TAX COURT OPINION

Case: David Lee Nelson & Cynthia Elizabeth Nelson
Docket Number: 12491-16S
Judge: Carluzzo
Opinion Type: bench
Filed: 04/19/2017
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 DAVID LEE NELSON & CYNTHIA ELIZABETH NELSON, Petitioners, v. ) ) ) ) ALS ) Docket No. 12491-16S COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Lewis R. Carluzzo at Los Angeles, California, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. April 19, 2017 SERVED Apr 20 2017 Capital Reporting Company 3 1 Bench Opinion by Special Trial Judge Lewis R. 2 Carluzzo 3 April 6, 2017 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 David Lee Nelson & Cynthia Elizabeth Nelson v. Commissioner Docket No. 12491-16S THE COURT: The Court has decided to render oral findings of fact and opinion in this case and the following represents the Court's oral findings of fact and opinion (bench opinion). Unless otherwise noted, section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period, and Rule references are to the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. This proceeding for the redetermination of a deficiency is a small tax case subject to the provisions of section 7463 and Rules 170 through 175. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority, and pursuant to section 7463(b) the decision entered in this case shall not be treated as precedent for any other case. David Lee Nelson and Cynthia Elizabeth 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 Nelson appeared unrepresented by counsel. Emma S. 2 Warner appeared on behalf of respondent. 3 4 5 6 7 8 9 10 11 In a notice of deficiency dated March 1, 2016 (notice), respondent determined a $3,392 deficiency in petitioners' 2014 Federal income tax. The deficiency results entirely from the disallowance of the premium tax credit in the same amount claimed on petitioners' timely filed joint 2014 Federal income tax return. The issue for decision is whether petitioners are entitled to that credit. As it turns out, the resolution of the issue depends upon the 12 manner in which petitioners' premium assistance 13 14 15 16 17 18 19 20 21 22 23 24 25 amount, see sec. 36B(b)(2) is computed. Some of the facts have been stipulated and are so found. At the time the petition was filed and at all other time here relevant, the petitioners resided in California. References to petitioner in this bench opinion are to Cynthia Elizabeth Nelson. Petitioner was self-employed during the year in issue. For the first seven months of 2014 petitioners were covered by a health insurance plan offered through Kaiser Permanente (plan). Petitioner enrolled in the plan directly through the insurance company. Neither she nor David Lee Nelson enrolled in any health insurance plan "through an Exchange 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 established by the State under [section] 1311 of the Patient Protection and Affordable Care Act". Sec. 36B(b)(2) (A). According to the notice, the credit here in dispute was disallowed because petitioners were not "enrolled in health insurance coverage through the 7 Health Insurance Marketplace." 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 At trial petitioners pointed out the use of the term "marketplace", particularly in various publications issued by the Commissioner is ambiguous. As they define the term, specifically pursuant to a standard dictionary definition, the plan was purchased in or through the "marketplace" as it was offered by the insurance company both as an indívidual plan and a plan available on a State Exchange. It is clear that respondent would define the term more narrowly, but we need not resolve the apparent dispute between the parties on the point. Although in not so many words, the parties agree that Covered California is an Exchange established by California under section 1311 of the Patient Protection and Affordable Care Act. The stipulation of facts shows that neither petitioner enrolled in a qualified insurance plan through Covered California or any other Exchange during 2014. 866.488.DEPO www.Capita1ReportingCompany.com . Capital Reporting Company 6 1 2 3 4 5 6 That being so, the flush language of the controlling statute supports respondent's disallowance of the credit here in dispute. Petitioners' invitation to ignore the statute and proceed upon information provided in various publications issued by the Commissioner, of course, must be rejected. See 7 Miller v. Commissioner, 114 T.C. 184, 195 (2000) 8 aff'd sub nom. Lovejoy v. Commissioner, 293 F.3d 9 1208 (10th Cir. 2002). 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Section 36B(a) states, "In General - In the case of an applicable taxpayer, there so be allowed as a credit against the tax imposed by this subtitle for any taxable year an amount equal to the premium assistance credit amount of the taxpayer for the taxable year." In relevant part, section 36B(b)(2) defines the taxpayer's premium assistance credit amount to be the lesser of "the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer's spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under [section] 1311 of the Patient Protection and Affordable Care Act", see sec. 36B(b)(2) (A), over the excess of an amount computed 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 pursuant to section 36(B) (b)(2)(B). Because petitioners' plan was not "enrolled in" through Covered California, which is the relevant Exchange, petitioners' premium assistance amount, as computed pursuant to section 36B(b)(2) UA) is zero. That being so, the amount contemplated in section 36B(b)(2)(B) need not be computed as it cannot be less than zero. Because the amount of petitioners' premium assistance amount as defined in section 36(B) (b) (2) is zero, the amount of petitioners' premium assistance credit amount, as allowed by section 36(B)(a) is likewise zero. It follows that petitioners are not entitled to the credit here in dispute and respondent's disallowance of that credit is sustained. In closing we think it important to note that our reading of the publications relied upon by petitioners, even if those publications were not timely published, is not inconsistent with the statute scheme summarized above. We think it is also appropriate to note that at the conclusion of trial the Court questioned whether in lieu of the disputed credit, the petitioners might be entitled to the deduction for the health insurance premiums paid by petitioners during 2014 as allowable pursuant to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 section 162(1). A closer review of the record shows that the deduction was claimed and allowed. As for the interplay between the credit allowed by section 36B(a) and the deduction allowed by section 162(1), see Rev. Proc. 2014-41, I.R.B. 2014-33 (August 11, 2014). See also page 52, I.R.S. Publication 974, Premium Tax Credit (PTC), January 3, 2017. Otherwise, to reflect the foregoing, decision will be entered for respondent. This concludes the Court's bench opinion in this case. (whereupon, at 9:55 a.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com