TAX COURT OPINION

Case: Wayne Dennis Woodrow & Colleen J. Woodrow
Docket Number: 13346-18S
Judge: Carluzzo
Opinion Type: bench
Filed: 11/22/2019
Pages: 9

SEC UNITED STATES TAX COURT WASHINGTON, DC 20217 WAYNE DENNIS WOODROW & COLLEEN J. ) ) WOODROW, ) ) Petitioners, v. ) Docket No. 13346-18S 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 Chief Special Trial Judge Lewis R. Carluzzo at Tampa, Florida, 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 under Rule 155. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. November 22, 2019 SERVED Nov 25 2019 Bench Opinion by Special Trial Judge Lewis R. Carluzzo 3 October 30, 2019 Wayne Dennis Woodrow & Colleen J. Woodrow v. Commissioner Docket No. 13346-18S 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 contained 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 1 2 3 4 5 6 7 8 9 10 11 12 Court Rules of Practice and Procedure. This bench opinion 13 14 15 is made pursuant to the authority granted by section 7459(b) and Rule 152. This proceeding for the redetermination of a 16 deficiency is a small tax case subject to the provisions 17 of section 7463 and Rules 170 through 174. Except as 18 provided in Rule 152(c), this bench opinion shall not.be 19 cited as authority, and pursuant to section 7463(b) the 20 decision entered in this case shall not be treated as 21 22 precedent for any other case. Wayne Dennis Woodrow (petitioner) appeared on 23 his own behalf. Colleen J. Woodrow did not appear at 24 25 trial, but she did sign the stipulation of facts that was filed on October 21, 2019, and admitted into evidence 73)406-2250|operations®escribers.net|wviw.escribers.net 4 1 2 3 4 5 6 7 8 9 10 11 during the trial on October 28, 2019. David Livermore appeared on behalf of respondent. At the time the petition was filed, petitioners lived in Florida. In a notice of deficiency dated April 13, 2018 (notice), respondent determined a deficiency in petitioners' 2016 Federal income tax and imposed a section 6662(a) penalty. Respondent now concedes a portion of that deficiency and the penalty. The deficiency, or the portion of it that remains in dispute, results entirely from the Federal income tax consequences that flow to a taxpayer who secures health insurance pursuant to the 12 Patient Protection and Affordable Care Act (ACA), Pub. L. 13 No. 111-148, 124 Stat. 119(2010). In order to resolve 14 what remains in dispute between the parties we must decide 15 16 17 18 19 20 21 22 23 (1) whether petitioners are entitled to a health care premium assistance tax credit (premium tax credit or PTC) for 2016, and (2) whether the advance payments of the premium tax credit (APTC) they received that year exceeded that credit. See sec. 36B. The resolution of these questions depends upon whether petitioners may exclude certain distributions from petitioner's retirement accounts or pensi-on plans from their modified adjusted gross income as that term is defined in section 24 36B(d)(2)(B). 25 All of the stipulated facts are found. In (973)406-2250|operat nseescribers.net|www.eséribersiet . 5 1 2 3 4 5 6 7 8 9 addition to the stipulated facts, we incorporate all of facts included in petitioner's trial testimony as the findings of the Court. Because there is no apparent factual disputes between the parties, only the more relevant facts will be mentioned in this bench opinion. Petitioner had a long career in the coal industry before and until political and economic conditions caused his employer to lay-off or eliminate 60 percent of its workforce. His employment ended in 10 December 2014, but he was able to maintain health 11 insurance for his family through a private plan with 12 Highmark Health Insurance Company (Highmark) at least 13 through 2015 (private plan). The private plan cost 14 petitioners about $1,000.per month. A dramatic increase 15 in the cost of petitioner's monthly prescriptions alerted 16 him to the fact that Highmark had switched him to a 17 different plan that apparently cost the same as the 18 Private plan, but did not provide the same coverage as the 19 private plan. 20 While investigating health insurance coverage 21 options petitioner was referred to a health insurance 22 marketplace created under the ACA (marketplace). 23 Following a consultation with a representative of the 24 marketplace, petitioner opted for a health insurance plan 25 offered by Highmark through the marketplace (marketplace 973)406-2250[operations@escribers.net|www.escribers.net plan). The monthly premium for the marketplace plan was $1,944 per month, which was more than petitioner wanted to 6 pay, but he was advised that a portion of the cost would be covered by the APTC. As petitioner viewed the matter at the time, the marketplace plan he selected would offer about the same coverage available to him and his family under the private plan for about the same out-of-pocket cost. Had petitioner known at the time that he would not be eligibleAPTC he would not have enrolled in the 1 2 3 4 5 6 7 8 9 10 marketplace plan. 11 Coverage under the marketplace plan was 12 effective for petitioners and three other individuals from 13 March 1, 2016, through December 31, 2016, and over that 14 10-month period APTC payments totaling $9,170 were paid 15 directly to Highmark. 16 17 Petitioner prepared petitioners' 2016 Federal income tax return (return) using a commercially available 18 Federal income tax return preparation program. The 19 20 adjusted gross income shown on the return is significantly higher than 400 percent of the applicable Federal poverty 21 guidelines published in the Federal Register (poverty 22 guidelines), and a great majority of that adjusted gross 23 24 25 2ncome consists of distributions from petitioner's retirement account and pension plan (retirement account income). If the retirement account income is not taken 73) 406-2250|operati ns@escribers.net |0 ww.escribers.net 7 into account, petitioners' adjusted gross income would be more that 100 percent but less than 400 percent of the poverty guidelines. eetitioners did not include a rorm 8962, Premium Tax Credit, with the return, and no amount is shown on line 46, "Excess advance premium tax credit overpayment" of the return. In general, section 36B(a) allows a refundable Federal income tax credit computed with reference to amounts incurred by an "applicable taxpayer" for the cost 1 2 3 4 5 6 7 8 9 10 of certain qualified health care insurance plans. 11 Application of the provisions of section 36B can be 12 13 14 15 16 complicated, and during trial I admitted to being less than completely informed as to how those provisions apply to the dispute between the parties in this case. But as it turns out, deep analysis into what are otherwise complicated statutory provisions is not necessary here. 17 The first q'uestion posed, that is, are petitioners 18 entitled to a PTC is answered by little more than reading 19 a few simple sentences. 20 21 22 23 24 25 The credit created by section 36B is only allowed to an "applicable taxpayer". The term "applicable taxpayer" is defined in section 36B(c) to include only those taxpayers whose "household income" falls between 100 percent and 400 percent of the poverty guidelines. "Household income" means the "modified adjusted gross t973)406-2250loperations escribers.netlwww.escribers.net income" of 8 the taxpayer, see sec. 36B(d)(2), and "modified adjusted gross income" means the adjusted gross income shown on the taxpayer's return, increased by certain items of income excludable from the taxpayer's income and/or exempt from tax. See sec. 36B(d)(2)(B). Contrary to the advice received by petitioners, retirement income must be included in the computation of modified adjusted gross TYMSDYL income and -therefe ousehold income. Here's how those provisions apply here. 1 2 3 4 5 6 7 8 9 10 Petitioners' adjusted gross income as shown on the return, 11 12 13 their modified adjusted gross income, and household income for 2016, as those terms are defined in section 36B are equal and all exceed 400 percent of the poverty 14 guidelines. It follows then, that petitioners are not an 15 16 17 18 "applicable taxpayer" within the meaning of section 36B, and they are not entitled to an PTC. A simple mathematical equation taking into account petitioners' APTC, which amounted to $9,170 and 19 petitioners' PTC, which is zero, shows that the excess 20 APTC equals the APTC, that is $9,170. Section 36B(f) 21 provides that the excess APTC increases the Federal income 22 23 24 tax imposed by section 1 on the taxpayer's taxable income, and now subject to respondent's concession, that is how the deficiency was computed in this case. Had petitioner 25 properly completed a Form 8962 when the return was due (973 406-2250|operations®escribers.net|www.escribers iet 9 this would all have become clear at the time, and we are satisfied from pétitioner's presentation at trial that is has become clear to him after the return was filed. Petitioners do not challenge the inevitable results that flow from the application of the technical provisions of section 36B. Instead, they point out that they were eerenco Ydvised that petitioner's retirement t r (OMOG tíln income would not be taken into account in the computation of their household income for purposes of the PTC. 1 2 3 4 5 6 7 8 9 10 According to petitioners' the erroneous rompted 11 12 them to select a marketplace plan that they would not otherwise have selected. At trial petitioner commented on 13 his attempts to resolve the dispute administratively and 14 noted that respondent's employees were sympathetic to 15 petitioners' situation, but claimed to have no discretion 16 17 18 to offer any relief under the circumstances. We share both the sympathy and lack of discretion exhibited by respondent's employees that previously considered 19. petitioners' claim for relief. Like petitioners, the 20 21 taxpayers' in McGuire v. Commissioner, 149 T.C. 254(2017) considered themselves trapped in a health care plan that 22 they did not want, or could not afford without the subsidy 23 Provided under the ACA. The taxpayer's request for an 24 equitable result McGuire, like petitioners' request here, 25 is simply not available, as we explained in that case, the cribers (9733406-2250loperat nseescr&ersmetlwww.escilbetsmét Court is "not a court of equity" and it "cannot 10 ignore the law to achieve an equitable result." It follows that.the deficiency determined in the notice, as now modified by respondent, is sustained. In order to give effect to that modification and to respondent's concession of the section 6662(a) penalty, decision will be entered under Rule 155. This concludes the Court's bench opinion in this case. (Whereupon, at 10:06 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 2 4 25 (973)406-2250|operations@escribersaet j www.escribersaet