Supreme Court decision on Affordable Care Act cuts possibility of tax refunds

The U.S. Supreme Court recently determined that the plaintiffs in California v. Texas lacked standing necessary to challenge the constitutionality of certain provisions of the Affordable Care Act (ACA). The Court’s decision means that all provisions of the ACA remain constitutional. Taxpayers that filed protective claims on the possibility that all or part of the ACA would be deemed unconstitutional should not expect tax refunds from such claims. 

Background

When the ACA was signed into law in 2010, one provision required many taxpayers to obtain a certain minimum health coverage, or otherwise face a monetary penalty (the “individual mandate”). In 2017, the Tax Cuts and Jobs Act (TCJA) effectively removed that penalty. Over a dozen states, as well as two individuals, sued federal officials, stating that requiring individuals to obtain a minimum health coverage without imposing a monetary penalty was unconstitutional. In March 2020, the Supreme Court agreed to hear the case. 

On June 17, 2021, the Supreme Court decided that the plaintiffs lacked standing and therefore would not rule on the constitutionality of the ACA nor on the individual mandate therein. Generally, standing is a legal requirement for parties to a lawsuit. It might generally be thought of as a party’s “legal interest” in the case for which the suit is brought. The Court’s decision means that the ACA and provisions therein remain constitutional. 

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