26 Jun ACA subsidies upheld by Supreme Court
Being a CPA in the Asheville area, it is important to me to keep up with the latest tax rulings and accounting updates. Especially when those rulings have the ability to affect my clients whether they are individuals or small businesses. Today I read an article in one of my trade publications, Accounting Today, which states that the Supreme Court has upheld the Affordable Care Act tax subsidies.
The challenge by opponents of Obamacare grew out of the phrase “established by the state,” which referred to the exchanges, or marketplaces, where people could compare and purchase insurance plans. Each state can establish its own Exchange, but the ACA also provides that the federal government will establish an exchange if the state does not.
Under the ACA, tax credits “shall be allowed” for any applicable taxpayer, but only if the taxpayer has enrolled in an insurance plan through “an Exchange established by the State.” An IRS regulation interprets this as making the credits available on an exchange “regardless of whether the Exchange is established and operated by a State…or by [Health and Human Services].”
What does this ruling mean for the tax payer?
Tax experts weighed in on the Supreme Court’s ruling. “The status quo has been preserved.” said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting US. “The stock market seems to be rewarding the health insurance companies that might have lost out on subsidies. By and large, people can keep doing what they were doing—this is the way the IRS has been interpreting the law, so in that sense, nothing will change.”