TAX COURT OPINION

Case: Juanita P. Morgan
Docket Number: 14362-16
Judge: Buch
Opinion Type: bench
Filed: 11/28/2017
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 PA JUANITA P. MORGAN, Petitioner, v. ) ) ) ) Docket No. 14362-16. 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 with this order to petitioner and respondent a copy of the pages of the transcript of the trial in this case before Judge Ronald L. Buch at Indianapolis, Indiana, 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) Ronald L. Buch Judge Dated: Washington, D.C. November 28, 2017 SERVED Nov 28 2017 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Ronald L. Buch November 2nd, 2017 Juanita P. Morgan v. Commissioner Docket No. 14362-16 THE COURT: The following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal Revenue Code section 7459(b) and Rule 152(a) of 10 the Tax Court Rules of Practice and Procedure. Any 11 12 13 section references refer to the Internal Revenue Code or the Treasury regulations in effect during the years at issue, and all Rule references are to the Tax Court Rules 14 of Practice and Procedure. 15 The question before the Court is whether Ms. 16 Morgan is liable for a deficiency of $6,930 for 2014 and 17 which represents a recapture of Affordable Care Act 18 19 20 21 22 premium assistance credits. We hold that she is liable. Background Although Ms. Morgan did not have any records to substantiate the events she described, we decide this case based on the facts as she described them and as shown by 23 the documents in the record. Ms. Morgan received a notice 24 25 in the mail informing her that her health insurance did not meet the minimum requirements of health insurance that (973)406-2250|operations@escribersmet|wwvascribers.riet 4 1 2 3 4 5 6 7 8 9 she was required to maintain under what is commonly referred to as the Affordable Care Act or the ACA. Through a series of telephone calls, Ms. Morgan eventually arranged for health insurance. Through those telephone calls, Ms. Morgan effectively applied for and received benefits under the ACA. On the basis of her household income the Health Insurance Marketplace determined that Ms. Morgan was eligible for an advance premium assistance credit of $770 per month to be applied to her monthly 10 health insurance premium. That credit was applied to her 11 health insurance premiums from April 2014 through December 12 13 14 2014. She received a total credit of $6,930 for 2014. After the eligibility determination, but still in 2014, one or more of Ms. Morgan's family members needed 15 financial assistance. Ms. Morgan had funds that she could 16 withdraw from a retirement account without penalty and 17 graciously decided to help her family. She was not aware 18 that she might run afoul of the ACA income limits. Ms. 19 Morgan took gross distributions from her individual 20 retirement accounts in the amount of $36,408. 21 22 Ms. Morgan timely filed her tax return and reported an adjusted gross income of $49,282. Due to the 23 withdrawal from her retirement accounts, Ms. Morgan's 24 income was greater than the premium assistance credit 25 eligibility threshold. The Commissioner issued a Letter (973)406-2250|operations@escribersaiet|www.esenbers.net 5 1 2 3 4 5 6 7 8 9 692-C, Request for Consideration of Additional Findings, asserting that Ms. Morgan was required to reconcile, on Form 8962, Premium Tax Credit, the $6,930 advance premium tax credit paid on her behalf. After some back and forth, the Commissioner issued a notice of deficiency to Ms. Morgan, disallowing the $6,930 advance premium tax credit, the effect of which was to increase her tax liability in the amount of that disallowed credit. While residing in Indiana, Ms. Morgan timely filed a petition. 10 Discussion: 11 12 Discussion As a general matter, the Commissioner's 13 determinations in the notice of deficiency are presumed 14 correct, and the taxpayer bears the burden of proving an 15' error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 16 17 (1933). In limited situations, the burden can shift to respondent under section 7491(a), but the record does not 18 establish that the criteria under section 7491 have been 19 met, therefore, the burden of proof remains on Ms. Morgan. 20 21 The premium assistance tax credit is available to households with incomes between 100 percent and 400 22 percent of the Federal poverty line. 'See McGuire v. 23 Commissioner, 149 T.C. (slip. op. at 3) (Aug. 28, 2017) 24 25 for a full discussion of eligibility requirements. During 2014 the Federal poverty line was $11,'490 for a one-person cribers 1973)406-2250|operationspescribersaiet j wwwäscribersJ et 6 1 2 3 4 5 6 7 8 household in Indiana, and 400 percent of the Federal poverty line was $45,960. The ACA allows for the advance payment of the premium assistance tax credit "in order to reduce premiums payable by individuals eligible for [premium assistance tax credits]". Id. sec. 1412(a)(3), 124 Stat at 231-232 (codified at 42 U.S.C. 18082). The "advance premium tax credits" are paid directly to the insurer in the form of 9 monthly payments based on advance eligibility 10 determinations. Id. sec. 1412(c) (2) (A), 124 Stat. at 232 11 12 13 14 15 16 17 (codified at 42 U.S.C. 18082(c)(2)). Sometimes circumstances change, and a taxpayer's annual income might be more or less than the estimate that was used when the advance premium tax credit was determined. So at the end of the year, a taxpayer who receives an advance premium tax credit must reconcile the amount of the credit received (i.e., the premiums paid 18 with the advance credits) with the eligible credit amount. 19 Sec. 36(B)(f). This is done when the taxpayer files her 20 21 22 23 24 25 annual income tax return. If the amount of the advance premium tax credit is more than the amount to which the taxpayer is ultimately entitled, the taxpayer owes the excess credit back to the government, and it is reflected as an increase in tax. Sec. 36(B)(f)(.2). A taxpayer with income greater than 400 percent of the Federal poverty cribers (973)406-2250|operat ns@escribersaiet|wwnescribersaiet line is not eligible for the credit, and the full amount of the advance premium tax credit received during the year must be included as a tax liability with the tax return. Section 36(B)(f)(2); sec. 1.36B-4(a)(4), Example(5), 7 Income Tax Regs. Because Ms. Morgan's household income exceeded that threshold, she is not entitled to any of the advance premium tax credit she received. See sec. 36(B)(c) (1) (A), and (f)(2). 1 2 3 4 5 6 7 8 9 10 Ms. Morgan's withdrawal of retirement funds to 11 help her family put her income over 400 percent of the 12 Federal poverty line. Although we are sympathetic to Ms. 13 Morgan's situation, the statute is clear; because her income was over that threshold, she was no longer entitled to the credits she had received. And excess advance premium tax credits are treated as an increase in the tax imposed. Sec. 36(B)(f)(2) (A). She is liable for the $6,930 deficiency. Decision will be entered for the Commissioner. (Whereupon, at 9:57 a.m., the above-entitled matter was concluded.) 14 15 16 17 18 19 20 21 22 23 24 25 973i406-2250|operations@escribersmet|www.escribers.net