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Coronavirus Help Center – tools to help you navigate today's challenges and opportunities.

Supreme Court Upholds Tax Credits in King v. Burwell

Health Care

The Supreme Court's decision in King v. Burwell upheld that all eligible taxpayers can receive premium tax credits for health insurance premiums, even those purchased through federally established marketplaces.

The basics of the case

The Court began hearing arguments in King v. Burwell in early March. The plaintiffs in the case argued that individuals in states with only federally established marketplaces were not eligible for premium tax credits under the Affordable Care Act (ACA). This is because a section of the law describing how the credit amounts are determined said these credits applied to exchanges "established by the State."

The government argued that when the law is read as a whole, it's clear the tax credits are intended for any "applicable taxpayer."

On June 25, 2015, the Court agreed with the government. Although the Court's opinion said that the wording was "ambiguous," six Justices decided that "Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter."

Because 37 states elected not to set up their own health insurance marketplaces, the stakes in the case were huge. Had the Court sided with the plaintiffs, millions of people would have lost their premium tax credits, thereby losing access to affordable health insurance.

What this means for small business

With this decision, the Supreme Court has upheld  much of the key aspects of the ACA. For small businesses, this means the employer shared responsibility (ESR) provisions are still in effect in all states.

If you are an applicable large employer (ALE), which in general means you have 50 or more full-time employees, including full-time equivalent employees in the previous tax year, you must file the appropriate information with the Internal Revenue Service (IRS) for the 2015 tax year, using the new Forms 1094-C and 1095-C.

You will need to report information on full-time employees, offers of health coverage, and details of the cost and adequacy of that coverage. In 2015, ALEs must provide affordable, minimum essential coverage that meets minimum value requirements to full-time employees and their dependents or face penalties.

ALEs with more than 50 but less than 100 full-time employees, including full-time equivalent employees may qualify for transitional relief from penalties in 2015 if certain conditions are met, but still need to certify that they met the conditions for the relief, as well as file the new forms.

Paychex offers Employer Shared Responsibility Services to help you track your ALE status and pull together the information you'll need at tax time. Call us at 844-802-2248 for more information.


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