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Tax Credit

King v. Burwell

Issues

Can the IRS give tax credits to participants of federally-run health insurance marketplaces established under the Affordable Care Act?

In 2010, Congress passed the Patient Protection and Affordable Care Act (“ACA”). The ACA, in part, provides tax credits for insurance premiums to eligible citizens that obtain insurance through “Exchanges,” which are health insurance marketplaces. The IRS interpreted the ACA to permit tax credits to all eligible citizens regardless of whether the Exchange is federally or state-run. In this case, the Supreme Court will have the opportunity to resolve whether the ACA, which grants tax credits to individuals who obtained insurance through state-established Exchanges, also extends those tax credits to federally-established Exchanges. Several Virginia residents contend that the plain text of the ACA shows that Congress only intended for state-established Exchanges receive tax credits and that the Chevron deference is inapplicable because of the unambiguous meaning of the text. The government counters that tax credits are available to “applicable taxpayers”—a status determined independent of the type of Exchange within a citizen’s state—and, also, that the Chevron deference applies because the government’s interpretation avoids creating conflicts within the ACA. This case will profoundly impact the balance of federalism, the separation of power between the legislative and executive branches, and the American healthcare marketplace. 

Questions as Framed for the Court by the Parties

Section 36B of the Internal Revenue Code, which was enacted as part of the Patient Protection and Affordable Care Act ("ACA"), authorizes federal tax-credit subsidies for health insurance coverage that is purchased through an "Exchange established by the State under section 1311" of the ACA.

The question presented is whether the Internal Revenue Service ("IRS") may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through Exchanges established by the federal government under section 1321 of the ACA.

In 2010, to help increase health care insurance coverage, Congress passed the Patient Protection and Affordable Care Act (“ACA”). See King v. Burwell, 759 F.3d 358, 363 (4th Cir. 2014).

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