Update on the Affordable Care Act

In July 2020, our office filed protective claims for some of you in the event that the Affordable Care Act (ACA) would be overturned. We knew of a court case challenging the ACA’s individual mandate. The protective claim functioned to keep the 2016 tax year open for filing amendments, which could have resulted in the refund of ACA-related taxes.

This case, originally brought by Texas, a group of other states, and two individuals, claimed that since the individual mandate penalty had been zeroed out by Congress in 2017, the mandate was unconstitutional. If the mandate is unconstitutional, the entire law must be struck down with it. If the law were struck down in its entirety, the taxes associated with the ACA would have been thrown out with it, which could have resulted in refunds for those affected by these taxes, such as the 3.8% Net Investment Tax and extra Medicare tax.

The District Court of the Northern District of Texas ruled in favor of the plaintiff’s arguments. California, along with a group of other states, intervened to appeal the original District Court’s decision, and after the Firth Circuit court upheld the original ruling in part and reversed it in part, both Texas and California petitioned the Supreme Court to review the decision. The two cases were consolidated into California v. Texas.

Ultimately, the Supreme Court did not reach the point of analyzing the arguments of the case. In their decision issued on June 17, 2021, they found by a vote of 7-2 that neither the states nor the individuals challenging the law had standing to sue in the first place. The case was effectively thrown out and the ACA remains in place.

Some of you have been asking about the protected claims—you have received IRS notices about the claims—and we wanted to update you on the status. The protective claims will not result in any amended returns or the refund of ACA-related taxes.

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