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Federal Court Orders IRS to Repay Texas for ACA Tax on State Medicaid Programs

Texas stands to be reimbursed $304 million and five other states also stand to be repaid

A Federal Court has ordered the IRS to repay Texas for an ACA tax on State Medicaid programs.

A U.S. District Court decision has ordered the Internal Revenue Service to repay Texas and five other states more than $839 million because of an unlawful Affordable Care Act (ACA) tax on state Medicaid programs, Texas Attorney General Ken Paxton said Tuesday. 

A news release from Paxton’s office detailed that Texas stands to be repaid $304 million.

In October 2015, Paxton led a multi-state lawsuit against the federal government over the Obama-era regulation that threatened to curtail Medicaid funds unless Texas taxpayers paid a portion of the Health Insurance Providers Fee to help fund the ACA.

The court’s decision also means that Indiana, Kansas, Louisiana, Nebraska and Wisconsin also stand to be repaid ACA fees by the IRS.

Texas and Wisconsin will argue at a hearing on September 5 that the ACA, as amended by the recent tax bill, is unconstitutional in its entirety.

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