Ind., schools sue over IRS health overhaul rules

Indiana and 15 public school districts are suing the Internal Revenue Service for allegedly overstepping its authority in imposing "employer mandate" regulations on state and local governments under the federal health care overhaul.

The lawsuit filed Tuesday in federal court in Indianapolis contends the IRS is improperly treating Indiana as a taxable entity under the Affordable Care Act with regulations that impose financial penalties on state and local governments, including school districts.

The plaintiffs contend those penalties cannot be applied to government employers in states like Indiana that didn't create their own state health care exchanges.

Attorney General Greg Zoeller says the IRS is creating hardships for state and local government employees such as those in school districts whose hours are being reduced so employers can avoid the penalties.

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