T.C. Summary Opinion 2017-50
UNITED STATES TAX COURT
CAROL SUE WALKER AND THEODORE PAUL WALKER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 30549-15S. Filed July 12, 2017.
Carol Sue Walker and Theodore Paul Walker, pro sese.
Janice B. Geier, Peter R. Hochman, David Lau, and Erik W. Nelson, for
respondent.
SUMMARY OPINION
PANUTHOS, Chief Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in effect when the
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petition was filed.1 Pursuant to section 7463(b), the decision to be entered is not
reviewable by any other court, and this opinion shall not be treated as precedent
for any other case.
In a notice of deficiency dated September 18, 2015, respondent determined
a deficiency of $12,924 in petitioners’ 2014 Federal income tax and a section
6662(a) accuracy-related penalty of $2,584.
After concessions,2 the issue for decision is whether petitioners are required
to repay advance premium tax credit payments totaling $12,924 for 2014.
Background
Some of the facts have been stipulated, and we incorporate the stipulation of
facts by this reference. Petitioners resided in California when their petition was
timely filed.
1
Unless otherwise indicated, subsequent section references are to the
Internal Revenue Code in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
2
Respondent conceded the accuracy-related penalty. The notice of
deficiency also determined that petitioners underreported their Social Security
income by $3. Petitioners did not address this in their petition; thus this issue is
deemed conceded. See Rule 34(b)(4).
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Petitioners enrolled in health insurance for 2014 though Covered California,
a health insurance Marketplace.3 Petitioners were enrolled in a health insurance
plan with Anthem Blue Cross for all of 2014. Petitioner’s monthly premium for
Anthem Blue Cross was $1,378. Petitioners elected to receive a monthly advance
premium tax credit (APTC) of $1,077 to cover part of the cost of the monthly
premium; this amount was paid on behalf of petitioners directly to Anthem Blue
Cross.
Petitioners timely filed for 2014 a joint Form 1040A, U.S. Individual
Income Tax Return, dated February 4, 2015. Petitioners reported (1) wage income
of $16,918, (2) a taxable pension or annuity distribution of $27,192, and (3) Social
Security income of $31,089, of which $19,307 was taxable. Petitioners reported
adjusted gross income (AGI) of $63,417.4
After the filing of the 2014 return, petitioners separately mailed a Form
1095-A, Health Insurance Marketplace Statement, and a Form 8962, Premium Tax
Credit (PTC), each of which respondent received on October 14, 2015.
3
A health insurance Marketplace, also known as an “Exchange”, is a State or
federally run program where taxpayers can purchase health insurance. Internal
Revenue Manual pt. 21.6.3.4.2.16.1(1) (Oct. 1, 2014).
$16,918 wage income % $27,192 taxable pension or annuity distribution +
4
$19,307 taxable Social Security income' $63,417 AGI.
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Petitioners’ Form 1095-A reflected monthly APTC payments of $1,077, totaling
$12,924. Petitioners’ Form 8962 reported modified adjusted gross income
(MAGI) of $75,199, which included the nontaxable portion of Social Security
income and reflected a family size of two persons.5
In the notice of deficiency respondent determined that petitioners were
ineligible for the PTC because their MAGI for 2014, $75,199, exceeded 400% of
the Federal poverty line amount for their family size. Petitioners timely filed a
petition in which they asserted that they were informed by Covered California that
they qualified for insurance coverage through Anthem Blue Cross for 2014.
Petitioners also assert that they would not have purchased insurance through
Covered California if they had known that they did not qualify for the PTC.
Discussion
In general, the Commissioner’s determination set forth in a notice of
deficiency is presumed correct, and the taxpayer bears the burden of proving that
the determination is in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933). Pursuant to section 7491(a), the burden of proof as to factual matters
shifts to the Commissioner under certain circumstances. Petitioners did not allege
5
$63,417 AGI + $11,782 nontaxable Social Security income = $75,199
MAGI.
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or otherwise show that section 7491(a) applies. See sec. 7491(a)(2)(A) and (B).
Therefore, petitioners bear the burden of proof. See Rule 142(a).
In 2010 the Patient Protection and Affordable Care Act (ACA), Pub. L. No.
111-148, 124 Stat. 119 (2010), became law. ACA sec. 1401(a), 124 Stat. at 213,
enacted section 36B, which allows a refundable tax credit, known as the PTC.6
The PTC assists eligible taxpayers with the costs of their premiums for health
insurance purchased through an Exchange. See id.
A taxpayer generally qualifies for the PTC if he has household income that
is equal to an amount that is at least 100%, but not greater than 400%, of the
Federal poverty line amount for the taxpayer’s family size for the taxable year.7
Sec. 36B(c)(1)(A); sec. 1.36B-2(b)(1), Income Tax Regs. The Federal poverty
line amount is established by the most recently published poverty guidelines in
effect on the first day of the open enrollment period preceding that taxable year.
Sec. 36B(d)(3); sec. 1.36B-1(h), Income Tax Regs.
6
The PTC is available for tax years ending after December 31, 2013. See
Patient Protection and Affordable Care Act, Pub. L. No. 111-148, sec. 1401(e),
124 Stat. at 220 (2010).
7
There are certain exceptions to this general rule, none of which is relevant
here. See, e.g., sec. 36B(c)(1)(B); sec. 1.36B-2(b), Income Tax Regs.
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Household income is defined as the MAGI of the taxpayer plus the MAGI
of family members (1) for whom the taxpayer properly claims deductions for
personal exemptions and (2) who were required to a file a Federal income tax
return under section 1. Sec. 36B(d); sec. 1.36B-1(d), (e)(1), Income Tax Regs.
MAGI for purposes of eligibility for the premium tax credit is determined by
adding to AGI the following amounts, which are normally excludable from
income: “(i) Amounts excluded from gross income under section 911; (ii) Tax-
exempt interest the taxpayer receives or accrues during the taxable year; and (iii)
Social security benefits (within the meaning of section 86(d)) not included in gross
income under section 86.” Sec. 1.36B-1(e)(2), Income Tax Regs.; see also sec.
36B(d)(2)(B).
ACA sec. 1412, 124 Stat. at 231, allows the Secretary to authorize advance
payments of the PTC, known as the APTC, on behalf of qualifying taxpayers. In
such circumstances, a taxpayer elects to have the Bureau of the Fiscal Service pay
the APTC directly to his insurance carrier to help cover the cost of insurance
premiums during the year. Internal Revenue Manual pt. 21.6.3.4.2.16(6) (Oct. 1,
2014). The amount of the payment is based upon the Exchange’s estimate of the
PTC which the taxpayer may be entitled to claim on his return. The APTC may
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cover some or all of the taxpayer’s monthly premiums for a health insurance plan.
ACA sec. 1412, 124 Stat. at 231-233.
When preparing his income tax return, a taxpayer who has received the
APTC is required to reconcile the APTC payments made during the year with the
amount of the PTC for which he is actually eligible. If the total APTC payments
exceed the amount of the PTC for which he is eligible, he owes the excess as a tax
liability, subject to a repayment limitation in section 36B(f)(2)(B). ACA sec.
1401(a), 124 Stat. at 219; sec. 36B(f)(2)(A); sec. 1.36B-4(a)(1), Income Tax Regs.
This repayment limitation applies only to taxpayers whose household income is
less than 400% of the Federal poverty line amount.8 Sec. 36B(f)(2)(B)(i); sec.
1.36B-4(a)(3), Income Tax Regs.
Petitioners, who have a household size of two persons and were each
required to file a Federal income tax return, reported MAGI of $75,199; this
amount is greater than $62,040, 400% of the Federal poverty line amount
8
The repayment limitation provides that the amount to be repaid is limited to
the following amounts on the basis of household income (expressed as a
percentage of the poverty line amount): (1) $600 if household income is less than
200%; (2) $1,500 if household income is at least 200% but less than 300%; and
(3) $2,500 if household income is at least 300% but less than 400%. These dollar
amounts are reduced by one-half in the case of unmarried individuals whose tax is
determined under sec. 1(c). The section also provides that these amounts are
indexed. Sec. 36B(f)(2)(B); see also sec. 1.36B-4(a)(3), Income Tax Regs.
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applicable for the year in issue.9 See secs. 1, 36B(c)(1)(A), (d); sec. 1.36B-1(d),
(e), (h), Income Tax Regs. Because petitioners’ household income for their family
size is greater than 400% of the Federal poverty line amount, they do not qualify
for the PTC. See sec. 36B(a), (c)(1)(A); sec. 1.36B-2(a) and (b)(1), Income Tax
Regs. Since petitioners qualify for zero of the PTC, they owe the excess of the
APTC payments made on their behalf, the entire $12,924, as a tax liability. See
sec. 36B(f)(1) and (2); sec. 1.36B-4(a)(1), Income Tax Regs. Petitioners are not
subject to the repayment limitation because their household income is greater than
400% of the Federal poverty line amount. See sec. 36B(f)(2)(B)(i); sec. 1.36B-
4(a)(3), Income Tax Regs.
9
The Federal poverty line amount for 2013 for a household of two people,
for the 48 contiguous States and District of Columbia, was $15,510. The
applicable Federal poverty guidelines were referred to in the instructions for Form
8962. The Federal poverty guidelines are revised at least annually and are
released by the Department of Health and Human Services. 42 U.S.C. sec.
9902(2), (4) (1998). The Federal poverty guidelines for 2013 can be found at
https://www.federalregister.gov/documents/2013/01/24/2013-01422/annual-updat
e-of-the-hhs-poverty-guidelines.
As previously indicated, the Federal poverty line refers to the most recently
published Federal poverty guidelines in effect on the first day of the open
enrollment period preceding that taxable year; thus for petitioners we apply the
Federal poverty guidelines in effect during 2013. See sec. 36B(d)(3); sec. 1.36B-
1(h), Income Tax Regs.
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We note that it appears that Covered California may have incorrectly
informed petitioners that they were eligible for the APTC for 2014.10 We are not
unsympathetic to petitioners’ plight; however, we are bound by the statute as
written and the accompanying regulations when consistent therewith. Michaels v.
Commissioner, 87 T.C. 1412, 1417 (1986); Brissett v. Commissioner, T.C. Memo.
2003-310, 2003 WL 22520105, at *3. The simple facts are that petitioners’ MAGI
exceeded eligible levels and that they must repay the APTC payments made on
their behalf. Accordingly, we sustain respondent’s determination.
We have considered all of the parties’ arguments, and, to the extent not
addressed herein, we conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered
under Rule 155.
10
Petitioners also testified that Covered California erroneously terminated
petitioner wife from her healthcare plan in 2015. The State of California SDSS
State Hearings Division ordered that Covered California re-instate her healthcare
coverage for 2015. Petitioners present this information to highlight additional
errors made by Covered California. While indeed errors may have been made, this
information does not relate to petitioners’ eligibility for the PTC for 2014. See
sec. 36B(c)(1)(A); sec. 1.36B-2(b)(1), Income Tax Regs. Therefore, this
information was not considered by the Court.