy, J. Michael Connolly, WILEY REIN LLP,
Washington, D.C., for Amici Pacific Research Institute, The Cato
Institute,     and    The     American     Civil    Rights   Union.
Andrew M. Grossman, BAKER HOSTETLER, Washington, D.C., for Amici
Jonathan H. Adler and Michael F. Cannon.          E. Scott Pruitt,
Attorney General, Patrick R. Wyrick, Solicitor General, OFFICE
OF THE ATTORNEY GENERAL OF OKLAHOMA, Oklahoma City, Oklahoma;
Luther Strange, Attorney General, OFFICE OF THE ATTORNEY GENERAL
OF ALABAMA, Montgomery, Alabama; Sam Olens, Attorney General,

                                2
OFFICE OF THE ATTORNEY GENERAL OF GEORGIA, Atlanta, Georgia;
Patrick Morrisey, Attorney General, OFFICE OF THE ATTORNEY
GENERAL    OF    WEST     VIRGINIA,    Charleston,      West     Virginia;
Jon Bruning, Attorney General, Katie Spohn, Deputy Attorney
General, OFFICE OF THE ATTORNEY GENERAL OF NEBRASKA, Lincoln,
Nebraska; Alan Wilson, Attorney General, OFFICE OF THE ATTORNEY
GENERAL OF SOUTH CAROLINA, Columbia, South Carolina, for Amici
State of Oklahoma, State of Alabama, State of Georgia, State of
West Virginia, State of Nebraska, and State of South Carolina.
Rebecca A. Beynon, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL,
P.L.L.C., Washington, D.C., for Amicus Consumers’ Research.
Derek Schmidt, Attorney General, Jeffrey A. Chanay, Deputy
Attorney General, Stephen R. McAllister, Solicitor General,
Bryan C. Clark, Assistant Solicitor General, OFFICE OF THE
ATTORNEY GENERAL OF KANSAS, Topeka, Kansas; Jon Bruning,
Attorney General, OFFICE OF THE ATTORNEY GENERAL OF NEBRASKA,
Lincoln, Nebraska, for Amici State of Kansas and State of
Nebraska.   C. Boyden Gray, Adam J. White, Adam R.F. Gustafson,
BOYDEN GRAY & ASSOCIATES, Washington, D.C., for Amicus The Galen
Institute.           Mark      R.    Herring,       Attorney      General,
Cynthia E. Hudson, Chief Deputy Attorney General, Trevor S. Cox,
Deputy Solicitor General, OFFICE OF THE ATTORNEY GENERAL OF
VIRGINIA,   Richmond,     Virginia,    for    Amicus    Commonwealth    of
Virginia.    Joseph Miller, Julie Simon Miller, AMERICA’S HEALTH
INSURANCE     PLANS,    Washington,     D.C.;     Andrew     J.    Pincus,
Brian D. Netter, MAYER BROWN LLP, Washington, D.C., for Amicus
America’s Health Insurance Plans.          Mary P. Rouvelas, AMERICAN
CANCER   SOCIETY     CANCER    ACTION   NETWORK,     Washington,     D.C.;
Brian G. Eberle, SHERMAN & HOWARD L.L.C., Denver, Colorado, for
Amici American Cancer Society, American Cancer Society Cancer
Action Network, American Diabetes Association, and American
Heart Association.         Clint A. Carpenter, H. Guy Collier,
Ankur J. Goel, Cathy Z. Scheineson, Lauren A. D'Agostino,
MCDERMOTT WILL & EMERY LLP, Washington, D.C., for Amicus Public
Health Deans, Chairs, and Faculty.                Elizabeth B. Wydra,
Douglas T.     Kendall,     Simon    Lazarus,     Brianne     J.    Gorod,
CONSTITUTIONAL ACCOUNTABILITY CENTER, Washington, D.C., for
Amicus    Members      of     Congress     and     State     Legislators.
Melinda Reid Hatton,       Maureen     Mudron,      AMERICAN      HOSPITAL
ASSOCIATION, Washington, D.C.; Dominic F. Perella, Sean Marotta,
HOGAN LOVELLS US LLP, Washington, D.C., for Amicus American
Hospital Association.        Matthew S. Hellman, Matthew E. Price,
Julie Straus Harris, Previn Warren, JENNER & BLOCK LLP,
Washington,       D.C.,      for     Amicus      Economic        Scholars.
Robert N. Weiner, Michael Tye, ARNOLD & PORTER LLP, Washington,
D.C.,   for      Amicus     Families    USA.          Stuart R.     Cohen,


                                    3
Michael Schuster, AARP FOUNDATION LITIGATION, Washington, D.C.;
Martha Jane Perkins, NATIONAL HEALTH LAW PROGRAM, Carrboro,
North Carolina, for Amici AARP and National Health Law Program.




                               4
GREGORY, Circuit Judge:

      The plaintiffs-appellants bring this suit challenging the

validity    of    an    Internal      Revenue      Service    (“IRS”)    final    rule

implementing the premium tax credit provision of the Patient

Protection and Affordable Care Act (the “ACA” or “Act”).                           The

final rule interprets the ACA as authorizing the IRS to grant

tax credits to individuals who purchase health insurance on both

state-run        insurance      “Exchanges”            and   federally-facilitated

“Exchanges” created and operated by the Department of Health and

Human Services (“HHS”).              The plaintiffs contend that the IRS’s

interpretation         is   contrary    to       the   language   of   the    statute,

which, they assert, authorizes tax credits only for individuals

who   purchase     insurance     on     state-run       Exchanges.      For    reasons

explained below, we find that the applicable statutory language

is ambiguous and subject to multiple interpretations.                         Applying

deference to the IRS’s determination, however, we uphold the

rule as a permissible exercise of the agency’s discretion.                          We

thus affirm the judgment of the district court.



                                          I.

      In March of 2010, Congress passed the ACA to “increase the

number of Americans covered by health insurance and decrease the

cost of health care.”           Nat’l Fed’n of Indep. Bus. v. Sebelius,

132   S.    Ct.    2566,      2580     (2012)      (NFIB).        To   increase    the

                                             5
availability of affordable insurance plans, the Act provides for

the establishment of “Exchanges,” through which individuals can

purchase    competitively-priced           health      care     coverage.           See    ACA

§§ 1311,      1321.      Critically,      the    Act      provides         a    federal    tax

credit to millions of low- and middle-income Americans to offset

the cost of insurance policies purchased on the Exchanges.                                 See

26   U.S.C.    § 36B.         The    Exchanges     facilitate         this       process    by

advancing an individual’s eligible tax credit dollars directly

to health insurance providers as a means of reducing the up-

front cost of plans to consumers.

       Section 1311 of the Act provides that “[e]ach State shall,

not later than January 1, 2014, establish an American Health

Benefit Exchange.”            ACA § 1311(b)(1).            However, § 1321 of the

Act clarifies that a state may “elect” to establish an Exchange.

Section    1321(c)      further       provides     that    if    a     state       does    not

“elect” to establish an Exchange by January 1, 2014, or fails to

meet    certain       federal       requirements     for       the    Exchanges,          “the

Secretary      [of    HHS]    shall     . . .    establish           and       operate    such

exchange    within      the   State     . . . .”         ACA    § 1321(c)(1).             Only

sixteen states plus the District of Columbia have elected to set

up their own Exchanges; the remaining thirty-four states rely on

federally-facilitated Exchanges.

       Eligibility      for     the    premium     tax     credits         is    calculated

according to 26 U.S.C. § 36B.               This section defines the annual

                                           6
“premium assistance credit amount” as the sum of the monthly

premium     assistance       amounts      for      “all    coverage       months    of    the

taxpayer occurring during the taxable year.”                          Id. § 36B(b)(1).

A “coverage month” is one in which the taxpayer is enrolled in a

health plan “through an Exchange established by the State under

section      1311.”           Id.        § 36B(c)(2)(A)(i);           see       also      id.

§ 36B(b)(2)(A)-(B) (calculating the premium assistance amount in

relation     to   the   price      of    premiums     available       and    enrolled      in

“through an Exchange established by the State under [§] 1311”).

      In    addition    to    the       tax   credits,      the     Act   requires       most

Americans to obtain “minimum essential” coverage or pay a tax

penalty imposed by the IRS.                   Id. § 5000A; NFIB, 132 S. Ct. at

2580.       However, the Act includes an unaffordability exemption

that excuses low-income individuals for whom the annual cost of

health      coverage    exceeds          eight     percent     of     their       projected

household     income.        26    U.S.C.       § 5000A(e)(1)(A).           The    cost    of

coverage     is   calculated        as    the     annual    premium       for   the    least

expensive insurance plan available on an Exchange offered in a

consumer’s state, minus the tax credit described above.                                   Id.

§ 5000A(e)(1)(B)(ii).             The tax credits thereby reduce the number

of individuals exempt from the minimum coverage requirement, and

in   turn    increase    the      number      of    individuals       who   must      either

purchase health insurance coverage, albeit at a discounted rate,

or pay a penalty.

                                              7
       The IRS has promulgated regulations making the premium tax

credits available to qualifying individuals who purchase health

insurance on both state-run and federally-facilitated Exchanges.

See    26   C.F.R.   § 1.36B-1(k);      Health   Insurance      Premium   Tax   7

Credit, 77 Fed. Reg. 30,377, 30,378 (May 23, 2012) (collectively

the “IRS Rule”).         The IRS Rule provides that the credits shall

be available to anyone “enrolled in one or more qualified health

plans through an Exchange,” and then adopts by cross-reference

an    HHS   definition    of   “Exchange”     that   includes   any   Exchange,

“regardless of whether the Exchange is established and operated

by a State . . . or by HHS.”                26 C.F.R. § 1.36B-2; 45 C.F.R.

§ 155.20.     Individuals who purchase insurance through federally-

facilitated     Exchanges      are   thus   eligible   for   the   premium   tax

credits under the IRS Rule.           In response to commentary that this

interpretation might conflict with the text of the statute, the

IRS issued the following explanation:

       The statutory language of section 36B and other
       provisions of the Affordable Care Act support the
       interpretation that credits are available to taxpayers
       who obtain coverage through a State Exchange, regional
       Exchange, subsidiary Exchange, and the Federally-
       facilitated   Exchange.      Moreover,   the    relevant
       legislative history does not demonstrate that Congress
       intended to limit the premium tax credit to State
       Exchanges.      Accordingly,  the   final    regulations
       maintain the rule in the proposed regulations because
       it is consistent with the language, purpose, and
       structure of section 36B and the Affordable Care Act
       as a whole.

77 Fed. Reg. at 30,378.

                                        8
       The plaintiffs in this case are Virginia residents who do

not want to purchase comprehensive health insurance.                             Virginia

has declined to establish a state-run Exchange and is therefore

served by the prominent federally-facilitated Exchange known as

HealthCare.gov.         Without the premium tax credits, the plaintiffs

would       be   exempt    from      the    individual          mandate       under    the

unaffordability         exemption.         With    the     credits,       however,     the

reduced      costs   of    the    policies        available       to    the   plaintiffs

subject them to the minimum coverage penalty.                          According to the

plaintiffs, then, as a result of the IRS Rule, they will incur

some    financial       cost   because     they     will    be     forced     either    to

purchase insurance or pay the individual mandate penalty.

       The plaintiffs’ complaint alleges that the IRS Rule exceeds

the agency’s statutory authority, is arbitrary and capricious,

and    is    contrary     to   law   in    violation       of     the    Administrative

Procedure Act (“APA”), 5 U.S.C. § 706.                     The plaintiffs contend

that the statutory language calculating the amount of premium

tax credits according to the cost of the insurance policy that

the taxpayer “enrolled in through an Exchange established by the

State under [§ 1311]” precludes the IRS’s interpretation that

the credits are also available on national Exchanges.                           26 U.S.C.

§ 36B(b)(2)(A),         (c)(2)(A)(i)       (emphasis       added).        The    district

court disagreed, finding that the statute as a whole clearly

evinced      Congress’s    intent     to    make    the     tax    credits      available

                                            9
nationwide.        The district court granted the defendants’ motion

to dismiss, and the plaintiffs timely appealed.



                                            II.

       We must first address whether the plaintiffs’ claims are

justiciable.          The defendants make two arguments on this point:

(1)    that    the     plaintiffs       lack      standing;       and   (2)    that     the

availability of a tax-refund action acts as an independent bar

to the plaintiffs’ claims under the APA.

                                             A.

       We review de novo the legal question of whether plaintiffs

have standing to sue.               Wilson v. Dollar General Corp., 717 F.3d

337,   342     (4th    Cir.    2013).       Article    III     standing       requires   a

litigant      to   demonstrate        “an   invasion    of    a     legally    protected

interest” that is “concrete and particularized” and “‘actual or

imminent.’”        Lujan v. Defenders of Wildlife, 504 U.S. 555, 560

(1992) (quoting Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)).

The plaintiffs premise their standing on the claim that, if they

were    not    eligible       for    the    premium    tax    credits,        they    would

qualify for the unaffordability exemption in 26 U.S.C. § 5000A

and    would    therefore      not     be   subject    to     the    tax    penalty     for

failing to maintain minimum essential coverage.                            Thus, because

of the credits, the plaintiffs argue that they face a direct



                                             10
financial    burden     because     they       are    forced    either     to   purchase

insurance or pay the penalty.

       We agree that this represents a concrete economic injury

that is directly traceable to the IRS Rule.                     The IRS Rule forces

the plaintiffs to purchase a product they otherwise would not,

at an expense to them, or to pay the tax penalty for failing to

comply with the individual mandate, also subjecting them to some

financial    cost.         Although       it    is    counterintuitive,         the    tax

credits, working in tandem with the Act’s individual mandate,

impose a financial burden on the plaintiffs.

       The defendants’ argument against standing is premised on

the claim that the plaintiffs want to purchase “catastrophic”

insurance coverage, which in some cases is more expensive than

subsidized      comprehensive       coverage         required   by   the    Act.        The

defendants thus claim that the plaintiffs have acknowledged they

would actually expend more money on a separate policy even if

they were eligible for the credits.                   Regardless of the viability

of   this   argument,      it     rests    on    an     incorrect    premise.          The

defendants      misread     the     plaintiffs’         complaint,       which,       while

mentioning the possibility that several of the plaintiffs wish

to   purchase      catastrophic     coverage,         also   clearly     alleges       that

each plaintiff does not want to buy comprehensive, ACA-compliant

coverage and is harmed by having to do so or pay a penalty.                            The

harm   in   this    case   is     having    to   choose      between     ACA-compliant

                                           11
coverage and the penalty, both of which represent a financial

cost to the plaintiffs.            That harm is actual or imminent, and is

directly traceable to the IRS Rule.                   The plaintiffs thus have

standing to present their claims.

                                          B.

       The defendants also argue that the availability of a tax-

refund action bars the plaintiffs’ claims under the APA.                               The

defendants      assert     that    the   proper     course      of   action     for    the

plaintiffs is to pay the tax penalty and then present their

legal arguments against the IRS Rule as part of a tax-refund

action brought under either 26 U.S.C. § 7422(a) (“No suit or

proceeding shall be maintained in any court for the recovery of

any internal revenue tax alleged to have been erroneously or

illegally assessed or collected, . . . until a claim for refund

or credit has been duly filed . . . .”), or the Little Tucker

Act, 28 U.S.C. § 1346 (granting district courts jurisdiction to

hear   “[a]ny      civil    action    against     the     United     States     for   the

recovery     of    any     internal-revenue         tax   alleged     to    have      been

erroneously or illegally assessed or collected, or any penalty

claimed    to     have   been     collected    without     authority       or   any    sum

alleged    to     have   been     excessive    or    in   any    manner     wrongfully




                                          12
collected under the internal-revenue laws”). 1                      The defendants do

not, nor could they, assert this as a jurisdictional bar, but

instead point to “general equitable principles disfavoring the

issuance     of    federal    injunctions       against       taxes,     absent    clear

proof that available remedies at law [are] inadequate.”                                 Bob

Jones     Univ.   v.   Simon,    416   U.S.     725,    742    n.16      (1974).        The

defendants argue that a tax refund action presents an “adequate

remedy” that the plaintiffs must first pursue before challenging

the   IRS   Rule     directly     under   the    APA.         See    5   U.S.C.    § 704

(“Agency     action    made     reviewable     by    statute     and      final    agency

action for which there is no other adequate remedy in a court

are subject to judicial review.”).

      The defendants’ arguments are not persuasive.                        First, they

fail to point to a single case in which a court has refused to

entertain a similar suit on the grounds that the parties were

required to first pursue a tax-refund action under 26 U.S.C.

§ 7422(a) or 28 U.S.C. § 1346.             Moreover, the plaintiffs are not

seeking a tax refund; they ask for no monetary relief, alleging

instead     claims     for    declaratory      and     injunctive        relief    in   an

attempt to forestall the lose-lose choice (in their minds) of


      1
        Although 26 U.S.C. § 7422(a) does not appear to
specifically authorize suits, § 6532 speaks of refund suits
filed “under § 7422(a).”   See also Cohen v. United States, 650
F.3d 717, 731, n.11 (D.C. Cir. 2011) (en banc).



                                          13
purchasing a product they do not want or paying the penalty.

Section 7422(a) does not allow for prospective relief.                                       Instead,

it    bars    suit       “for       the    recovery         of   any       internal      revenue    tax

alleged       to       have    been       erroneously            or    illegally         assessed    or

collected.”            26 U.S.C. 7422(a) (emphasis added); see also Cohen,

650    F.3d        at    732        (“[Section          7422(a)]           does    not,    at    least

explicitly, allow for prospective relief.”).                                      Similarly, “[t]he

Little Tucker Act does not authorize claims that seek primarily

equitable relief.”                  Berman v. United States, 264 F.3d 16, 21

(1st Cir. 2001) (citing Richardson v. Morris, 409 U.S. 464, 465

(1973); Bobula v. United States Dep’t of Justice, 970 F.2d 854,

858-59 (Fed. Cir. 1992)).

       It is clear, then, that the alternative forms of relief

suggested by the defendants would not afford the plaintiffs the

complete relief they seek.                        This is simply not a typical tax

refund action in which an individual taxpayer complains of the

manner       in    which       a    tax    was       assessed         or    collected      and   seeks

reimbursement            for       wrongly       paid       sums.          The     plaintiffs      here

challenge         the    legality          of    a     final      agency         action,    which    is

consistent         with       the    APA’s       underlying           purpose       of    “remov[ing]

obstacles         to    judicial          review       of    agency         action.”        Bowen    v.

Massachusetts,            487       U.S.        879,      904     (1988).           Requiring       the

plaintiffs to choose between purchasing insurance and thereby

waiving their claims or paying the tax and challenging the IRS

                                                     14
Rule after the fact creates just such an obstacle.                           We therefore

find that the plaintiffs’ suit is not barred under the APA.



                                          III.

      Turning to the merits, “we review questions of statutory

construction de novo.”             Orquera v. Ashcroft, 357 F.3d 413, 418

(4th Cir. 2003).           Because this case concerns a challenge to an

agency’s construction of a statute, we apply the familiar two-

step analytic framework set forth in Chevron U.S.A., Inc. v.

Natural   Res.    Def.      Council,      Inc.,    467     U.S.    837       (1984).    At

Chevron’s first step, a court looks to the “plain meaning” of

the   statute    to    determine     if    the     regulation      responds       to   it.

Chevron, 467 U.S. at 842-43.              If it does, that is the end of the

inquiry and the regulation stands.                 Id.    However, if the statute

is susceptible to multiple interpretations, the court then moves

to    Chevron’s       second       step     and        defers     to     the     agency’s

interpretation        so    long    as    it      is    based     on     a    permissible

construction of the statute.              Id. at 843.

                                           A.

      At step one, “[i]f the statute is clear and unambiguous

‘that is the end of the matter, for the court, as well as the

agency, must give effect to the unambiguously expressed intent

of Congress.’”         Bd. of Governors of the Fed. Reserve Sys. v.

Dimension Fin. Corp., 474 U.S. 361, 368 (1986) (quoting Chevron,

                                           15
467   U.S.    at    842-43).        A   statute    is     ambiguous       only   if   the

disputed     language        is    “reasonably         susceptible    of     different

interpretations.”          Nat’l R.R. Passenger Corp. v. Atchison Topeka

&   Santa    Fe    Ry.   Co.,     470   U.S.    451,    473   n.27   (1985).          “The

objective of Chevron step one is not to interpret and apply the

statute to resolve a claim, but to determine whether Congress’s

intent in enacting it was so clear as to foreclose any other

interpretation.”           Grapevine Imports, Ltd. v. United States, 636

F.3d 1367, 1377 (Fed. Cir. 2011).                 Courts should employ all the

traditional        tools    of    statutory      construction        in    determining

whether Congress has clearly expressed its intent regarding the

issue in question.           Chevron, 467 U.S. at 843 n.9; Nat’l Elec.

Mfrs. Ass’n v. U.S. Dep’t of Energy, 654 F.3d 496, 504 (4th Cir.

2011).

                                           1.

      In construing a statute’s meaning, the court “begin[s], as

always, with the language of the statute.”                      Duncan v. Walker,

533 U.S. 167, 172 (2001).               As described above, 26 U.S.C. § 36B

provides that the premium assistance amount is the sum of the

monthly premium assistance amounts for all “coverage months” for

which the taxpayer is covered during a year.                    A “coverage month”

is one in which “the taxpayer . . . is covered by a qualified

health plan . . . enrolled in through an Exchange established by

the   State        under     [§] 1311      of     the     [Act].”          26    U.S.C.

                                           16
§ 36B(b)(2)(A).                Similarly,             the     statute        calculates         an

individual’s       tax     credit        by     totaling      the       “premium    assistance

amounts”     for     all      “coverage         months”      in     a    given     year.       Id.

§ 36B(b)(1).         The “premium assistance amount” is based in part

on the cost of the monthly premium for the health plan that the

taxpayer purchased “through an Exchange established by the State

under [§] 1311.”           Id. § 36B(b)(2).

       The   plaintiffs         assert         that    the    plain       language       of   both

relevant subsections in § 36B is determinative.                                  They contend

that    in   defining         the       terms    “coverage        months”        and     “premium

assistance      amount”            by     reference          to     Exchanges          that    are

“established by the State under [§] 1311,” Congress limited the

availability of tax credits to individuals purchasing insurance

on state Exchanges.                 Under the plaintiffs’ construction, the

premium      credit      amount         for     individuals         purchasing         insurance

through a federal Exchange would always be zero.

       The plaintiffs’ primary rationale for their interpretation

is that the language says what it says, and that it clearly

mentions state-run Exchanges under § 1311.                              If Congress meant to

include federally-run Exchanges, it would not have specifically

chosen    the   word       “state”        or    referenced        § 1311.          The    federal

government      is      not    a    “State,”          and    so   the      phrase      “Exchange

established        by    the       State       under    [§] 1311,”          standing       alone,

supports the notion that credits are unavailable to consumers on

                                                 17
federal Exchanges.        Further, the plaintiffs assert that because

state and federal Exchanges are referred to separately in § 1311

and § 1321, the omission in 26 U.S.C. § 36B of any reference to

federal     Exchanges      established        under     § 1321    represents        an

intentional      choice   on   behalf    of    Congress    to    exclude     federal

Exchanges    and   include     only   state     Exchanges     established      under

§ 1311.

       There can be no question that there is a certain sense to

the plaintiffs’ position.             If Congress did in fact intend to

make the tax credits available to consumers on both state and

federal Exchanges, it would have been easy to write in broader

language, as it did in other places in the statute.                           See 42

U.S.C.       § 18032(d)(3)(D)(i)(II)                 (referencing          Exchanges

“established under this Act”).

       However, when conducting statutory analysis, “a reviewing

court    should    not    confine     itself    to    examining      a    particular

statutory provision in isolation.               Rather, [t]he meaning – or

ambiguity – of certain words or phrases may only become evident

when    placed    in   context.”       Nat’l    Ass’n    of   Home       Builders   v.

Defenders    of    Wildlife,    551     U.S.    644,    666     (2007)     (internal

citation and quotation marks omitted).                 With this in mind, the

defendants’ primary counterargument points to ACA §§ 1311 and

1321, which, when read in tandem with 26 U.S.C. § 36B, provide

an equally plausible understanding of the statute, and one that

                                        18
comports         with     the     IRS’s        interpretation             that       credits       are

available nationwide.

       As noted, § 1311 provides that “[e]ach State shall, not

later than January 1, 2014, establish an American Health Benefit

Exchange (referred to in this title as an “Exchange”)[.]”                                           It

goes   on    to     say    that      “[a]n      Exchange      shall       be     a    governmental

agency      or    nonprofit       entity       that    is     established            by    a   State,”

apparently narrowing the definition of “Exchange” to encompass

only state-created Exchanges.                     ACA § 1311(d)(1).              Similarly, the

definitions section of the Act, § 1563(b), provides that “[t]he

term     ‘Exchange’        means          an   American       Health       Benefit             Exchange

established under [§] 1311,” further supporting the notion that

all Exchanges should be considered as if they were established

by a State.

       Of course, § 1311’s directive that each State establish an

Exchange         cannot   be    understood         literally         in    light          of   § 1321,

which provides that a state may “elect” to do so.                                              Section

1321(c) provides that if a state fails to establish an Exchange

by January 1, 2014, the Secretary “shall . . . establish and

operate such Exchange within the State and the Secretary shall

take   such       actions       as   are       necessary      to   implement              such   other

requirements.”            (emphasis added).                 The defendants’ position is

that the term “such Exchange” refers to a state Exchange that is

set    up   and     operated         by    HHS.        In    other    words,          the      statute

                                                  19
mandates the existence of state Exchanges, but directs HHS to

establish       such     Exchanges        when    the        states     fail     to     do     so

themselves.         In    the      absence       of    state        action,    the     federal

government is required to step in and create, by definition, “an

American Health Benefit Exchange established under [§] 1311” on

behalf of the state.

       Having     thus     explained        the       parties’        competing        primary

arguments, the court is of the opinion that the defendants have

the    stronger     position,        although         only    slightly.         Given        that

Congress defined “Exchange” as an Exchange established by the

state, it makes sense to read § 1321(c)’s directive that HHS

establish “such Exchange” to mean that the federal government

acts    on   behalf      of    the    state       when       it     establishes       its     own

Exchange.        However, the court cannot ignore the common-sense

appeal of the plaintiffs’ argument; a literal reading of the

statute undoubtedly accords more closely with their position.

As such, based solely on the language and context of the most

relevant     statutory        provisions,         the        court     cannot     say        that

Congress’s       intent       is     so    clear        and       unambiguous        that      it

“foreclose[s] any other interpretation.”                          Grapevine Imports, 636

F.3d at 1377.

                                             2.

       We    next      examine       two     other,          less     directly        relevant

provisions of the Act to see if they shed any more light on

                                             20
Congress’s intent.              Food and Drug Admin. v. Brown & Williamson

Tobacco Corp., 529 U.S. 120, 132-33 (2000) (“A court must . . .

interpret the statute as a symmetrical and coherent regulatory

scheme,    and     fit,        if    possible,           all     parts    into       a    harmonious

whole.”)       (citation            and     internal           quotation       marks          omitted).

First,     the     defendants             argue         that     reporting         provisions        in

§ 36B(f)       conflict        with         the      plaintiffs’          interpretation            and

confirm    that        the     premium         tax      credits     must      be     available       on

federally-run            Exchanges.                      Section         36B(f)           –      titled

“Reconciliation of credit and advance credit” – requires the IRS

to reduce the amount of a taxpayer’s end-of-year premium tax

credit by the amount of any advance payment of such credit.                                          See

26 U.S.C. § 36B(f)(1) (“The amount of the credit allowed under

this section for any taxable year shall be reduced (but not

below     zero)    by     the       amount        of     any    advance       payment          of   such

credit[.]”).       To enable the IRS to track these advance payments,

the statute requires “[e]ach Exchange (or any person carrying

out   1   or   more      responsibilities                of    an   Exchange        under      section

1311(f)(3)        or     1321(c)          of      the     [Act])”        to    provide         certain

information to the Department of the Treasury.                                     Id. § 36B(f)(3)

(emphasis      added).              There      is    no       dispute    that       the       reporting

requirements           apply    regardless               of    whether        an    Exchange        was

established by a state or HHS.                            The Exchanges are required to

report the following information:

                                                    21
      (A)    The level of coverage described in section
             1302(d) of the Patient Protection and Affordable
             Care Act and the period such coverage was in
             effect.

      (B)    The total premium for the coverage without regard
             to the credit under this section or cost-sharing
             reductions under section 1402 of such Act.

      (C)    The aggregate amount of any advance payment of
             such credit or reductions under section 1412 of
             such Act.

      (D)    The name, address, and TIN of the primary insured
             and the name and TIN of each other individual
             obtaining coverage under the policy.

      (E)    Any   information  provided  to   the  Exchange,
             including any change of circumstances, necessary
             to determine eligibility for, and the amount of,
             such credit.

      (F)    Information necessary to determine whether                      a
             taxpayer has received excess advance payments.

Id.

      The defendants argue, sensibly, that if premium tax credits

were not available on federally-run Exchanges, there would be no

reason to require such Exchanges to report the information found

in subsections (C), (E), and (F).                It is therefore possible to

infer from the reporting requirements that Congress intended the

tax   credits   to    be    available     on    both    state-      and   federally-

facilitated Exchanges.         The plaintiffs acknowledge that some of

the   reporting      requirements    are       extraneous     for    federally-run

Exchanges,    but    note   that    the    other      categories     of   reportable

information,      i.e.,     subsections        (A),    (B),   and     (D),   remain

relevant even in the absence of credits.                 The plaintiffs suggest

                                          22
that Congress was simply saving itself the trouble of writing

two   separate    subsections,       one    for   each    type       of   Exchange,      by

including a single comprehensive list.

      The   second     source   of    potentially        irreconcilable          language

offered by the defendants concerns the “qualified individuals”

provision under ACA § 1312.            That section sets forth provisions

regarding     which    individuals     may      purchase    insurance            from   the

Exchanges.       It provides that only “qualified individuals” may

purchase health plans in the individual markets offered through

the Exchanges, and explains that a “qualified individual” is a

person who “resides in the State that established the Exchange.”

ACA § 1312.      The defendants argue that unless their reading of

§ 1321   is   adopted     and   understood        to     mean    that      the    federal

government stands in the shoes of the state for purposes of

establishing      an    Exchange,       there     would         be    no    “qualified

individuals” existing in the thirty-four states with federally-

facilitated Exchanges because none of those states is a “State

that established the Exchange.”                 This would leave the federal

Exchanges with no eligible customers, a result Congress could

not possibly have intended.

      The plaintiffs acknowledge that this would be untenable,

and suggest that the residency requirement is only applicable to

state-created Exchanges.             They note that § 1312 states that a

“qualified individual” – “with respect to an Exchange” – is one

                                           23
who “resides in the State that established the Exchange.”                            ACA

§ 1312(f)(1)(A)           (emphasis        added).           Accordingly,        because

“Exchange” is defined as an Exchange established under § 1311,

i.e., the provision directing states to establish Exchanges, the

residency requirement only limits enrollment on state Exchanges.

       Having considered the parties’ competing arguments on both

of   the    above-referenced         sections,       we    remain     unpersuaded     by

either side.         Again, while we think the defendants make the

better of the two cases, we are not convinced that either of the

purported     statutory         conflicts    render      Congress’s    intent     clear.

Both   parties      offer       reasonable    arguments       and    counterarguments

that make discerning Congress’s intent difficult.                      Additionally,

we   note    that   the     Supreme    Court       has    recently    reiterated     the

admonition     that       courts      avoid       revising    ambiguously        drafted

legislation out of an effort to avoid “apparent anomal[ies]”

within a statute.           Michigan v. Bay Mills Indian Cmty., No. 12-

515, 572 U.S. ___, ___, slip op. at 10 (May 27, 2014).                            It is

not especially surprising that in a bill of this size – “10

titles stretch[ing] over 900 pages and contain[ing] hundreds of

provisions,” NFIB, 132 S. Ct. at 2580, – there would be one or

more conflicting provisions.                See Bay Mills, at 10-11 (“Truth be

told, such anomalies often arise from statutes, if for no other

reason      than    that        Congress     typically       legislates     by    parts

. . . .”).         Wary    of    granting     excessive      analytical     weight    to

                                             24
relatively minor conflicts within a statute of this size, we

decline to accept the defendants’ arguments as dispositive of

Congress’s intent.

                                              3.

       The    Act’s       legislative       history      is     also    not    particularly

illuminating on the issue of tax credits.                              See Philip Morris

USA,       Inc.    v.     Vilsack,    736     F.3d      284,    289     (4th     Cir.     2013)

(considering legislative history at Chevron step one).                                But see

Nat’l      Elec.    Mfrs.     Ass’n,    654    F.3d      at    505     (noting      that,    “in

consulting legislative history at step one of Chevron, we have

utilized such history only for limited purposes, and only after

exhausting         more    reliable    tools       of    construction”).             As     both

parties concede, the legislative history of the Act is somewhat

lacking, particularly for a bill of this size. 2                              Several floor

statements from Senators support the notion that it was well

understood        that     tax   credits     would      be     available      for    low-    and

middle-income Americans nationwide.                     For example, Senator Baucus

stated that the “tax credits will help to ensure all Americans


       2
       As another court considering a similar challenge to the
IRS Rule recently noted, “[b]ecause the House and Senate
versions of the Act were synthesized through a reconciliation
process, rather than the standard conference committee process,
no conference report was issued for the Act, and there is a
limited legislative record relating to the final version of the
bill.”   Halbig v. Sebelius, No. 13-623, 2014 WL 129023, at *17
n.13 (D.D.C. Jan. 15, 2014).



                                              25
can afford quality health insurance.”            155 Cong. Rec. S11,964

(Nov. 21, 2009).      He later estimated that “60 percent of those

who   are   getting   insurance   in    the   individual    market   on   the

exchange will get tax credits . . . .”               155 Cong. Rec. S12,764

(Dec. 9, 2009).       Similarly, Senator Durbin stated that half of

the “30 million Americans today who have no health insurance

. . . will qualify for . . . tax credits to help them pay their

premiums so they can have and afford health insurance.”                    155

Cong. Rec. S13,559 (Dec. 20, 2009).             These figures only make

sense if all financially eligible Americans are understood to

have access to the credits.

      However,   it   is   possible    that   such    statements   were   made

under the assumption that every state would in fact establish

its own Exchange.      As the district court stated, “Congress did

not expect the states to turn down federal funds and fail to

create and run their own Exchanges.”                 King v. Sebelius, No.

3:13-cv-630, 2014 WL 637365, at *14 (E.D. Va. Feb. 18, 2014).

The Senators’ statements therefore do not necessarily address

the question of whether the credits would remain available in

the absence of state-created Exchanges.               The plaintiffs argue

extensively that Congress could not have anticipated that so few

states would establish their own Exchanges.              Indeed, they argue

that Congress attempted to “coerce” the states into establishing

Exchanges by conditioning the availability of the credits on the

                                      26
presence    of     state   Exchanges.           The    plaintiffs     contend         that

Congress struck an internal bargain in which it decided to favor

state-run      Exchanges     by    incentivizing           their     creation         with

billions      of   dollars    of    tax        credits.       According         to        the

plaintiffs, however, Congress’s plan backfired when a majority

of states refused to establish their own Exchanges, in spite of

the incentives.        The plaintiffs thus acknowledge that the lack

of   widely      available   tax    credits       is      counter    to    Congress’s

original      intentions,    but    consider          this   the     product         of    a

Congressional miscalculation that the courts have no business

correcting.

        Although the plaintiffs offer no compelling support in the

legislative record for their argument, 3 it is at least plausible

that Congress would have wanted to ensure state involvement in

the creation and operation of the Exchanges.                       Such an approach

would    certainly    comport     with    a    literal     reading    of   26    U.S.C.

§ 36B’s text.        In any event, it is certainly possible that the

Senators quoted above were speaking under the assumption that


     3
        The plaintiffs take an isolated, stray comment from
Senator Baucus during a Senate Finance Committee hearing well
out of context, see J.A. 285-87, and similarly place too much
emphasis on a draft bill from the Senate Health, Education,
Labor, and Pensions Committee that would have conditioned
subsidies for a state’s residents on the state’s adoption of
certain “insurance reform provisions,” see S. 1679, § 3104(a),
(d)(2), 111th Cong. (2009).



                                          27
each state would establish its own Exchange, and that they could

not    have    envisioned        the   issue       currently        being      litigated.

Although Congress included a fallback provision in the event the

states   failed    to     act,    it   is   not     clear    from    the    legislative

record how large a role Congress expected the federal Exchanges

to play in administering the Act.                   We are thus of the opinion

that   nothing    in     the    legislative       history    of     the    Act    provides

compelling support for either side’s position.

       Having examined the plain language and context of the most

relevant      statutory        sections,    the        context    and     structure      of

related provisions, and the legislative history of the Act, we

are unable to say definitively that Congress limited the premium

tax    credits    to    individuals        living      in   states      with     state-run

Exchanges.       We note again that, on the whole, the defendants

have the better of the statutory construction arguments, but

that they fail to carry the day.                    Simply put, the statute is

ambiguous and subject to at least two different interpretations.

As a result, we are unable to resolve the case in either party’s

favor at the first step of the Chevron analysis.

                                            B.

       Finding    that    Congress      has      not    “directly       spoken     to   the

precise question at issue,” we move to Chevron’s second step.

467 U.S. at 842.           At step two, we ask whether the “agency’s

[action] is based on a permissible construction of the statute.”

                                            28
Id.   at    843.         We    “will      not    usurp       an    agency’s      interpretive

authority by supplanting its construction with our own, so long

as    the    interpretation            is       not    ‘arbitrary,            capricious,         or

manifestly contrary to the statute.’                         A construction meets this

standard     if     it        ‘represents        a     reasonable           accommodation         of

conflicting policies that were committed to the agency’s care by

the statute.’”           Philip Morris, 736 F.3d at 290 (quoting Chevron,

467 U.S. at 844, 845).                We have been clear that “[r]eview under

this standard is highly deferential, with a presumption in favor

of    finding      the     agency      action         valid.”          Ohio     Vall.       Envt’l

Coalition    v.     Aracoma        Coal      Co.,     556    F.3d      177,    192    (4th       Cir.

2009).

      As explained, we cannot discern whether Congress intended

one way or another to make the tax credits available on HHS-

facilitated Exchanges.                The relevant statutory sections appear

to    conflict      with       one     another,        yielding        different        possible

interpretations.              In     light      of    this    uncertainty,           this    is    a

suitable    case     in       which    to    apply     the    principles        of    deference

called for by Chevron.                See Scialabba v. Cuellar de Osorio, No.

12-930,     573    U.S.       ___,    ___,      slip    op.       at   14     (June   9,     2014)

(“[I]nternal tension [in a statute] makes possible alternative

reasonable      constructions,            bringing      into      correspondence            in   one

way or another the section’s different parts.                               And when that is

so, Chevron dictates that a court defer to the agency’s choice

                                                29
. . . .”) (plurality opinion); Nat’l Elec. Mfrs. Ass’n, 654 F.3d

at   505   (“[W]e   have   reached        Chevron’s   second   step   after

describing statutory language as ‘susceptible to more precise

definition and open to varying constructions.’”) (quoting Md.

Dep’t of Health and Mental Hygiene v. Centers for Medicare and

Medicaid Servs., 542 F.3d 424, 434 (4th Cir. 2008)). 4

     What we must decide is whether the statute permits the IRS

to decide whether the tax credits would be available on federal

Exchanges.   In answering this question in the affirmative we are

primarily persuaded by the IRS Rule’s advancement of the broad

     4
       We recognize that not every ambiguity in a statute gives
rise to Chevron deference.    Often, but not always, courts will
yield to an agency’s interpretation only when the ambiguity
creates some discretionary authority for the agency to fulfill.
See Chamber of Commerce of U.S. v. N.L.R.B., 721 F.3d 152, 161
(4th Cir. 2013) (“‘Mere ambiguity in a statute is not evidence
of congressional delegation of authority.’        Rather, ‘[t]he
ambiguity must be such as to make it appear that Congress either
explicitly or implicitly delegated authority to cure that
ambiguity.’”) (quoting Am. Bar Ass’n v. F.T.C., 430 F.3d 457,
469 (D.C. Cir. 2005)) (alteration in original). However, given
the importance of the tax credits to the overall statutory
scheme, it is reasonable to assume that Congress created the
ambiguity   in  this   case  with   at   least  some  degree  of
intentionality.   See City of Arlington v. F.C.C., 133 S. Ct.
1863, 1868 (2013) (“Congress knows to speak in plain terms when
it wishes to circumscribe, and in capacious terms when it wishes
to enlarge, agency discretion.”).     There are several possible
reasons for leaving an ambiguity of this sort: Congress perhaps
might not have wanted to resolve a politically sensitive issue;
additionally, it might have intended to see how large a role the
states were willing to adopt on their own before having the
agency respond with rules that could best effectuate the purpose
of the Act in light of the actual circumstances present several
years after the bill’s passage.



                                     30
policy goals of the Act.                  See Vill. of Barrington v. Surface

Transp. Bd., 636 F.3d 650, 666 (D.C. Cir. 2011) (“[W]hen an

agency     interprets       ambiguities        in    its   organic    statute,      it    is

entirely appropriate for that agency to consider . . . policy

arguments that are rationally related to the [statute’s] goals.”

(internal     quotation         marks    and    citation    omitted));       Ariz.    Pub.

Serv. Co. v. EPA, 211 F.3d 1280, 1287 (D.C. Cir. 2000) (“[A]s

long as the agency stays within [Congress’s] delegation, it is

free to make policy choices in interpreting the statute, and

such     interpretations         are    entitled      to   deference.”)       (quotation

marks omitted).           There is no question that the Act was intended

as   a    major    overhaul      of    the    nation’s     entire    health      insurance

market.     The Supreme Court has recognized the broad policy goals

of the Act:             “to increase the number of Americans covered by

health insurance and decrease the cost of health care.”                              NFIB,

132 S. Ct. at 2580.                  Similarly, Title I of the ACA is titled

“Quality, Affordable Health Care for All Americans” (emphasis

added).

         Several provisions of the Act are necessary to achieving

these goals.            To begin with, the individual mandate requires

nearly all Americans to have health insurance or pay a fine.

Increasing        the    pool    of    insured      individuals     has    the    intended

side-effect of increasing revenue for insurance providers.                               The

increased     revenue,          in    turn,    supports     several       more   specific

                                               31
policy goals contained in the Act.                 The most prominent of these

are the guaranteed-issue and community-rating provisions.                                  In

short, these provisions bar insurers from denying coverage or

charging     higher       premiums    because      of   an    individual’s           health

status.      See ACA § 1201.          However, these requirements, standing

alone, would result in an “adverse selection” scenario whereby

individuals     disproportionately           likely     to    utilize      health         care

would drive up the costs of policies available on the Exchanges.

       Congress     understood       that    one    way      to    avoid     such     price

increases     was    to    require    near-universal         participation           in    the

insurance      marketplace         via      the    individual         mandate.              In

combination     with      the     individual      mandate,        Congress    authorized

broad incentives - totaling hundreds of billions of dollars – to

further    increase       market     participation      among       low-     and    middle-

income individuals.          A Congressional Budget Office report issued

while the Act was under consideration informed Congress that

there would be an “an influx of enrollees with below-average

spending for health care, who would purchase coverage because of

the new subsidies to be provided and the individual mandate to

be imposed.”        J.A. 95.       The report further advised Congress that

“[t]he substantial premium subsidies available in the exchanges

would encourage the enrollment of a broad range of people”; and

that   the    structure      of    the   premium      tax    credits,        under    which

federal subsidies increase if premiums rise, “would dampen the

                                            32
chances that a cycle of rising premiums and declining enrollment

would ensue.”           J.A. 108-109.      As the defendants further explain,

denying tax credits to individuals shopping on federal Exchanges

would      throw    a    debilitating      wrench   into   the    Act’s    internal

economic machinery:

       Insurers in States with federally-run Exchanges would
       still be required to comply with guaranteed-issue and
       community-rating rules, but, without premium tax
       subsidies to encourage broad participation, insurers
       would be deprived of the broad policy-holder base
       required to make those reforms viable.         Adverse
       selection would cause premiums to rise, further
       discouraging market participation, and the ultimate
       result would be an adverse-selection “death spiral” in
       the individual insurance markets in States with
       federally-run Exchanges.

Br. of Appellees, at 35; see also Amicus Br. of America’s Health

Insurance Plans, at 3-6; Amicus Br. for Economic Scholars, at 3-

6. 5

       It is therefore clear that widely available tax credits are

essential      to       fulfilling   the    Act’s   primary      goals    and   that

Congress was aware of their importance when drafting the bill.

The IRS Rule advances this understanding by ensuring that this

       5
       Likewise, four Supreme Court Justices have remarked on the
importance of the tax credit system:        “Without the federal
subsidies, individuals would lose the main incentive to purchase
insurance inside the exchanges, and some insurers may be
unwilling to offer insurance inside of exchanges.      With fewer
buyers and even fewer sellers, the exchanges would not operate
as Congress intended and may not operate at all.” NFIB, 132 S.
Ct.  at 2674     (Scalia,  Kennedy,   Thomas,   and  Alito,  JJ.,
dissenting).



                                           33
essential component exists on a sufficiently large scale.                              The

IRS Rule became all the more important once a significant number

of   states        indicated        their   intent      to       forgo     establishing

Exchanges.      With only sixteen state-run Exchanges currently in

place, the economic framework supporting the Act would crumble

if   the      credits     were        unavailable       on       federal     Exchanges.

Furthermore,       without     an    exception   to     the      individual      mandate,

millions more Americans unable to purchase insurance without the

credits would be forced to pay a penalty that Congress never

envisioned imposing on them.                 The IRS Rule avoids both these

unforeseen and undesirable consequences and thereby advances the

true purpose and means of the Act.

     It is thus entirely sensible that the IRS would enact the

regulations        it   did,     making     Chevron      deference         appropriate.

Confronted     with     the    Act’s    ambiguity,    the        IRS   crafted    a   rule

ensuring     the    credits’        broad   availability         and   furthering      the

goals of the law.         In the face of this permissible construction,

we must defer to the IRS Rule.               See Scialabba, at 33 (“Whatever

Congress might have meant in enacting [the statute], it failed

to   speak     clearly.          Confronted      with        a   self-contradictory,

ambiguous provision in a complex statutory scheme, the Board

chose   a    textually    reasonable        construction         consonant    with     its

view of the purposes and policies underlying immigration law.

Were we to overturn the Board in that circumstance, we would

                                            34
assume as our own the responsible and expert agency’s role.”);

Nat’l   Elec.   Mfrs.   Ass’n,     654   F.3d   at   505   (“[W]e   defer    at

[Chevron’s] step two to the agency’s interpretation so long as

the construction is a reasonable policy choice for the agency to

make.”) (second alteration in original).

     Tellingly, the plaintiffs do not dispute that the premium

tax credits are an essential component of the Act’s viability.

Instead, as explained above, they concede that Congress probably

wanted to make subsidies available throughout the country, but

argue that Congress was equally concerned with ensuring that the

states play a leading role in administering the Act, and thus

conditioned the availability of the credits on the creation of

state Exchanges.     The plaintiffs argue that the IRS Rule exceeds

the agency’s authority because it irreconcilably conflicts with

Congress’s goal of ensuring state leadership.               For the reasons

explained   above,      however,    we    are    not   persuaded     by     the

plaintiffs’ “coercion” argument and do not consider it a valid

basis for circumscribing the agency’s authority to implement the

Act in an efficacious manner.

     The plaintiffs also attempt to avert Chevron deference by

arguing that ACA §§ 1311 and 1321 are administered by HHS and

not the IRS, and that as a result the IRS had no authority to

enact its final rule.       However, the relevant statutory language

is found in 26 U.S.C. § 36B, which is part of the Internal

                                     35
Revenue Code and subject to interpretation by the IRS.                             See 77

Fed.    Reg.    at   30,378      (describing     the     IRS    Rule      as   a     valid

interpretation       of    26    U.S.C.   § 36B).        Although      the     IRS    Rule

adopts by cross-reference an HHS definition of “Exchange,” 26

C.F.R. § 1.36B-1(k), the Act clearly gives to the IRS authority

to resolve ambiguities in 26 U.S.C. § 38B (“The Secretary shall

prescribe such regulations as may be necessary to carry out the

provisions      of   this       section”).        This    clear      delegation           of

authority to the IRS relieves us of any possible doubt regarding

the propriety of relying on one agency’s interpretation of a

single piece of a jointly-administered statute.

       Finally, the plaintiffs contend that a rule of statutory

construction      that     requires   tax      exemptions      and   credits         to   be

construed      narrowly    displaces      Chevron   deference        in    this      case.

However, while the Supreme Court has stated that tax credits

“must   be     expressed    in    clear   and   unambiguous       terms,”       Yazoo      &

Miss. Valley R.R. Co. v. Thomas, 132 U.S. 174, 183 (1889), the

Supreme Court has never suggested that this principle displaces

Chevron deference, and in fact has made it quite clear that it

does not.        See Mayo Found. for Medical Educ. and Research v.

United States, 131 S. Ct. 704, 713 (2011) (“[T]he principles

underlying our decision in Chevron apply with full force in the

tax context.”); see also id. at 712 (collecting cases in which



                                          36
the Supreme Court has applied Chevron deference interpreting IRS

regulations).

     Rejecting   all     of   the   plaintiffs’       arguments    as   to     why

Chevron deference is inappropriate in this case, for the reasons

explained   above   we    are   satisfied      that    the   IRS   Rule      is   a

permissible construction of the statutory language.                     We must

therefore apply Chevron deference and uphold the IRS Rule. 6

     Accordingly,      the    judgment    of    the     district    court         is

affirmed.



                                                                        AFFIRMED


     6
       The Commonwealth of Virginia, acting as amicus on behalf
of the defendants, argues that the plaintiffs’ construction of
the statute violates the Constitution’s Spending Clause by
failing to provide Virginia with “clear notice” that receipt of
billions of dollars in tax credits for its low- and middle-
income citizens was contingent on establishing an Exchange. The
Commonwealth’s argument derives from Pennhurst State School &
Hospital v. Halderman, in which the Supreme Court stated that
“if Congress intends to impose a condition on the grant of
federal moneys, it must do so unambiguously. By insisting that
Congress speak with a clear voice, we enable the States to
exercise their choice knowingly, cognizant of the consequences
of their participation.”      451 U.S. 1, 17 (1981) (internal
citations omitted).   Although ably advanced, we have no reason
to reach the Commonwealth’s constitutional argument because we
find the IRS Rule to be an appropriate exercise of the agency’s
authority under Chevron.     See Norfolk S. Ry. Co. v. City of
Alexandria, 608 F.3d 150, 157 (4th Cir. 2010) (“The principle of
constitutional avoidance . . . requires the federal courts to
avoid   rendering   constitutional   rulings  unless  absolutely
necessary.”) (citing Ashwander v. Tenn. Valley Auth., 297 U.S.
288, 347 (1936) (Brandeis, J., concurring)).



                                     37
DAVIS, Senior Circuit Judge, concurring:

       I am pleased to join in full the majority’s holding that

the    Patient     Protection      and     Affordable    Care     Act      (the      Act)

“permits” the Internal Revenue Service to decide whether premium

tax credits should be available to consumers who purchase health

insurance coverage on federally-run Exchanges. Maj. Op. at 30.

But I am also persuaded that, even if one takes the view that

the Act is not ambiguous in the manner and for the reasons

described, the necessary outcome of this case is precisely the

same. That is, I would hold that Congress has mandated in the

Act that the IRS provide tax credits to all consumers regardless

of whether the Exchange on which they purchased their health

insurance coverage is a creature of the state or the federal

bureaucracy.      Accordingly,       at   Chevron     Step   One,    the       IRS   Rule

making the tax credits available to all consumers of Exchange-

purchased health insurance coverage, 26 C.F.R. § 1.36B-1(k), 77

Fed.    Reg.     30,377,    30,378       (May   23,   2012),    is       the     correct

interpretation of the Act and is required as a matter of law.

Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,

467 U.S. 837, 842-43 (1984).

       Although      the     Act      expressly       contemplates             state-run

Exchanges,     ACA   §     1311(b)(1),     Congress     created      a    contingency

provision that permits the federal government, via the Secretary

of Health and Human Services, to “establish and operate such

                                           38
Exchange within the State and . . . take such actions as are

necessary         to        implement          such       other        requirements.”               Id.     §

1321(c)(1). This contingency provision is triggered when a state

elects not to set up an Exchange, when a state is delayed in

setting up an Exchange, or when a state Exchange fails to meet

certain statutory and regulatory requirements. Id. § 1321(c)(1).

      Enter the premium tax credits, essentially a tax subsidy

for the purchase of health insurance. The amended tax code, 26

U.S.C.      §    36B(b),         sets    forth       the    formula         for    calculating            the

amount      of    a       consumer’s         premium       tax       credit.       In    general,         the

credit      is    equal          to   the     lesser       of    two       amounts:          the   monthly

premium         for   a     qualified         health      plan       “enrolled          in    through      an

Exchange         established            by    the     State,”         or     the    excess         of     the

adjusted monthly premium for a certain type of health plan over

a    percentage             of    the        taxpayer’s         household          income.          Id.    §

36B(b)(2).

      Appellants contend that the language “enrolled in through

an Exchange established by the State” precludes the IRS from

providing premium tax credits to consumers who purchase health

insurance coverage on federal Exchanges. To them, “established

by    the        State”          in     the     premium          tax       credits           calculation

subprovision           is    the      sine     qua    non       of    this    case.          An    Exchange

established by the State is not an Exchange established by the

federal         government,             they     argue;          thus,       the        equation          for

                                                     39
calculating    the       amount       of    the     premium       tax   credit      is   wholly

inapplicable       to    all       consumers       who   purchase       health       insurance

coverage on federally-run Exchanges (the amount would be zero,

according to Appellants).

       I am not persuaded and for a simple reason: “[E]stablished

by the State” indeed means established by the state - except

when   it   does    not,          i.e.,    except    when     a    state    has     failed   to

establish    an    Exchange          and    when     the    Secretary,         charged    with

acting pursuant to a contingency for which Congress planned, id.

§ 1321(c), establishes and operates the Exchange in place of the

state. When a state elects not to establish an Exchange, the

contingency provision authorizes federal officials to establish

and operate “such Exchange” and to take any action adjunct to

doing so.

       That disposes of the Appellants’ contention. This is not a

case that calls up the decades-long clashes between textualists,

purposivists, and other schools of statutory interpretation. See

Abbe    Gluck,          The        States     As      Laboratories            of     Statutory

Interpretation:         Methodological            Consensus       and   the    New    Modified

Textualism, 119 Yale L.J. 1750, 1762-63 (2010). The case can be

resolved    through           a    contextual       reading       of    a     few    different

subsections of the statute. If there were any remaining doubt

over this construction, the bill’s structure dispels it: The

contingency provision at § 1321(c)(1) is set forth in “Part III”

                                              40
of the bill, titled “State Flexibility Relating to Exchanges,” a

section       that    appears      after        the     section          that    creates       the

Exchanges       and      mandates        that        they    be     operated          by     state

governments,         ACA   §     1311(b).        What’s          more,     the       contingency

provision does not create two-tiers of Exchanges; there is no

indication       that      Congress        intended           the        federally-operated

Exchanges to be lesser Exchanges and for consumers who utilize

them to be less entitled to important benefits. Thus, I conclude

that a holistic reading of the Act’s text and proper attention

to    its    structure     lead     to    only       one    sensible       conclusion:        The

premium tax credits must be available to consumers who purchase

health       insurance     coverage       through          their    designated          Exchange

regardless      of    whether     the     Exchange          is     state-       or    federally-

operated.

       The     majority        opinion     understandably             engages         with    the

Appellants and respectfully posits they could be perceived to

advance a plausible construction of the Act, i.e., that Congress

may    have     sought     to    restrict        the       scope    of     the       contingency

provision when it used the phrase “established by the State” in

the premium tax credits calculation subprovision. But as the

majority opinion deftly illustrates, a straightforward reading

of the Act strips away any and all possible explanations for why

Congress would have intended to exclude consumers who purchase

health       insurance     coverage        on        federally-run          Exchanges        from

                                                41
qualifying for premium tax credits. (The best Appellants can

come up with seems to be some non-existent Congressional desire

for    “state    leadership”      (whatever    that   means)     in    effecting    a

comprehensive        overhaul      of    the   nation’s     health       insurance

marketplaces and related health care markets.) Such a reading,

the majority opinion persuasively explains, is not supported by

the legislative history or by the overall structure of the Act.

Maj.    Op.     at   27,   24.    Moreover,    the    majority    carefully      and

cogently      explains     how     “widely     available    tax       credits    are

essential       to   fulfilling    the    Act’s   primary      goals    and     [how]

Congress was aware of their importance when drafting the bill.”

Maj. Op. at 33. Thus, the majority correctly holds that Congress

did not intend a reading that has no legislative history to

support it and runs contrary to the Act’s text, structure, and

goals. Appellants’ “literal reading” of the premium tax credits

calculation subprovision renders the entire Congressional scheme

nonsensical. Cf. Maj. Op. at 27.

       In fact, Appellants’ reading is not literal; it’s cramped.

No case stands for the proposition that literal readings should

take place in a vacuum, acontextually, and untethered from other

parts of the operative text; indeed, the case law indicates the

opposite. National Association of Home Builders v. Defenders of

Wildlife, 551 U.S. 644, 666 (2007). So does common sense: If I

ask for pizza from Pizza Hut for lunch but clarify that I would

                                         42
be fine with a pizza from Domino’s, and I then specify that I

want ham and pepperoni on my pizza from Pizza Hut, my friend who

returns from Domino’s with a ham and pepperoni pizza has still

complied with a literal construction of my lunch order. That is

this    case:      Congress        specified       that      Exchanges    should    be

established and run by the states, but the contingency provision

permits federal officials to act in place of the state when it

fails     to     establish      an       Exchange.     The    premium     tax   credit

calculation       subprovision           later    specifies    certain     conditions

regarding state-run Exchanges, but that does not mean that a

literal        reading    of    that       provision      somehow      precludes    its

applicability       to    substitute       federally-run      Exchanges    or   erases

the contingency provision out of the statute.

       That      Congress      sometimes         specified     state     and    federal

Exchanges in the bill is as unremarkable as it is unrevealing.

This    was,      after     all,     a    900-page     bill    that     purported   to

restructure the means of providing health care in this country.

Neither the canons of construction nor any empirical analysis

suggests that congressional drafting is a perfectly harmonious,

symmetrical, and elegant endeavor. See generally Abbe Gluck &

Lisa Schultz Bressman, Statutory Interpretation from the Inside:

An Empirical Study of Congressional Drafting, Delegation, and

the Canons: Part I, 65 Stan. L. Rev. 901 (2013). Sausage-makers

are indeed offended when their craft is linked to legislating.

                                             43
Robert Pear, If Only Laws Were Like Sausages, N.Y. Times, Dec.

5,     2010,        at     WK3.         At     worst,          the     drafters’               perceived

inconsistencies (if that is what they are at all) are far less

probative of Congress’ intent than the unqualified and broad

contingency provision.

       Appellants         insist        that       the    use    of    “established              by    the

State” in the premium tax credits calculation subprovision is

evidence of Congress’ intent to limit the availability of tax

credits       to     consumers           of        state       Exchange-purchased                 health

insurance      coverage.             Their     reading         bespeaks         a       deeply    flawed

effort to squeeze the proverbial elephant into the proverbial

mousehole. Whitman v. American Trucking Associations, 531 U.S.

457,    468    (2001).          If    Congress       wanted      to     create           a    two-tiered

Exchange system, it would have done so expressly in the section

of     the    Act        that        authorizes          the    creation            of       contingent,

federally-run            Exchanges.          If     Congress         wanted          to       limit   the

availability of premium tax credits to consumers who purchase

health coverage on state-run Exchanges, it would have said so

rather       than    tinkering          with       the     formula         in       a     subprovision

governing how to calculate the amount of the credit.

       The real danger in the Appellants’ proposed interpretation

of the Act is that it misses the forest for the trees by eliding

Congress’      central          purpose       in    enacting         the   Act:          to    radically

restructure         the    American          health       care       market         with      “the    most

                                                   44
expansive      social     legislation         enacted         in    decades.”         Sheryl    Gay

Stolberg & Robert Pear, Obama Signs Health Care Overhaul Into

Law, With a Flourish, N.Y. Times, March 24, 2010, at A19. The

widespread availability of premium tax credits was intended as a

critical part of the bill, a point the President highlighted at

the bill signing. Transcript of Remarks by the President and

Vice President at Signing of the Health Insurance Reform Bill,

March   23,    2010     (“And      when      this       exchange        is    up    and   running,

millions      of   people       will    get       tax    breaks     to       help    them    afford

coverage, which represents the largest middle-class tax cut for

health care in history. That's what this reform is about.”).

Appellants’ approach would effectively destroy the statute by

promulgating        a     new     rule       that        makes     premium          tax     credits

unavailable        to   consumers           who        purchased        health      coverage     on

federal    Exchanges.        But       of    course,         as    their      counsel       largely

conceded    at     oral    argument,         that       is   their      not    so     transparent

purpose.

    Appellants, citizens of the Commonwealth of Virginia, do

not wish to buy health insurance. Most assuredly, they have the

right, but not the unfettered right, Nat’l Fed’n of Indep. Bus.

v. Sebelius, 132 S. Ct. 2566 (2012), to decline to do so. They

have a clear choice, one afforded by the admittedly less-than-

perfect    representative          process         ordained        by    our       constitutional

structure: they can either pay the relatively minimal amounts

                                                  45
needed to obtain health care insurance as provided by the Act,

or they can refuse to pay and run the risk of incurring a tiny

tax penalty. Id. What they may not do is rely on our help to

deny    to     millions       of     Americans    desperately-needed       health

insurance     through     a   tortured,       nonsensical   construction       of   a

federal      statute   whose       manifest    purpose,   as   revealed   by    the

wholeness and coherence of its text and structure, could not be

more clear.

       As elaborated in this separate opinion, I am pleased to

concur in full in Judge Gregory’s carefully reasoned opinion for

the panel.




                                         46
