## Facts

- Steven A. McGuire and Robin L. McGuire obtained 2014 health insurance through California’s ACA exchange and received advance premium tax credits (APTC) of $591 per month ($7,092 total), paid to the insurer.
- They initially projected household income that qualified them for APTC; later in 2014, Mrs. McGuire began earning additional wages, which they reported to the exchange.
- The updated income information made their household income exceed 400% of the federal poverty line, which statutorily eliminates eligibility for any premium tax credit.
- The exchange generated a notice stating they were no longer eligible and warning of possible repayment, but due to the exchange’s administrative error the notice was not delivered.
- APTC payments nevertheless continued throughout 2014.
- On their 2014 federal return, the McGuires did not file Form 8962 to reconcile APTC, did not report APTC, and did not claim a premium tax credit.
- The IRS issued a notice of deficiency increasing their 2014 income tax liability by $7,092 as excess APTC required to be repaid.
- The McGuires conceded their actual income and ineligibility under the statutory income limit but sought equitable relief because the exchange’s error prevented timely notice.

## Issues

1. Whether taxpayers whose actual household income exceeds 400% of the federal poverty line must repay the full amount of APTC received during the year under I.R.C. § 36B(f).
2. Whether the Tax Court has authority to grant equitable relief from statutory repayment of excess APTC based on exchange error and taxpayers’ good-faith conduct.

## Decision

- The court sustained the deficiency and held the McGuires must repay the full $7,092 of APTC as an increase in tax.
- Because their actual household income exceeded 400% of the federal poverty line, their allowable premium tax credit was zero, making all APTC “excess” subject to repayment.
- The court held it lacked general equitable power to excuse or reduce repayment contrary to the express terms of I.R.C. § 36B(f)(2)(A), even where an exchange error contributed to the overpayment.

## Legal Principles

- Eligibility for the premium tax credit under I.R.C. § 36B depends on actual annual household income; if income exceeds 400% of the federal poverty line, the allowable credit is zero.
- Advance payments of the premium tax credit are estimates that must be reconciled on the tax return; any excess APTC over the allowable credit “shall be treated as an increase in the tax” under I.R.C. § 36B(f)(2)(A).
- Statutory repayment caps apply only where Congress provided them; no repayment limitation applies once household income exceeds 400% of the federal poverty line.
- Exchange determinations and communications do not control the final federal tax outcome; the allowable credit and required repayment are determined on the return and enforced under the Internal Revenue Code.
- The Tax Court is a court of limited jurisdiction and cannot grant equitable relief that would override an unambiguous statutory recapture requirement.

## Conclusion

The Tax Court held that taxpayers whose actual income exceeds the statutory 400% federal-poverty-line ceiling must repay all advance premium tax credits received, and that administrative mistakes by an ACA exchange and taxpayers’ good faith do not authorize the court to waive the mandatory § 36B reconciliation and recapture rule.


McGuire v. Commissioner, 149 T.C. 254 (2017)