Obamacare Tax Decision Deadline Looming | Net Investment Income Tax (NII)

Obamacare Tax Decision Unresolved as Statute of Limitations Looms

Published on by Dave Phelps in Tax Services

Obamacare Tax Decision Unresolved as Statute of Limitations Looms

Supreme Court Decision on Obamacare Tax Still Unresolved as Statute of Limitations Looms on 2017 Tax Returns

The Patient Protection and Affordable Care Act, sometimes referred to as Obamacare, has been challenged at the state court level, and in March of 2020, the U.S. Supreme Court decided it would take on the case. If the Supreme Court were to repeal Obamacare, in part or whole, it is possible that 3.8% tax on Net Investment Income and the 0.9% Additional Medicare tax under Obamacare would also be repealed.

In November of 2020, the Supreme Court held oral arguments in the case (California v. Texas Dkt. No. 19-840) and a ruling is expected this spring. While a decision is yet to be made, commentary on the subject seems to lean toward Obamacare being left intact, and it is unlikely that the Net Investment Income and Additional Medicare Tax would be overturned.

However, no ruling has been made, and taxpayers who have paid substantial tax under the Obamacare provisions may want to file a protective claim for a refund before time runs out on their ability to do so. IRS allows taxpayers to file amended returns to claim refunds for up to three years after the return was due or filed, whichever is later. For taxpayers who filed their 2017 federal tax return on or before April 15, 2018, that statute will expire on April 15, 2021.

IRS issued notice 2021-21 on March 29, 2021, giving relief of the April 15th deadline to file claims for a refund until May 17, 2021.  This extension of time not only allows us to see if the Supreme Court will rule before May 17th, but will also allow for a protective claim to be filed for non-extended 2017 tax returns by May 17th.

A protective claim requests a refund if a certain action that would affect the tax refund takes place; the claim must be filed before the statute of limitations expires.

Additional Resources

Barnes Dennig is here to help you with questions on this matter or assistance in filing a protective claim. If you believe you may be affected, please contact your Barnes Dennig team so that we can help you work through all of the details. We’re here to help.


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