T .C. Su m m ary Op i n io n 2 02 1 -1 3

UNITED STATES TAX COURT
CONNIE SUE HESTON, Pet it i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 4 5 51 -1 8 S. Fi l edM ay 1 9 , 2 0 2 1
.

Co n ni e Su e Hes t o n , p ro s e. Vas s i l i k i Eco n o m i d es Farri o r an d Ph i l i p A. M y ers , fo r res p on d en t
.

SUM M ARY OPINION PARIS, J u d g e: Th i s cas e was s ub m i t tedp u rs uan tt o th e p ro v i s i o ns o f
s ect i on 7 4 6 3 o f t h e In t ern al Rev en u e Co d e i n effect wh en th e p et i t i on was fi l ed
. 1

1 Un l es s o th erwi s e i nd i cat ed , s ect io n referen ces are t o t h e In t ern al Rev en u e Co d e o f 1 9 8 6 , as am en d ed , i n effect atal l rel ev an tt i m es . 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. Served 05/19/21- 2
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Pu rs u an t t o s ect i o n 7 4 6 3(b ), th e d eci s i o n t o b e en t eredi s n o trev i ewab le b y an y
o th er co u rt , an dth i s o p i ni o n s h al l n o t b e t reat ed as p reced en tfo r an y o th er cas e. Pet i t i o ner, Co n n i e Su e Hes t o n , recei v edad v an ce Prem i u m Tax Cred i t s (APTC) du ri n g h er 2 0 17 t ax y ear. 2 See Pat i en tPro t ect i o n an dAffo rd ab le Care Act(ACA), Pub . L. No . 1 1 1-1 48 , s ec. 1 4 12 , 1 24 St at . at2 3 1 (2 0 1 0 ) (co d i fi edat4 2 U.S.C. s ec. 1 8 08 2 (2 0 12 )). Th ats am e y ear, s h e al s o recei v eda l u m p-s u m d i s tri b u t i o n th ro u g h t h e So ci al Secu ri ty Adm i n i st rat i o n (SSA) fo r d i s ab i l i ty b en efi t s rel at i n g t o th e 2 0 15 , 2 0 1 6 , an d 2 0 1 7 t ax y ears . M s . Hes t o n d i d n ot i n cl u d e t h e d is ab i l i ty

b en efi t s as p arto f h er m o d i fi edad ju s tedg ro s s i n co m e (M AGI) 3 o n h er 2 0 1 7 tax retu rn . Th e Co m m i s s i o n er d et erm i n edth atM s . Hes t o n
was req u ired t o i n cl u d e al l o f t h e l u m p -s u m So ci al Secu ri ty d is tri bu t i o ns recei v ed (i ncl ud i ng th e b ackp aym en t s fo r 2 0 1 5 , 2 0 1 6 , an d 2 0 1 7 ) i n th e cal cu lat i o n o f h er M AGI. As a res u l t , h e fu rth er d et erm i n edth at M s. Hes t o n ’ s h o u s eh o l di n co m e

2 Fo r t h e p u rp o s es o f t h i s Su m m ary Op i ni o n , th e fo l lo wi n g wi l l b e u s edas d efi n edt erm s th ro u g ho u tth e o p i n i o n , l i s t edi n th ei r o rd er o f i n tro du ct i o n : (1 ) “ A d v an ce Prem i um

Tax Cred i t ” (APTC), (2 ) “ Affo rd ab l e Care Act ” (ACA), (3 ) “ So ci al Secu ri ty

Adm i n i st rat i o n ” (SSA), (4 ) “ M o d ifi edAd ju s tedGro ss In co m e” (M AGI), (5 ) “ Ho u s eh o l d In co m e” (HHI), (6 ) “ Prem i u m Tax Cred i t ” (PTC), (7 ) “ So ci al Secu ri ty Di s ab i l i ty

In s u ran ce” (SSDI), (8 ) “ So ci al Secu ri ty Ret i rem en t ” (SSR), (9 ) “ Ad ju s t edGro s s In co m e” (AGI), (1 0 ) “ Fed eral Po v ert y Li n e” (FPL).

3 M AGI i s s p eci fi cal l y

d efi n edfo r t h e p u rp o s es o f s ec. 3 6 B. Sec. 3 6 B(d )(2 )(B).- 3
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(HHI) ex ceed ed al lo w ab l e l i m it s fo r t h e Prem i u m Tax Cred i t (PTC); th ats h e h ad
ex ces s APTC o f $ 1 , 2 7 5 ; th at s he was n o ten t i t l ed t o th e n et PTC o f $ 3 2 7 cl ai m ed
o n h er ret u rn ; an dthats h e h ada res u l t in g t o t al d efi ci en cy o f $ 1 ,6 0 2 fo r 2 0 1 7 . M s. Hes to n s eek s red et erm i n at i on o f t h e Co m m i s s i on er’ s d et erm i n at i o n s . Th e i s s u es fo r d eci s i o n are: (1 ) wh et her M s . Hes t o n recei vedex ces s APTC p aym en t s o f $ 1,2 7 5 . Th e Co u rth o l d s thats h e d i d ; an d (2 ) wh et her M s . Hes t o n i s en t it l edt o th e n etPTC o f $ 32 7 cl ai m edo n h er retu rn . Th e Co u rth o l ds thats h e i s n o t
. Back gro u n d Th e p art i es s ubm it t edth i s cas e fo r d eci si on wi th o u t tri al u n der Ru l e 1 2 2
. See Ru l e 1 2 2 (a). Pet i t i o n er res i d edi n Ok l ah o m a wh en s h e t im el y fi ledh er p et i t i o n . Befo re 2 0 1 7 M s . Hes t o n h ada p en d i n g cl ai m fo r So ci al Secu ri ty b en efi t s
u n d er t h e So ci al Secu ri ty Di s ab i l i ty

Ben efi ts In s u ran ce (SSDI) p ro gram fo r a d i s ab i l i ty fro m s ev eral y ears b efo re. Th e cl ai m h adn o ty etb een res o l v edatth e b eg in n i n g o f 2 0 17 . InJ an u ary 2 0 1 7 M s . Hes t o n was recei v in g So ci al Secu ri ty Ret i rem en t(SSR) b en efi t s o f $ 1 ,2 4 1 p er m o n th
.- 4
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Ato r ab o u t th e b eg i nn in g o f 2 0 1 7 M s . Hes t o n en ro l l edi n h eal th i n s u ran ce
co v erag e th ro u g h a h eal th i n su ran ce m ark et p l ace, an dm o n th ly

APTC p aym en t s
were m ad e o n h er b eh al f. See 4 2 U.S.C. s ec. 1 8 0 82 . In2 0 17 th e Dep art m en to f th e Treas u ry

(Treas u ry ) p ai d t h e p l an ei g h t fu ll m o n th l y i n s t al l m en t s o f $ 1 ,0 7 3 an d M s . Hes t o n p ai d$ 1 2 6 .0 6, the d i fferen ce b etween h er m o nt h l y p l anp rem i um , $ 1 ,1 9 9 .0 6 , an d t h e am o u n t o f t h e m o n th ly APTC, $ 1 ,0 7 3 . InSep t em b er a p art ial APTC p rem i u m

o f $ 4 6 4 .9 7 was p ai d , an dM s . Hes t o n p ai dth e b al an ce o f $ 5 4 .6 2
o f t h e p art i al m o n th l y

p rem i u m . Duri n g 2 0 1 7 Treas u ry m ad e APTC p aym en t s o n M s . Hes t o n ’ s b eh al f t o t al i n g $ 9,0 4 8 .9 7 , an dM s . Hes t on m ad e p lan p rem i u m p aym en t s t ot al i n g $ 1 ,0 6 3 .1 0. OnSep t em

b er 2 , 2 01 7 , th e SSA n o t ifi edM s . Hes t o n t h ath er d i s ab il i ty ap p li cat io n h adb een ret ro act i v el y ap p ro v edan di twas d et erm i nedth at s he h ad b eco m e d i sab l edo n J an u ary 2 2 , 2 0 1 5 . As a res u lt , s h e recei v eda l u m p-s u m So ci al Secu ri ty

d i s tri b ut i o n o f $ 1 2 ,5 3 2 o n o r ab o u tSep t em b er 3 , 2 0 1 7
. Th ats u m rep res en t edSSDI o f $ 4,4 5 4 fo r 2 0 1 5 , $ 4 ,8 4 4 fo r 2 0 16 , an d$ 3 ,2 3 4 fo r 2 0 17 . M s . Hes to n recei v edm o n th l y SSDI b en efi t s o f $ 1 ,6 4 5 i n l i euo f SSR b en efi t s , fo r a t o t al o f $ 6 , 5 8 0 i n SSDI b en efi t s b et ween Sep t em b er an dDecem

b er o f 2 0 1 7
. As a res u l t o f h er SSDI award , M s. Hes to n b eg an recei v in g h eal th care
co v erag e th ro u g h M ed i care Part A an dPartB b eg i n n i n g J u l y 1 , 2 01 7
. Th e fi rs t- 5
-

t i m e M s . Hes t on was n o t i fi edo f h er M ed i care el i g ib i l i ty an den ro l l m en twas al s o i n the SSA l et t er d at edSep t em b er 2 , 2 0 1 7 . Sh e was en t i tl edt o M ed i care h o s p i tal i n s u ran ce an dm ed i cal i n s u ran ce b eg i n n i n g J ul y 2 0 1 7 , an d SSA wo u l d d edu ct $ 1 3 4 each m o nt h fro m

h er So ci al Secu ri ty

b en efi t s fo r m ed ical i n s uran ce p rem i u m s b eg i n n i n g i n J u l y . Des p i t e M s . Hes t o n ’ s el i g i b i l i ty fo r, an den ro l l m en ti n , M ed i care Part A b y SSA ret ro act i v el y

i n J ul y , Treas u ry

co n ti n u edt o p ay

M s . Hes t o n ’ s m ark etp l ace p l an fo r al l o f J u l y , Au g u s t , an dth e fi n al , p art i al m on th o f Sep tem ber. Du ri n g that t i m e M s . Hes t on co n ti n u ed t o b e ch arg edh er p o rt io n o f t h e p rem i u m . Atth e en do f the y ear, M s . Hes t o n recei v edFo rm 1 0 9 5 -B, Heal th Co v erag e, fo r 2 0 1 7 s h o wi n g th ats h e h ad M ed i care co v erag e fro m J u l y th ro u g h Decem

b er. Her h eal th i n s uran ce co m pan y al s o s en tM s . Hes t o n Fo rm 1 09 5 -A, Heal th In s u ran ce M ark etp lace St at em en t , fo r 2 01 7 fo r i n su ran ce co v erag e fro m J an u ary t o Sep tem b er. Th e Fo rm

1 0 9 5 -A rep o rt ed(1 ) t h e co s to f th e m o n th l y p l an p rem i u m s , (2 ) t h e m o n th l y

b en ch m arks i l v er p l an p rem iu m o f $ 1 ,1 9 0
. 7 1 u sedt o cal cu l at e t h e PTC, an d(3 ) t h e m o n th ly APTC p aym en t s Treas u ry p ai d t o th e p l an . M s . Hes to n t im el y

fi l edh er Fo rm

1 0 4 0, U.S. In d i v i du al In co m e Tax Retu rn , fo r 2 0 1 7 . Sh e cl ai m eda p ers o n al ex em p t i on o n l y

fo r h ers el f an drep ort edad ju s t ed g ro s s i n co m e o f $ 8 , 5 0 0 co n s i s ti n g o f t ax ab l e In d i v i du al Ret i rem en tAcco u n t- 6
-

d i s tri b u t i o n s fro m

ret i rem en tacco u n ts . On h er Fo rm 1 0 4 0 s h e al s o rep o rt ed $ 2 9 ,0 3 8 as th e t o t al s u m

o f So ci al Secu ri ty

b en efi t s s he recei v ed b u tex cl u dedth e
am ou n tfro m

h er ad ju s t edg ro s s i n co m e (AGI) fo r 2 0 1 7
. 4 M s. Hes to n ’ s Fo rm 1 0 4 0 rep o rt edh er AGI fo r 2 0 1 7 as $ 8 ,5 0 0
. Fi l edwi th h er Fo rm 10 4 0 was a Fo rm 8 9 6 2 , Prem i u m Tax Cred i t . Th e Fo rm 8 9 6 2 i s u s edt o reco n ci l e t h e am o un to f APTC a t ax p ay er recei v es wi th the
am ou n to f PTC t o wh i ch th e t ax p ay er i s u l t i m at el y en ti tl ed . Onth e Fo rm

8 9 6 2 , M s . Hes t o n rep o rt ed$ 2 0,1 9 2 as h er M AGI 5 an dth e s am e am o u n tas h er HHI. Sh e rep o rt ed$ 3 2 7 as h er n etPTC. OnSep t em

b er 1 2 , 2 0 1 8 , th e Co m

m i s s i o n er i ss uedM s . Hes t o n a n o t i ce o f d efi ci en cy

d et erm i n i n g th at s he recei v edex ces s APTC duri n g 2 0 1 7 res u l t i n g i n a d efi ci en cy

o f $ 1 ,6 0 2 . Th atam ou n tco n s i st edo f a co rrect edt ax l i ab i l i ty o f $ 1 ,2 7 5 p l u s an ad

ju s t m en tt o th e refu n d ab l e PTC o f $ 3 2 7
. Th e Co m m is s i o n er’ s d et erm i n at i o n i n creas edM s . Hes t o n ’ s 2 01 7 HHI t o $ 3 7 ,5 3 8 . Th ats u m rep res en t s

4 Th e $ 2 9,0 3 8 co n si s t s o f So ci al Secu ri ty i n co m e fro m

th e $ 9 ,9 2 6 i n SSR b en efi t s , th e $ 1 2 ,5 3 2 l u m p -s u m SSDI p aym en t s , an d t h e $ 6 ,5 8 0 recei v ed i n SSDI b en efi t s b et ween Sep t em b er an dDecem

b er 2 0 1 7
. 5 Onb ri ef, t h e Co m

m i s s i on er n ot edth at h e was u n cert ai n h o wM s . Hes t o n arri v edatthi s n u m

b er, an ds h e h as o ffered n o fu rt h er ex p l an at i o n .- 7
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M s . Hes t o n ’ s 2 0 1 7 AGI o f $ 8 ,5 0 0 , p l us th e $ 2 9,0 3 8 u n tax edp o rt io n o f h er 2 0 1 7 So ci al Secu ri ty

i n co m e. M s . Hes to n co n t en ds thatb ecau s e h er HHI was b el o w 4 0 0 % o f t he Fed eral p o v ert y l in e (FPL) fo r m o sto f 2 0 17 , s h e s h o u ldn o t b e l iab l e fo r an y ad d it i o n al t ax rel at i n g t o th e m o n th s b efo re h er recei pto f t h e l u m p -s u m So ci al Secu ri ty

p aym en t , es s en t i al l y arg u in g t h ath er HHI s h o u l db e d et erm i n edo n a m o n thl y b as i s rat h er th an an n u al l y . Sh e al s o co n t en d s th ati t i s a h ard s h i p t o p ay th e d efi ci en cy . Di s cu ss i o n I. Bu rd en o f Pro o f Th e p art i es s ubm it t edth i s cas e fo r d eci si on wi th o u t tri al u n der Ru l e 1 2 2 (a). Th e fact th ata cas e h as b een s ub m i t t edu n d er Ru l e 1 2 2 (a) “ d oes n o t al t er t he b u rd eno f p ro of, o r t h e requ i rem en t s o therwi s e ap p l i cab l e wi th res p ectt o ad du ci n g p ro o f, o r th e effect o f fai l u re o f p ro o f.” Ru le 1 2 2 (b ). Gen eral ly , th e Co m

m i s s i o n er’ s d et erm i n at i o n s i n a n o t i ce o f d efi ci en cy are p res u m edco rrect , an dth e t ax p ay er b ears th e b urd en o f p ro v i n g t h atth o s e d et erm i n at i o n s are erro n eo u s . Ru l e 1 4 2 (a)(1 ); W el ch v . Hel v eri n g , 2 9 0 U.S. 1 1 1 , 1 1 5 (1 93 3 ). M s . Hes t o n d o es n o tco n t en d , an dth e ev i d en ce d o es n otes t ab l i s h , th atth e b u rd en o f p ro o f s h i ft s t o th e Co m m i s s i o n er u n d er s ect i o n 7 49 1 (a) as t o
an y i s s u e o f fact
.- 8
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II. An al y s i s Des p i t e d et erm i n i n g a d efi ci en cy , th e Co m m i s s i o n er d o es n o td i s p u t e t h at M s . Hes t o n i s el i g i b l e fo r s o m e am ou n t o f PTC. Fi rs t , the Co u rtrev i ews PTC el i g i b i l i ty an d b ri efl y

ex p l ai ns wh y

th e Co u rtag rees th at M s . Hes t o n i s en t i t l ed
s o m e am o u n to f PTC. See i n fra Part II.A. Nex t , th e Co u rtd et erm i n es th e act u al
am ou n to f PTC t o wh i ch M s . Hes t o n was en t i t l edfo r 2 0 1 7
. See i n fra Part II.B. Th en th e Co u rtex p l ai n s h o w M s . Hes t on m u s treco n ci l e APTC wi th t h e am o u n to f PTC t o wh i ch s h e was actu al ly en t i t l ed , an dth enth e Co urtcal cu l at es h er ex ces s APTC. See i n fra Part II.C. Fi n al l y , th e Co u rtad dres ses wh et h er M s . Hes t o n was
en t i t l edt o cl ai m

a n etPTC o f $ 3 2 7 . See i n fra Part II.D. A. M s . Hes to n ’ s PTC El i g ib i l i ty ACA s ec. 1 4 01 , 1 2 4 St at . at2 1 3, creat eds ect i o n 3 6 B, wh i ch p ro v i d es th at t ax p ay ers m eet i n g cert ai n req u i rem en t s are el i g i bl e fo r t h e PTC. Th e PTC
s ub s i d i zes th e co s t o f h eal th i n s u ran ce p u rch as edth ro u g h a h eal th i n s uran ce
ex ch an g e. See s ec. 1 .3 6 B-2 (a), In co m e Tax Reg s . A reci p ien tcan el ectt o recei v e PTC p aym en t s i n ad v an ce (i .e., APTC) o n th e b as i s o f anes t i m at e o f t h e am o u n t
o f PTC fo r wh i ch th e reci pi en twi l l b e el i g i b l e an dwh ereu p on m o n th l y p aym en ts
are m ad e th ro u g h o u t th e y ear d i rect l y fro m Treas u ry t o th e reci p i en t ’ s i n s u rer.- 9
-

ACA s ec. 1 4 12 , 1 2 4 St at . at2 3 1 ; M cGu i re v . Co m m i s s i o ner, 1 4 9 T.C. 2 5 4 , 2 5 9
- 2 6 2 (2 01 7 ) (d i s cu s s i n g el ig i b i l i ty req u irem en ts ). Tax p ay ers are g en eral ly

el i g i b l e fo r t h e PTC i f t hei r HHI i s at l eas t 1 0 0 % b u tn o t m o re t h an 4 0 0% o f t h e am ou n tequ al t o th e FPL fo r t h e ap p l icab l e y ear. Sec. 3 6 B(c)(1 )(A). HHI i s s p eci fi cal l y d efi n edfo r t h i s p u rp o s e. Sec. 3 6 B(d )(2 )(A); s ec. 1 .3 6 B-1 (d ) an d(e)(1 ), In co m e Tax Reg s. El i g i b i l i ty i s al s o
co n ti n g en to n en ro l l m en t i n a qu al i fi edh eal th p l an . Sec. 3 6 B(b )(2 )(A). Fo r p u rp o s es o f t h i s cal cu l at i o n , HHI m ean s t h e s u m o f t h e t ax p ay er’ s M AGI p l u s th e M AGI o f fam i ly m em bers : (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 o n s fo r p ers o n al ex em p t i o ns an d(2 ) wh o are req u i redt o fi l e a Fed eral i nco m e t ax return u n d er s ect i o n 1
. Sec. 3 6 B(d )(2 )(A); s ec. 1
. 3 6 B-1 (d ) an d (e)(1 ), In co m e Tax Reg s . As p ert i n en th ere, an i n d i v i dual ’ s M AGI i s h is o r h er AGI (wi th in th e m ean i n g o f s ect i o n 6 2 ), i n creas edb y the am o u n to f an y So ci al Secu ri ty b en efi t s (as d efi n edi n s ect i o n 8 6 (d )) wh i ch were n o t i n cl ud edi n g ro s s- 1 0 -

i n co m e u n d er s ect i o n 8 6
. 6 Sec. 3 6 B(d )(2 )(B); s ec. 1 .3 6 B-1 (e)(2 ), In co m e Tax Reg s. Th e FPL m ean s 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 . 7 Acco rd i n g t o tho s e g u i d el i nes , th e ap p l i cab l e FPL fo r a fam i l y o f o n e i n Ok l ah o m a du ri n g 2 0 1 6 was $ 1 1 ,8 8 0 . See s up ra n o t e 7
.

6 SSDI l u m

p -s u m backp aym en t s h av e fru s trat edAPTC reci pi en t s. See J o h n so n v . Co m

m i s s i o ner, 1 52 T.C. 1 2 1 (2 0 19 ); M o n ro e v . Co m m i s s io n er, T.C. M em o. 2 0 1 9 -4 1 . Th e co n cern i s th ath ad th e SSDI p aym en t s b een award ed p ro m p t ly an dth erefo re d i st ri b u t edi n th e ap p l i cab l e y ears , th e reci p i en ts wo u l d h av e b een el i g i b l e fo r th e PTC. In J o h ns o n v . Co m m i s si o n er, 1 5 2 T.C. at 1 2 7 , th e Co u rth el dth atth e s ec. 3 6 B req u i rem en tt o i n cl u de So ci al Secu ri ty b en efi t s i n M AGI i s u n am

b i g u o us . Th e s ec. 3 6 B(d )(2 )(B) M AGI d efi n i t i o n refers t o So ci al Secu ri ty b en efi t s, as d efi n edi n s ec. 8 6 (d ), wh i ch were n o ti n cl ud edi n g ro ss i n co m e u n d er s ec. 8 6 . Sec. 8 6 (d )(1 )(A) d efi n es a “ So ci al s ecu ri ty b en efi t ” as an y am ou n trecei vedb y

th e t ax pay er b y

reas on o f “ a m o n th l y

b en efi tu n d er t i t le II o f th e So ci al Secu ri ty

Act ”. Ti tl e II o f t h e So ci al Secu ri ty Actp ro vi d es fo r SSDI p aym en t s. 4 2 U.S.C. s ec. 4 2 3 (2 0 1 8 ). Th e Co u rtm u s tco n cl u de i twas co n gres si o n al i n t en tth atSSDI l u m p -s u m b ackp aym en t s are req u i redt o b e i n cl u d edi n M AGI fo r p urp os es o f t h e PTC.

7 Th e FPL i s up d at ed p eri o d i cal l y i n the Fed eral Reg i s t er b y th e Secret ary

o f Heal th an dHu m an Serv ices (HHS) u n d er t h e au th o ri ty o f t he Co m

m u n i ty Op p o rtu n i ti es , Acco u n t ab il i ty , an dTrai n i n g an dEdu cat i o n al Serv i ces Acto f 1 9 9 8 , Pub . L. No
. 1 0 5-2 85 , s ec. 2 0 1 , 1 1 2 St at . at2 7 2 9 (co d i fi edat4 2 U.S.C. s ec. 9 9 0 2 (2 ) (2 0 12 ))), i n effect on th e fi rs td ay o f th e reg u lar en ro l l m en t p eri o dfo r co v erag e b y

a qu al ifi edh eal th p l an fo r a cal en d ar y ear. See s ec. 3 6 B(d )(3 )(B). Th e fi rs t d ay

o f t h e reg u l ar en ro l l m en tp eri o d fo r 2 0 1 7 was No vem b er 1 , 2 0 1 6 . 4 5 C.F.R. s ec. 1 5 5 .4 1 0 (e)(2 ) (2 0 1 6). As o f No vem b er 1 , 2 0 16 , 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 nes h adb een p ub l i s h edi n the Fed eral Reg i s t er o n J an u ary 2 5 , 2 0 1 6. An n u al Up d at e o f t h e HHS Po v ert y Gu i d el i n es , 8 1 Fed . Reg
. 4 0 3 6 (J an . 2 5, 2 0 1 6 ).- 1 1 -

Th i s cas e turn s o n wh et her M s . Hes t o n i m pro p erl y fai l edt o i n cl u d e al l o f h er So ci al Secu ri ty

b en efi ts i n th e cal cu l at i o n o f h er M AGI, as th e Co m m i s s i o n er al l eg es . See s ec. 3 6 B(d )(2 )(B); s ec. 1 .3 6B-1 (e)(2 ), In co m e Tax Reg s . InJ o h n so n
v . Co m m i s s i o n er, 1 5 2 T.C. 1 21 (2 0 1 9 ), th e Co u rtad dres sedwh et h er M AGI i n cl u d es al l So ci al Secu ri ty b en efi t s recei v eddu ri ng a t ax ab l e y ear, i rres p ect i v e o f
an y s ect i on 8 6 (e) el ect i o n , fo r p u rp o s es o f d et erm i n i n g a t ax p ay er’ s el i g i b i l i ty fo r th e PTC. In J o h ns o n , th e t ax p ay er recei v edSo ci al Secu ri ty d is ab i l i ty b en efi t s i n a l u m p -s u m p aym en t o f $ 2 6,1 8 0 , o f wh i ch $ 1 1 ,9 0 2 was at tri b u t ab l e t o 2 0 1 3 an d $ 1 4 ,2 7 8 t o 2 0 1 4 . Id . at1 2 2 . Aft er recei v i n g a n o t i ce o f d efi ci en cy fo r ex ces s APTC, M r. J oh n s on fi l ed an am en d edretu rn , m ak i n g a s ect i o n 8 6 (e) el ect i o n . Id
. at1 2 3
. Th e Co u rth el dth atth e en t i re $ 26 ,1 8 0 i n So ci al Secu ri ty d is ab i l i ty b en efi t s h e recei v ed th aty ear h adt o b e i n cl ud edi n the cal cu l at i on o f h i s M AGI fo r p u rp o s es o f d et erm in i n g h i s PTC el i g i b i l i ty . See i d . at1 2 5 -1 28 . Whi l e M r. J o h n so n ’ s s i tu at i o n was s ym pat h et i c, h is M A GI u l t im at el y ex ceed ed el i g i bl e l ev el s. M s . Hes to n ’ s s i tu at i o n i s al s o s ym p at h et i c, b u t th e Co u rtm u st co n cl u d e t hat M s . Hes t o n ’ s co rrectM AGI fo r 2 0 1 7 co m pri s es $ 8 , 5 0 0 (h er AGI), i n creas edb y $ 2 9 ,0 3 8 (t he t ot al am o u n to f So ci al Secu ri ty b en efi ts s h e recei v edi n 2 0 1 7 wh i ch
were n o t i n cl u d edi n h er ad ju s tedg ro s s i n co m e), fo r a t o t al M AGI o f $ 3 7 ,5 3 8 . In- 1 2 -

tu rn , M s . Hes t on ’ s HHI wo u l dal s o b e $ 3 7,5 3 8
. 8 Th e Co m m i s si o n er d is al l o wed
s o m e o f M s . Hes t o n’ s PTC b ecau s e h er co rrect HHI o f $ 3 7 ,5 3 8 was 3 1 6 % 9 o f t h e FPL. Bu tb ecau s e t ax pay ers are g en eral l y el ig ib l e fo r t h e PTC i f t h ei r HHI i s at l eas t 10 0 %, b u tn o t m o re t h an 4 0 0 %, o f t h e FPL fo r t h e ap p l i cab l e y ear, M s . Hes to n i s en t i t l edt o s o m e am ou n to f PTC fo r 2 0 1 7 . See s ec. 3 6 B(c)(1 )(A). B. Cal cu l at i n g M s. Hes t o n ’ s PTC En t i t l em en t On ce i ti s d et erm i n edth ata t ax p ay er i s el i gi b l e fo r t h e PTC, t he p reci s e
am ou n to f PTC m

u s tb e cal cu l at ed . Un der s ect i o n 3 6 B(b )(2 ), a t ax p ay er’ s
m o nt h l y PTC am ou n ti s the l es s er o f: (A) t h e m on th l y p rem i u m s fo r s u ch m o n th fo r 1 o r m o re qu al ifi edh eal th p l an s o fferedi n th e i n d i v i du al m ark etwi thi n a St at e wh i ch co ver t h e t ax p ay er, t h e t ax p ay er’ s s p o u s e, o r an y d ep en den t(as d efi n edi n s ect i o n 1 5 2 ) o f t h e t ax p ay er an d wh i ch were en ro l ledi n th ro ug h an Ex ch an g e es tab l i s h edb y th e St at e u n d er [s ect i o n ] 1 3 1 1 o f th e * * * [ACA] , o r (B) t h e ex ces s (i f an y ) o f-- (i ) t h e ad ju s t edm o n th l y

p rem i u m fo r s u ch m o n th fo r t h e ap p l i cab l e s eco n d l o wes tco s ts i l v er p l an wi th res p ect t o t h e t ax pay er, o v er

8 Th i s i s s o b ecau s e s h e cl ai m eda p ers on al ex em p t io n o nl y

fo r h ers el f an d h ad n o o th er fam i l y

m em b ers fo r wh o m

s h e cl ai m eda d edu ct i on an dwh o were req u i redt o fi l e a Fed eral i n co m e t ax retu rn u nd er s ec. 1 . See s ec. 3 6 B(d )(2 )(A); s ec. 1 .3 6 B-1 (e)(1 ), In co m e Tax Reg s .

9 HHI /FPL = $ 3 7 ,5 3 8 /$ 1 1 ,8 8 0 = 3 .1 6 0 = 3 1 6 %- 1 3 - (i i ) an am o u n tequ al t o 1 / 1 2 o f t h e p ro ducto f t h e ap p l i cab l e p ercen tag e an dth e t ax pay er’ s h o u seh o l di n co m e fo r th e t ax ab l e y ear. See al s o s ec. 1 .3 6 B-3 (d )(1 ), In co m e Tax Reg s . Sect io n 3 6B(b )(2 )(B)(i i ) i s
co m m o n ly referred t o as th e t ax p ay er’ s “ co n tri b u t i o n am o u n t ”. See s ec. 1 .3 6 B3 (d )(1 )(i i ), In co m e Tax Reg s . To cal cu l at e t h e co n tri b u t i o n am o u nt , o n e m u s t d et erm i n e t h e ap p li cab l e p ercen t ag e, wh i ch i s b as edo n a s cal e rel at i v e t o th e t ax p ay er’ s HHI as a p ercen t ag e o f t h e FPL. See s ec. 3 6 B(b )(3 )(A). M s . Hes to n ’ s HHI as a p ercen t ag e o f t h e FPL was 3 1 6 %. Th e ap p l icab l e p ercen t ag e fo r a t ax p ay er wh o se HHI was 3 1 6 % o f th e FPL fo r 2 0 1 7 was 9 .6 9 %. Rev
. Pro c. 2 0 1 6 -2 4 , s ec. 2 , 2 0 16 -1 8 I.R.B. 6 77 , 6 7 7 . Th e Co u rtcan th en cal cu l at e th atM s . Hes t o n ’ s co nt ri b ut i o n am o u n twas $ 30 3
. 1 2
. 1 0 Th i s am o u n ti s m o re t h an th e $ 1 26 .0 6 o f m o n thl y

p rem i um th at M s . Hes t o n actu al l y p ai d
. In tu rn th e Co u rtcan cal cu l at e t h e ex ces s , i f an y , o f t he b en ch m arkp l an p rem i u m (i .e., th e s il v er p l an ), o v er M s . Hes t o n ’ s co n tri b u t i on am o u n t
. Here,
u s i n g th e co rrect edHHI am o u nt , th e ex ces s o f $ 8 8 7 .5 9 wo u l d b e b et ween th e b en ch m arkp lan p rem i um , $ 1 ,1 9 0 .7 1 , an dh er m on thl y co n tri b u t i on am o u n t , $ 3 0 3 .1 2
.

1 0 Co n tri bu t i o n am o u n t = (HHI × Ap p l i cab l e Percen t ag e) /1 2 M on th s = ($ 3 7 , 53 8 × .0 9 6 9 ) /1 2 = $ 3 0 3
. 1 2 . See s ec. 3 6 B(b )(2 ); s ec. 1 .3 6 B-3 (d )(1 ), In co m e Tax Reg s .- 1 4 -

As n o ted , M s . Hes t o n was en t i t l ed t o th e PTC i n th e am o u n tth ati s th e l es s er o f (1 ) h er m o n th l y

p l an prem i u m ($ 1,1 9 9 .0 6 ) o r (2 ) an y ex ces s o f t h e b en ch m arkp lan p rem i um o v er t h e co n tri b u t i o n am ou n t($ 8 8 7 .5 9 ). Th us , M s . Hes to n was en t i t l edt o a m o n th l y PTC o f $ 8 87 .5 9
. As th e Co u rts t at edi n Ab reg o v . Co m m is s i o n er, T.C. M em o . 2 0 2 0-8 7 , at* 1 2 -* 1 3 : In p l ai n En g l i s h , th e am o u n to f t h e PTC a t ax p ay er i s en t i t l ed t o i s cal cu l at edb y

co m p ari n g th e p rem i u m fo r th e p lan th e t ax p ay er s el ect edt o a PTC am o un tcal cu l at edag ai n s ta b en ch m arkp lan p rem i u m . If th e act u al p l an p rem i u m i s l es s t h an th e cal cu l at edPTC am o u nt , th en th e PTC wi l l co v er t h e en ti re p lan p rem i u m . If th e p l an p rem i u m i s m o re t h an the cal cu l at edPTC am o u nt , th enth e PTC wi l l co v er o n l y

th e cal cu l at edPTC am o u n t
. Th e Co u rtcan co n cl u d e t h atM s . Hes t o n was el i g i b l e fo r $ 8 8 7 .5 9 1 1 i n m o n th l y PTC, fo r a t o t al o f $ 7 ,6 2 0 .3 1 1 2 du ri n g 2 0 1 7 v ers u s th e $ 1 , 0 7 3 p er m o n th s he actu al l y recei v ed
. M s . Hes to n ap p ears t o h av e h adn o n o t i ce o f h er M ed icare el ig i b i l i ty o r
en ro l l m en tu n t i l atl eas tSep t em b er 2 , 2 0 1 7 , wh en s h e recei v eda l et t er fro m SSA

1 1 M s . Hes t o n ’ s p l an p rem i u m was $ 1 ,1 9 9.0 6 . Th e d i fferen ce b et ween th e b en ch m arkp lan p rem i um , $ 1 ,1 9 0 .7 1 , an dh er m on thl y co n tri b u t i on am o u n t , $ 3 0 3 .1 2 , was $ 8 8 7 .5 9. Th us , M s . Hes to n ’ s m o n th ly PTC am o un t was $ 88 7 .5 9 b ecau s e i twas l es s th an h er p l an p rem i u m .

1 2 Fo r p art i al m o n th cal cu l at i o n s s ee s ec. 1 .3 6 B-3 (d )(1 ) an d(2 ), Ex am p l e (2 ), In co m e Tax Reg s .; s ee al s o , fo r ex am p l e, T.D. 9 7 4 5 , 2 0 16 -2 I.R.B. 2 5 6 , 2 5 9
.- 1 5 -

n o t i fy i n g h er, aft er t h e fact , th ats h e h ad b een en ro l l edi n M ed i care Part A an dPart B as o f J ul y

1 , 2 0 1 7 . M s . Hes t o n p o i n ts t o th e ret ro act iv e ap p ro v al an dl u m p -s u m p aym en t i n Sep tem

ber 2 0 1 7 as h er p ri m ary

arg u m en treg ard i ng wh y s h e s h o u l d
n o to we an y

ad d i t i o n al t ax . Acco rd i n g t o M s . Hes t on , h er APTC cal cu l at i o n was
co rrect atthe b eg i n n i n g o f 2 0 1 7 an ds h e s ho u ldn o tb e p en al i zedfo r t h e ret ro act i v e SSDI p aym en t. Bu tth ere h av e b een n o p en al t ies d et erm i n edb y th e Co m m i s s i o n er, an dth i s o p in i o n ad dres s es m erel y th e co rrect t ax l i ab i l i ty . C. Reco n ci l i ng M s . Hes t o n ’ s APTC an dPTC M s . Hes to n el ect ed t o recei v e h er PTC b en efi ti n ad v an ce o n th e b as i s o f h er
es t i m at edel i g i b i l i ty . As was the cas e wi th h er l u m p -s u m SSDI b en efi ts , s o m et i m es ci rcu m s t an ces ch an g e an da t ax p ay er’ s an n u al i n co m e m i gh tb e m o re
o r l es s than th e es t i m at e t h at was u s edwh en th e am ou n t o f APTC was d et erm i n ed
. Atth e en do f the y ear a t ax p ay er wh o recei v edAPTC i s i n s tru ct ed b y th e IRS t o
u s e Fo rm 8 9 6 2 t o reco n ci l e (1 ) t h e am ou n t o f APTC (wh ich was b as edo n th e
es t i m at edel i g i b i l i ty ) t h e t ax p ay er recei v eddu ri n g the y ear wi th (2 ) t h e am ou n to f PTC t o wh i ch th e t ax p ay er i s actu al l y en ti t led(wh i ch i s b as edo n HHI wh en th e t ax p ay er fi l es h i s o r h er an n u al i n co m e t ax retu rn ). See s ec. 3 6 B(f)(2 ). Th i s i s d o n e wh enth e t ax p ay er fi l es h i s o r h er an n u al i n co m e t ax retu rn . Th e PTC
co m p u t edo n Fo rm

8 96 2 i s b as edo n a n u m

b er o f fact o rs , i n cl u d i n g th e t ax p ay er’ s- 1 6 -

HHI an dfam il y

s i ze rep o rt edo n the i n co m e t ax retu rn . If th e am o un to f APTC i s
m o re th an th e am ou n to f PTC t o wh i ch th e reci p i en ti s u lt i m at el y en t i t l ed , th e t ax p ay er o wes b ackt o the Go vern m en tth e ex ces s cred i t , wh i ch i s refl ect edas an i n creas e i n t ax . See s ec. 3 6 B(f)(2 )(A); Keel v . Co m m is s i o n er, T.C. M em o . 2 0 1 8 -5 , at* 5-* 6
. Ho wev er, t h e i n creas e i n t ax fo r ex ces s APTC i s l i m i t edt o a m ax i m u m o f $ 1 ,2 7 5 fo r a s i n g l e t ax p ay er wh o s e HHI was at l eas t 3 0 0 % b u tl es s th an 4 0 0 % o f th e FPL. Sec. 3 6 B(f)(2 )(B)(i ) an d (i i ); Rev . Pro c. 2 0 16 -5 5 , s ec. 3
. 0 6 , 2 0 1 6 -4 5 I.R.B. 7 0 7 , 7 1 1. If a reci p i en ti s wh o l l y i n el ig i b l e fo r t h e PTC b ecau s e th e reci pi en t’ s HHI was m o re t h an4 0 0 % o f t h e FPL, t h en th e en t i re am o u n to f al read y p ai dAPTC m

u s t b e i n cl u d edas a t ax l i ab i l i ty o n th e reci p i en t -t ax pay er’ s t ax retu rn . Sec. 3 6 B(c)(1 )(A), (f)(2 )(B); s ec. 1
. 3 6B-4 (a)(4 ), Ex am p l e (5 ), In co m e Tax Reg s. M s . Hes to n recei v ed$ 9 ,0 4 8 .9 7 i n APTC. Atth e en do f th e d ay i ttu rn s o ut th ats h e was en t i t l ed t o o n l y $7 ,6 2 0 .3 1 1 3 o f PTC. As a res u l t , s h e h as $ 1 ,4 28 .6 6 1 4 i n ex ces s APTC l i ab i l it y . Bu t s h e i s el i g i b l e fo r rel i ef u n d er t h e m ax i m u m l i m i tat i on s . Her HHI was 3 1 6 % o f t h e FPL, m ean in g th ath er ad d i t io n al i n co m e

1 3 See s up ra p . 1 4
. 1 4 $ 9 ,0 4 8 .9 7

! $7 ,6 2 0 .3 1 = $ 1 ,4 2 8.6 6- 1 7 -

t ax l i ab i l i ty

i s s ub j ectt o th e m ax i m

u m l i m i to f $ 1 ,2 7 5 fo r s i n g l e t ax p ay ers wh o s e HHI i s atl eas t3 0 0% b utl es s th an 4 0 0% o f t h e FPL. See s ec. 3 6 B(f)(2 )(B)(i ) an d (i i); s ec. 1 .3 6 B-4 (a)(3 )(i i ) an d(i i i ), Ex am p l e (1 5 ), In co m e Tax Reg s . ; Rev . Pro c. 2 0 1 6 -5 5 , s ec. 3 .0 6
. Becau s e M s . Hes t o n ’ s ex ces s APTC ($ 1 ,4 2 8 .6 6 ) i s m o re t h an th e m ax im

u m l i m i t at io n ($ 1 , 27 5 ), th e $ 1 ,2 7 5 l im i t at i o n i s al l th atM s . Hes t o n
o wes . D. NetPTC Cl ai m M s . Hes to n cl ai m ed a n etPTC o f $ 32 7 o n h er 2 0 1 7 t ax retu rn . Th e Co u rt
s t at eds up ra p . 1 6 th ati f t h e am o u n to f APTC i s m o re t h an th e am o u n to f PTC t o wh i ch th e reci p i en t i s u l t i m at el y en t i tl ed , th e t ax p ay er o w es b ackt o th e Go v ern m en tth e ex ces s cred i t, wh ich i s refl ect edas an i ncreas e i n t ax . See s ec. 3 6 B(f)(2 )(A); Keel v . Co m m i s s i o n er, at* 5 -* 6 . Th ere i s a co n v ers e t o th at p ro p os i t i on : If t h e am o un to f APTC i s l es s th an th e am ou n t o f PTC t o wh i ch th e reci pi en t i s u lt i m at el y

en t it l ed , th e t ax p ay er can cl ai m th e ex ces s as a cred i t(“ n et PTC”). Sec. 3 6B(a). Th e d i fferen ce i s rep o rt edo n Fo rm 1 0 4 0 , l i n e 6 9, an dres u l t s i n ei th er a redu ct i on t o th e am o u n t o f t ax o wedo r a refu nd
. As th e Co u rth as m ad e cl ear, s ee s upra Part II.C, M s . Hes t on i s i n the fo rm er p o s i t i on o f h av i n g ex ces s APTC refl ect edas an i n creas e i n t ax rat h er t h an i n th e- 1 8 -

l at t er p o s i t i o n o f h av in g n etPTC. Acco rd i n g l y , th e Co u rtfi nd s th atM s . Hes t o n
was n oten ti t ledt o t h e cl ai m ed$ 3 2 7 n etPTC. III. Co n cl u si o n In reach i n g a d eci s io n, the Co u rth as co n s i d eredal l arg u m en t s m ad e b y th e p art i es , an dt o th e ex ten tn o tm en t i o n edo r ad dres s ed th ey are i rrel ev an to r wi th o u t
m eri t . Th e Co u rtn o tes th att o t h e ex ten tM s . Hes t o n cl ai m s th atp ay i n g t h e d efi ci en cy

wo u l db e a h ard s h i p , s h e i s free t o s ubm i tt o th e IRS, at an y t im e aft er th e en try o f t h i s d eci s i on , fo r i ts co n s i d erat i o n an dp o s s i b le accep t an ce, a
co l l ect i o n al t ern at i v e i n t h e fo rm o f an i n st al lm en tag reem en to r o ffer-i nco m p ro m i s e, s up p o rt edb y

th e n eces s ary

fi nan ci al i nfo rm at i o n . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t ered fo r res p o n den t
.