Opinion
10240-19S
04-01-2022
JACK DONOVAN CAMPBELL, JR. & KATHRYN M. CAMPBELL, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
James S. Halpern Judge
By Notice of Deficiency dated April 2, 2019, respondent determined a deficiency of $12, 564 in petitioners' 2016 Federal income tax. Respondent's grounds were that petitioners improperly failed to report on their 2016 Form 1040, U.S. Individual Income Tax Return, an excess advance premium tax credit of $12, 564. Petitioners assigned error to respondent's determination. Both parties have moved for summary judgment in their favor. On March 28, 2002, during our trial session commencing that date in the C. Clifton Young Federal Building and U.S. Courthouse, 300 Booth Street, Reno, Nevada, the parties appeared and we heard argument on the motions (hearing). For the reasons that follow, we will grant respondent's motion and deny petitioners'.
All section references are to the Internal Revenue Code of 1986 as amended and in effect for 2016. All rule references are to the Tax Court Rules of Practice and Procedure.
Summary Judgment
Summary judgment is appropriate "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits or declarations, if any, show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law." Rule 121(b). The moving party bears the burden of proving that no genuine dispute as to any material fact exists, and we will draw any factual inferences in the light most favorable to the nonmoving party. See, e.g., Anonymous v. Commissioner, 134 T.C. 13, 15 (2010). 1
Section 36B, Refundable Credit for Coverage under a Qualified Health Plan
Section 36B was added to the Internal Revenue Code by the Patient Protection and Affordable Care Act (ACA), Pub. L. No. 111-148, sec. 1311, 124 Stat. 173 (2010). Section 36B allows a premium assistance tax credit to eligible taxpayers to subsidize the cost of health insurance purchased through a qualified health plan. See sec. 36B(a); McGuire v. Commissioner, 149 T.C. 254, 259 (2017). The amount of the premium assistance tax credit depends in part on household income. See sec. 36B(c)(1)(A); McGuire, 149 T.C. at 260. A taxpayer may receive during the year an advance payment of the premium assistance tax credit, paid directly to the health insurance provider. See ACA sec. 1412(a)(3), 124 Stat. at 231-232 (codified at 42 U.S.C. 18082); McGuire, 149 T.C. at 260. Because the estimate of the premium assistance tax credit to which a taxpayer is entitled may prove inaccurate, a taxpayer benefiting from advance payments of the credit must, at the end of the year, reconcile the amount of the credit received (i.e., the premiums paid with the advance payment credit) with the amount of the credit that, in hindsight, the taxpayer should have received. See sec. 36B(b)(f)(2); McGuire v. Commissioner, 149 T.C. at 261. That is done when the taxpayer files his annual income tax return. If the amount of the advance payments of the premium assistance tax credit is more than the amount of the credit to which the taxpayer is entitled, the taxpayer owes the excess credit back to the Government and it is reflected as an increase in tax. See sec. 36B(b)(f)(2); McGuire v. Commissioner, 149 T.C. at 261.
To following facts are gathered from the pleadings, the motions, the declaration of Gretchen W. Altenburger, an attorney employed by the Office of Chief Counsel, Internal Revenue Service, and the stipulation of facts filed by the parties. During the hearing, we addressed and denied petitioners' objections to Exhibit 5-R attached to the parties stipulation (and described as "documents from the Health Insurance Market Place related to the Policy").
In 2016, petitioners purchased a Health Insurance Marketplace Policy from Prominence Health Care. Based on petitioners' expected annual household income of $53, 233, the enrollment premium for the Policy was $13, 072, and petitioners' received an advance premium assistance tax credit of $12, 654. Because of unexpected income received by petitioner husband in 2016, however, the amount of advance payments of the credit exceeded the credit allowed by section 36B(a). The result was that the Federal income tax imposed on petitioner husband for 2016 was increased by the amount of the excess premium credit, i.e., $12, 654. See sec. 36B(f)(2)(A). 2
Petitioners make no argument that, under the provision of section 36B, respondent miscalculated the deficiency in tax resulting from increasing the tax due from petitioner by the amount of the excess premium tax credit. See sec. 36B(f)(2). There is no dispute as to relevant facts. The dispute is one of law. Petitioners' arguments are similar to those of the taxpayers in McGuire, 149 T.C. 254, that it is unfair to tax them on account of unexpected circumstances for insurance that, at least in retrospect, they believe was not for them such a good deal. But as we said in McGuire, 149 T.C. at 262, "We are not a court of equity, and we cannot ignore the law to achieve an equitable end." Although we are sympathetic to the Campbells' situation, the statute is clear: Excess advance payment premium tax credits are treated as an increase in the tax imposed. Sec. 36B(f)(2)(A); see McGuire, supra. The Campbells received an advance of a credit to which they ultimately were not entitled. They are liable for the $12, 654 deficiency in tax.
Order and Decision
Therefore, it is
ORDERED that petitioners' motion for summary judgment is denied. It is further ORDERED that respondent's motion for summary judgment is granted. It is further
ORDERED AND DECIDED that there is a deficiency in Federal income tax due from petitioners, in the amount of $12, 564.00, for the 2016 taxable year. 3