Saturday, December 15, 2018


U.S. District Judge Reed O’Connor ruled last night that the Affordable Care Act is unconstitutional - because of a recent change in federal tax law. 

According to O’Connor the reduction of the Individual Mandate tax penalty to 0 in the GOP Tax Act effectively guts the ACA because the U.S. Supreme Court upheld Obamacare in 2015 based on the conclusion that the mandate would be an unconstitutional exercise of federal power without the tax penalty.

The decision states -

"The Individual Mandate can no longer be fairly read as an exercise of Congress's Tax Power and is still impermissible under the Interstate Commerce Clause—meaning the Individual Mandate is unconstitutional."

As the individual mandate was an "essential" element of the ACA, the whole of Obamacare was therefore unconstitutional,

What does this mean for the 2018 tax return?  As the White House officially explained (highlight is mine), after a tweet by Trump expressing his glee at the decision, “We expect this ruling will be appealed to the Supreme Court.  Pending the appeal process, the law remains in place.”  

The Supreme Court had upheld the ACA as constitutional in 2012 and 2015, but, as the Judge explained, this decision is based on the finding in the 2015 decision.

The GOP Tax Act reduced the Individual Mandate penalty to 0 effective with tax year 2019.  The existing penalty for not having “adequate” health coverage for the full year, and not exempt from the penalty under any of the identified exceptions, was still in place for 2018.

So, until the Supreme Court has provided the final word on this decision, as the White House statement says “the law remains in place”. 

Whether it is appropriate to “remain silent” on health insurance coverage on the 2018 Form 1040 - not checking the box on the top of the “postcard” 1040, not calculating an Individual Mandate penalty on Line 61 of Schedule 4, and not including Form 8965 with the return – will depend on the IRS and Treasury Department reaction to this decision.

The two Obamacare surtaxes - the additional Medicare tax and the 3.8% Net Investment Income Tax (NIIT) - are also affected by this decision.  Another potential question for the 2018 return - can these taxes be calculated on the appropriate IRS forms but not entered on Line 62 of Schedule 4 and Line 14 of the "postcard" 2018 Form 1040?  Again, we must wait for IRS and/or Treasury Department guidance.  

The ruling came on the eve of today’s deadline for Americans to sign up for coverage in 2019 via the Obamacare marketplace (  Despite the ruling, Americans can still sign up for health coverage through the marketplace up until 11:59 PM today (Saturday, December 15th).  

Personally, while I strongly support the Premium Tax Credit component of Obamacare, and the requirement for health insurance to cover pre-existing conditions, I oppose the Individual Mandate and corresponding penalty and some other items in the Act.  The ACA, like the recent GOP Tax Act, was written hastily to get an early legislative victory for the President (then Obama).  Also like the GOP Tax Act, no member of Congress who voted on the ACA, either for or against, actually read it – they just did what they were told to do by their Party’s leaders.

I will report on more developments related to the Form 1040 as they happen.


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