Urgent: You May Want To File A Protective Claim For Refund For 2016 By July 15, 2020


The United States Supreme Court has agreed to hear California v. Texas (known as Texas v. U.S. in previous litigation) Docket No. 19-840, in which several states are arguing that the individual mandate in the Affordable Care Act (“ACA”) (as revised by Congress in late 2017) is unconstitutional. The Supreme Court is scheduled to hear the case this fall and is expected to render a decision in the first half of 2021.

Recently, a question has arisen whether, if the ACA is found to be unconstitutional in its entirety, the 3.8% Net Investment Income Tax (“NIIT”) and the 0.9% Additional Medicare Tax, could be impacted. The NIIT is imposed on individuals with adjusted gross income over $200,000 for single taxpayers and $250,000 for taxpayers filing as married filing jointly. The NIIT threshold for estates and trusts is much lower. The Additional Medicare Tax is imposed on earned income in excess of $200,000 for single taxpayers and $250,000 for taxpayers filing as married filing jointly.

We understand that most national CPA firms believe it unlikely that the Supreme Court will declare the tax unconstitutional for tax years prior to 2019 in any case, if at all. We have read similar analyses and conclusions by law firms. We concur.

Nevertheless, individuals, trusts and estates who paid a substantial amount of NIIT in 2016 and individuals who paid a substantial amount of Additional Medicare Tax may consider filing a protective claim for refund for 2016, the earliest year for which the statute of limitations is still open in normal situations.

Consequently, if a subject taxpayer filed their 2016 calendar year income tax return on or before April 15, 2017, the taxpayer has until July 15, 2020 (the substitute original due date for 2019 income tax returns) to file a protective claim for refund. Among other applications, a protective refund claim allows a taxpayer to preserve a claim in the event a tax is found to be unconstitutional after the statute of limitations has expired. If the subject taxpayer filed their tax return after July 15, 2017, they will have until three years from the date their 2016 tax return was filed to file a protective claim. What if a 2016 tax return was filed between April 15, 2017 and July 15, 2017? It is not certain if the protective claim must be claimed within three years of filing or by July 15, 2020.

Should you file a protective claim? First, review your 2016 income tax return to determine the amount of these two surtaxes that you paid. The Additional Medicare Tax is reported on Form 8959, line 18. The NIIT is reported on Form 8960, line 17 (individuals) and line 21 (estates and trusts).

Then, consider a cost/benefit analysis. We provide you forms with this communication that you may file yourself by July 15, 2020 to make a protective claim. If the surtaxes are retroactively repealed for 2016, then you will have to perfect the claim and, most likely, have multiple communications with the IRS. We have no doubt that such dealings will be drawn out over a long period of time, considering the current state of the IRS in this COVID-19 pandemic and the massive project for the IRS that would ensue from a Supreme Court’s ruling of retroactive repeal for 2016. We can assist you with perfecting the claim, if that should be necessary.

We believe it unlikely that the Supreme Court will declare these surtaxes unconstitutional for tax years prior to 2019, if it does indeed determine the ACA unconstitutional. However, there are no guarantees in life or litigation. We provide to you for your use a sample claim that you can use, if you wish to file a protective claim. We also provide charts for where you should file the protective claims. If you do file by July 15, 2020, be sure to retain your proof of mailing, such as a certified mailing receipt or other approved proof of mailing.

Download Protective Claim for Refund – Individual Form

Find IRS Addresses for Individuals here.


Protective Claim for Refund – Trusts and Estates Form

Find IRS Addresses for Trusts and Estates here.


Please contact your HM&M tax advisor with any questions.

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