Supreme Court Vacates District Court’s Judgement on a Provision of the Affordable Care Act

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Supreme Court Vacates District Court’s Judgement on a Provision of the Affordable Care Act

On June 17, 2021, the Supreme Court issued an opinion that reverses and remands California et al. v. Texas et al. The lawsuit was originally filed by Texas and 17 other states in 2018 and challenged the minimum essential coverage provision enacted in 2010 under the Patient Protection and Affordable Care Act (ACA) and later revised by the Tax Cuts and Jobs Act (TCJA) in 2017. 

The TCJA nullified the penalty most American taxpayers were required to pay under the ACA if they did not meet the minimum essential health insurance coverage requirement. Two individual plaintiffs later joined the 18 states. Collectively, they argued that, without a penalty in place, the minimum essential health insurance coverage requirement is unconstitutional and the ACA in its entirety is invalid. California, 15 other states, and the District of Columbia argued in defense of the ACA. 

The District Court initially ruled the plaintiffs had standing to challenge the minimum coverage requirement and held that the requirement was both unconstitutional and “not severable” from the rest of the ACA. When appealed, a majority panel agreed the requirement was unconstitutional but remanded further analysis regarding the provision’s severability from the ACA as a whole. 

The Supreme Court vacated the District Court’s judgment and remanded the case with instructions to dismiss. The Supreme Court did not analyze the constitutionality of the provision on the grounds that the plaintiffs had no standing to bring the case, as the government’s enforcement actions “fairly traceable” to the minimum coverage requirement have not caused, nor will they cause, harm to “the plaintiffs’ pocketbook.” 

For the 2016, 2017, and 2018 tax years, ARB prepared a number of “Protective Claim” filings for our clients to preserve their ability to claim a refund of the “Net Investment Income Tax” in the event the Supreme Court ruled the ACA was unconstitutional. However, with the Court’s decision in this case, the Net Investment Income Tax remains valid, and no refund claims can be filed.

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by Dan Doiron, CPA, CVA


Dan Doiron has been in public accounting since his college internship with ARB in 1986. He has been a Principal since 1996 and works extensively with all types of clients to solve their compliance and tax planning issues. Dan was the May 1987 State of Maine Gold Medalist for earning the highest scores on all four parts of the CPA Examination. He is the Practice Leader of ARB’s Business Tax Services Team and ARB’s Private Client Advisory Services Team.

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