U.S. v. Fazio Alicea, CA-4 (Jan. 19, 2023)
This post is part of our series on recent important tax cases that may be of interest to accounting, tax, and finance professionals. For more like this, see our Federal Tax Update and California Federal Tax Update, which offer a comprehensive analysis of the year’s most pivotal tax developments.
Shared Responsibility Payment Is a Priority Status Tax in Bankruptcy (U.S. v. Fazio Alicea, CA-4 (Jan. 19, 2023))
For clients who declared bankruptcy while owing an individual mandate penalty, the Fourth Circuit reversed a district court decision and held that the shared responsibility payment under the ACA is a tax rather than a penalty, and it is entitled to priority status under the Bankruptcy Code.
Also see.
US v. Russell Brown, CA-9 (Feb. 27, 2023), where the Court ruled that the shared responsibility payment was a tax (not a penalty) and therefore entitled to priority status in the Bankruptcy Code.
Don’t forget state requirements. California, DC, New Jersey, Rhode Island, and Vermont have enacted their own individual mandate. These jurisdictions use Form 1095-C to administer their individual mandate requirements. Massachusetts enacted its own individual mandate and uses Form 1099-HC for reporting. The California, Massachusetts, and Rhode Island furnishment requirement for 2024 forms has not been extended and remains Jan. 31, 2025.