On Appeal From the United States District Court for the District of Columbia
JUSTICE STEVENS delivered the opinion of the Court.
The Line Item Veto Act (Act), 110 Stat. 1200, 2 U.S.C. §691 et seq. (1994 ed., Supp. II), was enacted
in April 1996 and became effective on January 1, 1997. The following day, six Members of Congress who
had voted against the Act brought suit in the District Court for the District of Columbia challenging
its constitutionality. On April 10, 1997, the District Court entered an order holding that the Act is
unconstitutional. Byrd v. Raines, 956 F. Supp. 25. In obedience to the statutory direction
to allow a direct, expedited appeal to this Court, see §§692(b)—(c), we promptly noted probable jurisdiction
and expedited review, 520 U.S. (1997). We determined, however, that the Members of Congress did not have
standing to sue because they had not "alleged a sufficiently concrete injury to have established
Article III standing," Raines v. Byrd, 521 U. S. , (1997) (slip op., at 18); thus,
"in . . . light of [the] overriding and time-honored concern about keeping the Judiciary’s power
within its proper constitutional sphere," id., at (slip op., at 8), we remanded the case to
the District Court with instructions to dismiss the complaint for lack of jurisdiction.
Less than two months after our decision in that case, the President exercised his authority to cancel
one provision in the Balanced Budget Act of 1997, Pub. L. 105—33, 111 Stat. 251, 515, and two provisions
in the Taxpayer Relief Act of 1997, Pub. L. 105—34, 111 Stat. 788, 895—896, 990—993. Appellees, claiming
that they had been injured by two of those cancellations, filed these cases in the District Court.
That Court again held the statute invalid, 985 F. Supp. 168, 177—182 (1998), and we again expedited our
review, 522 U. S. (1998). We now hold that these appellees have standing to challenge the constitutionality
of the Act and, reaching the merits, we agree that the cancellation procedures set forth in the Act violate
the Presentment Clause, Art. I, §7, cl. 2, of the Constitution.
I
We begin by reviewing the canceled items that are at issue in these cases.
Section 4722(c) of the Balanced Budget Act
Title XIX of the Social Security Act, 79 Stat. 343, as amended, authorizes the Federal Government to transfer
huge sums of money to the States to help finance medical care for the indigent. See 42 U.S.C. §1396d(b).
In 1991, Congress directed that those federal subsidies be reduced by the amount of certain taxes levied
by the States on health care providers. In 1994, the Department of Health and Human Services (HHS) notified
the State of New York that 15 of its taxes were covered by the 1991 Act, and that as of June 30, 1994,
the statute therefore required New York to return $955 million to the United States. The notice advised
the State that it could apply for a waiver on certain statutory grounds. New York did request a waiver
for those tax programs, as well as for a number of others, but HHS has not formally acted on any of those
waiver requests. New York has estimated that the amount at issue for the period from October 1992 through
March 1997 is as high as $2.6 billion.
Because HHS had not taken any action on the waiver requests, New York turned to Congress for relief. On
August 5, 1997, Congress enacted a law that resolved the issue in New York’s favor. Section 4722(c) of
the Balanced Budget Act of 1997 identifies the disputed taxes and provides that they "are deemed
to be permissible health care related taxes and in compliance with the requirements" of the relevant
provisions of the 1991 statute.
On August 11, 1997, the President sent identical notices to the Senate and to the House of Representatives
canceling "one item of new direct spending," specifying §4722(c) as that item, and stating that
he had determined that "this cancellation will reduce the Federal budget deficit." He explained
that §4722(c) would have permitted New York "to continue relying upon impermissible provider taxes
to finance its Medicaid program" and that "[t]his preferential treatment would have increased
Medicaid costs, would have treated New York differently from all other States, and would have established
a costly precedent for other States to request comparable treatment."
Section 968 of the Taxpayer Relief Act
A person who realizes a profit from the sale of securities is generally subject to a capital gains tax.
Under existing law, however, an ordinary business corporation can acquire a corporation, including a food
processing or refining company, in a merger or stock-for-stock transaction in which no gain is recognized
to the seller, see 26 U.S.C. §§354(a), 368(a); the seller’s tax payment, therefore, is deferred. If, however,
the purchaser is a farmers’ cooperative, the parties cannot structure such a transaction because the stock
of the cooperative may be held only by its members, see 26 U.S.C. §521(b)(2); thus, a seller dealing with
a farmers’ cooperative cannot obtain the benefits of tax deferral.
In §968 of the Taxpayer Relief Act of 1997, Congress amended §1042 of the Internal Revenue Code to permit
owners of certain food refiners and processors to defer the recognition of gain if they sell their stock
to eligible farmers’ cooperatives. The purpose of the amendment, as repeatedly explained by its sponsors,
was "to facilitate the transfer of refiners and processors to farmers’ cooperatives." The amendment
to §1042 was one of the 79 "limited tax benefits" authorized by the Taxpayer Relief Act of 1997
and specifically identified in Title XVII of that Act as "subject to [the] line item veto."
On the same date that he canceled the "item of new direct spending" involving New York’s health
care programs, the President also canceled this limited tax benefit. In his explanation of that action,
the President endorsed the objective of encouraging "value-added farming through the purchase by
farmers’ cooperatives of refiners or processors of agricultural goods," but concluded that the provision
lacked safeguards and also "failed to target its benefits to small-and-medium-size cooperatives."
II
Appellees filed two separate actions against the President and other federal officials challenging
these two cancellations. The plaintiffs in the first case are the City of New York, two hospital associations,
one hospital, and two unions representing health care employees. The plaintiffs in the second are a farmers’
cooperative consisting of about 30 potato growers in Idaho and an individual farmer who is a member and
officer of the cooperative. The District Court consolidated the two cases and determined that
at least one of the plaintiffs in each had standing under Article III of the Constitution.
Appellee New York City Health and Hospitals Corporation (NYCHHC) is responsible for the operation of public
health care facilities throughout the City of New York. If HHS ultimately denies the State’s waiver requests,
New York law will automatically require NYCHHC to make retroactive tax payments to the State of about
$4 million for each of the years at issue. 985 F. Supp., at 172. This contingent liability for NYCHHC,
and comparable potential liabilities for the other appellee health care providers, were eliminated by
§4722(c) of the Balanced Budget Act of 1997 and revived by the President’s cancellation of that provision.
The District Court held that the cancellation of the statutory protection against these liabilities constituted
sufficient injury to give these providers Article III standing.
Appellee Snake River Potato Growers, Inc. (Snake River) was formed in May 1997 to assist Idaho potato
farmers in marketing their crops and stabilizing prices, in part through a strategy of acquiring potato
processing facilities that will allow the members of the cooperative to retain revenues otherwise payable
to third-party processors. At that time, Congress was considering the amendment to the capital gains tax
that was expressly intended to aid farmers’ cooperatives in the purchase of processing facilities, and
Snake River had concrete plans to take advantage of the amendment if passed. Indeed, appellee Mike Cranney,
acting on behalf of Snake River, was engaged in negotiations with the owner of an Idaho potato processor
that would have qualified for the tax benefit under the pending legislation, but these negotiations terminated
when the President canceled §968. Snake River is currently considering the possible purchase of other
processing facilities in Idaho if the President’s cancellation is reversed. Based on these facts, the
District Court concluded that the Snake River plaintiffs were injured by the President’s cancellation
of §968, as they "lost the benefit of being on equal footing with their competitors and will likely
have to pay more to purchase processing facilities now that the sellers will not [be] able to take advantage
of section 968’s tax breaks." Id., at 177
|
