Premium Tax Credit Problems

Two of three recent federal court rulings held that the premium tax credit (PTC) is only available to individuals obtaining coverage through their state exchange, not the federal exchange. This is a big deal because the PTC serves to help make health insurance affordable to individuals with income between 100% and 400% of the federal poverty line. Also, the majority of states did not create their own exchange, forcing individuals in need of insurance to go to the federal exchange (if they are eligible for a PTC).

Resolution of this big issue likely won’t happen until next year. Meanwhile, the upcoming filing season will involve millions of individuals having to reconcile the PTC they may have received in advance, with their true amount. There is also a lot of complexity for practitioners too. Another key piece of the Affordable Care Act that comes into play in 2014 is the individual mandate. How many people are subject to it will also depend on the outcome of the PTC litigation.

Original Post By:  Annette Nellen

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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