T .C. Su m m ary Op i n io n2 01 7 -5 0

UNITED STATES TAX COURT

CAROL SUE WALKER AND THEODORE PAUL W A LKER, Pet it i o n ers v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 3 0 5 49 -1 5 S. Fi l edJ u l y 1 2, 2 0 17
.

Caro l Su e W al k er an dTh eo d ore Pau l W al k er, p ro s es e. J an i ce B. Gei er, Pet er R. Ho ch m an , Dav i dLau , an dEri k W . Nel s on , fo r
res p o n d en t.

SUM M ARY OPINION PANUTHOS, Ch i ef Sp eci al Tri al J u d g e: Th i s cas e was h eardp u rs u an tt o th e p ro v i s i o n s o f s ect i o n 7 4 6 3 o f t h e In t ern al Rev en u e Co d e i neffect wh en th e- 2
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p et i t i o n was fi l ed
. 1 Pu rs u an t t o s ect i o n7 4 6 3(b ), th e d eci si on t o b e en t eredi s n o t
rev i ewab l e b y

an y o ther co u rt , an d t h i s o p i n i o ns h al l n o tb e t reat ed as p reced en t fo r an y o th er cas e. In a n o t ice o f d efi ci en cy d at edSep t em b er 1 8, 2 0 1 5 , res po n d en td et erm i n ed a d efi ci en cy

o f $ 1 2 ,9 24 i n p et it i o n ers ’ 2 0 1 4 Fed eral i n co m e t ax an da s ect i o n 6 6 6 2 (a) accu racy -rel at edp en al ty o f $ 2 ,5 84
. Aft er co n ces si o ns , 2 th e i s s u e fo r d eci s io ni s wh et h er p et it i on ers are req u i red t o rep ay ad v an ce p rem i u m

t ax cred i tp aym en t s t o t al i n g $ 1 2 ,9 2 4 fo r 2 0 1 4. Back gro u n d So m e o f t h e fact s h av e b een s ti p u lat ed , an dwe i n co rp o rat e t h e s t i p u l at i o n o f fact s b y th i s referen ce. Pet it i o n ers res i d edi n Cal i fo rn i a wh enthei r p et i ti o nwas t i m el y fi l ed
.

1 Un l es s o th erwi s e i nd i cat ed , s ub s equ en ts ect i on referen ces are t o t h e In t ern al Rev enu e Co d e i n effect fo r t h e y ear i n i s s u e, an dal l Ru l e referen ces are t o th e Tax Co u rt Ru l es o f Pract ice an dPro cedu re.

2 Res p o n d en tco n ced edthe accu racy -rel at edp en al ty . Th e n o t i ce o f d efi ci en cy

al s o d et erm i n edth atp et i t i o n ers u n derrep ort edth ei r So ci al Secu ri ty i n co m e b y

$ 3. Pet i t i o n ers d id n o tad dres s thi s i nth ei r p et i t i o n; th u s t h is i s s u e i s d eem edco nced ed . See Ru l e 3 4 (b )(4 ).- 3
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Pet i t i o ners en ro l l edi n h eal th i n s u ran ce fo r 2 0 1 4 tho u g h Co vered Cal i fo rn i a, a h eal th i n su ran ce M ark etp lace. 3 Pet i t i o n ers were en ro l l edi na h eal th i ns u ran ce p l an wi th An th em

Bl u e Cro s s fo r al l o f 2 0 1 4 . Pet i t io n er’ s m o n th l y p rem iu m fo r An them Bl u e Cro s s was $ 1 ,3 7 8 . Pet i t i o n ers el ect edt o recei v e a m o n th ly ad v an ce p rem i u m t ax cred i t(APTC) o f $ 1 ,0 7 7 t o co v er p arto f t h e co st o f th e m o n th l y p rem i u m ; th i s am o un twas p ai do nb eh al f o f p et i ti o n ers d irect l y t o An th em

Bl u e Cro ss . Pet i t i o ners t i m el y

fi l edfo r 2 0 1 4 a jo i n tFo rm 1 0 4 0 A , U.S. In d iv idu al In co m e Tax Return , d at edFeb ru ary 4 , 2 0 15 . Pet it i on ers rep o rt ed(1 ) wag e i n co m e
o f $ 1 6,9 1 8 , (2 ) a t ax ab l e p en s i on o r an n ui ty d i st ri bu t i o no f $ 2 7 ,1 9 2 , an d(3 ) So ci al Secu ri ty i n co m e o f $ 31 ,0 89 , o f wh i ch $ 1 9 , 3 07 was t ax ab l e. Pet i t i o n ers rep o rt ed ad ju s t edg ro ss i nco m e (AGI) o f $ 6 3 ,4 1 7
. 4 Aft er t h e fi li n g o f t he 2 0 1 4 retu rn , p et i t i on ers s ep arat el y m ai l eda Fo rm 1 0 9 5 -A, Heal th In s uran ce M ark etp lace St at em en t , an da Fo rm 8 9 6 2 , Prem i u m

Tax Cred i t(PTC), each o f wh i ch res p o n d en t recei v edo n Oct o b er 1 4 , 2 0 1 5
.

3 A h eal th i n s uran ce M ark etp lace, al s o kn o wn as an “ Ex ch an g e”, i s a St at e o r fed eral ly ru n p ro g ram wh ere t ax p ay ers can p u rch as e h eal th i ns u ran ce. In t ern al Rev enu e M an u al p t . 2 1 .6
. 3 .4 .2 .1 6 .1 (1 ) (Oct . 1 , 2 0 1 4 ).

4 $ 1 6 ,9 1 8 wag e i n co m e % $ 2 7 ,1 9 2 t ax ab l e p en s i o no r an n u i ty d i s tri b u t i o n + $ 1 9 ,3 0 7 t ax ab l e So ci al Secu ri ty i n co m e ' $ 6 3 , 4 1 7 AGI.- 4
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Pet i t io n ers ’ Fo rm

1 0 9 5 -A refl ect edm o n th ly APTC p aym en t s o f $ 1 ,0 7 7 , t o t al i n g $ 1 2 ,9 2 4 . Pet i t i o n ers ’ Fo rm 8 9 62 rep o rt ed m o d i fi edad ju s t ed g ro s s i n co m e (M AGI) o f $ 7 5 ,1 9 9 , wh i ch i n cl u d edth e n o n t ax ab l e p o rt i o no f So ci al Secu ri ty i n co m e an d refl ect ed a fam i l y s i ze o f t wo p ers o n s . 5 In th e n ot ice o f d efi ci en cy res p o nd en t d et erm i n edth atp et i t i o n ers were i n el i g i b l e fo r t h e PTC b ecau s e t h ei r M AGI fo r 2 0 14 , $ 7 5 ,1 9 9 , ex ceed ed 4 0 0 % o f th e Fed eral p o v ert y

l i n e am o u n tfo r t h ei r fam i l y s i ze. Pet i t i o n ers t i m el y

fi l eda p et i t i o n i n wh i ch th ey

as s ert edth atth ey

were i n fo rm edb y

Co v eredCal i fo rn i a t h at th ey qu al i fi edfo r i ns u ran ce co v erag e t h ro u g h An th em Bl u e Cro ss fo r 2 0 1 4
. Pet i t io n ers al s o as s ertth atth ey wo u l dn oth av e p u rch as ed i n s u ran ce t h ro u g h Co v eredCal i fo rn ia i f t h ey h adkn o wnth at th ey

d i dn o t qu al i fy

fo r th e PTC. Di s cu ss i o n In g en eral , th e Co m

m i s s i o n er’ s d et erm i n at i o n s etfo rt h i n a n o t i ce o f d efi ci en cy

i s p res um edco rrect , an d t h e t ax p ay er b ears th e b u rd en o f p ro v i ng th at th e d et erm i n at i o n i s i n erro r. Ru l e 1 4 2 (a); W el ch v . Hel v eri n g, 2 9 0 U.S. 1 1 1 , 1 15 (1 9 3 3). Pu rs u an tt o s ect i o n 7 4 9 1 (a), t h e b u rd eno f p ro o f as t o fact ual m at t ers
s h i ft s t o th e Co m

m is s i o n er u n d er cert ai nci rcu m s t an ces . Pet i t io n ers d i dn o tal l eg e

5 $ 6 3 ,4 1 7 AGI + $ 1 1,7 8 2 n o n tax ab l e So ci al Secu ri ty i n co m e = $ 75 ,1 9 9 M AGI.- 5
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o r o th erwi s e s ho w th ats ect i o n 7 4 9 1 (a) ap p l i es . See s ec. 7 4 9 1 (a)(2 )(A) an d(B). Th erefo re, p et it i o n ers b ear t h e b u rd eno f p ro o f. See Ru l e 1 4 2 (a). In 2 0 1 0 th e Pat ien tPro t ect i o nan d Affo rd ab l e Care Act (ACA), Pub . L. No
. 1 1 1 -1 4 8 , 1 2 4 St at . 1 19 (2 0 1 0 ), b ecam e l aw. ACA s ec. 1 4 0 1(a), 1 2 4 St at . at2 1 3 , en act eds ect io n 3 6 B, wh i ch al l o ws a refu n d ab l e t ax cred i t, kno wnas the PTC. 6 Th e PTC as s i s t s el i gi b l e t ax p ay ers wi th th e co s ts o f t h ei r p rem i u m s fo r h eal th i n s u ran ce p u rch as ed th ro u g h an Ex ch an g e. See i d. A t ax p ay er g en eral l y

qu al i fi es fo r th e PTC i f h e h as h o u seh o l d i n co m e t h at i s equ al t o an am o u n t th ati s atl eas t1 0 0 %, b u tn o tg reat er t h an 4 0 0 %, o f t h e Fed eral p o v ert y l i n e am o u n tfo r t h e t ax p ay er’ s fam i l y s i ze fo r t h e t ax ab l e y ear. 7 Sec. 3 6 B(c)(1 )(A); s ec. 1 .3 6B-2 (b )(1 ), In co m e Tax Reg s . Th e Fed eral p o v ert y l i ne am o u n ti s es t ab l is h edb y th e m o s trecen t l y

p ub l i s h edp o v ert y

g u i d el i n es i n effect o n th e fi rs td ay

o f t h e o p en en ro l l m en tp eri o dp reced i n g th att ax ab l e y ear. Sec. 3 6 B(d )(3 ); s ec. 1 .3 6B-1 (h ), In co m e Tax Reg s .

6 Th e PTC i s av ai l ab l e fo r t ax y ears en d i n g aft er Decem b er 3 1 , 2 01 3
. See Pat i en tPro t ect i o n an d Affo rd ab l e Care Act , Pub . L. No . 1 1 1 -1 4 8 , s ec. 1 4 0 1 (e), 1 2 4 St at . at2 2 0 (2 01 0).

7 Th ere are cert ai n ex cep t i o n s t o th is g en eral ru l e, n o n e o f wh ich i s rel ev an t h ere. See, e.g ., s ec. 3 6 B(c)(1 )(B); s ec. 1 .3 6 B-2 (b ), In co m e Tax Reg s .- 6
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Ho u seh ol d i n co m e i s d efi n edas th e M A GI o f t h e t ax p ay er p l us th e M AGI
o f fam i l y m em b ers (1 ) fo r wh o m

th e t ax p ay er p ro p erl y

cl ai m s d edu ct i on s fo r p ers o n al ex em

p ti o n s an d (2 ) wh o were req u i red t o a fi l e a Fed eral i n co m e t ax retu rn u n d er s ect io n 1 . Sec. 3 6B(d ); s ec. 1 .3 6 B-1 (d ), (e)(1 ), In co m e Tax Reg s . M AGI fo r p urp o s es o f el i g i b i l i ty fo r t h e p rem i u m t ax cred i ti s d et erm i n edb y ad d in g t o AGI th e fo ll owi n g am o u n t s, wh i ch are n o rm al ly ex cl u d ab l e fro m i n co m e: “ (i ) Am o u n t s ex cl u d edfro m g ro s s i n co m e u n d er s ect i o n9 1 1 ; (i i) Tax

ex em p ti n t eres tth e t ax p ay er recei v es o r accru es du ri n g th e t ax ab l e y ear; an d(i i i ) So ci al s ecu ri ty

b en efi t s (wi th i n th e m ean i ng o f s ect i o n8 6 (d )) n o t i n cl u d edi ng ro s s i n co m e un d er s ect i o n 8 6 .” Sec. 1 .3 6 B-1 (e)(2 ), In co m e Tax Reg s .; s ee al so s ec. 3 6 B(d )(2 )(B). ACA s ec. 1 4 12 , 1 2 4 St at . at2 3 1, al l o ws the Secret ary t o au th o ri ze ad v an ce p aym en t s o f t h e PTC, kno wnas th e APTC, o nb eh al f o f qu al i fy i n g t ax pay ers . In
s u ch ci rcu m s tan ces , a t ax p ay er el ect s t o h av e th e Bu reau o f t h e Fi s cal Serv i ce p ay th e APTC d irect l y

t o h i s i ns u ran ce carri er t o h el p co v er t h e co sto f i n s u ran ce p rem i u m s du ri n g t he y ear. In tern al Rev en u e M an u al p t . 2 1 .6 .3 .4 .2 .1 6 (6 ) (Oct . 1 , 2 0 1 4 ). Th e am o u n to f t h e p aym en ti s b as edup o nth e Ex ch an g e’ s es t i m at e o f t h e PTC wh i ch th e t ax p ay er m ay b e en t i t l edt o cl ai m

o nh i s retu rn . Th e APTC m ay- 7
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co v er s o m e o r al l o f t h e t ax pay er’ s m o n th l y p rem i u m s fo r a h eal th i n s u ran ce p l an . ACA s ec. 1 4 12 , 1 2 4 St at . at2 3 1 -2 3 3
. Wh en p rep ari n g h i s i n co m e t ax retu rn , a t ax p ay er wh o h as recei v edth e APTC i s req u i redt o reco n ci l e t h e APTC p aym en t s m ad e duri n g th e y ear wi th th e
am ou n to f t h e PTC fo r wh i ch h e i s actu al l y el i g i b l e. If th e t o tal APTC p aym en t s
ex ceed th e am ou n to f t h e PTC fo r wh i ch h e i s el ig i b l e, h e o wes th e ex ces s as a t ax l i ab i l i ty , s ub

jectt o a rep aym en tl i m i t at i o n i ns ect i o n3 6B(f)(2 )(B). ACA s ec. 1 4 0 1 (a), 1 2 4 St at . at2 19 ; s ec. 3 6 B(f)(2 )(A); s ec. 1 .3 6 B-4 (a)(1 ), In co m e Tax Reg s . Th i s rep aym en tl i m i t at io n ap p l i es o nl y t o t ax p ay ers wh o s e h o u s eh o ldi n co m e i s l es s th an4 0 0 % o f t he Fed eral p o v ert y l i n e am o u n t . 8 Sec. 3 6 B(f)(2 )(B)(i ); s ec. 1 .3 6B-4 (a)(3 ), In co m e Tax Reg s . Pet i t i o ners , wh o h av e a h o us eh o l ds i ze o f t wo p ers o n s an dwere each req u i redt o fi l e a Fed eral i n co m e t ax retu rn , rep o rt ed M AGI o f $ 7 5,1 9 9 ; th i s
am ou n ti s g reat er t h an $ 6 2 , 0 4 0 , 4 0 0 % o f t he Fed eral p o v ert y l i n e am o u n t

8 Th e rep aym en tl i m i t at i o n p ro v i des th atth e am o u n tt o b e rep ai d i s l i m i t edt o th e fo l lo wi n g am o u n ts o n th e b as i s o f h o u s eh o ldi n co m e (ex p res s edas a p ercen t ag e o f t h e p o v erty l i n e am o u n t ): (1 ) $ 6 0 0 i f h o u s eh o l di n co m e i s l es s th an 2 0 0 %; (2 ) $ 1 ,5 0 0 i f h ou seh ol di n co m e i s atl eas t2 0 0 % b u tl es s th an3 0 0 %; an d (3 ) $ 2 ,5 00 i f h o u s eh o l d i n co m e i s atl eas t3 0 0% b u tl es s th an 4 00 %. Th es e d o l l ar am ou n t s are red u cedb y

o ne-h al f i nth e cas e o f u n m arri edi n d i v i du al s wh o s e t ax i s d et erm i n edu nd er s ec. 1 (c). Th e s ect i o nal s o p ro v i d es th atthes e am o u n t s are i n d ex ed
. Sec. 3 6B(f)(2 )(B); s ee al s o s ec. 1 .3 6 B-4 (a)(3 ), In co m e Tax Reg s .- 8
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ap p li cab l e fo r t h e y ear i n i s s ue. 9 See s ecs . 1 , 3 6 B(c)(1 )(A), (d ); s ec. 1
. 3 6 B-1 (d ), (e), (h ), In co m e Tax Reg s . Becau s e p et i t i o ners ’ h o u s eh o l d i n co m e fo r t h ei r fam i l y
s i ze i s g reat er t h an 4 0 0 % o f th e Fed eral p o v erty l i n e am o u nt , th ey

d o n otqu al i fy fo r t h e PTC. See s ec. 3 6 B(a), (c)(1 )(A); s ec. 1 .3 6 B-2 (a) an d (b )(1 ), In co m e Tax Reg s. Si nce p et i t i o n ers qu al i fy fo r zero o f th e PTC, th ey o we t h e ex ces s o f t h e APTC p aym en t s m ad e o n thei r b eh al f, th e en t i re $ 1 2,9 2 4 , as a t ax l i ab i li ty . See
s ec. 3 6 B(f)(1 ) an d(2 ); s ec. 1 .3 6B-4 (a)(1 ), In co m e Tax Reg s . Pet i t io n ers are n o t
s ub jectt o t h e rep aym en tl i m it at i o nb ecau s e t h ei r h ou s eh o ldi nco m e i s g reat er t h an 4 0 0 % o f t h e Fed eral p o vert y l i n e am ou n t . See s ec. 3 6B(f)(2 )(B)(i ); s ec. 1 .3 6 B4 (a)(3 ), In co m e Tax Reg s .

9 Th e Fed eral p o v ert y

l i n e am o u n tfo r 2 0 1 3 fo r a h o u s eh o l d o f t wo p eo p l e, fo r t h e 4 8 co n t i g u ou s St at es an dDi s tri cto f Co l u m b i a, was $ 1 5 ,5 1 0 . Th e ap p li cab l e Fed eral po v ert y g u i d el i n es were referred t o i n th e i n s tru ct i o n s fo r Fo rm 8 9 6 2 . Th e Fed eral p o v ert y g u i d el i n es are rev i s edatl eas t an n u al ly an dare rel eas edb y

th e Dep art m en to f Heal th an d Hu m an Serv i ces . 4 2 U.S.C. s ec. 9 9 0 2 (2 ), (4 ) (1 9 9 8 ). Th e Fed eral p o v ert y g u i d el i n es fo r 2 01 3 can b e fo u n dat h t tp s : //www.fed eral reg i st er.g o v / d o cu m en t s / 2 0 1 3 / 0 1 / 2 4 / 2 0 1 3 -0 1 4 2 2 / an n u al -up d at e-o f-t h e-h h s -p o vert y -g u i d el i nes . As p rev i o u sl y

i n d i cat ed , th e Fed eral p o v erty l i ne refers t o th e m o s t recen t l y p ub l i s h edFed eral p o v erty g ui del i n es i neffect o nth e fi rs t d ay o f t h e o p en en ro l l m en tp eri o dp reced i n g th att ax ab l e y ear; th us fo r p et i t i o n ers we ap p l y th e Fed eral p o v ert y g u i d el i n es i n effect du ri n g 2 0 1 3 . See s ec. 3 6 B(d )(3 ); s ec. 1 .3 6 B1 (h ), In co m e Tax Reg s .- 9
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W e n o te t h ati tap p ears th atCo vered Cal i fo rn i a m ay h av e i n co rrect l y i n fo rm edp et i t i o n ers th atth ey were el i g i b l e fo r t h e APTC fo r 2 0 1 4
. 1 0 W e are n o t
u n s ym p at h et i c t o p et i t i o n ers ’ p l i g h t ; h o wev er, we are b o u n db y th e s t atu t e as wri t ten an dth e acco m

p an y i n g reg u l at i on s wh en co ns i s t en t th erewi th . M i ch ael s v . Co m m i s s i o n er, 8 7 T.C. 1 41 2 , 1 4 1 7 (1 9 86 ); Bri s s et tv . Co m m is s i o n er, T.C. M em o . 2 0 0 3 -3 1 0 , 2 0 0 3 W L 2 2 52 0 1 0 5 , at* 3 . Th e s i m p l e fact s are t h atp et i t i o ners ’ M AGI
ex ceed edel i gi bl e l ev el s an d t h atth ey m us trep ay th e APTC p aym en t s m ad e o n th ei r b eh al f. Acco rd in g l y , we s u s t ai nres p o n den t ’ s d et erm i n at i o n . W e h av e co n s id eredal l o f t h e p art i es ’ arg u m en t s , an d , t o th e ex t en tn o t ad dres s edh erei n , we co ncl u d e t h atth ey are m o o t, i rrel ev an t , o r wi tho u tm eri t . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t ered
u n der Ru l e 1 5 5
.

1 0 Pet i t i o ners al s o t es t i fi edth atCo v eredCal ifo rn ia erro n eo us l y t erm in at ed p et i t i o n er wi fe fro m

h er h eal th care p l an i n2 0 1 5 . Th e St at e o f Cal ifo rn i a SDSS St at e Heari n g s Di v i s i o n o rd eredth atCo v eredCal i fo rn i a re-i ns t at e h er h eal th care co v erag e fo r 2 01 5 . Pet i t i o n ers p res en tthi s i n fo rm at i on t o h i g h l i g h t ad d i t i o n al erro rs m ad e b y

Co v eredCal i fo rn i a. Whi l e i nd eederro rs m ay h av e b een m ad e, t h is i n fo rm at i o n d o es n o trel at e t o pet i t i o n ers ’ el i gi b i l i ty fo r t h e PTC fo r 2 01 4
. See s ec. 3 6 B(c)(1 )(A); s ec. 1 .3 6 B-2 (b )(1 ), In co m e Tax Reg s . Th erefo re, t h i s i n fo rm at i o n was n o tco n s i d eredb y th e Co u rt .