The Affordable Care Act (ACA), or Obamacare, has seen trouble since the beginning. When the Act was set in motion, the Obama administration refused to acknowledge the bill as a tax, even though many of its provisions were taxes. Only later was the Act essentially stamped as a valid exercise of the taxing power by the Supreme Court. Next, states were given the option to opt out of Medicaid provisions. Most recently, corporations may make religious objections and potentially opt out from contraceptive, and now potentially other mandates, as well.
Now, the ACA has been put under some serious tension. The D.C. Circuit of Appeals ruled that, as the ACA is written, only state-run insurance markets can offer tax insurance subsidies, leaving lower income individuals in the 36 states that rely on federally established market places high and dry. Only a few hours later, the Fourth Circuit court ruled the IRS rule allowing people to draw on the subsidies in both kinds of exchanges was a reasonable interpretation of the ambiguous language of the ACA.
This tension will likely not be resolved before next tax season. The ACA has already been a potential boon for tax lawyers, and this new split and conflict will likely lead to even more work for these practitioners.
How Has the ACA Been Beneficial to Tax Lawyers?
The ACA triggered health care providers, insurance companies, and even businesses concerned over tax penalties and implications to hire lawyers and firms specializing in tax. Moreover, some provisions have been postponed with respect to certain employers, and as well those that raise equity concerns, such as the “Cadillac Tax,” which is levied against providers whose plans exceed a certain threshold amount. This list of provisional nuances abounds, and each new ambiguity is an instance where the advice and counsel of a tax lawyer has been, and would be, extremely beneficial.
Over the last few years, the lawyers that may have benefitted the most from the over 2,400 new pages of federal legislation have been those in-house or associated with big firms. However, the recent changes may see small and solo practitioners experienced an influx of business as well.
How Will This New Tension Create Work for More Tax Lawyers?
This new tension creates an interesting dilemma; pay the ACA premiums without subsidies, that were initially promised and actually provided for by the law but are now potentially null with respect to 36 states, or face the tax penalty, which slowly increases over the years at a sliding scale. While tax preparation software and companies are a dime a dozen these days, none of them could reasonably be expected to contest a fee for opting out of coverage, and certainly could not be expected to write a demand letter, let alone get litigious over the matter.
Small and solo practitioners who are experienced with tax law may soon see an opportunity to represent middle America while this tension gets worked out, and potentially find further opportunities in the event it does not.
After all, even with the subsidies provision of the ACA being shot down (or even upheld), the bill isn’t going anywhere. This means businesses and individuals alike will need to start factoring requirements into their tax planning, and potentially brace for more changes to the law. Who better to handle those issues for individuals and small businesses than the lawyer who helped manage their initial dispute with the IRS when subsidy issues were being settled?