The tax law is not necessarily fair, and the Tax Court is not generally allowed to solve such unfairness. In the case of Fisher v. Commissioner, TC Memo 2019-44 the taxpayer found there was no relief available for what many people would see as an unfair result.
The case involves yet another marriage penalty in the tax law. In this case a mid-November marriage ended up forcing Christina Fisher to repay over $4,400 of advance premium tax credit (PTC) that had been used to reduce her Exchange purchased health care premiums for the year.
Under IRC §36B taxpayers who obtain their health insurance via an Exchange can qualify for a tax credit related to the cost of the insurance. The credit is a based on the income of the taxpayer’s household for the year in question, as well as the number of members of that household. The credit does not apply to taxpayers whose household income exceeds 400% of the federal poverty level (FPL).
Since the purpose of the credit was to encourage people to acquire insurance and make it more affordable, the law provides for an advance payment of such credit that reduces the premium paid, so on a monthly basis the taxpayers only has to pay the amount that won’t be subsidized. However, since the actual credit cannot be known until the year concludes, the advance payment is based on estimates of the taxpayer’s income and household for the year.
At the end of the year, the taxpayer computes the actual credit he/she is eligible for and compares that to the total advance credit. If the taxpayer has received advanced payments in excess of the actual credit he/she is eligible for, the excess must be repaid with the tax return for the year in question.
When the unmarried Christina applied for health care in December 2014, the Exchange used Christina’s household income to determine that she qualified for an advance credit of $371 per month in 2015 for the purchase of the insurance coverage she was signing up for.
However, in November she married Timothy Todd Fisher. Mr. Fisher’s income was substantially higher than Christina’s. Their household income for the year was well in excess of 400% of the FPL, the point at which no credit is available to the individual.
While special rules do apply to the calculation for months prior to marriage when a taxpayer is married during the year, those rules did not solve Christina’s problem. Her assigned portion of household income for those periods was still high enough to wipe out her right to any credit for the months prior to the marriage.
The taxpayers did not claim that the amount of credit was being computed incorrectly based on their income, nor did they claim that the information reported by the Exchange on Form 1095-A was in error. They just complained that it was unfair to require Christina to repay an amount that she was clearly eligible for prior to getting married.
Unfortunately, tax law is often unfair and the Tax Court is not a venue in which that statutory unfairness can be addressed. As the opinion notes:
Although we are sympathetic to petitioners’ situation, we are not a court of equity, and we cannot ignore the law to achieve what may be an equitable end. Commissioner v. McCoy, 484 U.S. 3, 7 (1987); Stovall v. Commissioner, 101 T.C. 140, 149-150 (1993); Paxman v. Commissioner, 50 T.C. 567, 576-577 (1968), aff’d, 414 F.2d 265 (10th Cir. 1969). The statute is clear; excess advance PTC payments are treated as an increase in the tax imposed. Sec. 36B(f)(2)(A). Petitioners received an advance of a PTC payment to which they ultimately were not entitled. They are liable for the $4,452 deficiency.