T.C. Memo. 2021-124
UNITED STATES TAX COURT
KARLA AMBURGEY AND MARY DUTEY-AMBURGEY a.k.a. MARY AMBURGEY, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3339-20. Filed November 1, 2021.
C. Page Hamrick III, for petitioners.
Lisa P. Lafferty, for respondent.
MEMORANDUM OPINION
KERRIGAN, Judge: Respondent determined a deficiency of $15,348, an
addition to tax pursuant to section 6651(a)(1) of $1,196, and an accuracy-related
penalty pursuant to section 6662(a) of $3,070 for 2018. Unless otherwise
indicated, all section references are to the Internal Revenue Code (Code) in effect
Served 11/01/21 -2-
[*2] at all relevant times, and all Rule references are to the Tax Court Rules of
Practice and Procedure. We round all monetary amounts to the nearest dollar.
The issues for consideration are whether for 2018 petitioners are:
(1) required to repay an advance premium tax credit (APTC); (2) liable for an
addition to tax pursuant to section 6651(a)(1); and (3) liable for the accuracy-
related penalty pursuant to section 6662(a).
Background
The parties submitted this case fully stipulated, without trial, pursuant to
Rule 122. The stipulation of facts and attached exhibits are incorporated herein by
this reference. Petitioners resided in Florida when they timely filed their petition.
Petitioners, a married couple, reported an adjusted gross income of $181,183
on their joint Federal tax return for 2018. Petitioners did not receive tax-exempt
interest, nontaxable Social Security, or excluded foreign earned income during
2018, and their modified adjusted gross income was $181,183.
Petitioners obtained health insurance for 2018 through the Health Insurance
Marketplace. They were enrolled in Florida Blue HMO throughout 2018. -3-
[*3] Petitioners’ health insurance premium was $1,772 per month ($21,269 for the
year). 1
In 2018 petitioners received an APTC benefit of $1,279 per month, totaling
$15,348 for the year. The APTC was paid directly to petitioners’ insurance
company and applied to the cost of petitioners’ 2018 health insurance premiums.
On April 25, 2019, petitioners untimely filed their Form 1040, U.S.
Individual Income Tax Return, for 2018. Petitioners’ 2018 income tax return was
due April 15, 2019. Their return showed a tax liability of $12,821 for 2018. For
2018 petitioners’ household consisted of two people. Their income tax return for
2018 did not include Form 8962, Premium Tax Credit (PTC), used to reconcile the
amount of APTC a taxpayer received with the amount he or she is entitled to
receive.
On November 22, 2019, respondent issued to petitioners a notice of
deficiency with respect to their Federal income tax for 2018. Respondent
determined that petitioners were not entitled to any PTC and that they must repay
the APTC paid on their behalf in 2018. Respondent also determined an addition to
The total annual health insurance premium of $21,269 differs from the 1
product of the monthly health insurance premium multiplied by 12 months-- $21,264--due to rounding. -4-
[*4] tax for failure to file timely pursuant to section 6651 and a substantial
understatement of income tax penalty pursuant to section 6662(a) and (b)(2). The
section 6662 penalty was automatically computed through electronic means.
Discussion
Generally, the Commissioner’s determinations in a notice of deficiency are
presumed correct and the taxpayer bears the burden of proving that those
determinations are erroneous. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111,
115 (1933).
I. APTC
Petitioners do not dispute that an APTC was paid on their behalves. Rather,
they dispute that they should have to repay it. The PTC offsets the cost of health
insurance. A recipient of the PTC can choose to receive the payments in advance--
an APTC. These payments are paid directly to the insurer. See sec. 36B; McGuire
v. Commissioner, 149 T.C. 254, 260 (2017).
At the end of the year a taxpayer who received an APTC is required to
reconcile the amount of the PTC already received with the entitlement amount.
See sec. 36B(f)(2). A taxpayer reconciles these amounts by completing Form 8962
and filing it with his or her tax return. If the APTC is more than the entitlement
amount, the taxpayer owes the Government the excess APTC, and it is reflected as -5-
[*5] an increase in tax. See sec. 36B(f)(2)(A); Keel v. Commissioner, T.C. Memo.
2018-5, at *6.
A taxpayer with income greater than 400% of the Federal poverty line (FPL)
is not eligible for the PTC, meaning the full amount of the APTC received during
the tax year must be included as a tax liability on the taxpayer’s tax return. Sec.
36B(c)(1)(A), (f)(2)(B); see also sec. 1.36B-4(a)(4), Example (5), Income Tax
Regs. Household income, as relevant to petitioners, is defined as modified
adjusted gross income. See sec. 36B(d)(1) and (2)(A). Modified adjusted gross
income means gross income adjusted by certain items, including Social Security
benefits, not included in gross income. Sec. 36B(d)(2)(B)(iii).
For 2018 the FPL was $16,240 for a household of two in Florida, and 400%
of the FPL was $64,960. See 82 Fed. Reg. 8832 (Jan. 31, 2017). Petitioners
reported household income of $181,183 for 2018. Because petitioners were not
entitled to the PTC in 2018, any APTC received is excess APTC and must be
repaid to the Government. We hold that they are liable for the $15,348 deficiency.
Petitioners claim respondent cannot assess a deficiency based on excess
APTC because the “tax is void and of no effect as in violation of the Constitution
of the United States.” We disagree. -6-
[*6] In Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012), the Supreme
Court held that the Affordable Care Act’s (ACA) penalty-backed individual shared
responsibility payment is constitutional. Petitioners argue that a subsequent
opinion, Texas v. United States, 945 F.3d 355 (5th Cir. 2019), rev’d and remanded
sub nom. California v. Texas, 593 U.S. , 141 S. Ct. 2104 (2021), renders the
individual shared responsibility payment and associated penalty invalid. We are
not persuaded.
In Texas the U.S. Court of Appeals for the Fifth Circuit dealt with 2017
amendments to the ACA that reduced the individual shared responsibility payment
under section 5000A(c) to zero. These 2017 amendments were not effective until
after December 31, 2018. Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, sec.
11081, 131 Stat. at 2092. The deficiency at issue here stems from an increase in
tax due to excess APTC paid on petitioners’ behalves throughout 2018 before the
ACA amendments discussed in Texas took effect. Therefore, the reasoning of the
U.S. Court of Appeals for the Fifth Circuit in Texas does not apply.
On June 17, 2021, the Supreme Court vacated the judgment of the Court of
Appeals in Texas and remanded the case with instructions to dismiss. See
California v. Texas, 539 U.S. at , 141 S. Ct. at 2120. Petitioners have failed to
meet their burden of showing that the provisions of section 36B violate the -7-
[*7] Constitution. See Conard v. Commissioner, 154 T.C. 96, 103 (2020)
Free access — add to your briefcase to read the full text and ask questions with AI
T.C. Memo. 2021-124
UNITED STATES TAX COURT
KARLA AMBURGEY AND MARY DUTEY-AMBURGEY a.k.a. MARY AMBURGEY, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3339-20. Filed November 1, 2021.
C. Page Hamrick III, for petitioners.
Lisa P. Lafferty, for respondent.
MEMORANDUM OPINION
KERRIGAN, Judge: Respondent determined a deficiency of $15,348, an
addition to tax pursuant to section 6651(a)(1) of $1,196, and an accuracy-related
penalty pursuant to section 6662(a) of $3,070 for 2018. Unless otherwise
indicated, all section references are to the Internal Revenue Code (Code) in effect
Served 11/01/21 -2-
[*2] at all relevant times, and all Rule references are to the Tax Court Rules of
Practice and Procedure. We round all monetary amounts to the nearest dollar.
The issues for consideration are whether for 2018 petitioners are:
(1) required to repay an advance premium tax credit (APTC); (2) liable for an
addition to tax pursuant to section 6651(a)(1); and (3) liable for the accuracy-
related penalty pursuant to section 6662(a).
Background
The parties submitted this case fully stipulated, without trial, pursuant to
Rule 122. The stipulation of facts and attached exhibits are incorporated herein by
this reference. Petitioners resided in Florida when they timely filed their petition.
Petitioners, a married couple, reported an adjusted gross income of $181,183
on their joint Federal tax return for 2018. Petitioners did not receive tax-exempt
interest, nontaxable Social Security, or excluded foreign earned income during
2018, and their modified adjusted gross income was $181,183.
Petitioners obtained health insurance for 2018 through the Health Insurance
Marketplace. They were enrolled in Florida Blue HMO throughout 2018. -3-
[*3] Petitioners’ health insurance premium was $1,772 per month ($21,269 for the
year). 1
In 2018 petitioners received an APTC benefit of $1,279 per month, totaling
$15,348 for the year. The APTC was paid directly to petitioners’ insurance
company and applied to the cost of petitioners’ 2018 health insurance premiums.
On April 25, 2019, petitioners untimely filed their Form 1040, U.S.
Individual Income Tax Return, for 2018. Petitioners’ 2018 income tax return was
due April 15, 2019. Their return showed a tax liability of $12,821 for 2018. For
2018 petitioners’ household consisted of two people. Their income tax return for
2018 did not include Form 8962, Premium Tax Credit (PTC), used to reconcile the
amount of APTC a taxpayer received with the amount he or she is entitled to
receive.
On November 22, 2019, respondent issued to petitioners a notice of
deficiency with respect to their Federal income tax for 2018. Respondent
determined that petitioners were not entitled to any PTC and that they must repay
the APTC paid on their behalf in 2018. Respondent also determined an addition to
The total annual health insurance premium of $21,269 differs from the 1
product of the monthly health insurance premium multiplied by 12 months-- $21,264--due to rounding. -4-
[*4] tax for failure to file timely pursuant to section 6651 and a substantial
understatement of income tax penalty pursuant to section 6662(a) and (b)(2). The
section 6662 penalty was automatically computed through electronic means.
Discussion
Generally, the Commissioner’s determinations in a notice of deficiency are
presumed correct and the taxpayer bears the burden of proving that those
determinations are erroneous. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111,
115 (1933).
I. APTC
Petitioners do not dispute that an APTC was paid on their behalves. Rather,
they dispute that they should have to repay it. The PTC offsets the cost of health
insurance. A recipient of the PTC can choose to receive the payments in advance--
an APTC. These payments are paid directly to the insurer. See sec. 36B; McGuire
v. Commissioner, 149 T.C. 254, 260 (2017).
At the end of the year a taxpayer who received an APTC is required to
reconcile the amount of the PTC already received with the entitlement amount.
See sec. 36B(f)(2). A taxpayer reconciles these amounts by completing Form 8962
and filing it with his or her tax return. If the APTC is more than the entitlement
amount, the taxpayer owes the Government the excess APTC, and it is reflected as -5-
[*5] an increase in tax. See sec. 36B(f)(2)(A); Keel v. Commissioner, T.C. Memo.
2018-5, at *6.
A taxpayer with income greater than 400% of the Federal poverty line (FPL)
is not eligible for the PTC, meaning the full amount of the APTC received during
the tax year must be included as a tax liability on the taxpayer’s tax return. Sec.
36B(c)(1)(A), (f)(2)(B); see also sec. 1.36B-4(a)(4), Example (5), Income Tax
Regs. Household income, as relevant to petitioners, is defined as modified
adjusted gross income. See sec. 36B(d)(1) and (2)(A). Modified adjusted gross
income means gross income adjusted by certain items, including Social Security
benefits, not included in gross income. Sec. 36B(d)(2)(B)(iii).
For 2018 the FPL was $16,240 for a household of two in Florida, and 400%
of the FPL was $64,960. See 82 Fed. Reg. 8832 (Jan. 31, 2017). Petitioners
reported household income of $181,183 for 2018. Because petitioners were not
entitled to the PTC in 2018, any APTC received is excess APTC and must be
repaid to the Government. We hold that they are liable for the $15,348 deficiency.
Petitioners claim respondent cannot assess a deficiency based on excess
APTC because the “tax is void and of no effect as in violation of the Constitution
of the United States.” We disagree. -6-
[*6] In Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012), the Supreme
Court held that the Affordable Care Act’s (ACA) penalty-backed individual shared
responsibility payment is constitutional. Petitioners argue that a subsequent
opinion, Texas v. United States, 945 F.3d 355 (5th Cir. 2019), rev’d and remanded
sub nom. California v. Texas, 593 U.S. , 141 S. Ct. 2104 (2021), renders the
individual shared responsibility payment and associated penalty invalid. We are
not persuaded.
In Texas the U.S. Court of Appeals for the Fifth Circuit dealt with 2017
amendments to the ACA that reduced the individual shared responsibility payment
under section 5000A(c) to zero. These 2017 amendments were not effective until
after December 31, 2018. Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, sec.
11081, 131 Stat. at 2092. The deficiency at issue here stems from an increase in
tax due to excess APTC paid on petitioners’ behalves throughout 2018 before the
ACA amendments discussed in Texas took effect. Therefore, the reasoning of the
U.S. Court of Appeals for the Fifth Circuit in Texas does not apply.
On June 17, 2021, the Supreme Court vacated the judgment of the Court of
Appeals in Texas and remanded the case with instructions to dismiss. See
California v. Texas, 539 U.S. at , 141 S. Ct. at 2120. Petitioners have failed to
meet their burden of showing that the provisions of section 36B violate the -7-
[*7] Constitution. See Conard v. Commissioner, 154 T.C. 96, 103 (2020)
(rejecting taxpayer’s constitutional challenge of a Code provision because taxpayer
failed to negate “every conceivable basis which might support” the legislation
(quoting Estate of Kunze v. Commissioner, 233 F.3d 948, 954 (7th Cir. 2000),
aff’g T.C. Memo. 1999-344)).
II. Addition to Tax
Section 6651(a)(1) imposes an addition to tax if the taxpayer fails to file an
income tax return by the required due date, including any extension of time for
filing. Under section 7491(c) the Commissioner bears the burden of production
with respect to the liability of the taxpayer for additions to tax. See Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001). If the Commissioner meets the
burden, the taxpayer has the burden of proving that failure to timely file was due to
reasonable cause and not willful neglect. See sec. 6651(a)(1); Higbee v.
Commissioner, 116 T.C. at 447.
Petitioners stipulated that they untimely filed their 2018 Federal tax return
and have not contended that they had reasonable cause. The Commissioner has
met the burden of production. Petitioners are liable for the addition to tax pursuant
to section 6651(a)(1). -8-
[*8] III. Section 6662(a) Penalty
The Commissioner bears the burden of production with respect to the
penalty imposed by section 6662(a). See sec. 7491(c). This burden of production
includes producing evidence that respondent complied with the procedural
requirements of section 6751(b). Respondent’s automated underreporter program
detected the deficiency, and section 6751(b) does not apply to automated penalties.
See Walquist v. Commissioner, 152 T.C. 61 (2019).
Section 6662(a) and (b)(2) imposes a 20% penalty on any portion of an
underpayment attributable to a substantial understatement of income tax. An
understatement of tax is equal to the amount of tax required to be shown on the
return, less the amount shown. Sec. 6662(d)(2)(A). With respect to individual
taxpayers, an understatement of tax is substantial if it exceeds the greater of 10%
of the tax required to be shown in the return or $5,000. Sec. 6662(d)(1)(A). The
deficiency meets these threshold requirements.
The penalty for an underpayment attributable to a substantial understatement
of income tax under section 6662(b)(2) will not apply to the extent that a taxpayer
shows he or she exercised both reasonable care and good faith with respect to that
portion of the underpayment. Sec. 6664(c). Petitioners have not argued or -9-
[*9] presented any evidence that their underpayment of tax was due to reasonable
cause. Therefore, petitioners are liable for the section 6662(a) penalty.
Decision will be entered for
respondent.