Congress Should Pass Legislation to Recover Improper Obamacare Tax Credits

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Posted by Alexander Hendrie on Monday, March 14th, 2016, 1:30 AM PERMALINK

Later this week, the House Ways and Means Committee is expected to consider H.R. 4723, legislation introduced by Congresswoman Lynn Jenkins (R-Kan.) to recover erroneously-claimed Obamacare tax credits.

Under Obamacare, individuals who purchase insurance from an exchange are generally eligible for a tax credit which is both refundable (meaning that it can be used even if income tax liability is zero), and advance-able (meaning that it is given at the beginning of a tax year, prior to the ultimate income level of the taxpayer for that year being known).

Because the ultimate earnings of a taxpayer cannot be known at the beginning of the year, the IRS must use a prior tax return’s income level to determine probable eligibility for the credit, and at what size.

This legislation requires all individuals who improperly receive Obamacare exchange subsidies to repay the full amount of overpayments, saving taxpayers $8.7 billion over two years.

H.R. 4723 is entirely consistent with the Taxpayer Protection Pledge and ATR encourages all Members of Congress to support, co-sponsor, and vote for this important bill.

While this may be scored by the Joint Tax Committee as an increase in revenues, it is assuredly not a tax increase. This money was advanced to the taxpayer in error, based on outdated tax return information about the taxpayer. No one is at fault, but it is hardly a tax increase for taxpayers to benefit only from those tax provisions that the law allows them.

As such, efforts to recapture advanced tax credits when the 1040 is ultimately filed is in full compliance with the Taxpayer Protection Pledge. ATR urges full support for Congresswoman Jenkins’ legislation.

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