July 23, 2014

The tax credits and subsidies provided through the Affordable Care Act have become the focus of a heated debate that could see its resolution in the Supreme Court, as a recent appellate court decision could trigger the end of these subsidies – and, in so doing, could deal a crippling blow to Obamacare itself.

A recent court decision has dealt a crippling blow to Obamacare, ruling that the Affordable Care Act only allows for state exchanges, not federal exchanges.

A recent court decision has dealt a crippling blow to Obamacare, ruling that the Affordable Care Act only allows for state exchanges, not federal exchanges.

Ruling in Halbig v. Burwell

This controversy has arisen due to a decision handed down by the U.S. Court of Appeals for the District of Columbia Circuit in Halbig v. Burwell (Case No. 14-5018) on July 22, 2014. In this ruling, the judges decided (2 to 1) that, as the Affordable Care Act is currently written, state governments are the providers of subsidies. The language is in Section 1311 of the Act, where it is clearly stated that subsidies should be provided for plans obtained “through an Exchange established by the State.” According to Section 1321 of the Affordable Care Act, subsidies cannot be provided by federal exchanges.

As the judges explained in their written decision, “we conclude that appellants have the better of the argument: a federal Exchange is not an ‘Exchange established by the State,’ and section 36B does not authorize the IRS to  provide tax credits for insurance purchased on federal  Exchanges.”

In 36 states, the federal government is currently providing subsidies for low-income individuals so they can purchase health insurance. What this could end up meaning is that, if the appellate court’s decision stands, Obamacare could be seriously crippled in more than 70 percent of U.S. states.

Response to the Ruling 

In the wake of this controversial ruling, officials representing the Obama Administration were quick to explain that, for the time being, nothing will change with the tax credits and subsidies that allow people to purchase healthcare. In fact, as Emily Pierce, a spokesperson for the Department of Justice explained:

We believe that this decision is incorrect, inconsistent with Congressional intent, different from previous rulings, and at odds with the goal of the law: to make health care affordable no matter where people live…The government will therefore immediately seek further review of the court’s decision. In the meantime, to be clear, people getting premium tax credits should know that nothing has changed, tax credits remain available.

Ultimately, this case is likely to see its way to the Supreme Court.

Denver Tax Law Attorney at Goldman Law, LLC

If you are dealing with any tax issue, don’t try to resolve this issue on your own. Instead, contact a trusted Denver tax law attorney at Goldman Law, LLC. Our lawyers are ready to stand up for your rights and help you resolve your tax issues as favorably as possible.

At Goldman Law, LLC, we know how distressing audits and other tax issues can be, and we also know how to stand up to the IRS and effectively protect our clients to ensure they are able to obtain the best possible outcomes to their cases.

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To receive a professional case evaluation, contact us by calling (303) 656-9529 or by emailing us using the contact form on this page. From our offices in Denver, we serve clients throughout Colorado.

Categories: Blog, IRS, Tax Credits