Background. If the Supreme Court finds the ACA to be unconstitutional (decision coming most likely in late Spring - think May - 2021), the taxes, fees, penalties and requirements enacted under the ACA will be nullified and many of my clients will be entitled to refunds for:

(1) Medicare tax on investment income (3.8% over $200,000 for single or $250,000 for married filers)
(2) Medicare Part A tax increase (0.9% for income over $200,000 for single or $250,000 for married filers)

If those ACA taxes were paid on a timely filed 2017 Form 1040 in 2018, the statute of limitations for claiming a refund of those taxes will run out on Apr 15, 2021 ... possibly before the Sup Ct decision in May, 2021. Thus a protective claim for 2017 needs to be prepared and filed before Apr 15, 2021 for the 2017 payment of those taxes. NOTE: July 15, 2020 was the extended due date for filing protective claims for 2016, For 2018 and 2019, amended returns will be needed for the intervening years' refunds if the ACA is found to be unconstitutional.

Note, that about 21 tax, penalties, mandates were in the ACA, including:

Tax on suntan parlors

Penalties for non-compliance of employer-provided health ins if over 50 employees

Enhanced penalties on non-qualified HSA distributions

The protective claim can be filed on a 1040X, Form 843 or on a mere letter and must:

- Be in writing
- Include your name, address, SSN or ITIN and other contact information
- Be signed under penalties of perjury
- Identify and describe the contingencies affecting the claim (name the case or cause of delay)
- Clearly alert the IRS to the essential nature of the claim (name the credit or nature of refund)
- Identify the specific year(s) for which a refund is sought
- A specific dollar amount does not have to be claimed
- On the top margin write something like:
“Protective Claim Under ACA Litigation” or
“Protective Claim Pending a Decision in Smith, et. al. vs California”
- Properly addressed and timely mailed to the address and zip code for filing a 1040X for the taxpayer

Once the contingency has lifted, the claim ripens, the IRS must be notified, generally within 90 days and your claim must be monetized and filed. Check out the Rev. Procs. and IRM for details.

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