Howard D. Juntoff

• Court: United States Bankruptcy Court, N.D. Ohio
• Decided: April 15, 2021
• Docket: 19-17032
• Status: Unknown

Opinion

The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document was signed electronically on April 15, 2021, which may be different from its entry on the record.

IT IS SO ORDERED. 03 2 iG Dated: April 15, 2021 ‘ Vw 4 i ARTHUR I. HARRIS 2 ay UNITED STATES BANKRUPTCY JUDGE

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO In re: ) Chapter 13 ) HOWARD D. JUNTOFF, ) Case No. 19-17032 Debtor. ) ) Judge Arthur I. Harris

) In re: ) Chapter 13 ) GEORGE J. McPHERSON & ) Case No. 20-13035 MELANIE A. McPHERSON, ) Debtors. ) Judge Arthur I. Harris

MEMORANDUM OF OPINION! In these two Chapter 13 cases, the debtors have objected to the claims filed by the United States on behalf of the Internal Revenue Service (“IRS”). At issue is whether the shared responsibility payment for not having health insurance under

' This Opinion is not intended for official publication.

the Affordable Care Act is entitled to priority as “a tax on or measured by income or gross receipts” or “an excise tax on . . . a transaction” under § 507(a)(8)(A) or

(E) of the Bankruptcy Code. For the reasons that follow, the Court finds that the shared responsibility payment is neither “a tax on or measured by income or gross receipts” nor “an excise tax on . . . a transaction” within the meaning of

§ 507(a)(8)(A) or (E) of the Bankruptcy Code and sustains the debtors’ objections to the United States’ claims. JURISDICTION These are core proceedings under 28 U.S.C. § 157(b)(2)(I). The Court has

jurisdiction over core proceedings under 28 U.S.C. §§ 1334 and 157(a) and Local General Order 2012-7 of the United States District Court for the Northern District of Ohio.

BACKGROUND The sole issue in each of these two Chapter 13 cases is whether the debtors’ shared responsibility payment under the Affordable Care Act, included in the United States’ proof of claim, is entitled to priority as “a tax on or measured by

income or gross receipts” or “an excise tax on . . . a transaction” under § 507(a)(8)(A) or (E) of the Bankruptcy Code. Because the parties have stipulated that this issue is properly presented and can be resolved on the record without an

2 evidentiary hearing, the Court will limit its presentation of the factual and procedural background to those matters needed to understand the context of the

issue at hand. Howard Juntoff On November 15, 2019, debtor Howard Juntoff filed for relief under

Chapter 13 of the Bankruptcy Code. Case No. 19-17032; Docket No. 1. Although the United States has amended its proof of claim three times, the amount attributable to Juntoff’s liability for the shared responsibility payment for calendar year 2018—the only portion of the proof of claim at issue—has remained

unchanged. The United States claims a tax in the amount of $1,016 and prepetition interest of $26.39, for a total priority claim attributable to the shared responsibility payment for calendar year 2018 of $1,042.39. The United States identified this

obligation as an “excise tax” on the original and first two amended proofs of claim, and as an “excise/income tax” on the third amended proof of claim. Although Juntoff filed his claim objection before the United States filed its third amended proof of claim, by agreement, the Court will treat Juntoff’s claim objection as

challenging the United States’ third amended proof of claim. Juntoff’s Chapter 13 plan, which was confirmed on March 22, 2021, provides for payment in full of all priority tax claims and no payment for general

3 unsecured claims. Juntoff does not challenge the remainder of the United States’ third amended proof of claim, which includes an additional $3,950.03 in priority

tax claims. Thus, Juntoff’s priority tax liability to the United States is either $4,992.42, if the $1,042.39 attributable to the shared responsibility payment for calendar year 2018 is allowed as a priority tax under § 507(a)(8), or $3,950.03, if

the $1,042.39 is disallowed as a priority tax under § 507(a)(8). George and Melanie McPherson On June 24, 2020, debtors George and Melanie McPherson filed for relief under Chapter 13 of the Bankruptcy Code. Case No. 20-13035; Docket No. 1.

Although the United States has amended its proof of claim three times, the amount attributable to the McPhersons’ liability for the shared responsibility payment for calendar year 2017—the only portion of the proof of claim at issue—has remained

unchanged. The United States claims a tax in the amount of $1,564 and prepetition interest of $136.70, for a total priority claim attributable to the shared responsibility payment for calendar year 2017 of $1,700.70. The United States identified this obligation as an “excise tax” on the original and first amended

proofs of claim, and as an “excise/income tax” on the second and third amended proofs of claim. Although the McPhersons filed their claim objection before the United States filed its second and third amended proofs of claim, by agreement, the

4 Court will treat the McPhersons’ claim objection as challenging the United States’ third amended proof of claim.

The McPhersons’ Chapter 13 plan, which was confirmed on November 16, 2020, provides for payment in full of all priority tax claims and payment of $29,168 or 22 percent, whichever is greater, for general unsecured claims. The

McPhersons do not challenge the remainder of the United States’ third amended proof of claim, which includes an additional $3,950.03 in priority tax claims. Thus, the McPhersons’ priority tax liability to the United States is either $5,674.93, if the $1,700.70 attributable to the shared responsibility payment for calendar year

2017 is allowed as a priority tax under § 507(a)(8), or $3,974.23, if the $1,700.70 is disallowed as a priority tax under § 507(a)(8). If the McPhersons’ shared responsibility payment for calendar year 2017 is disallowed as a priority tax under

§ 507(a)(8), the United States would also receive a pro rata distribution as the holder of a general unsecured claim in the amount of $1,700.70. Briefing and Argument on Claim Objections In addition to the initial claim objection and response in each of the two

cases, see Case No. 19-17032, Docket Nos. 34, 37, 38; Case No. 20-13035, Docket Nos. 37, 49, the Court permitted a number of supplemental briefs. See Case No. 19-17032, Docket Nos. 48, 70, 75; Case No. 20-13035, Docket No. 56. The

5 Court heard oral argument on Juntoff’s objection to the United States’ claim on August 13, 2020, September 24, 2020, January 7, 2021, and February 18, 2021.

The Court heard oral argument on the McPhersons’ objection to the United States’ claim in conjunction with oral argument on Juntoff’s objection on January 7, 2021, and February 18, 2021. Juntoff and the McPhersons are represented by the same

attorney. During the argument on February 18, 2021, the parties agreed that the sole issue in each of these two Chapter 13 cases is whether the debtors’ shared responsibility payment under the Affordable Care Act, included in the United

States’ proof of claim, is a priority tax under § 507(a)(8) of the Bankruptcy Code. The parties further agreed that this issue is properly presented and can be resolved on the record without an evidentiary hearing.

RELEVANT STATUTES Relevant Bankruptcy Statutes The United States asserts that in each of these two Chapter 13 cases, the debtors’ shared responsibility payment under the Affordable Care Act, included in

the United States’ proof of claim, is a priority tax under § 507(a)(8)(A) or (E) of the Bankruptcy Code. Section 507 provides in pertinent part:

6 (a) The following expenses and claims have priority in the following order: . . . . (8) Eighth, allowed unsecured claims of governmental units, only to the extent that such claims are for—

(A) a tax on or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the petition . . . . . . . . (E) an excise tax on— (i) a transaction occurring before the date of the filing of the petition . . . .

11 U.S.C. § 507(a)(8)(A), (E). In addition, § 523(a) of the Bankruptcy Code makes debts that fall within the priority provisions of § 507(a)(8) nondischargeable. Section 523(a) provides in pertinent part: (a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—

(1) for a tax or a customs duty—

(A) of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed[.]

11 U.S.C. §523(a)(1)(A). For Chapter 13 debtors such as Juntoff and the McPhersons, their Chapter 13 plan must provide for full payment of all claims entitled to priority under § 507. Section 1322(a) provides in pertinent part: 7 (a) The plan— . . . . (2) shall provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of this title, unless the holder of a particular claim agrees to a different treatment of such claim[.]

11 U.S.C. §1322(a)(2). Thus, whether the shared responsibility payments under the Affordable Care Act are entitled to priority under § 507(a)(8) of the Bankruptcy Code determines not only whether the resulting claim receives priority treatment over general unsecured creditors (for example, in the Juntoff case, the difference is payment in full as a priority claim versus no payment whatsoever as a general unsecured claim), it also dictates how much debtors must pay for a plan to be confirmed and for the debtor to receive a general discharge of all other debts under § 1328(a). In other words, a Chapter 13 debtor must pay in full all allowed priority claims under § 507(a)(8) in order to discharge any other debts.

26 U.S.C. § 5000A The statutory authority for the shared responsibility payment at issue in these two Chapter 13 cases is contained in 26 U.S.C. § 5000A. Congress created § 5000A as part of the Affordable Care Act. See Patient Protection and Affordable

Care Act of 2010, Pub. L. No. 111-148, 124 Stat. 119.

8 Under § 5000A(a), as amended, Congress required applicable individuals to maintain a minimum level of health insurance coverage for such individuals and

their dependents for every month beginning in 2014. Under § 5000A(b), individuals who fail to maintain a minimum level of coverage for themselves and their dependents must pay a penalty in an amount determined under § 5000A(c),

unless they are subject to one of the exceptions under § 5000A(d). Exceptions under § 5000A(d) include members of certain religious sects and individuals who are incarcerated. Subsection 5000A(e) contains a list of additional exemptions under which no penalty is imposed. These exemptions include “individuals who

cannot afford coverage,” “taxpayers with income under 100 percent of poverty line,” “taxpayers with income below filing threshold,” and “members of Indian tribes.” Subsection 5000A(f) defines the “minimum essential coverage” required.

Subsection 5000A(g) explains how the penalty is to be paid, collected, and assessed, and contains limitations on enforcement. For example, subsection 5000A(g) prohibits the criminal prosecution of taxpayers for failure to pay the penalty imposed by this section. It also prohibits the filing of a notice of lien or

levy against property for failure to pay the penalty imposed by this section. (The entire text of § 5000A, as it existed just before Congress passed the Tax Cuts and Jobs Act in December 2017, is reproduced in the Appendix of this opinion.)

9 2017 Amendments to § 5000A In December 2017, as part of the Tax Cuts and Jobs Act, Congress reduced

to zero the amount of the shared responsibility payment imposed by § 5000A(c), effective January 1, 2019. See Pub. L. No. 115-97, § 11081, 131 Stat. 2054, 2092 (2017). The individual mandate to maintain minimum health insurance under

§ 5000A(a) continues, although the payment for noncompliance is now zero. Section 11081 of the Tax Cuts and Jobs Act provides as follows: SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR INDIVIDUALS FAILING TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.

(a) In General.—Section 5000A(c) is amended—

(1) in paragraph (2)(B)(iii), by striking ‘‘2.5 percent’’ and inserting ‘‘Zero percent’’, and (2) in paragraph (3)— (A) by striking ‘‘$695’’ in subparagraph (A) and inserting ‘‘$0’’, and (B) by striking subparagraph (D).

(b) Effective Date.—The amendments made by this section shall apply to months beginning after December 31, 2018.

Pub. L. No. 115-97, § 11081, 131 Stat. 2054, 2092.

On November 10, 2020, the Supreme Court heard oral argument in two consolidated cases involving this amendment to § 5000A(c). California v. Texas, Case No. 19-840, and Texas v. California, Case No. 19-1019. Besides standing, 10 the questions presented are whether reducing the amount specified in § 5000A(c) to zero rendered the individual coverage provision unconstitutional and, if so,

whether this provision is severable from the rest of the Affordable Care Act. Relevant Calculations under §5000A(c) Before Congress reduced the shared responsibility payment to zero for tax

years after 2018, § 5000A(c) detailed the procedure for calculating the “amount of penalty” owed by individuals who fail to maintain the minimum essential coverage required under § 5000A(a). Under § 5000A(c)(1), the “amount of the penalty imposed by this section . . .

shall be equal to the lesser of—the sum of the monthly penalty amounts determined under [§ 5000A(c)(2)]” or “an amount equal to the national average premium for qualified health plans which have a bronze level of coverage.”

Section 5000A(c)(2) set forth the “Monthly penalty amounts” as “equal to 1⁄12 of the greater of” a “Flat dollar amount” set forth in § 5000A(c)(2)(A) or a “Percentage of income” set forth in § 5000A(c)(2)(B). Under § 5000A(c)(3), for calendar years 2017 and 2018 Congress generally

set the “Flat dollar amount” at $695 per adult and one-half that amount, or $347.50, for children under 18.

11 Under § 5000A(c)(2)(B), for calendar years 2017 and 2018 Congress set the “Percentage of income” amount as equal to 2.5 percent “of the excess of the

taxpayer’s household income for the taxable year over the amount of gross income specified in § 6012(a)(1).” In other words, the “Percentage of income” amount is 2.5 percent of the amount of household income above the threshold amount for

which a federal tax return is required under § 6012(a)(1). Calculation for Juntoff Juntoff had no minimum health insurance for all twelve months of 2018 and had no dependents. See Case No. 19-17032; Docket No. 70. For a single filer

without health insurance for the entire year, the “Flat dollar amount” was $695. § 5000A(c)(3)(A). On his income tax return for 2018, Juntoff reported taxable income of $40,629. See Docket No. 75; Exhibit A. Taxable income multiplied by

2.5 percent results in a “Percentage of income” amount of $1,015.72 (rounded to $1,016). Because the “Percentage of income” amount of $1,016 is greater than the “Flat dollar amount” of $695, the “Percentage of income” amount of $1016 is used under § 5000A(c)(2). Then, this number is compared to the national average

premium for qualified health plans for one person, which have a bronze level of coverage, which was $3,396. The lesser number—$1,016—is then selected under

12 § 5000A(c)(1). Therefore, Juntoff’s shared responsibility payment under § 5000A(c)(1) for not having health insurance for all of 2018 was $1,016.

Calculation for the McPhersons The McPhersons had no minimum health insurance for nine months of 2017 and had two dependents. See Case No 20-13035; Docket No. 56. During 2017,

the “Flat dollar amount” was $695 for members of the household over 18 and $347.50 for members under 18 that went without minimum health insurance during the year. § 5000A(c)(3)(A), (C). Therefore, the total “Flat dollar amount,” when prorated for the nine months the McPhersons were without minimum health

insurance, was $1,563.75 (rounded to $1,564). On their income tax return for 2017, the McPhersons reported taxable income of $53,273. See Docket No. 56; Exhibit A. Taxable income multiplied by 2.5 percent results in $1,331.83.

Because the McPhersons were without minimum health insurance for nine months, the “Percentage of income” amount is prorated and equals $998.87 (rounded to $999). Because the “Flat dollar amount” of $1,564 is greater than the “Percentage of income” amount of $999, the “Flat dollar amount” of $1,564 is used under

§ 5000A(c)(2). Then, this number is compared to the national average premium for qualified health plans for four people, which have a bronze level of coverage, which was $13,056. The lesser number—$1,564—is then selected under

13 § 5000A(c)(1). Therefore, the McPhersons’ shared responsibility payment under § 5000A(c)(1) for not having health insurance for nine months of 2017 was $1,564.

DISCUSSION The sole issue in each of these two Chapter 13 cases is whether the debtors’ shared responsibility payment under the Affordable Care Act, included in the

United States’ proof of claim, is entitled to priority as “a tax on or measured by income or gross receipts” or “an excise tax on . . . a transaction” under § 507(a)(8)(A) or (E) of the Bankruptcy Code. Burden of Proof

The United States, as the claimant, has the burden of proving that its claim is entitled to priority treatment. See In re Micek, 473 B.R. 185, 188 (Bankr. E.D. Ky. 2012) (claimant had the burden of proof to show that a domestic support obligation

was entitled to priority status); see also In re Clark, 441 B.R. 752, 755 (Bankr. M.D.N.C. 2011). The Supreme Court has established the preponderance of evidence as the standard of proof for dischargeability actions under § 523 of the Bankruptcy Code and for civil actions in general. See Grogan v. Garner,

498 U.S. 279, 287 (1991). And given that priority status under § 507(a)(8) dictates whether a debt is nondischargeable under § 523(a), the Court will apply the same

14 preponderance of the evidence standard in determining whether the United States’ claims at issue here are entitled to priority status under § 507(a)(8).

The Court Will Assume that the Shared Responsibility Payment is a Tax for Purposes of Determining Whether the Exaction is Entitled to Priority Treatment under § 507(a)(8)(A) or (E) of the Bankruptcy Code

In United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U.S. 213 (1996), the Supreme Court expressly held that when determining whether an exaction is a tax for purposes of § 507(a)(7) of the Bankruptcy Code (now codified at § 507(a)(8)), a court must look behind the label placed on the exaction and instead make a “functional examination” of the statutory scheme. 518 U.S. at 220; accord In re Rizzo, 741 F.3d 703, 706 (6th Cir. 2014). In determining whether an exaction is entitled to priority status as a tax under the Bankruptcy Code, a court must engage:

. . . in a “functional examination” of the applicable statutory scheme to determine whether it falls within the federal statutory definition. . . . In doing so, the statutory labels of the exaction are not dispositive; the court must instead evaluate the statute’s “actual effects to determine whether it functions as either a tax or else as some different kind of obligation.”

741 F.3d at 705 (citations omitted). In Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012), the Supreme Court engaged in an analogous functional examination of the same statute at issue here to decide whether the statute could be upheld as constitutional under 15 Congress’s taxing power. 567 U.S. at 565. Indeed, the United States argues that this Court must construe § 5000A as a tax for purposes of the Bankruptcy Code

because courts must construe a statute consistently with the way that it has been construed constitutionally. See United States’ Reply Brief in Opposition at 6 (citing Clark v. Martinez, 543 U.S. 371, 381 (2005)).

Whether the shared responsibility payment functions as a tax or some different kind of obligation for purposes of the Bankruptcy Code is a complicated question. The functional test that the Supreme Court employed in NFIB v. Sebelius, while analogous to the one used to determine priority status under the

Bankruptcy Code, is not identical. Nor is it clear whether the constitutional analysis in NFIB v. Sebelius mandates a similar result when analyzing § 5000A in relation to the Bankruptcy Code.

The Chief Justice’s majority decision in NFIB v. Sebelius emphasized that in deciding whether the shared responsibility payment can be characterized as a tax for constitutional purposes, every effort should be made to save the statute from unconstitutionality.

The question is not whether that is the most natural interpretation of the mandate, but only whether it is a “fairly possible” one. Crowell v. Benson, 285 U.S. 22, 62 (1932). As we have explained, “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.” Hooper v. California, 155 U.S. 648, 657 (1895).

16 567 U.S. at 563. This preference for whatever interpretation can support a statute’s constitutionality stands in marked contrast to the test the Supreme Court

enunciated in Howard Delivery Serv., Inc. v. Zurich Am. Ins. Co., 547 U.S. 651 (2006) for determining whether a claim is entitled to priority treatment under § 507 of the Bankruptcy Code—“that provisions allowing preferences must be tightly

construed” and that “[a]ny doubt concerning the appropriate characterization . . . is best resolved in accord with the Bankruptcy Code’s equal distribution aim.” 547 U.S. at 667–68; see also In re Daley, 315 F.Supp.3d 679, 682–83 (D. Mass. 2018) (declining to treat the functional analysis in NFIB v. Sebelius as binding

precedent for purposes of the functional examination of a different statute under § 507(a)(8) of the Bankruptcy Code). In addition, the Supreme Court itself construed the shared responsibility

payment differently in the same opinion. For purposes of constitutionality, it was a tax; but for purposes of the Anti-Injunction Act it was a penalty. As the Chief Justice explained: Congress’s decision to label this exaction a “penalty” rather than a “tax” is significant because the Affordable Care Act describes many other exactions it creates as “taxes.” . . . . Where Congress uses certain language in one part of a statute and different language in another, it is generally presumed that Congress acts intentionally. . . .

. . . It is true that Congress cannot change whether an exaction is a tax or a penalty for constitutional purposes simply by describing it as one or the 17 other. Congress may not, for example, expand its power under the Taxing Clause, or escape the Double Jeopardy Clause’s constraint on criminal sanctions, by labeling a severe financial punishment a “tax.” . . .

The Anti-Injunction Act and the Affordable Care Act, however, are creatures of Congress’s own creation. How they relate to each other is up to Congress, and the best evidence of Congress’s intent is the statutory text.

NFIB v. Sebelius, 567 U.S. at 544–45 (citations omitted). Although the functional test for purposes of priority under § 507(a)(8) may be different from the test employed in NFIB v. Sebelius, this Court is reluctant to wade into this complicated area if the issue before the Court can be decided on other grounds. For example, if the shared responsibility payment is not entitled to priority as “a tax on or measured by income or gross receipts” or “an excise tax on . . . a transaction” under § 507(a)(8)(A) or (E) of the Bankruptcy Code, even assuming it functions as a tax, then the Court need not decide whether the functional analysis in NFIB v. Sebelius is binding for purposes of determining the shared responsibility payment’s priority status under the Bankruptcy Code. As explained more fully below, the Court holds that the shared responsibility payment is neither “a tax on or measured by income or gross receipts” nor “an

excise tax on . . . a transaction” within the meaning of § 507(a)(8)(A) or (E) of the Bankruptcy Code, even assuming it functions as a tax. Therefore, the Court need not decide whether the functional analysis in NFIB v. Sebelius is binding for

18 purposes of determining the shared responsibility payment’s priority status under the Bankruptcy Code. Nor must this Court decide what answer the correct

functional analysis would indicate. Priority Analysis The United States has the burden of showing that the shared responsibility

payment is entitled to priority treatment as “a tax on or measured by income or gross receipts” or “an excise tax on . . . a transaction” under § 507(a)(8)(A) or (E) of the Bankruptcy Code. Because the United States first claimed that the shared responsibility payment was an “excise tax,” the Court will address § 507(a)(8)(E)

before analyzing whether it is “a tax on or measured by income or gross receipts” under § 507(a)(8)(A). § 507(a)(8)(E) (“an excise tax on . . . a transaction”)

Congress placed § 5000A, which contains the requirement to maintain minimal essential health coverage, under Subtitle D of the Internal Revenue Code, which is entitled “Miscellaneous Excise Taxes.” Section 507(a)(8)(E) extends priority status to certain excise taxes on “. . . a transaction before the date of the

filing of the petition[.]” The United States asserts that the shared responsibility payment under § 5000A is an excise tax “on a transaction” because a taxpayer has an obligation, upon reaching a certain threshold of income, to maintain minimum

19 health coverage, and the act of not purchasing required health coverage is the exercise of a right of privilege within the broad definition of “excise tax” as

explained in Rizzo. Rizzo says that “[t]ypically, an excise tax is imposed upon ‘a discrete act by the person or entity being taxed,’ in contrast with, for example, a tax on income.”

Rizzo, 741 F.3d at 706 (internal citations omitted). As Rizzo goes on to explain: “Still, an ‘excise’ has a ‘broad definition,’ essentially encompassing any tax that is ‘indirectly assessed’; that is, any tax ‘that is not directly imposed upon people or property’ but is instead ‘imposed upon a particular use of property’ or upon the

exercise of a ‘right or privilege.’” Id. While a tax on failing to obtain minimum insurance coverage would qualify as an excise tax under Rizzo, the Bankruptcy Code does not provide priority

treatment on all excise taxes. Rather, priority treatment under § 507(a)(8)(E) is limited to an excise tax “on . . . a transaction” occurring within a specific time period before the date of the filing of the bankruptcy petition. § 507(a)(8)(E)(i). Black’s Law Dictionary defines transaction as:

Act of transacting or conducting any business; negotiation; management; proceeding; that which is done; an affair. It may involve selling, leasing, borrowing, mortgaging or lending. Something which has taken place, whereby a cause of action has arisen. It must therefore consist of an act or agreement, or several acts or agreements having some connection with each other, in which more than one person is concerned, and by which the legal 20 relations of such persons between themselves are altered. It is a broader term than “contract.”

Transaction, Black’s Law Dict. (5th ed. 1979).

Webster’s New Collegiate Dictionary (1975) defines transaction as: “an act, process, or instance of transacting,” or “something transacted; esp : a business deal.” The same dictionary further defines “transact” as “to carry on business” or “to carry out” or “perform.” Webster’s New Collegiate Dict. (8th ed. 1975). Under the ordinary meaning of “transaction,” it is impossible to construe the language contained in § 507(a)(8)(E) as encompassing “excise taxes” on events in which a taxpayer failed to act. There is no “discrete act” which can reasonably be determined to fall within the language of § 507(a)(8)(E). In fact, the shared

responsibility payment imposes an exaction on the opposite of a discrete act—a failure to act or an omission. This conclusion is especially true given the principle that courts tightly construe priority determinations under the Bankruptcy Code.

See Howard Delivery, 547 U.S. at 653. The Court rejects the United States’ argument that the act of earning enough income to become obligated to maintain minimum coverage somehow constitutes a “transaction.” Inaction is not a transaction. And while an exaction for failure to purchase health insurance may

constitute an excise tax, it is not an excise tax on a “transaction.”

21 Nor does this plain reading of “transaction” lead to an absurd result. There is nothing inherently wrong with Congress limiting priority status to those excise

taxes that involve transactions. Indeed, Congress has already declined to put the shared responsibility payment on equal footing with other excise taxes when it prohibited the government from using traditional tax collection and enforcement

tools for nonpayment. See § 5000A(g)(2); see also NFIB v. Sebelius, 567 U.S. at 566. Indeed, a large number of courts that have addressed this issue agree that the shared responsibility payment is not an excise tax on a “transaction” within the

meaning of § 507(a)(8)(E). See e.g., Matter of Chesteen, 799 F.App’x 236, 240 (5th Cir. 2020); In re Robert Szczyporski, Civil No. 2:20-cv-03133, 2021 WL 1207413, at *4–5 (E.D. Pa. March 31, 2021); Internal Revenue Service v.

Huenerberg, 623 B.R. 841, 845 (E.D. Wis. 2020); In re Albracht, 617 B.R. 851, 855 (Bankr. E.D.N.C. 2020); In re Jones, 610 B.R. 663, 670 (Bankr. D. Montana 2019) (finding that the shared responsibility payment was an excise tax but not an excise tax “on a transaction”); In re Bailey, 2019 WL 2367180, at *6 (Bankr.

E.D.N.C. May 24, 2019), vacated as moot, United States v. Bailey, No. 5:19-cv- 226, 2019 WL 7403930 (E.D.N.C. Nov. 22, 2019) (finding that the shared

22 responsibility payment is a penalty, not a tax, and even if it were a tax, it would not fit into any of the categories listed in § 507(a)(8)).

In other words, while the Supreme Court has said that an exaction on inactivity can be characterized as an excise tax for constitutional purposes, the Bankruptcy Code expressly limits priority status to those excise taxes on a

transaction within a certain time period. Accordingly, the Court rejects the argument that the shared responsibility payment is entitled to priority treatment as an excise tax on a transaction under § 507(a)(8)(E) the Bankruptcy Code. § 507(a)(8)(A) (“a tax on or measured by income or gross receipts”)

The United States argues in the alternative that the shared responsibility payment is entitled to priority as a “tax on or measured by income or gross receipts” under § 507(a)(8)(A), despite the fact that Congress placed § 5000A

under Subtitle D of the Internal Revenue Code, which is entitled “Miscellaneous Excise Taxes.” This alternative position seems to have come about in part because the United States’ initial position, that it is “an excise tax on . . . a transaction” under § 507(a)(8)(E), has not fared well in the courts. See, e.g., Chesteen,

799 F. App’x at 242 (declining to consider the United States’ argument that the shared responsibility is a tax on income because it failed to raise the argument below). In the Juntoff and McPherson cases, the United States did not assert that

23 the shared responsibility payment was a tax “on or measured by income or gross receipts” within the meaning of § 507(a)(8)(A) until it filed amended claims in

both cases on December 15, 2020. See Case No. 19-17032; Proof of Claim No. 3-4 & Case No. 20-13035; Proof of Claim No. 8-3. The Court does not take issue with the United States’ ability to raise new

arguments in support of its claims for priority treatment under the Bankruptcy Code or to change its litigating position in this case. Indeed, the Court would welcome a decision by the United States to no longer assert that the shared responsibility payment is entitled to priority treatment under the Bankruptcy Code,

especially given Congress’s refusal to call the exaction a tax; Congress’s refusal to put the shared responsibility payment on equal footing with other taxes, including income taxes, when it prohibited the government from using traditional tax

collection and enforcement tools for nonpayment; and Congress’s reducing the penalty to zero for all applicable individuals beginning in 2019, while leaving untouched the requirement to maintain minimum health insurance under § 5000A. In the absence of such action by the United States, the Court will address the

merits of the United States’ argument that the shared responsibility payment is entitled to priority as a “tax on or measured by income or gross receipts” under § 507(a)(8)(A).

24 Section 507(a)(8)(A) extends priority status to certain taxes “on or measured by income or gross receipts.” The United States does not credibly assert that the

shared responsibility payment under § 5000A is a tax “on” income. After all, the payment is for failure to maintain minimum insurance coverage under § 5000A(a). See § 5000A(b)(1). Rather, the United States maintains that because an

individual’s household income is part of the complex formula for calculating the shared responsibility payment under § 5000A(c), the payment constitutes a tax “measured by income or gross receipts” under § 507(a)(8)(A). Granted, one could read the statutory text in a vacuum as giving priority

treatment to two distinctly different creatures: (1) a tax “on” income or gross receipts, and (2) “a tax [on anything so long as it is] measured [in any way, shape, or form] by income or gross receipts.” Under this interpretation, a tax on not

having health insurance could fit within the latter category so long as it was measured, at least in part, on a taxpayer’s income. There are several problems with this argument. For starters, the second category—“a tax [on anything so long as it is] measured [in any way, shape, or

form] by income or gross receipts”—would by definition swallow up the first category—a tax “on” income or gross receipts. In other words, this interpretation would render superfluous the term “on.”

25 Second, such a broad reading runs contrary to the guidance from the Supreme Court that provisions allowing preferences for certain claims in

bankruptcy must be tightly construed. See Howard Delivery, 547 U.S. at 653. For example, a better and tighter construction of § 507(a)(8)(A) would be to treat “on” and “measured by” as two closely-related terms to encompass all traditional

income taxes, but not so broad as to include “a tax [on anything so long as it is] measured [in any way, shape, or form] by income or gross receipts. Nor does this reading of “on or measured by income or gross receipts” lead to an absurd result. There is nothing inherently wrong with Congress limiting

priority status under § 507(a)(8)(A) to taxes that are traditionally understood as income taxes as opposed to expanding the definition to include taxes on things besides income, so long as they are measured in any way, shape, or form by

income. As mentioned earlier, Congress has already declined to put the shared responsibility payment on equal footing with other taxes, including income taxes, when it prohibited the government from using traditional tax collection and enforcement tools for nonpayment. See § 5000A(g)(2); see also NFIB v. Sebelius,

567 U.S. at 566. Calculation of the shared responsibility payment depends on a complicated formula for which income is at most one of many factors to be considered. Other

26 factors that make up the formula for calculating the shared responsibility payment under § 5000A(c) include:

• the number of adults in a household without health insurance,

• the number of months each adult was without health insurance,

• the number of children in a household without health insurance,

• the number of months each child was without health insurance,

• a flat tax set by Congress per uninsured adult,

• a flat tax set by Congress per uninsured child, and

• a ceiling based on the national average cost of certain health insurance plans that have a bronze level of coverage.

26 U.S.C. § 5000A(c). Nor does income come into play for everyone subject to the shared responsibility payment. For instance, the calculation of the McPhersons’ shared responsibility payment is instructive. Under § 5000A, the tax is the greater of the “Flat dollar amount” based on number of uninsured adults and children determined monthly or the “Percentage of income” amount which is 2.5 percent of the McPhersons’ taxable income over the filing threshold specified in 26 U.S.C. § 6012(a)(1). § 5000A(c)(2). For the McPhersons, this turned out to be the greater of $1,564 (“Flat dollar amount”) or $999 (“Percentage of income” amount). In other words, their actual shared responsibility payment for 2017 was 27 not measured by income at all. Or their income was only relevant because it confirmed their shared responsibility payment equaled the flat tax for not having

health insurance. The United States argues that income information is needed to calculate the shared responsibility payment for all applicable individuals, if only to determine

whether they meet the minimum income threshold under § 5000A(e)(2) in order to be subject to any payment at all. But this minimum income threshold is an exemption in the statute just like the exemption for members of Indian tribes under § 5000A(e)(3). To the extent that the income plays a role in determining whether

one is exempt from the shared responsibility payment, it would be no more correct to say that the shared responsibility payment is “measured by income” than it would be to say that the shared responsibility payment is “measured by

membership in an Indian Tribe” or any other criteria justifying an exemption under the statute. The undersigned judge respectfully disagrees with those courts, such as the court in Szczyporski, that have held the shared responsibility payment to be a

priority as a tax “on or measured by income or gross receipts” under § 507(a)(8)(A). Courts like Szczyporski and Matter of Cousins, 601 B.R. 609, 620–21 (Bankr. E.D. La. 2019) do not appear to have applied the standard of tight

28 construction under Howard Delivery. Nor have these courts considered the fact that only a subset of applicable individuals have their shared responsibility

payment determined by income. In arguing that the shared responsibility payment is a tax “on or measured by income or gross receipts” within the meaning of § 507(a)(8)(A), the United States

is essentially trying to fit a square peg into a round hole. The square peg only fits if the round hole is made so big that any peg will fit regardless of its shape. But the Supreme Court in Howard Delivery has directed “that provisions allowing preferences must be tightly construed,” and “[a]ny doubt concerning the

appropriate characterization . . . is best resolved in accord with the Bankruptcy Code’s equal distribution aim.” 547 U.S. at 653, 668. Accordingly, the Court rejects the argument that the shared responsibility

payment is a tax “on or measured by income or gross receipts” entitled to priority treatment under § 507(a)(8)(A) of the Bankruptcy Code. CONCLUSION For the reasons stated above, the Court holds that the shared responsibility

payment is not a tax entitled to priority treatment under § 507(a)(8) of the Bankruptcy Code and sustains the objections in both cases. Specifically, the “excise/income” tax for Howard Juntoff in the amount of $1,016.00 and $29.39 in

29 interest in Claim 3-4 is allowed only as a general unsecured claim, reducing the United States’ priority tax claim from $4,992.42 to $3,950.03, and the

“excise/income” tax for the McPhersons in the amount of $1,564.00 and $136.70 in interest in Claim 8-4 is allowed only as a general unsecured claim, reducing the United States’ priority tax claim from $5,674.93 to $3,974.23

IT IS SO ORDERED.

30 §5000A TITLE 26—INTERNAL REVENUE CODE Page 2892 EFFECTIVE DATE OF 1989 AMENDMENT which have a bronze level of coverage, pro- Amendment by Pub. L. 101-239 applicable to items vide coverage for the applicable family size and services furnished after Dec. 19, 1989, see section involved, and are offered through Exchanges 6202(b)(5) of Pub. L. 101-239, set out as a note under sec- for plan years beginning in the calendar year tion 162 of this title. with or within which the taxable year ends. EFFECTIVE DATE (2) Monthly penalty amounts Section applicable to items and services furnished on For purposes of paragraph (1)(A), the month- or after Jan. 1, 1987, see section 9319(f) of Pub. L. 99-509, ly penalty amount with respect to any tax- set out as an Effective Date of 1986 Amendment note payer for any month during which any failure unger Section 1395y of Title 42, The Public Health and described in subsection (b)(1) occurred is an . amount equal to “2 of the greater of the fol- CHAPTER 48—MAINTENANCE OF MINIMUM lowing amounts: ESSENTIAL COVERAGE (A) Flat dollar amount Sec. An amount equal to the lesser of— 5000A. Requirement to maintain minimum essential di) the sum of the applicable dollar coverage. amounts for all individuals with respect to §5000A,. Requirement to maintain minimum es- who such failure occurred during such sential coverage (ii) 300 percent of the applicable dollar (a) Requirement to maintain minimum essential amount (determined without regard to coverage paragraph (38)(C)) for the calendar year An applicable individual shall for each month with or within which the taxable year beginning after 2013 ensure that the individual, ends. and any dependent of the individual who is an (B) Percentage of income applicable individual, is covered under minimum A t 1 to the followi t essential coverage for such month. n amount equa! to the 10 owns: percent- ay aye age of the excess of the taxpayer’s household (b) Shared responsibility payment income for the taxable year over the amount (1) In general of gross income specified in section 6012(a)(1) If a taxpayer who is an applicable individual, with respect to the taxpayer for the taxable or an applicable individual for whom the tax- year: payer is liable under paragraph (3), fails to (i) 1.0 percent for taxable years begin- meet the requirement of subsection (a) for 1 or ning in 2014. more months, then, except as provided in sub- (ii) 2.0 percent for taxable years begin- section (e), there is hereby imposed on the tax- ning in 2015. payer a penalty with respect to such failures (iii) 2.5 percent for taxable years begin- in the amount determined under subsection ning after 2015. (c). . . (3) Applicable dollar amount (2) Inclusion with return For purposes of paragraph (1)— Any penalty imposed by this section with re- spect to any month shall be included with a (A) In general . . taxpayer’s return under chapter 1 for the tax- Except as provided in subparagraphs (B) able year which includes such month. and (C), the applicable dollar amount is $695. (3) Payment of penalty (B) Phase in If an individual with respect to whom a pen- The applicable dollar amount is $95 for 2014 alty is imposed by this section for any and $325 for 2015. month— (C) Special rule for individuals under age 18 (A) is a dependent (as defined in section If an applicable individual has not at- 152) of another taxpayer for the other tax- tained th £18 f the besinni t payer’s taxable year including such month, ane © age OF 10 as 0 © beginning 01 a such other taxpayer shall be liable for such month, the applicable dollar amount with respect to such individual for the month penalty, or shall be equal to one-half of the applicable (B) files a joint return for the taxable year dollar amount for the calendar year in which including such month, such individual and the mouth occurs the spouse of such individual shall be jointly liable for such penalty. (D) Indexing of amount (c) Amount of penalty In the case of any calendar year beginning (1) In general after 2016, the applicable dollar amount shall The amount of the penalty imposed by this be equal to $695, increased by an amount section on any taxpayer for any taxable year equal to— sas with respect to failures described in sub- @) $695, multiplied by . section (b)(1) shall be equal to the lesser of— Gp the cost-of-living adjustment deter- (A) the sum of the monthly penalty mined under section 1(£)(8) for the calendar amounts determined under paragraph (2) for year, determined by substituting cal- months in the taxable year during which 1 or endar year 2015” for “calendar year 1992 more such failures occurred, or in subparagraph (B) thereof. (B) an amount equal to the national aver- If the amount of any increase under clause age premium for qualified health plans di) is not a multiple of $50, such increase

(4)o f T $ e5 r0 m. s relating to income and families 5u0n1d(ce)r( 3s)e catinodn 5i0s1 (eax),e mpt from taxation For purposes of this section— se( tI I) o fm ee tm hb ice ars l o of r w rh ei lc ih g is oh ua sr e b a el ic eo fm s m ao nn d (A) Family size share medical expenses among members The family size involved with respect to in accordance with those beliefs and any taxpayer shall be equal to the number of without regard to the State in which a individuals for whom the taxpayer is allowed member resides or is employed, a deduction under section 151 (relating to al- (III) members of which retain member- lowance of deduction for personal exemp- ship even after they develop a medical tions) for the taxable year. condition, (B) Household income (IV) which (or a predecessor of which) has been in existence at all times since The term ‘‘household income’’ means, with December 31, 1999, and medical expenses respect to any taxpayer for any taxable of its members have been shared con- year, an amount equal to the sum of— tinuously and without interruption since (i) the modified adjusted gross income of at least December 31, 1999, and the taxpayer, plus (V) which conducts an annual audit (ii) the aggregate modified adjusted which is performed by an independent gross incomes of all other individuals certified public accounting firm in ac- who— cordance with generally accepted ac- (I) were taken into account in deter- counting principles and which is made mining the taxpayer’s family size under available to the public upon request. paragraph (1), and (II) were required to file a return of tax (3) Individuals not lawfully present imposed by section 1 for the taxable Such term shall not include an individual year. for any month if for the month the individual (C) Modified adjusted gross income is not a citizen or national of the United States or an alien lawfully present in the The term ‘‘modified adjusted gross in- United States. come’’ means adjusted gross income in- creased by— (4) Incarcerated individuals (i) any amount excluded from gross in- Such term shall not include an individual come under section 911, and for any month if for the month the individual (ii) any amount of interest received or is incarcerated, other than incarceration pend- accrued by the taxpayer during the taxable ing the disposition of charges. year which is exempt from tax. (e) Exemptions (d) Applicable individual No penalty shall be imposed under subsection For purposes of this section— (a) with respect to— (1) In general (1) Individuals who cannot afford coverage The term ‘‘applicable individual’’ means, (A) In general w t (3hi )at , h n o rr a e (ns 4 p )i .e nc dt i vt io d a un ay l dm eo scn rt ih b, e a dn i nin d pi av ri ad gu ra al p o ht h (2e )r , t th rA ie b n uy ta ipa opp nlp icl (i a dc b ea tlb e el re m ii n in ndd i ei v dv i i dd ouu naa ll ’ a sf n o r r a ea nqn nuy ui r am e ld o bn at ch so i n si -f )

(2) Religious exemptions for coverage for the month exceeds 8 percent (A) Religious conscience exemption of such individual’s household income for Such term shall not include any individual the taxable year described in section for any month if such individual has in ef- 1412(b)(1)(B) of the Patient Protection and fect an exemption under section 1311(d)(4)(H) Affordable Care Act. For purposes of apply- of the Patient Protection and Affordable ing this subparagraph, the taxpayer’s house- Care Act which certifies that such individual hold income shall be increased by any exclu- is— sion from gross income for any portion of (i) a member of a recognized religious the required contribution made through a sect or division thereof which is described salary reduction arrangement. in section 1402(g)(1), and (B) Required contribution (ii) an adherent of established tenets or For purposes of this paragraph, the term teachings of such sect or division as de- ‘‘required contribution’’ means— scribed in such section. (i) in the case of an individual eligible to (B) Health care sharing ministry purchase minimum essential coverage con- (i) In general sisting of coverage through an eligible-em- Such term shall not include any individ- ployer-sponsored plan, the portion of the ual for any month if such individual is a annual premium which would be paid by member of a health care sharing ministry the individual (without regard to whether for the month. paid through salary reduction or other- wise) for self-only coverage, or (ii) Health care sharing ministry (ii) in the case of an individual eligible The term ‘‘health care sharing ministry’’ only to purchase minimum essential cov- means an organization— erage described in subsection (f)(1)(C), the pthlarnou gahv atihlaeb lEex cihna ntghee iinn dthivei dSutaalt em ianr ktheet opnerlyio dasp.p ly to months in the first of such r ( p t twa h hut e ei ri t cn h cEhg ro a x e u s ca dt e hr i de tar a ne a a g gi lan e lq o)r u ,w d w a rh alt ei bi o f dc li uh eew d c ut h e h h ne de t e d h ba ei e yl rn tr d h sti t e hv h p ci ee tld a i u a oi na mn n l d t o 3hir uv 6e r Bnis odi t uud fg oe a ohs rl f

T c s ceo lh ucle l t de i eocS t mne i c o i or nn ne tt c hoa af sr s y e it s nh s w mh e ha op el rl re eenp ta cr hle ot as ny nc t r i 1i ni b m tue aop xuor au ss b el p le d ees r yb if o eyo adr r st . t h ih nie s - the taxable year (determined as if the indi- (5) Hardships vidual was covered by a qualified health Any applicable individual who for any plan offered through the Exchange for the month is determined by the Secretary of entire taxable year). Health and Human Services under section (C) Special rules for individuals related to 1311(d)(4)(H) to have suffered a hardship with employees respect to the capability to obtain coverage For purposes of subparagraph (B)(i), if an under a qualified health plan. applicable individual is eligible for mini- (f) Minimum essential coverage mum essential coverage through an em- For purposes of this section— ployer by reason of a relationship to an em- (1) In general ployee, the determination under subpara- g qr ua irp eh d ( cA o) n s th ria bl ul tb ie o nm oa fd te h eb y e mre pf le or ye en ec .e to1 re- mT eah ne s at ner ym o f t‘‘ hm ei fn oi lm lou wm in ge :s sential coverage’’ (D) Indexing (A) Government sponsored programs In the case of plan years beginning in any Coverage under— calendar year after 2014, subparagraph (A) (i) the Medicare program under part A of shall be applied by substituting for ‘‘8 per- title XVIII of the Social Security Act, cent’’ the percentage the Secretary of (ii) the Medicaid program under title Health and Human Services determines re- XIX of the Social Security Act, flects the excess of the rate of premium (iii) the CHIP program under title XXI of growth between the preceding calendar year the Social Security Act, and 2013 over the rate of income growth for (iv) medical coverage under chapter 55 of such period. title 10, United States Code, including cov- erage under the TRICARE program;2 (2) Taxpayers with income below filing thresh- (v) a health care program under chapter old 17 or 18 of title 38, United States Code, as Any applicable individual for any month determined by the Secretary of Veterans during a calendar year if the individual’s Affairs, in coordination with the Secretary household income for the taxable year de- of Health and Human Services and the scribed in section 1412(b)(1)(B) of the Patient Secretary, Protection and Affordable Care Act is less (vi) a health plan under section 2504(e) of than the amount of gross income specified in title 22, United States Code (relating to section 6012(a)(1) with respect to the taxpayer. Peace Corps volunteers);2or (3) Members of Indian tribes (vii) the Nonappropriated Fund Health d InuA dr iin any ng twa rp h ibp ic eli h c ( aa t sb h l dee e i fn ii ndn eid v di iv d ii nud au sl ea cl i ts i f a oo nr m 4e 5a m Any (b c e )r (m 6 o )o )f .n ath n B D t fohe e ren f e Fe n Nf ii s sat e cs t, a i loeP n Ysr t a eo a l ag b rr l D a i 1s em 9h f 9e e 5nd o (s f Pe u ut n bAh d le e u i cr t D h Ls oe e arp c wia t z r i a 1ot t 0m n i 3o –e n 33n 3 4t 79 A ; co o 1t 0f f

(4) Months during short coverage gaps U.S.C. 1587 note). (A) In general (B) Employer-sponsored plan Any month the last day of which occurred Coverage under an eligible employer-spon- during a period in which the applicable indi- sored plan. vidual was not covered by minimum essen- tial coverage for a continuous period of less (C) Plans in the individual market than 3 months. Coverage under a health plan offered in (B) Special rules the individual market within a State. For purposes of applying this paragraph— (D) Grandfathered health plan (i) the length of a continuous period Coverage under a grandfathered health shall be determined without regard to the plan. calendar years in which months in such pe- (E) Other coverage r t n p ai h a noo ( e r did ai e p ) gxo ei rcc rf aec i pa pou h tdr c i , oo a fnn l ol t roi s wn h au e a ndo l yl u u s bn m ep d e oe pr nr ri too s hu vd i bi d ips nea dg r tr a u he ga n ert dae e ppr r eh rt t i(h h oAa di)n s, , a S c foos eS r oc au r pr dec uS ith rnat p aa ro oy ttt sie h eoo e snh f r o e H w fah el tie t a t ha h hl il t s t hb t h s he uan eb bn ee sd Sfn ei ee t cH cf s ti ru it e or ms ti n s aac .k rno y v p ,Se o er roa erl v cg , oie ca g, e s ns s iu ,t z c h eih ne s (iii) if there is more than 1 continuous (2) Eligible employer-sponsored plan period described in subparagraph (A) cov- The term ‘‘eligible employer-sponsored ering months in a calendar year, the ex- plan’’ means, with respect to any employee, a 1So in original. Probably should be followed by ‘‘the’’. 2So in original. The semicolon probably should be a comma. cpolovyeerae gweh iocfhfe irse—d by an employer to the em- (Addes dp e ac nt d t o a s mu ec nh d f ea dil u Pr ue. b . L. 111–148, title I, (A) a governmental plan (within the mean- §1501(b), title X, §10106(b)–(d), Mar. 23, 2010, 124 ing of section 2791(d)(8) of the Public Health Stat. 244, 909, 910; Pub. L. 111–152, title I, §§1002, Service Act), or 1004(a)(1)(C), (2)(B), Mar. 30, 2010, 124 Stat. 1032, (B) any other plan or coverage offered in 1034; Pub. L. 111–159, §2(a), Apr. 26, 2010, 124 Stat. the small or large group market within a 1123; Pub. L. 111–173, §1(a), May 27, 2010, 124 Stat. State. 1215.) S heu ac lh t h t pe lr am n ds eh sa cl rl i bei dn c il nu d pe a raa g rg ar pa hn d (1fa )(t Dh )e r oe fd - REFERENCES IN TEXT fered in a group market. The Patient Protection and Affordable Care Act, re- ferred to in subsecs. (d)(2)(A), (e)(1)(A), (2), and (f)(5), is (3) Excepted benefits not treated as minimum Pub. L. 111–148, Mar. 23, 2010, 124 Stat. 119. Title I of the essential coverage Act enacted chapter 157 of Title 42, The Public Health The term ‘‘minimum essential coverage’’ and Welfare, and enacted, amended, and transferred nu- s wh ha il cl h n co ot n si in sc tl su d oe f ch oe va el rt ah g ei n os fu r ea xn cc ee p tc eo dv e br ea ng ee - m 1 s3 e1e c1r t(o id ou ) ns (4 s ) o 1(t H 8h 0)e 3 1r a ( n ds de )( c 1 4t 4 )i (1o H2n ( )bs a) (a n1n d)(d B 1 8n ) 0 o o 8t 2fe (t bs h ) (ei 1n )A (t Bch t )e , a rC r eeo s pd c ee la c. s tS s ivie f ec i lt e yi do , n t oos f fits— Title 42. For complete classification of this Act to the (A) described in paragraph (1) of subsection Code, see Short Title note set out under section 18001 (c) of section 2791 of the Public Health Serv- of Title 42 and Tables. ice Act; or The Social Security Act, referred to in subsec. (B) described in paragraph (2), (3), or (4) of (f)(1)(A)(i) to (iii), is act Aug. 14, 1935, ch. 531, 49 Stat. such subsection if the benefits are provided 620. Part A of title XVIII of the Act is classified gener- u trn ad ce tr o a f is ne sp ua rr aa nt ce e .p olicy, certificate, or con- a c Thl il tay lp e tt seo r X p I7 Xa r o t af nA T d i t( Xl§ e X1 3 I49 25 o,c f Te th ht e es e P Aq u c. t) b l ao ic rf es H u ce lb a ac l sh t sha if p iat ee n dr d g X W enV e eI l rI f aI a lr lo e yf . (4) Individuals residing outside United States to subchapters XIX (§1396 et seq.) and XXI (§1397aa et or residents of territories seq.), respectively, of chapter 7 of Title 42. For com- Any applicable individual shall be treated as p 13l 0e 5t e o fc l Ta is ts li ef i 4c 2a ati no dn To af b t lh esis . Act to the Code, see section having minimum essential coverage for any Section 2791 of the Public Health Service Act, re- month— ferred to in subsec. (f)(2)(A), (3), is classified to section (A) if such month occurs during any period 300gg–91 of Title 42, The Public Health and Welfare. d tie os nc r 9i 1b 1e (d d )i (n 1) s wu hb ip ca hr a isg r aa pp ph l i( cA ab) lo er t o(B t) h o ef inse dc i-- AMENDMENTS vidual, or 2010—Subsec. (b)(1). Pub. L. 111–148, §10106(b)(1), de( nB t) oi ff as nu ych p oin sd seiv ssid iou na l o fi s t ha e b Uon na it ef did e S tr ae ts ei s- a r mem ea ee d tn d a te s hd e f op rla elr o q. w u ( is1 r:) e m‘g ‘Ie efn n e tar na o l fal y sp. up blP i scr ei a co b tr l i e ot no i n (a d am i )v e fin od rd u m a 1l e on f rat i, mlst oex t ro et (as determined under section 937(a)) for such months during any calendar year beginning after 2013, month. then, except as provided in subsection (d), there is here- (5) Insurance-related terms by imposed a penalty with respect to the individual in the amount determined under subsection (c).’’ Any term used in this section which is also Subsec. (c)(1), (2). Pub. L. 111–148, §10106(b)(2), amend- used in title I of the Patient Protection and ed pars. (1) and (2) generally. Prior to amendment pars. Affordable Care Act shall have the same mean- (1) and (2) related to the amount of and dollar limita- ing as when used in such title. tions on penalty for failure to maintain minimum es- (g) Administration and procedure se Sn uti ba sl e c co . v (e cr )a (2g )e (. B ). Pub. L. 111–152, §1002(a)(1)(A), in- (1) In general serted ‘‘the excess of’’ before ‘‘the taxpayer’s household The penalty provided by this section shall be income’’ and ‘‘for the taxable year over the amount of p rea ti ad r yu , po an n d n eo xt cic ee p t a an sd pd roem via dn edd ib ny pt ah rae grS ae pc h- g t dor uo cts ths oe ri yn ta c pxo rpm oa ve y i e ss irp o’e ’ n c b si e .f i fe od r ei n ‘‘ fs oe rc t ti ho en t 6 a0 x1 a2 b(a le)( 1 y) e aw ri ’t ’h i nr e is np te rc ot - (2), shall be assessed and collected in the same Subsec. (c)(2)(B)(i). Pub. L. 111–152, §1002(a)(1)(B), sub- manner as an assessable penalty under sub- stituted ‘‘1.0’’ for ‘‘0.5’’. chapter B of chapter 68. Subsec. (c)(2)(B)(ii). Pub. L. 111–152, §1002(a)(1)(C), (2) Special rules su Sb ust bi st eu ct .e d ( c‘ )‘ (2 2.0 )(’’ B f )o (ir i i‘ )‘1 . .0 P’’ u. b. L. 111–152, §1002(a)(1)(D), Notwithstanding any other provision of substituted ‘‘2.5’’ for ‘‘2.0’’. law— Subsec. (c)(3)(A). Pub. L. 111–152, §1002(a)(2)(A), sub- (A) Waiver of criminal penalties sti St uu bt se ed c ‘ .‘ $ (6 c9 )5 (’ 3’ ) (f Bor ) .‘ ‘ P$7 u5 b0 .’ ’. L . 111–152, §1002(a)(2)(B), sub- In the case of any failure by a taxpayer to stituted ‘‘$325’’ for ‘‘$495’’. timely pay any penalty imposed by this sec- Pub. L. 111–148, §10106(b)(3), substituted ‘‘$495’’ for tion, such taxpayer shall not be subject to ‘‘$350’’. any criminal prosecution or penalty with re- Subsec. (c)(3)(D). Pub. L. 111–152, §1002(a)(2)(C), sub- spect to such failure. s at ni dtu ct le . d ( i)‘ .‘ $695’’ for ‘‘$750’’ in introductory provisions (B) Limitations on liens and levies Subsec. (c)(4)(B)(i), (ii). Pub. L. 111–152, §1004(a)(1)(C), Th (ie ) S fie lc er e nt oa tr iy ce s h oa f l ll i en no t w— i th respect to any s gu r Sob uss st b’i s’t . eu ct .e d (c‘ )‘m (4)o (d Ci )f .i ed P ua bd .j us Lt .e d 11g 1r –o 1s 5s 2’ ,’ f §o 1r 0 0‘ 4‘m (ao )(d 2i )f (i Be )d , property of a taxpayer by reason of any amended subpar. (C) generally. Prior to amendment, failure to pay the penalty imposed by this text read as follows: ‘‘The term ‘modified gross income’ section, or means gross income— l6o2(waa),b le under paragraph (1), (3), (4), or (10) of section sPeucbt.i oLn. 151010–01B4,8 ,w taitsl en oXt, §s1e0t9 0o7u(ta )i, nM tahre. 2C3,o d20e1 0i,n 1 2v4i eSwt aotf. ‘‘(ii) increased by the amount of interest received 1020, which provided that the amendments made by sec- or accrued during the taxable year which is exempt tion 9017 of Pub. L. 111–148 were deemed null, void, and from tax imposed by this chapter, and of no effect. ‘‘(iii) determined without regard to sections 911, 931, and 933.’’ §5000B. Imposition of tax on indoor tanning Subsec. (c)(4)(D). Pub. L. 111–152, §1002(b)(1), struck services out subpar. (D). Text read as follows: ‘‘(i) IN GENERAL.—The term ‘poverty line’ has the (a) In general m cia ‘e ‘a l ( in S i)i e n c Pg u O rg Vii t Ev y Re Tn A Y ct th L a I( N4t 2 Et Ue Ur . SSm E. DCi ..n — 1 s 3 Ie 9 nc 7 jt tji h(o c en ) ( c52 a)1 ) s1 . e0 ( c o) f( 5 a) n o yf tt ah xe a S bo le- niT ngh e sr ee r vis ic eh e are b ty ax im eqp uo as le d t oo n 1 0a n py er cin end to o or f t ta hn e- year ending with or within a calendar year, the poverty amount paid for such service (determined with- line used shall be the most recently published poverty out regard to this section), whether paid by in- line as of the 1st day of such calendar year.’’ surance or otherwise. suS bu pb as re . c (A. )( d g) e(2 n) e( rA a) l. l yP .u Pb r. ioL r. t1 o1 1 a– m14 e8 n, d§ m10 e1 n0 t6 ,( c t) e, x a t m ree an dd e ad s (b) Indoor tanning service follows: ‘‘Such term shall not include any individual For purposes of this section— f eo mr pa tn ioy n m uno dn et rh si ef c ts iu oc nh 1i 3n 1d 1(i dv )i (d 4u )(a Hl )h oa fs ti hn e e Pff ae tc iet na tn P e rx o- - (1) In general tection and Affordable Care Act which certifies that The term ‘‘indoor tanning service’’ means a such individual is a member of a recognized religious service employing any electronic product de- sect or division thereof described in section 1402(g)(1) signed to incorporate 1 or more ultraviolet and an adherent of established tenets or teachings of lamps and intended for the irradiation of an s su uSc buh pb as s re e .c c (t C. o )( r e g )d e(i n1v ) e(i rCs ai )o l. l n yP .a u Ps b rd . ie oLs r.c r t1i o1b 1e a–d m1 4i e8n n, ds §u m1c 0 eh 1 n0 s t6e ,( dc tt ) e,i x o a tn m. r’ e’ e an dd e ad s i ln end giv ti hd su ia nl ab iy r u bl et tr wav ei eo nl e 2t 0 0r a ad ni da t 4i 0o 0n n, aw ni oth m w eta ev re s- , follows: ‘‘For purposes of subparagraph (B)(i), if an ap- to induce skin tanning. plicable individual is eligible for minimum essential (2) Exclusion of phototherapy services coverage through an employer by reason of a relation- ship to an employee, the determination shall be made Such term does not include any by reference to the affordability of the coverage to the phototherapy service performed by a licensed employee.’’ medical professional. ‘‘bS eu lob wse c fi. l i( ne) g( 2 t) h. rP eu shb o. lL d. ’ ’ 1 f1 o1 r– 1 ‘5 ‘u2, n § d1 e0 r0 12 0(b 0 )( p2 e) r, cs eu nb ts t oi ft u pt oe vd - (c) Payment of tax erty line’’ in heading and ‘‘the amount of gross income (1) In general specified in section 6012(a)(1) with respect to the tax- The tax imposed by this section shall be paid p o aa f s y t uhe nr e d. ’ ef’ a r f mo sur i l b‘ y s‘1 ei0 cn0 tv ip o oe l nr v c e (e bdn ) ((t 4d )o e )t .f ’ e ’t rh im ne i tp n eo e xv d te .i r nt y t hl ein se a mfo er t mh ae n s ni eze r b foy r mth ee d .i ndividual on whom the service is per- Subsec. (f)(1)(A)(iv). Pub. L. 111–159, §2(a)(1), added cl. (2) Collection ( ‘‘i tv h) ea Tnd R Is Ctr Au Rck E o fou rt Lfo ir fem pe rr o c gl r. a ( miv ,) ’ ’w . hich read as follows: Every person receiving a payment for serv- Subsec. (f)(1)(A)(v). Pub. L. 111–173, §1(a), amended cl. ices on which a tax is imposed under sub- (v) generally. Prior to amendment, cl. (v) read as fol- section (a) shall collect the amount of the tax lows: ‘‘the veteran’s health care program under chapter from the individual on whom the service is 17 of title 38, United States Code,’’. performed and remit such tax quarterly to the Subsec. (f)(1)(A)(vii). Pub. L. 111–159, §2(a)(2)–(4), Secretary at such time and in such manner as added cl. (vii). provided by the Secretary. EFFECTIVE DATE OF 2010 AMENDMENT (3) Secondary liability v [aiP d meu edb n . d tL ih n. a gt1 :1 t 1 h‘– ‘ i1 T s7 h3 se, e § ca t1 m i( ob e n), n ] M d sm ha ay e ln l2 t 7 t , am 2 k0 a e1 d 0 ee, f 1 fb e2 y4 c tS s at ua sb t s i. e f 1 c i2 t n1 i c5 o l, n up dr ( eo a d- )

noW t h pe ar ie d a an t y t ht ea x t imim ep po ase yd m b ey n ts su fb os re c inti do on o r( a t) a nis - in section 1501(b) of the Patient Protection and Afford- ning services are made, then to the extent able Care Act [Pub. L. 111–148].’’ that such tax is not collected, such tax shall Pub. L. 111–159, §2(b), Apr. 26, 2010, 124 Stat. 1123, pro- be paid by the person who performs the serv- vided that: ‘‘The amendments made by this section ice. [amending this section] shall take effect as if included in section 1501(b) of the Patient Protection and Afford- (Added Pub. L. 111–148, title X, §10907(b), Mar. 23, able Care Act [Pub. L. 111–148] and shall be executed 2010, 124 Stat. 1020.) immediately after the amendments made by such sec- tion 1501(b).’’ PRIOR PROVISIONS EFFECTIVE DATE §9A 01 7p (r ai )o , r M s ae rc .t i 2o 3n , 25 00 10 00 , B 12, 4a Sdd taed t. P 87u 2b , . w L h. i c1 h11 r– e1 l4 a8 t, et di t tl oe tI aX x, Pub. L. 111–148, title I, §1501(d), Mar. 23, 2010, 124 Stat. on elective cosmetic medical procedures, and section 249, provided that: ‘‘The amendments made by this sec- 9017(c) of Pub. L. 111–148, which provided that the tion [enacting this section and section 18091 of Title 42, amendments made by section 9017 of Pub. L. 111–148 The Public Health and Welfare] shall apply to taxable were applicable to procedures performed on or after years ending after December 31, 2013.’’ Jan. 1, 2010, were not set out in the Code in view of Pub. CHAPTER 49—COSMETIC SERVICES L w. h 1 ic1 h1– 1 p4 r8 o, v t ii dt el de tX h, a § t1 t0 h90 e7 ( pa r) o, vM isa ir o. n 2 s3 o, f2 ,0 a10 n, d 1 2 a4 m S et na dt m. 1 e0 n2 t0 s, S 50e 0c 0. B. Imposition of tax on indoor tanning services. m nua ld l,e v b oy id, , s ae nc dt i oo fn n 9 o0 1 e7 ff eo cf t .P ub. L. 111–148 were deemed PRIOR PROVISIONS EFFECTIVE DATE A prior chapter 49, added Pub. L. 111–148, title IX, Pub. L. 111–148, title X, §10907(d), Mar. 23, 2010, 124 §9017(a), Mar. 23, 2010, 124 Stat. 872, which related to Stat. 1021, provided that: ‘‘The amendments made by