The IRS has updated items related to the premium tax credit under IRC §36B that was enacted as part of the Affordable Care Act to take into account indexing required under the law.[1] The updated items are:

• The applicable percentage table under IRC §36B(b)(3)(A)(i) and

• The employee’s required contribution under IRC §36B(c)(2)(C)(i)(II) used to determine if an employer’s offer of coverage is affordable.

In CCA 201949001[1] the IRS looked at whether Executive Order 13765, which related to minimizing the burden of the Affordable Care Act, allowed the IRS to ignore a social security lump sum payment that was not considered by the Health Care Marketplace when the taxpayer received an advanced premium tax credit under §36B.  The advance credit reduces the premium the taxpayer is required to pay for the health care policy during the year.

But the taxpayer may be required to pay back some or all of the advance credit if, when the taxpayer’s return is prepared for the year in question, household income turns out to be different than expected when the advance credit was computed.

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.

Advisers often have the “is Junior still a dependent” conversation with clients when a child approaches or reaches adulthood.  Parents often insist that they have met the requirements to claim the child, presuming that doing so will give them a significant tax break. 

In the case of Gibson v. Commissioner, TC Memo 2017-187, the taxpayers discovered that there are now additional risks beyond simply losing a dependency exemption on exam when a parent claims a child as a dependent—a potential need to repay advance premium credits under IRC  §36B when the IRS doesn’t decide to challenge the exemption.

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The taxpayers in the case of McGuire v. Commissioner, 149 TC No. 9, were asking the Tax Court to find that they did not owe $7,805 in excess advance premium credit they had received under the Affordable Care Act (ACA). However, the Court found that it lacked the ability to grant the relief the taxpayers were requesting.

The taxpayer originally had obtained insurance from Covered California, an ACA health care exchange, for 2014.  Based on the household income reported, Covered California computed that the taxpayers were eligible for an advance premium credit of $591 per month, for a total credit of $7,092.  The taxpayers enrolled in a plan with a gross monthly premium of $1,181.97 per month.  Due to the credit, the net premium they paid each month was $590.97.

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In Revenue Procedure 2017-36 the IRS provided the 2018 inflation adjusted amounts for provisions related to the individual health care mandate and credit rules under the Affordable Care Act for 2017. 

Matters are clearly in flux, as the IRS published this table on the same day that the House of Representatives passed the American Health Care Act of 2017 and sent it on to its fate in the United States Senate.  But, for now, these numbers are scheduled to be in effect for 2018.

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Added March 11 - Link to Ways and Means Copy of the Bill.

The House Ways and Means Committee has released the markup version of the American Health Care Act, the proposed replacement for the Affordable Care Act.  The committee will meet on March 8 to begin the mark up process.

The bill in its present form is merely a starting point for the process of the modification, repeal and/or replacement of various provisions that were enacted in 2010 as part of the Patient Protection and Affordable Care Act and the Healthcare Reconciliation Act.

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The IRS has issued proposed regulations (REG-109086-15) on the premium tax credit that, among other things help explain how an employer could use an opt-out arrangement and not increase their potential liability for a shared responsibility payment under IRC §4980H.

While these regulations are not scheduled to be effective until years beginning after December 31, 2016, taxpayers may rely on them for years beginning after December 31, 2015 (or, in most cases, calendar year 2016).

In Notice 2014-69 the IRS has issued a warning regarding certain employer health plans it has learned about that have been designed to provide no, or extremely limited, in-patient hospitalization and/or physician coverage but still, due to quirks in the online minimum value calculator, be found to provide “minimum value” for health insurance.

The notice provides that plans that fail to provide significant in-patient hospitalization and/or physician coverage do provide minimum value and that regulations will shortly be issued to that effect. 

While obtaining conflicting results in different Circuit Courts of Appeal on matters occurs from time to time, it’s not often the conflicting decisions are issued on the same day.  But this is what occurred with regard to the validity of IRS regulations for the premium tax credit under IRC §36B.

The Court of Appeals for District of Columbia found that the regulations were invalid in the case of Halbig, et al. v. Burwell, CA DC, 114 AFTR 2d ¶ 2014-5068.  However, the Fourth Circuit concluded that the regulations were valid in the case of King v. Burwell, 114 AFTR 2d ¶ 2014‑5071.

When this occurs, the Supreme Court often steps in and, in a case of this importance, is virtually forced to do so.  In its decision in the appeal of the Fourth Circuit decision the Court, in a 6-3 decision, decided that the Fourth Circuit was correct—the regulations were valid, though the exact logic of the opinion suggests that the issue actually had to be decided by the United States Supreme Court (King v. Burrell, USSC, No. 14-114, 115 AFTR 2d ¶2015-841)

The IRS announced relief for certain taxpayers who end up having to repay amounts related to advance payment of the premium tax credit in Notice 2015-9.  The IRS announced that the relief will apply to liabilities under IRC §6651(a)(2) for late payment of a balance due for taxpayers unable to pay the balance due and under IRC §6654(a) for underpayment of estimated taxes.  The relief will only apply to 2014 taxes.