[Federal Register Volume 77, Number 100 (Wednesday, May 23, 2012)]
[Rules and Regulations]
[Pages 30377-30400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-12421]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 9590]
RIN 1545-BJ82
Health Insurance Premium Tax Credit
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations relating to the
health insurance premium tax credit enacted by the Patient Protection
and Affordable Care Act and the Health Care and Education
Reconciliation Act of 2010, as amended by the Medicare and Medicaid
Extenders Act of 2010, the Comprehensive 1099 Taxpayer Protection and
Repayment of Exchange Subsidy Overpayments Act of 2011, the Department
of Defense and Full-Year Continuing Appropriations Act, 2011, and the
3% Withholding Repeal and Job Creation Act. These final regulations
provide guidance to individuals who enroll in qualified health plans
through Affordable Insurance Exchanges (Exchanges) and claim the
premium tax credit, and to Exchanges that make qualified health plans
available to individuals and employers.
DATES: Effective Date: These regulations are effective on May 23, 2012.
Comment date: Comments will be accepted until August 21, 2012.
Applicability Date: For date of applicability, see Sec. 1.36B-
1(o).
ADDRESSES: Comments should be submitted to Internal Revenue Service,
CC:PA:LPD:PR (REG-131491-10), Room 5203, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044, or electronically to www.regulations.gov
(IRS REG-131491-10). Alternatively, comments may be hand delivered
between the hours of 8 a.m. and 4 p.m. Monday to Friday to CC:PA:LPD:PR
(REG-131491-10), Courier's Desk, Internal Revenue Service, 1111
Constitution Avenue NW., Washington, DC. All comments will be available
for public inspection and copying.
FOR FURTHER INFORMATION CONTACT: Shareen S. Pflanz, (202) 622-4920, or
Andrew S. Braden, (202) 622-4960 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these regulations has
been reviewed and approved by the Office of Management and Budget in
accordance with the Paperwork and Reduction Act (44 U.S.C. 3507(d))
under control number 1545-2232.
The collection of information in these final regulations is in
Sec. 1.36B-5. The information will help the IRS properly reconcile the
amount of the premium tax credit with advance credit payments made
under section 1412 of the Patient Protection and Affordable Care Act
(42 U.S.C. 18082). The collection of information is required to comply
with the provisions of section 36B(f)(3) of the Internal Revenue Code
(Code). An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless the
collection of information displays a valid control number assigned by
the Office of Management and Budget.
The estimated total annual reporting burden is 250,000 hours. The
estimated annual burden per respondent is 5,000 hours. The estimated
number of respondents is 50.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC 20224, and to the Office of
Management and Budget, Attn: Desk Officer for the Department of the
Treasury, Office of Information and Regulatory Affairs, Washington, DC
20503.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
return information are confidential, as required by 26 U.S.C. 6103.
Background
This document contains final regulations that amend the Income Tax
Regulations (26 CFR part 1) under section 36B relating to the premium
tax credit. Section 36B was enacted by the Patient Protection and
Affordable Care Act, Public Law 111-148 (124 Stat. 119 (2010)), and the
Health Care and Education Reconciliation Act of 2010, Public Law 111-
152 (124 Stat. 1029 (2010)) (collectively, the Affordable Care Act). On
August 17, 2011, a notice of proposed rulemaking (REG-131491-10) was
published in the Federal Register (76 FR 50931). Written comments
responding to the notice of proposed rulemaking were received. The
comments are available for public inspection at www.regulations.gov or
on request. A public hearing was held on November 17, 2011. After
consideration of all the comments, the proposed regulations are adopted
as amended by this Treasury decision. The comments and revisions are
discussed in the preamble.
Explanation of Provisions and Summary of Comments
1. Premium Tax Credit Definitions
a. Family Size
The proposed regulations define a taxpayer's family as the
individuals for whom a taxpayer claims a deduction for a personal
exemption under section 151 for the taxable year, which may include the
taxpayer, the taxpayer's spouse, and dependents. The proposed
regulations also clarify that the family includes individuals who are
not applicable individuals under section 5000A(d) and thus are not
subject to the penalty for failing to maintain minimum essential
coverage.
Commentators recommended clarifying that the family also includes
individuals who are exempt under section 5000A(e) from the requirement
to maintain minimum essential coverage. Accordingly, the final
regulations clarify that a family may include all individuals not
subject to the section 5000A penalty.
Some commentators disagreed with the rule in the proposed
regulations that a taxpayer's family includes a child only if the
taxpayer is allowed a dependency exemption deduction for the child.
Commentators suggested that taxpayers should be able to compute a
premium tax credit based on premiums for a child for whom the person is
not allowed a dependency exemption deduction. Section 36B(d)(1) defines
the family as the individuals for whom the taxpayer is allowed a
personal exemption deduction under section 151. Accordingly, the final
regulations do not adopt these comments. We note however, that the non-
dependent child may be able to claim a premium tax credit if otherwise
eligible. See Sec. 1.36B-3(h).
b. Requirement To File a Return for Purposes of Household Income
Under section 36B, household income includes the modified adjusted
gross income of a dependent who is required to file a return of tax
imposed by section
[[Page 30378]]
1. The final regulations conform to this statutory language, thus
clarifying that household income does not include the modified adjusted
gross income of a family member who is required to file a tax return
solely to report tax imposed under Code sections other than section 1
(for example, the early distribution penalty imposed under section
72(q) or self-employment tax under section 1401).
c. Modified Adjusted Gross Income
Under the proposed regulations, modified adjusted gross income is
adjusted gross income increased by amounts excluded from gross income
under section 911 and tax-exempt interest a taxpayer receives or
accrues during the taxable year. The 3% Withholding Repeal and Job
Creation Act, Public Law 112-56 (125 Stat. 711 (2011)), which was
enacted after the proposed regulations were published, amended the
definition of modified adjusted gross income to include Social Security
benefits (as defined in section 86(d)) not included in gross income
under section 86. The final regulations reflect this amendment.
d. Lawfully Present
Under section 36B(c)(1)(B) and the proposed regulations, a taxpayer
who is an individual lawfully present in the United States may be
treated as an applicable taxpayer if the taxpayer's household income is
under 100 percent of the Federal poverty line (FPL) and the taxpayer is
not eligible for Medicaid. Under section 1321(f)(3) of the Affordable
Care Act, an individual who is not lawfully present in the United
States may not enroll in a qualified health plan through an Exchange.
The proposed regulations define lawfully present by referencing 45 CFR
152.2, which also is referenced in defining lawfully present in
proposed regulations on Exchanges under 45 CFR 155.20 issued by the
Department of Health and Human Services (HHS).
Commentators requested that the final regulations expand the
definition of lawfully present to include the categories of immigrants
described in the Children's Health Insurance Program Reauthorization
Act. One commentator stated that the final regulations should allow
States to use existing administrative mechanisms to determine
eligibility if those mechanisms are not more restrictive than Federal
law.
To maintain consistency with the HHS Exchange final regulations,
the final regulations define lawfully present by referencing 45 CFR
155.20, the definition in the HHS Exchange final regulations.
e. Federal Poverty Line
The proposed regulations define federal poverty line by reference
to the Federal poverty guidelines published annually by HHS. The
Federal poverty guidelines for Alaska and Hawaii differ from the
guidelines for the 48 contiguous states and the District of Columbia.
The final regulations clarify that, if married taxpayers reside in
separate States with different Federal poverty guidelines, or if a
taxpayer resides in States with different Federal poverty guidelines
during the year, the Federal poverty line that applies for purposes of
section 36B and the associated regulations is the higher Federal
poverty line (resulting in a lower percentage of the Federal poverty
line for the taxpayers' household income and family size).
f. Federally-Facilitated Exchange
Under the proposed regulations, the term Exchange has the same
meaning as in 45 CFR 155.20, which provides that the term Exchange
refers to a State Exchange, regional Exchange, subsidiary Exchange, and
Federally-facilitated Exchange.
Commentators disagreed on whether the language in section
36B(b)(2)(A) limits the availability of the premium tax credit only to
taxpayers who enroll in qualified health plans on State Exchanges.
The statutory language of section 36B and other provisions of the
Affordable Care Act support the interpretation that credits are
available to taxpayers who obtain coverage through a State Exchange,
regional Exchange, subsidiary Exchange, and the Federally-facilitated
Exchange. Moreover, the relevant legislative history does not
demonstrate that Congress intended to limit the premium tax credit to
State Exchanges. Accordingly, the final regulations maintain the rule
in the proposed regulations because it is consistent with the language,
purpose, and structure of section 36B and the Affordable Care Act as a
whole.
g. Rating Area
The proposed regulations define rating area as an Exchange service
area, as described in 45 CFR 155.20. Commentators suggested that an
Exchange service area is different than a rating area as that term is
used in section 36B(b)(3) for determining the applicable benchmark
plan. The final regulations reserve the definition of rating area.
2. Eligibility for the Premium Tax Credit
a. Applicable Taxpayer
Under section 36B(c)(1) and the proposed regulations, in general a
taxpayer is an applicable taxpayer for a taxable year only if the
taxpayer's household income for the taxable year is at least 100
percent but not more than 400 percent of the FPL for the taxpayer's
family size. Commentators requested that the final regulations treat a
taxpayer whose household income exceeds 400 percent of the FPL for the
taxpayer's family size as an applicable taxpayer if, at enrollment, the
Exchange estimates that the taxpayer's household income will be between
100 and 400 percent of the FPL for the taxpayer's family size and
approves advance credit payments. Other commentators advocated allowing
taxpayers with household income above 400 percent of the FPL for their
family size to be treated as eligible for a premium tax credit for the
months before a change in circumstances affecting household income
occurs or for the months for which the taxpayer receives advance
payments.
The final regulations do not adopt these comments because they are
contrary to the language of section 36B limiting the premium tax credit
to taxpayers with household income for the taxable year at or below 400
percent of the FPL for the taxpayer's family size.
Commentators requested that the final regulations clarify that a
taxpayer who has household income between 100 percent and 133 percent
of the FPL but is not eligible for Medicaid qualifies for the premium
tax credit. Under section 36B(c)(1)(A) and the proposed regulations, an
applicable taxpayer who may claim the premium tax credit is a taxpayer
with household income between 100 and 400 percent of the FPL for the
family size. Thus, it is clear that a taxpayer with household income
between 100 percent and 133 percent of the FPL for the taxpayer's
family size may be an applicable taxpayer.
Commentators requested that the final regulations allow an
individual who may be claimed as a dependent by another taxpayer to
qualify as an applicable taxpayer for a taxable year if, for the
taxable year, another taxpayer does not claim the individual as a
dependent. The final regulations do not adopt this comment because it
is inconsistent with section 36B(c)(1)(D), which provides that a
premium tax credit is not allowed to any individual for whom a
deduction under section 151 is ``allowable to another taxpayer'' for
the taxable year.
[[Page 30379]]
b. Incarceration
Under section 1312(f) of the Affordable Care Act, individuals who
are incarcerated (other than pending disposition of charges) may not
enroll in a qualified health plan through an Exchange. The proposed
regulations provide, however, that an individual who is incarcerated
may be allowed a premium tax credit if a family member is enrolled in a
qualified health plan.
A commentator suggested that the rules relating to incarcerated
individuals should apply to individuals incarcerated pending
disposition of charges, as is the case under the Medicaid program. The
comment addresses an issue beyond the scope of the premium tax credit
regulations. Standards for enrollment in a qualified health plan fall
under rules within the jurisdiction of HHS.
c. Minimum Essential Coverage
i. Government-Sponsored Coverage
A. Time of Eligibility
The proposed regulations provide that an individual generally is
treated as eligible for a government-sponsored program on the first day
of the first full month in which the individual may receive benefits
under the program. The proposed regulations further provide that an
individual who fails to complete the requirements necessary to receive
benefits available under a government-sponsored program (other than a
veteran's health care program) reasonably promptly is treated as
eligible for the coverage on the first day of the second calendar month
following the event that establishes eligibility.
Commentators asked that the final regulations allow individuals a
certain amount of time to complete the requirements (such as submitting
an application) necessary to obtain government-sponsored minimum
essential coverage. Some commentators suggested that the final
regulations could provide this period by defining ``reasonably
promptly'' as 90 days after the event that establishes eligibility.
Commentators requested that the final regulations allow exemptions from
the 90-day period, however, when additional delay in receiving benefits
occurs despite the good faith efforts of the taxpayer, for example as a
result of inaction of a government agency or official.
To provide greater clarity, the final regulations delete the
language ``reasonably promptly'' and extend this time period. Under the
final regulations, an individual who fails to complete the requirements
necessary to receive benefits available under a government-sponsored
program by the last day of the third full calendar month following the
event that establishes eligibility is treated as eligible for the
coverage on the first day of the fourth calendar month. Because an
individual who timely completes the necessary requirements is treated
as eligible for government-sponsored minimum essential coverage no
earlier than the first month that the individual may receive benefits,
this 3-month time period does not include the time needed for a
government agency to process an application.
The proposed regulations request comments on whether rules should
provide flexibility if operational challenges prevent timely transition
from coverage under a qualified health plan to coverage under a
government-sponsored program. Commentators stated that the final
regulations should provide that an individual transitioning from a
qualified health plan to coverage under a government-sponsored program
should not be treated as eligible for government-sponsored minimum
essential coverage until the individual is able to effectively
terminate his or her qualified health plan coverage. They expressed
concern that an individual may be unable to discontinue advance credit
payments by the beginning of a month for which the individual is
eligible for government-sponsored coverage and could be responsible for
an excess advance payment for that month.
The concerns expressed in these comments are addressed in the HHS
final regulations on Exchanges. Under 45 CFR 155.430, an Exchange must
permit an enrollee to terminate coverage in a qualified health plan no
later than 14 days after the enrollee requests termination. For an
enrollee who is newly eligible for Medicaid or the Children's Health
Insurance Program (CHIP), 45 CFR 155.430(d)(2)(iv) provides that
qualified health plan coverage terminates on the last day before
Medicaid or CHIP coverage begins. These termination rules enable
individuals transitioning to coverage under a government-sponsored
program to effectively terminate qualified health plan coverage (and
liability for advance credit payments) before they are eligible for
government-sponsored minimum essential coverage.
B. Definition of ``Eligible''
The proposed regulations provide that an individual is eligible for
government-sponsored minimum essential coverage when an individual
meets the requirements for coverage under the program. For
administrative convenience, however, because the standards for
eligibility in veterans' programs do not allow Exchanges to identify
everyone who may be eligible for veterans' coverage at the time he or
she is seeking an eligibility determination for advance payments of the
premium tax credit, the proposed regulations provide that an individual
is eligible for minimum essential coverage under the veteran's health
care program authorized under chapter 17 or 18 of Title 38, U.S.C. only
if the individual is enrolled in a veteran's health care program
identified as minimum essential coverage in regulations issued under
section 5000A.
The final regulations conform the rules to amendments to section
5000A that delete the word ``veteran's'' in describing health care
programs under chapter 17 or 18 of Title 38. Thus, the special rule for
veterans' coverage may apply to individuals who are not veterans but
are eligible for the Civilian Health and Medical Program of the
Department of Veterans Affairs (VA) or the VA's spina bifida program.
Commentators requested that the final regulations define
eligibility for government-sponsored programs as actual enrollment for
individuals suffering from end stage renal disease who become eligible
for Medicare as a result of their diagnosis. Other commentators
requested this treatment for any individual suffering from an acute
illness who becomes eligible for a government-sponsored program. The
commentators asserted that these seriously-ill individuals should be
able to choose to remain enrolled in a qualified health plan with the
benefit of a premium tax credit to maintain continuity of medical care,
which may be disrupted if the individual loses eligibility for the
premium tax credit and is required to move to a government-sponsored
program in which the individual's medical provider does not
participate.
Section 36B(c)(2)(B) establishes a clear structure under which
eligibility for government-sponsored minimum essential coverage in a
given month precludes including an individual in a taxpayer's coverage
family for purposes of computing the premium assistance amount for that
month. In keeping with the statutory scheme, the final regulations do
not adopt these comments. However, the IRS and the Treasury Department
expect to publish additional guidance, see Sec. 601.601(d)(2),
clarifying when or if an individual becomes ``eligible for government-
sponsored minimum essential coverage'' when the eligibility for that
coverage is a result of a particular illness or
[[Page 30380]]
condition. For example, as the preamble to the proposed regulations
notes, the additional guidance would clarify the rules in the case of
eligibility for Medicaid on the basis of blindness or disability.
C. Eligibility for Limited Benefits
Commentators requested that the final regulations address whether
eligibility for benefits with a limited scope under government programs
(for example, eligibility only for family planning services under
Medicaid) constitutes eligibility for minimum essential coverage. The
final regulations do not address these comments because minimum
essential coverage is defined in section 5000A(f). It is anticipated
that regulations under section 5000A will provide that government-
sponsored health benefit programs that offer only very limited benefits
are not minimum essential coverage.
D. Medicare Eligibility
A commentator noted that the dates in some of the examples in the
proposed regulations concerning eligibility for Medicare inaccurately
describe when an individual's Medicare coverage begins. The commentator
also asked that the final regulations create a safe harbor for
taxpayers whose Medicare coverage is delayed because they enroll during
the later months of their Medicare initial enrollment period.
The final regulations revise the examples in response to this
comment. The final regulations do not include the suggested Medicare
safe harbor because the commentator's concerns are addressed by the
general rule that an individual is eligible for minimum essential
coverage on the first day of the first full month the individual may
receive benefits. Additionally, as discussed earlier in this preamble,
the final regulations revise the rule that an individual who fails to
complete the requirements to obtain coverage is treated as eligible on
the first day of the fourth month after the event establishing
eligibility. Thus, individuals enrolling during the later months of
their initial Medicare enrollment period will not be deemed eligible
for Medicare before the expiration of the enrollment period.
E. Indian Health Service
Commentators requested that the final regulations provide that
individuals eligible to receive health care from the Indian Health
Service (IHS) are not eligible for government-sponsored minimum
essential coverage. Section 5000A(f) defines minimum essential
coverage. It does not designate the IHS as providing minimum essential
coverage. Section 5000A(f)(1)(E) authorizes HHS to designate other
coverage as minimum essential coverage. HHS has advised the IRS and the
Treasury Department that it does not intend to designate access to the
IHS as minimum essential coverage. Thus, individuals who are eligible
to receive health care from the IHS will not be barred by IHS access
alone from eligibility for the premium tax credit or from access to the
special cost-sharing reduction for tribal members under section 1402(d)
of the Affordable Care Act.
ii. Employer-Sponsored Coverage
A. Affordability
The proposed regulations provide that an eligible employer-
sponsored plan is affordable for an employee and related individuals if
the portion of the annual premium the employee must pay for self-only
coverage does not exceed the required contribution percentage (9.5
percent for taxable years beginning before January 1, 2015) of the
taxpayer's household income. Commentators suggested that the
affordability of coverage for related individuals should be based on
the portion of the annual premium the employee must pay for family
coverage.
Under section 36B(c)(2)(C), an individual who may enroll in an
eligible employer-sponsored plan may nonetheless be eligible for a
premium tax credit if the employer-sponsored coverage either is
unaffordable or fails to provide minimum value. Future regulations
concerning employer-sponsored coverage will provide final rules on
determining affordability for related individuals and proposed rules on
determining minimum value.
Some commentators asked that the final rules clarify how employer
contributions to health savings accounts (HSAs), and amounts made
available under health reimbursement arrangements (HRAs) are treated in
determining affordability. Employer contributions to an HSA would not
affect the affordability of employer-sponsored coverage because HSA
contributions may not be used to pay for premiums for health insurance
coverage (except in limited circumstances not applicable in the context
of employer-sponsored coverage). Amounts available under an HRA that
may be used only to reimburse medical expenses other than the
employee's required share of the cost of employer-sponsored coverage
also would not affect the affordability of employer-sponsored coverage.
These final regulations do not address how other HRAs are treated for
purposes of determining the affordability of an employer-sponsored
plan, which may be addressed further in additional published guidance,
see Sec. 601.601(d)(2).
Some commentators also asked for clarification on how wellness
incentive programs affect the premium affordability determination. The
final regulations authorize the Commissioner to publish additional
guidance, see Sec. 601.601(d)(2), to address the effect on
affordability of wellness incentives that increase or decrease an
employee's share of premiums. Comments are requested on types of
wellness incentives, how these programs affect the affordability of
eligible employer-sponsored coverage for employees and related
individuals, and how incentives are earned and applied. The
administrability of any rule on wellness incentives must consider the
extent to which employees can be certain they will qualify for the
incentives at the time they otherwise would be evaluated for
eligibility for advance credit payments.
B. Affordability Safe Harbor
Under the proposed regulations, an employer-sponsored plan is not
affordable for an employee or family member for a plan year if, when
the employee or family member enrolls in a qualified health plan, an
Exchange determines that the eligible employer-sponsored plan is not
affordable. Individuals applying for advance credit payments are
required to provide the Exchange with information on whether employer-
sponsored coverage is available to them. Because an Exchange will make
an affordability determination only when an individual represents that
employer-sponsored coverage is available, the affordability safe harbor
will not be available to a taxpayer who misrepresents to an Exchange
the availability of employer-sponsored coverage. The final regulations
provide that the affordability safe harbor does not apply if a
taxpayer, with reckless disregard for the facts, provides incorrect
information to an Exchange concerning an employee's portion of the
annual premium for employer coverage. The final regulations clarify
that the affordability safe harbor applies only until such time as the
availability of employer-sponsored coverage changes. If new or
different employer-sponsored coverage becomes available after an
individual enrolls in a qualified health plan, the individual must
notify the Exchange and get a new affordability determination to extend
the safe harbor. As the preamble to the proposed regulation notes,
regulations under
[[Page 30381]]
section 4980H are expected to provide that an employer is not subject
to a penalty merely because an employee receives a premium tax credit
under this affordability safe harbor if the employer offers to its
full-time employees affordable coverage that provides minimum value.
Under 45 CFR 155.335, Exchanges generally will conduct an annual
redetermination process that will allow individuals who enroll in a
qualified health plan to maintain their eligibility and enrollment for
subsequent years with limited burden. This process involves notifying
the individual of the information the Exchange intends to use to make a
new determination of eligibility for advance credit payments and
soliciting the individual to report changes. The final regulations
clarify that the affordability safe harbor does not carry over to later
plan years automatically as part of the redetermination process. The
affordability safe harbor applies only to a plan year for which a
taxpayer responds to the notification and affirmatively provides
information relating to the affordability in the upcoming year of
available employer-sponsored coverage, allowing an Exchange to
determine that employer-sponsored coverage available to the taxpayer
for that plan year is unaffordable.
C. Eligibility During a Waiting Period
Under section 2708 of the Public Health Service Act, employers are
permitted to apply a waiting period of up to 90 days beginning when the
employee is otherwise eligible for coverage under a group health plan.
See Notice 2012-17 (2012-9 IRB 430). The final regulations clarify that
an employee or related individual is treated as not eligible for
coverage under the employer's plan during a waiting period.
D. Minimum Value
The proposed regulations provide that an eligible employer-
sponsored plan provides minimum value only if the plan's share of the
total allowed costs of benefits provided under the plan is at least 60
percent. Commentators provided various recommendations for determining
minimum value. Some commentators requested transition relief. Notice
2012-31 (2012-20 IRB 906) solicits additional comments on potential
approaches for determining minimum value. All comments will be
considered in separate guidance on determining minimum value.
E. Individuals Enrolled in Coverage
Section 36B(c)(2)(C)(iii) and the proposed regulations provide that
an individual who enrolls in an eligible employer-sponsored plan is not
eligible for the premium tax credit even if the plan is unaffordable or
fails to offer minimum value. Commentators asked whether an individual
who enrolls in an eligible employer-sponsored plan and then terminates
coverage during the plan year is treated as eligible for minimum
essential coverage under the plan for the entire plan year under this
rule, even though the coverage is unaffordable or does not provide
minimum value. Commentators similarly asked if individuals who enroll
in continuation coverage and then disenroll from it later during the
year are treated as eligible for minimum essential coverage for the
entire year. In response to these comments, the final regulations
clarify that an individual is treated as eligible for minimum essential
coverage under an eligible employer-sponsored plan by reason of
enrolling in the plan or in continuation coverage only for months the
individual is enrolled in the coverage.
Commentators expressed concern that an employee may be enrolled
automatically in employer-sponsored coverage and would be treated as
eligible for minimum essential coverage under an employer-sponsored
plan by reason of the automatic enrollment even though the plan is not
affordable or does not provide minimum value. The commentators were
specifically concerned about the automatic enrollment provision in
section 18A of the Fair Labor Standards Act (added by section 1511 of
the Affordable Care Act), which is applicable to employers with more
than 200 full-time employees. (The Department of Labor, which has
jurisdiction over the automatic enrollment provisions under section 18A
of the Fair Labor Standards Act, does not intend to require employers
to comply with the automatic enrollment provisions until after it
publishes regulations and those regulations become applicable, and has
indicated that the regulations will not take effect by 2014. See Notice
2012-17, Q&A-1.)
Commentators also raised concerns about the automatic enrollment of
an employee in an employer-sponsored plan for other reasons, which
could include automatic enrollment that a plan might provide for
without regard to the automatic enrollment requirements of the
Affordable Care Act, automatic enrollment that might occur because of
administrative error, or automatic re-enrollment in the plan in a
subsequent year. The commentators recommended allowing an employee to
opt out of the employer-sponsored coverage following automatic
enrollment.
In response to these comments, the final regulations provide that
an employee or related individual is treated as not enrolled in an
eligible employer-sponsored plan for a month in a plan year or other
period if (1) the employee or related individual is automatically
enrolled in the plan for that plan year or other period, and (2)
terminates the coverage before the later of the first day of the second
full calendar month of the plan year or other period or the last day of
any permissible opt-out period provided by the employer-sponsored plan
or in regulations to be issued by the Department of Labor. Thus, an
individual who is automatically enrolled for a plan year or other
period in coverage that is unaffordable or that does not provide
minimum value and who terminates that coverage by the date specified in
the preceding sentence will not be treated as eligible for minimum
essential coverage under the employer-sponsored plan for the months in
which the individual was automatically enrolled in the plan that are
within that plan year or period. Accordingly, the individual will not
be precluded by the automatic enrollment from inclusion in the
taxpayer's coverage family for computing the amount of the premium tax
credit for those months.
iii. Nondependent Eligibility for Minimum Essential Coverage
Commentators asked whether individuals who may enroll in an
eligible employer-sponsored plan based on their relationship to an
employee but who are not tax dependents (for example, a 25-year old
child or a domestic partner of the employee) are treated as eligible
for minimum essential coverage under the plan. In response to these
comments, the final regulations provide that an individual who may
enroll in minimum essential coverage because of a relationship to
another person eligible for the coverage, but for whom the other
eligible person does not claim a personal exemption deduction under
section 151, is treated as eligible for minimum essential coverage
under the coverage only for months that the related individual is
enrolled in the coverage. This change reflects the fact that the
related individual is a member of a different family with different
household income for purposes of the premium tax credit. Furthermore, a
person who may not claim a related individual as a
[[Page 30382]]
dependent is not responsible for the section 5000A penalty for the
related individual who does not receive coverage. Thus, the final
regulations ensure that coverage available through another person does
not create an obstacle to a related individual claiming a premium tax
credit.
3. Computing the Premium Tax Credit
a. Definition of Coverage Month
Section 36B(c)(2)(A)(ii) and the proposed regulations provide that
a month is a coverage month for an individual only if the individual is
enrolled in a qualified health plan and is not eligible for other
minimum essential coverage on the first day of the month, and the
premiums are paid by the taxpayer or through advance credit payments.
Consistent with the proposed regulations, the final regulations
provide that an individual must be enrolled in a qualified health plan
as of the first day of the month for a month to be a coverage month.
However, instead of testing whether the individual is eligible for
other minimum essential coverage as of the first day of the month, the
final regulations provide that an individual may have a coverage month
as long as there is at least one day of the month when the individual
is not eligible for other minimum essential coverage. The final
regulations also clarify that a month is not a coverage month for a
taxpayer if the taxpayer's share of premiums is not paid in full by the
unextended due date for filing the taxpayer's income tax return for the
taxable year.
b. Third-Party Payments
Under the proposed regulations, premiums another person pays for
coverage of the taxpayer or a member of the taxpayer's family for a
month are treated as paid by the taxpayer solely for purposes of the
month qualifying as a coverage month. Commentators asked for
confirmation that an Indian tribe may pay premiums on behalf of a
tribal member. The final regulations add an example illustrating that
premiums paid for a taxpayer by an Indian tribe are treated as paid by
the taxpayer under the coverage month rule.
c. Adjusted Monthly Premium
Under section 36B(b)(3)(C), the adjusted monthly premium is the
premium an issuer would charge to cover all members of a taxpayer's
coverage family, adjusted only for age. A commentator noted that the
definition of adjusted monthly premium in the proposed regulations does
not include the statutory qualification that, in the case of a State
participating in the wellness discount demonstration project under
section 2705(d) of the Public Health Service Act, the adjusted monthly
premium is determined without regard to any premium discount or rebate
under the project. The final regulations revise the definition of
adjusted monthly premium in accordance with this comment and clarify
that the premium may not be adjusted for tobacco use, see section
36B(b)(3)(C).
d. Applicable Benchmark Plan
i. In General
Under section 36B(b)(3)(B), a taxpayer's premium tax credit is
computed based on the premium for the applicable second lowest cost
silver plan in the rating area where the taxpayer resides and offered
by the Exchange where the taxpayer enrolls in a qualified health plan.
For simplicity, the proposed regulations refer to this plan as the
applicable benchmark plan.
Section 36B(b)(3)(B)(ii) describes the ``applicable'' benchmark
plan as providing self-only or family coverage. The proposed
regulations define family coverage as insurance that covers more than
one individual. The proposed regulations further provide that a
taxpayer's ``applicable'' benchmark plan is the benchmark plan that
``applies'' to the members of the taxpayer's coverage family. The
proposed regulations define the coverage family, in general, as the
members of the taxpayer's family (the individuals for whom the taxpayer
properly claims a personal exemption deduction under section 151) who
are not eligible for other minimum essential coverage. The final
regulations clarify that the coverage family includes only those
individuals in the taxpayer's family who are not eligible for other
minimum essential coverage and enroll in a qualified health plan.
For purposes of determining the benchmark plan that ``applies'' to
a coverage family, the proposed regulations provide that if an Exchange
offers categories of family coverage (such as coverage for two adults
or coverage for one adult plus children), the applicable benchmark plan
for family coverage is the coverage category that applies to the
members of the taxpayer's coverage family who enroll in a qualified
health plan. The final regulations delete the reference to coverage
categories. The final Exchange rules promulgated by HHS removed
references to rating categories, which are a parallel concept to
coverage categories. The final regulations provide that the applicable
benchmark plan for family coverage is the plan that applies to the
members of the taxpayer's coverage family.
Commentators requested clarification on how the applicable
benchmark plan would be determined for a qualified health plan that
covers children only. The final regulations provide an example in
response to this comment.
ii. Families Not Covered by One Applicable Benchmark Plan
The proposed regulations provide that the premium for the
applicable benchmark plan is the sum of the premiums for the applicable
benchmark plans that cover components of the taxpayer's coverage family
if a single benchmark plan would not cover the family, for example
because members live in different rating areas. The final regulations
provide that, if there is at least one silver level plan offered on an
Exchange that does not cover all members of a taxpayer's coverage
family under one policy and premium, for example because of
nontraditional relationships within the family, the premium for the
applicable benchmark plan is the single premium or the combination of
premiums that is the second lowest cost silver option for covering the
entire family. The final regulations reserve rules for determining the
applicable benchmark plan for families with members residing in
different locations.
Commentators stated that the final regulations should allow
domestic partners and other two-adult groups to use a family benchmark
plan to compute their premium tax credit if the Exchange allows both
adults to be covered by the same qualified health plan. The final
regulations do not adopt this suggestion. If the adults constitute two
separate households for Federal tax purposes, section 36B requires a
separate credit computation for each household that includes only those
individuals for whom each taxpayer claims a personal exemption
deduction under section 151.
iii. Plans Closed to Enrollment
The proposed regulations provide that, in general, an applicable
benchmark plan is the second lowest cost silver plan offered through
the Exchange at the time a taxpayer or family member enrolls. However,
a plan does not cease to be a taxpayer's applicable benchmark plan for
that enrollment period because the plan or a lower cost plan closes to
enrollment during the taxable year. Thus, a plan may continue to be an
applicable benchmark plan if it closes to
[[Page 30383]]
enrollment after a taxpayer enrolls in a qualified health plan, but it
is disregarded in determining the applicable benchmark plan if it is
closed to enrollment at the time the taxpayer enrolls.
A commentator requested that the final regulations exclude certain
qualified health plans open to enrollment only to certain individuals
when determining which plan constitutes a taxpayer's applicable
benchmark plan. The final regulations clarify that a plan is taken into
account in determining the taxpayer's applicable benchmark plan only if
it is open to enrollment to one or more members of a taxpayer's
coverage family.
iv. Changes Affecting Applicable Benchmark Plan
Commentators asked whether a taxpayer's applicable benchmark plan
is locked in at enrollment and whether the benchmark plan could change
during the year if a plan is decertified or if members of the
taxpayer's family leave the plan. The proposed regulations provide that
a taxpayer's applicable benchmark plan may change from month to month
if changes in the taxpayer's coverage family occur (for example, if a
family member becomes eligible or ineligible for minimum essential
coverage during the taxable year). The proposed regulations also
provide that a taxpayer's applicable benchmark plan does not cease to
be the applicable benchmark plan solely because the plan, or a lower
cost plan, terminates or closes to enrollment during the year. The
final regulations adopt the proposed regulations without change.
e. Combining Qualified Health Plan Premiums With Premiums for Other
Coverage
Section 36B(b) and the proposed regulations provide that the
premium tax credit is the lesser of (1) the premiums for the qualified
health plan or plans in which a taxpayer or family member enrolls, or
(2) the difference between the premium for a benchmark qualified health
plan and the amount of the premium that the taxpayer would be required
to pay if the taxpayer purchased the benchmark plan (the taxpayer's
contribution amount). Commentators suggested that the final regulations
allow taxpayers to determine the premium tax credit by combining the
premiums for one or more qualified health plans with premiums a
taxpayer pays for other minimum essential coverage (particularly
premiums for coverage under CHIP). Under the rule suggested by the
commentators, the taxpayer's contribution amount would be reduced by
the amount of the family's other premiums to ensure that a family could
afford the combined premiums for qualified health plan coverage and
CHIP or other coverage.
Under section 36B(b)(2), the premium tax credit is computed by
taking into account only the premiums for qualified health plans. Thus,
the credit may not be increased for premiums for other minimum
essential coverage.
f. Pediatric Dental Coverage
Under section 36B(b)(3)(E), if an individual enrolls in both a
qualified health plan and a dental plan, the portion of the premium for
the dental plan properly allocable to pediatric dental benefits that
are essential health benefits is treated as premiums payable for a
qualified health plan for purposes of determining the monthly premium.
The proposed regulations requested comments on methods for determining
the amount of the premium properly allocable to pediatric dental
benefits.
Commentators requested that the final regulations use a methodology
that reflects the true costs of medical and dental care for children.
Other commentators recommended that the Federal government split the
value of the premium tax credit on a basis proportionate to the premium
for the pediatric service in the dental plan and the qualified health
plan premium. Some commentators requested a simple formula for
allocating a taxpayer's dental benefits premium to pediatric dental
care. A commentator requested a safe harbor permitting dental insurance
carriers to use a reasonable method based on sound actuarial practice.
The final regulations provide that the portion of the premium for a
stand-alone dental plan properly allocable to pediatric dental benefits
is determined under guidance issued by HHS. Under the final HHS
Exchange regulations at 45 CFR 156.210, a qualified health plan issuer
that offers a standalone dental plan is required to provide information
on the plan's rates to the Exchange each year. It is anticipated that
future HHS guidance will address how this required reporting on rates
will include reporting on the portion of the premium allocable to
pediatric dental coverage.
g. Families With Individuals Not Lawfully Present
Section 36B(e)(1)(B) describes a method for determining the FPL
percentage for families that include an individual not lawfully present
(the statutory method) and allows a comparable method that reaches the
same results to be prescribed by regulations. Commentators suggested
that the final regulations provide a comparable method based on the
Medicaid rules for income and family size determinations.
The commentators' suggested method may not reach the same result as
the statutory method. Thus, the final regulations do not adopt this
suggestion. The final regulations provide that the Commissioner may
provide a comparable method in additional published guidance, see Sec.
601.601(d)(2).
4. Reconciling the Credit and Advance Credit Payments
a. Months for Which an Issuer Does Not Provide Coverage
Section 1412(c)(2)(B) of the Affordable Care Act provides that an
issuer receiving an advance credit payment must reduce the premiums
charged to the insured for the period covered by the advance payment
but may terminate coverage if the insured fails to pay premiums for a
3-month period. The final HHS Exchange regulations describe the
operation of this grace period in more detail. Under the retroactive
termination rule, if a taxpayer does not pay premiums in full for 3
months, the issuer must terminate coverage retroactive to the end of
the first of those months and will be required to return any advance
payments received for any terminated coverage months. These final
regulations clarify that a taxpayer does not have an advance credit
payment for a month in which the issuer of the qualified health plan
does not provide coverage and will not be required to reconcile
payments for those months. The taxpayer will, however, have to
reconcile the payment for the first month of the grace period. If the
taxpayer has not paid the taxpayer's share of the premium for that
month by the unextended due date for filing the return, the first month
is not a coverage month, and the taxpayer is not eligible for the
premium tax credit for that month.
b. Changes in Circumstances
Section 36B(f) provides that a taxpayer must reconcile on the
taxpayer's income tax return for the taxable year the premium tax
credit allowed under section 36B with the advance payments paid during
the course of the taxable year and must pay the amount of any excess
advance payments as additional tax. For taxpayers with household income
below 400 percent of the FPL, the amount of
[[Page 30384]]
additional tax liability the taxpayer must repay is capped.
Commentators requested that the final regulations include rules to
mitigate the effects of the requirement to repay excess advance
payments. Commentators suggested that the final regulations adopt a
safe harbor for individuals and families who can demonstrate that they
accurately reported any changes in income or family size to the
Exchange and that their advance payments were properly computed based
on the information available at the time the payments were made.
Commentators suggested that taxpayers who experience changes in
circumstances during the year, including taxpayers whose household
income for the taxable year exceeds 400 percent of the FPL, should be
allowed to prorate the repayment limitations based on the portion of
the year the taxpayer receives advance payments. Other commentators
asked that taxpayers who would experience a hardship as a result of
repaying excess advance payments be exempt from the repayment
requirement or that the IRS should disregard changes that cause income
to slightly exceed 400 percent of the FPL. Commentators also suggested
that taxpayers be allowed to compute their premium tax credit using the
largest family size of the household during the year rather than the
family size reported on the tax return.
The statute sets forth clear rules for reconciling advance credit
payments, which are not consistent with the suggestions made by the
commentators. Accordingly, the final regulations do not adopt these
comments.
Commentators suggested that the IRS should offer automatic payment
plans for taxpayers who have an additional tax liability and should not
impose interest or penalties on this additional tax liability repaid
through the payment plan. Although these comments are beyond the scope
of these final regulations, the IRS will consider possible avenues of
administrative relief in appropriate cases for taxpayers who have
additional tax liability as a result of excess advance payments.
c. Changes in Filing Status
i. Taxpayers Who Marry During the Taxable Year
The proposed regulations provide that, like other taxpayers, newly-
married taxpayers compute their premium tax credit using family size
and household income as reported on their tax return and the
appropriate applicable benchmark plan for each coverage month
regardless of whether the taxpayers were married or single during the
month. The proposed regulations request comments on alternative credit
computations for taxpayers who receive advance payments, marry during
the year, and owe additional tax, even if the Exchange accurately
projects each spouse's separate income.
Some commentators suggested an alternative computation that
computes the credit for the single months separately for each spouse as
if each taxpayer's annual income was one-half of the actual household
income for the year. For the married months, the credit would be
computed using actual household income for the year. The premium tax
credit would be the sum of the credits computed for the single months
and the married months. This computation generally results in a smaller
amount of excess advance payments compared to the amount computed under
the proposed regulations.
The final regulations adopt the alternative credit computation
suggested by the commentators as an option for taxpayers who marry
during the taxable year. Under this alternative method, the credit for
the single months is computed separately for each spouse as if each
taxpayer's annual income was one-half of the actual household income
for the year, the credit for the married months is computed using
actual household income for the year, and the premium tax credit is the
sum of the credits computed for the single months and the married
months. However, to avoid allowing taxpayers an increased amount of
additional premium tax credit resulting from marriage, the final
regulations cap any additional premium tax credit allowed to a taxpayer
under this alternative computation method at the amount of additional
credit that results from computing the credit under the general rule.
Commentators requested that the final regulations allow a year-of-
marriage waiver on repaying excess advance payments. The final
regulations do not adopt these comments as these rules would create
unwarranted benefits, for example in cases of taxpayers who marry
during the year and owe additional tax because their income is
significantly higher than what the Exchange projected.
ii. Taxpayers Whose Marital Status Changes From Married to Single
During the Taxable Year
The proposed regulations provide that taxpayers who are married to
each other at the beginning but not at the end of the taxable year must
allocate the premium for the applicable benchmark plan, the premium for
the plan in which the taxpayers enroll, and the advance credit payments
for the period the taxpayers are married. The proposed regulations
permit the allocation to be made in any proportion, but if the
taxpayers cannot agree on a proportion, these items are allocated 50
percent to each taxpayer.
Commentators opined that the final regulations should provide for
allocating these items to each taxpayer in proportion to each
taxpayer's household income. The final regulations do not adopt this
suggestion as it would require divorced taxpayers to exchange income
information or require the IRS to associate each taxpayer's return with
the other. Divorced taxpayers may allocate the premium for the
applicable benchmark plan, the premium for the plan in which the
taxpayers enroll, and the advance credit payments in proportion to
household income under the final regulations if they choose.
iii. Married Taxpayers Filing Separately
Section 36B(c)(1)(C) provides that married taxpayers who do not
file a joint return are not applicable taxpayers and are not allowed a
premium tax credit. Accordingly, married taxpayers who receive advance
credit payments but do not file a joint return must repay the advance
credit payments. The advance credit payments must be allocated equally
to each taxpayer for purposes of determining the amount of excess
advance payments. The final regulations clarify that this equal
allocation also applies if one spouse is treated as unmarried under
section 7703(b) (and may, for example, properly claim the premium tax
credit on a return filed as head of household).
The proposed regulations requested comments on special rules for
taxpayers who receive advance payments but face challenges in meeting
the joint return requirement, for example because of the incarceration
of a spouse, domestic abuse, or a pending divorce.
Numerous commentators stated that the final regulations should
provide special rules allowing these spouses to file separate returns
and claim the premium tax credit. Commentators suggested that abandoned
spouses also warrant an exception. Other commentators noted that other
married taxpayers may face challenges in filing a joint return and
asked for a hardship exemption from the joint filing requirement.
Commentators suggested that taxpayers should be able to certify on
the premium tax credit form that they meet the criteria for an
exemption from the joint filing requirement. One
[[Page 30385]]
commentator suggested granting an exception in case of domestic
violence for a taxpayer who has or during the taxable year had an order
of protection.
Some commentators, noting that many of these situations are not
resolved in a single taxable year, requested a three-year exception to
the joint filing requirement.
The final regulations do not provide special rules allowing married
taxpayers to claim the premium tax credit on separate returns. However,
the IRS and the Treasury Department intend to propose additional
regulations regarding eligibility for the premium tax credit to address
circumstances in which domestic abuse, abandonment, or similar
circumstances create obstacles to the ability of taxpayers to file
joint returns. Comments are requested on the documentation that a
taxpayer could provide to establish that he or she cannot file a joint
return because of the domestic abuse, abandonment, or other similar
circumstances, on what treatment should be accorded the other spouse if
he or she does not file with documentation supporting an exception, and
the need for anti-abuse rules.
5. Information Reporting
Commentators requested that the final regulations require an
Exchange, in reporting information under section 36B(f)(3), to strictly
define and limit the use and disclosure of immigration status
information for any purpose other than ensuring efficient operation of
the Exchange and prohibit the transfer of immigration status
information from the Exchange to the IRS. The final regulations do not
include a rule responding to these comments because the IRS does not
require information on immigration status of any individual in order to
administer the premium tax credit and will not obtain this information.
The Exchange will verify that an individual is a citizen or lawfully
present and eligible to enroll in coverage through the Exchange.
The proposed regulations provide that the IRS will provide rules on
the time and manner of information reporting by Exchanges in additional
published guidance, see Sec. 601.601(d)(2). Commentators requested
that the final regulations provide information on the time and manner
of information reporting by Exchanges. A commentator suggested that the
information returns should be provided to taxpayers by December 31.
Another commentator suggested that the annual information return should
report the cost of the applicable benchmark plan on the first day of
each month. The final regulations defer rules on the time for
information reporting by Exchanges to additional regulations, which are
expected to provide for monthly reporting by Exchanges to the IRS and
an annual report to the IRS and the taxpayer due by January 31.
6. American Indians/Alaska Natives
Commentators asked that the final regulations provide special
provisions for American Indians and Alaska Natives, for example that
they be treated as eligible for employer-sponsored minimum essential
coverage only if they are enrolled in the coverage, that they should
not be required to pay any premiums for a qualified health plan, and
that they be exempted from reconciliation. The IRS and HHS have
conducted several tribal consultations on these and other issues under
the proposed regulations. The final regulations do not adopt these
suggestions, as they are inconsistent with the statute.
7. Effective/Applicability Date
These final regulations apply to taxable years ending after
December 31, 2013.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866, as
supplemented by Executive Order 13563. Therefore, a regulatory
assessment is not required. Section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations,
and, because the regulations do not impose a collection of information
requirement on small entities, the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the
notice of proposed rulemaking that preceded these final regulations was
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business, and no
comments were received.
Comments
Written (including electronic) comments must be received by August
21, 2012. Comments should be submitted to Internal Revenue Service,
CC:PA:LPD:PR (REG-131491-10), Room 5203, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044, or electronically to www.regulations.gov
(IRS REG-131491-10). Alternatively, comments may be hand delivered
between the hours of 8:00 a.m. and 4:00 p.m. Monday to Friday to
CC:PA:LPD:PR (REG-131491-10), Courier's Desk, Internal Revenue Service,
1111 Constitution Avenue NW., Washington, DC All comments will be
available for public inspection and copying.
Drafting Information
The principal authors of these final regulations are Shareen S.
Pflanz, Frank W. Dunham III, Andrew S. Braden, and Stephen J. Toomey of
the Office of Associate Chief Counsel (Income Tax and Accounting).
However, other personnel from the IRS and the Treasury Department
participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by adding an
entry in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.36B-4 also issued under 26 U.S.C. 36B(g).
* * * * *
0
Par. 2. Sections 1.36B-0, 1.36B-1, 1.36B-2, 1.36B-3, 1.36B-4, and
1.36B-5 are added to read as follows:
Sec. 1.36B-0 Table of contents.
This section lists the captions contained in Sec. Sec. 1.36B-1
through 1.36B-5.
Sec. 1.36B-1 Premium tax credit definitions.
(a) In general.
(b) Affordable Care Act.
(c) Qualified health plan.
(d) Family and family size.
(e) Household income.
(1) In general.
(2) Modified adjusted gross income.
(f) Dependent.
(g) Lawfully present.
(h) Federal poverty line.
(i) Reserved.
(j) Advance credit payment.
(k) Exchange.
(l) Self-only coverage.
(m) Family coverage.
(n) Rating area.
(o) Effective/applicability date.
Sec. 1.36B-2 Eligibility for premium tax credit.
(a) In general.
[[Page 30386]]
(b) Applicable taxpayer.
(1) In general.
(2) Married taxpayers must file joint return.
(3) Dependents.
(4) Individuals not lawfully present or incarcerated.
(5) Individuals lawfully present.
(6) Special rule for taxpayers with household income below 100
percent of the Federal poverty line for the taxable year.
(7) Computation of premium assistance amounts for taxpayers with
household income below 100 percent of the Federal poverty line.
(c) Minimum essential coverage.
(1) In general.
(2) Government-sponsored minimum essential coverage.
(i) In general.
(ii) Obligation to complete administrative requirements to obtain
coverage.
(iii) Special rule for coverage for veterans and other individuals
under chapter 17 or 18 of Title 38, U.S.C.
(iv) Retroactive effect of eligibility determination.
(v) Determination of Medicaid or Children's Health Insurance Program
(CHIP) ineligibility.
(vi) Examples.
(3) Employer-sponsored minimum essential coverage.
(i) In general.
(ii) Plan year.
(iii) Eligibility for months during a plan year.
(A) Failure to enroll in plan.
(B) Waiting periods.
(C) Example.
(iv) Continuation coverage.
(v) Affordable coverage.
(A) In general.
(1) Affordability for employee.
(2) Affordability for related individual.
(3) Employee safe harbor.
(4) Wellness incentives and employer contributions to health
reimbursement arrangements.
(B) Affordability for part-year period.
(C) Required contribution percentage.
(D) Examples.
(vi) Minimum value.
(vii) Enrollment in eligible employer-sponsored plan.
(A) In general.
(B) Automatic enrollment.
(C) Examples.
(4) Related individual not claimed as a personal exemption
deduction.
Sec. 1.36B-3 Computing the premium assistance credit amount.
(a) In general.
(b) Definitions.
(c) Coverage month.
(1) In general.
(2) Premiums paid for a taxpayer.
(3) Examples.
(d) Premium assistance amount.
(e) Adjusted monthly premium.
(f) Applicable benchmark plan.
(1) In general.
(2) Family coverage.
(3) Silver level plan not covering a taxpayer's family.
(4) Family members residing at different locations.
(5) Plan closed to enrollment.
(6) Benchmark plan terminates or closes to enrollment during the
year.
(7) Examples.
(g) Applicable percentage.
(1) In general.
(2) Applicable percentage table.
(3) Examples.
(h) Plan covering more than one family.
(1) In general.
(2) Example.
(i) Reserved.
(j) Additional benefits.
(1) In general.
(2) Method of allocation.
(3) Examples.
(k) Pediatric dental coverage.
(1) In general.
(2) Method of allocation.
(3) Example.
(l) Families including individuals not lawfully present.
(1) In general.
(2) Revised household income computation.
(i) Statutory method.
(ii) Comparable method.
Sec. 1.36B-4 Reconciling the premium tax credit with advance
credit payments.
(a) Reconciliation.
(1) Coordination of premium tax credit with advance credit payments.
(i) In general.
(ii) Responsibility for advance credit payments.
(iii) Advance credit payment for a month in which an issuer does not
provide coverage.
(2) Credit computation.
(3) Limitation on additional tax.
(i) In general.
(ii) Additional tax limitation table.
(4) Examples.
(b) Changes in filing status.
(1) In general.
(2) Taxpayers who marry during the taxable year.
(i) In general.
(ii) Alternative computation of additional tax liability.
(A) In general.
(B) Alternative premium assistance amounts for pre-marriage months.
(C) Premium assistance amounts for marriage months.
(3) Taxpayers not married to each other at the end of the taxable
year.
(4) Married taxpayers filing separate returns.
(5) Taxpayers filing returns as head of household and married filing
separately.
(6) Examples.
Sec. 1.36B-5 Information reporting by Exchanges.
(a) Information required to be reported.
(b) Time of reporting.
(c) Manner of reporting.
Sec. 1.36B-1 Premium tax credit definitions.
(a) In general. Section 36B allows a refundable premium tax credit
for taxable years ending after December 31, 2013. The definitions in
this section apply to this section and Sec. Sec. 1.36B-2 through
1.36B-5.
(b) Affordable Care Act. The term Affordable Care Act refers to the
Patient Protection and Affordable Care Act, Public Law 111-148 (124
Stat. 119 (2010)), and the Health Care and Education Reconciliation Act
of 2010, Public Law 111-152 (124 Stat. 1029 (2010)), as amended by the
Medicare and Medicaid Extenders Act of 2010, Public Law 111-309 (124
Stat. 3285 (2010)), the Comprehensive 1099 Taxpayer Protection and
Repayment of Exchange Subsidy Overpayments Act of 2011, Public Law 112-
9 (125 Stat. 36 (2011)), the Department of Defense and Full-Year
Continuing Appropriations Act, 2011, Public Law 112-10 (125 Stat. 38
(2011)), and the 3% Withholding Repeal and Job Creation Act, Public Law
112-56 (125 Stat. 711 (2011)).
(c) Qualified health plan. The term qualified health plan has the
same meaning as in section 1301(a) of the Affordable Care Act (42
U.S.C. 18021(a)) but does not include a catastrophic plan described in
section 1302(e) of the Affordable Care Act (42 U.S.C. 18022(e)).
(d) Family and family size. A taxpayer's family means the
individuals for whom a taxpayer properly claims a deduction for a
personal exemption under section 151 for the taxable year. Family size
means the number of individuals in the family. Family and family size
may include individuals who are not subject to or are exempt from the
penalty under section 5000A for failing to maintain minimum essential
coverage.
(e) Household income--(1) In general. Household income means the
sum of--
(i) A taxpayer's modified adjusted gross income; plus
(ii) The aggregate modified adjusted gross income of all other
individuals who--
(A) Are included in the taxpayer's family under paragraph (d) of
this section; and
(B) Are required to file a return of tax imposed by section 1 for
the taxable year (determined without regard to the exception under
section (1)(g)(7) to the requirement to file a return).
(2) Modified adjusted gross income. Modified adjusted gross income
means adjusted gross income (within the meaning of section 62)
increased by--
(i) Amounts excluded from gross income under section 911;
(ii) Tax-exempt interest the taxpayer receives or accrues during
the taxable year; and
(iii) Social security benefits (within the meaning of section
86(d)) not included in gross income under section 86.
[[Page 30387]]
(f) Dependent. Dependent has the same meaning as in section 152.
(g) Lawfully present. Lawfully present has the same meaning as in
45 CFR 155.20.
(h) Federal poverty line. The Federal poverty line means the most
recently published poverty guidelines (updated periodically in the
Federal Register by the Secretary of Health and Human Services under
the authority of 42 U.S.C. 9902(2)) as of the first day of the regular
enrollment period for coverage by a qualified health plan offered
through an Exchange for a calendar year. Thus, the Federal poverty line
for computing the premium tax credit for a taxable year is the Federal
poverty line in effect on the first day of the initial or annual open
enrollment period preceding that taxable year. See 45 CFR 155.410. If a
taxpayer's primary residence changes during a taxable year from one
state to a state with different Federal poverty guidelines or married
taxpayers reside in separate states with different Federal poverty
guidelines (for example, Alaska or Hawaii and another state), the
Federal poverty line that applies for purposes of section 36B and the
associated regulations is the higher Federal poverty guideline
(resulting in a lower percentage of the Federal poverty line for the
taxpayers' household income and family size).
(i) [Reserved]
(j) Advance credit payment. Advance credit payment means an advance
payment of the premium tax credit as provided in section 1412 of the
Affordable Care Act (42 U.S.C. 18082).
(k) Exchange. Exchange has the same meaning as in 45 CFR 155.20.
(l) Self-only coverage. Self-only coverage means health insurance
that covers one individual.
(m) Family coverage. Family coverage means health insurance that
covers more than one individual.
(n) Rating area. [Reserved]
(o) Effective/applicability date. This section and Sec. Sec.
1.36B-2 through 1.36B-5 apply for taxable years ending after December
31, 2013.
Sec. 1.36B-2 Eligibility for premium tax credit.
(a) In general. An applicable taxpayer (within the meaning of
paragraph (b) of this section) is allowed a premium assistance amount
only for any month that one or more members of the applicable
taxpayer's family (the applicable taxpayer or the applicable taxpayer's
spouse or dependent)--
(1) Is enrolled in one or more qualified health plans through an
Exchange; and
(2) Is not eligible for minimum essential coverage (within the
meaning of paragraph (c) of this section) other than coverage described
in section 5000A(f)(1)(C) (relating to coverage in the individual
market).
(b) Applicable taxpayer--(1) In general. Except as otherwise
provided in this paragraph (b), an applicable taxpayer is a taxpayer
whose household income is at least 100 percent but not more than 400
percent of the Federal poverty line for the taxpayer's family size for
the taxable year.
(2) Married taxpayers must file joint return. A taxpayer who is
married (within the meaning of section 7703) at the close of the
taxable year is an applicable taxpayer only if the taxpayer and the
taxpayer's spouse file a joint return for the taxable year.
(3) Dependents. An individual is not an applicable taxpayer if
another taxpayer may claim a deduction under section 151 for the
individual for a taxable year beginning in the calendar year in which
the individual's taxable year begins.
(4) Individuals not lawfully present or incarcerated. An individual
who is not lawfully present in the United States or is incarcerated
(other than incarceration pending disposition of charges) is not
eligible to enroll in a qualified health plan through an Exchange.
However, the individual may be an applicable taxpayer if a family
member is eligible to enroll in a qualified health plan. See sections
1312(f)(1)(B) and 1312(f)(3) of the Affordable Care Act (42 U.S.C.
18032(f)(1)(B) and (f)(3)) and Sec. 1.36B-3(b)(2).
(5) Individuals lawfully present. If a taxpayer's household income
is less than 100 percent of the Federal poverty line for the taxpayer's
family size and the taxpayer or a member of the taxpayer's family is an
alien lawfully present in the United States, the taxpayer is treated as
an applicable taxpayer if--
(i) The lawfully present taxpayer or family member is not eligible
for the Medicaid program; and
(ii) The taxpayer would be an applicable taxpayer if the taxpayer's
household income for the taxable year was between 100 and 400 percent
of the Federal poverty line for the taxpayer's family size.
(6) Special rule for taxpayers with household income below 100
percent of the Federal poverty line for the taxable year. A taxpayer
(other than a taxpayer described in paragraph (b)(5) of this section)
whose household income for a taxable year is less than 100 percent of
the Federal poverty line for the taxpayer's family size is treated as
an applicable taxpayer if--
(i) The taxpayer or a family member enrolls in a qualified health
plan through an Exchange;
(ii) An Exchange estimates at the time of enrollment that the
taxpayer's household income will be between 100 and 400 percent of the
Federal poverty line for the taxable year;
(iii) Advance credit payments are authorized and paid for one or
more months during the taxable year; and
(iv) The taxpayer would be an applicable taxpayer if the taxpayer's
household income for the taxable year was between 100 and 400 percent
of the Federal poverty line for the taxpayer's family size.
(7) Computation of premium assistance amounts for taxpayers with
household income below 100 percent of the Federal poverty line. If a
taxpayer is treated as an applicable taxpayer under paragraph (b)(5) or
(b)(6) of this section, the taxpayer's actual household income for the
taxable year is used to compute the premium assistance amounts under
Sec. 1.36B-3(d).
(c) Minimum essential coverage--(1) In general. Minimum essential
coverage is defined in section 5000A(f) and regulations issued under
that section. As described in section 5000A(f), government-sponsored
programs, eligible employer-sponsored plans, grandfathered health
plans, and certain other health benefits coverage are minimum essential
coverage.
(2) Government-sponsored minimum essential coverage--(i) In
general. An individual is eligible for government-sponsored minimum
essential coverage if the individual meets the criteria for coverage
under a government-sponsored program described in section
5000A(f)(1)(A) as of the first day of the first full month the
individual may receive benefits under the program, subject to the
limitation in paragraph (c)(2)(ii) of this section. The Commissioner
may define eligibility for specific government-sponsored programs
further in additional published guidance, see Sec. 601.601(d)(2) of
this chapter.
(ii) Obligation to complete administrative requirements to obtain
coverage. An individual who meets the criteria for eligibility for
government-sponsored minimum essential coverage must complete the
requirements necessary to receive benefits. An individual who fails by
the last day of the third full calendar month following the event that
establishes eligibility under paragraph (c)(2)(i) of this section to
complete the requirements to obtain government-sponsored minimum
essential coverage (other than a veteran's health care program) is
treated
[[Page 30388]]
as eligible for government-sponsored minimum essential coverage as of
the first day of the fourth calendar month following the event that
establishes eligibility.
(iii) Special rule for coverage for veterans and other individuals
under chapter 17 or 18 of Title 38, U.S.C. An individual is eligible
for minimum essential coverage under a health care program under
chapter 17 or 18 of Title 38, U.S.C. only if the individual is enrolled
in a health care program under chapter 17 or 18 of Title 38, U.S.C.
identified as minimum essential coverage in regulations issued under
section 5000A.
(iv) Retroactive effect of eligibility determination. If an
individual receiving advance credit payments is determined to be
eligible for government-sponsored minimum essential coverage that is
effective retroactively (such as Medicaid), the individual is treated
as eligible for minimum essential coverage under that program no
earlier than the first day of the first calendar month beginning after
the approval.
(v) Determination of Medicaid or Children's Health Insurance
Program (CHIP) ineligibility. An individual is treated as not eligible
for Medicaid, CHIP, or a similar program for a period of coverage under
a qualified health plan if, when the individual enrolls in the
qualified health plan, an Exchange determines or considers (within the
meaning of 45 CFR 155.302(b)) the individual to be not eligible for
Medicaid or CHIP.
(vi) Examples. The following examples illustrate the provisions of
this paragraph (c)(2):
Example 1. Delay in coverage effectiveness. On April 10, 2015,
Taxpayer D applies for coverage under a government-sponsored health
care program. D's application is approved on July 12, 2015, but her
coverage is not effective until September 1, 2015. Under paragraph
(c)(2)(i) of this section, D is eligible for government-sponsored
minimum essential coverage on September 1, 2015.
Example 2. Time of eligibility. Taxpayer E turns 65 on June 3,
2015, and becomes eligible for Medicare. Under section
5000A(f)(1)(A)(i), Medicare is minimum essential coverage. However,
E must enroll in Medicare to receive benefits. E enrolls in Medicare
in September, which is the last month of E's initial enrollment
period. Thus, E may receive Medicare benefits on December 1, 2015.
Because E completed the requirements necessary to receive Medicare
benefits by the last day of the third full calendar month after the
event that establishes E's eligibility (E turning 65), under
paragraph (c)(2)(i) and (c)(2)(ii) of this section E is eligible for
government-sponsored minimum essential coverage on December 1, 2015,
the first day of the first full month that E may receive benefits
under the program.
Example 3. Time of eligibility, individual fails to complete
necessary requirements. The facts are the same as in Example 2,
except that E fails to enroll in the Medicare coverage during E's
initial enrollment period. E is treated as eligible for government-
sponsored minimum essential coverage under paragraph (c)(2)(ii) of
this section as of October 1, 2015, the first day of the fourth
month following the event that establishes E's eligibility (E
turning 65).
Example 4. Retroactive effect of eligibility. In November 2014,
Taxpayer F enrolls in a qualified health plan for 2015 and receives
advance credit payments. F loses her part-time employment and on
April 10, 2015 applies for coverage under the Medicaid program. F's
application is approved on May 15, 2015, and her Medicaid coverage
is effective as of April 1, 2015. Under paragraph (c)(2)(iv) of this
section, F is eligible for government-sponsored minimum essential
coverage on June 1, 2015, the first day of the first calendar month
after approval.
Example 5. Determination of Medicaid ineligibility. In November
2014, Taxpayer G applies through the Exchange to enroll in health
coverage for 2015. The Exchange determines that G is not eligible
for Medicaid and estimates that G's household income will be 140
percent of the Federal poverty line for G's family size for purposes
of determining advance credit payments. G enrolls in a qualified
health plan and begins receiving advance credit payments. G
experiences a reduction in household income during the year and his
household income for 2015 is 130 percent of the Federal poverty line
(within the Medicaid income threshold). However, under paragraph
(c)(2)(v) of this section, G is treated as not eligible for Medicaid
for 2015.
Example 6. Mid-year Medicaid eligibility redetermination. The
facts are the same as in Example 5, except that G returns to the
Exchange in July 2015 and the Exchange determines that G is eligible
for Medicaid. Medicaid approves G for coverage and the Exchange
discontinues G's advance credit payments effective August 1. Under
paragraphs (c)(2)(iv) and (c)(2)(v) of this section, G is treated as
not eligible for Medicaid for the months when G is covered by a
qualified health plan. G is eligible for government-sponsored
minimum essential coverage for the months after G is approved for
Medicaid and can receive benefits, August through December 2015.
(3) Employer-sponsored minimum essential coverage--(i) In general.
For purposes of section 36B, an employee who may enroll in an eligible
employer-sponsored plan (as defined in section 5000A(f)(2)) and an
individual who may enroll in the plan because of a relationship to the
employee (a related individual) are eligible for minimum essential
coverage under the plan for any month only if the plan is affordable
and provides minimum value. Government-sponsored programs described in
section 5000A(f)(1)(A) are not eligible employer-sponsored plans.
(ii) Plan year. For purposes of this paragraph (c)(3), a plan year
is an eligible employer-sponsored plan's regular 12-month coverage
period (or the remainder of a 12-month coverage period for a new
employee or an individual who enrolls during a special enrollment
period).
(iii) Eligibility for months during a plan year--(A) Failure to
enroll in plan. An employee or related individual may be eligible for
minimum essential coverage under an eligible employer-sponsored plan
for a month during a plan year if the employee or related individual
could have enrolled in the plan for that month during an open or
special enrollment period.
(B) Waiting periods. An employee or related individual is not
eligible for minimum essential coverage under an eligible employer-
sponsored plan during a required waiting period before the coverage
becomes effective.
(C) Example. The following example illustrates the provisions of
this paragraph (c)(3)(iii):
Example. (i) Taxpayer B is an employee of Employer X. X offers
its employees a health insurance plan that has a plan year (within
the meaning of paragraph (c)(3)(ii) of this section) from October 1
through September 30. Employees may enroll during an open season
from August 1 to September 15. B does not enroll in X's plan for the
plan year October 1, 2014, to September 30, 2015. In November 2014,
B enrolls in a qualified health plan through an Exchange for
calendar year 2015.
(ii) B could have enrolled in X's plan during the August 1 to
September 15 enrollment period. Therefore, unless X's plan is not
affordable for B or does not provide minimum value, B is eligible
for minimum essential coverage under X's plan for the months that B
is enrolled in the qualified health plan during X's plan year
(January through September 2015).
(iv) Continuation coverage. An individual who may enroll in
continuation coverage required under Federal law or a State law that
provides comparable continuation coverage is eligible for minimum
essential coverage only for months that the individual is enrolled in
the coverage.
(v) Affordable coverage--(A) In general--(1) Affordability for
employee. Except as provided in paragraph (c)(3)(v)(A)(3) of this
section, an eligible employer-sponsored plan is affordable for an
employee if the portion of the annual premium the employee must pay,
whether by salary reduction or otherwise (required contribution), for
self-only coverage does not exceed the required contribution percentage
(as defined in paragraph (c)(3)(v)(C) of this section) of the
applicable taxpayer's household income for the taxable year.
[[Page 30389]]
(2) Affordability for related individual. [Reserved]
(3) Employee safe harbor. An employer-sponsored plan is not
affordable for an employee or a related individual for a plan year if,
when the employee or a related individual enrolls in a qualified health
plan for a period coinciding with the plan year (in whole or in part),
an Exchange determines that the eligible employer-sponsored plan is not
affordable for that plan year. This paragraph (c)(3)(v)(A)(3) does not
apply to a determination made as part of the redetermination process
described in 45 CFR 155.335 unless the individual receiving an Exchange
redetermination notification affirmatively responds and provides
current information on affordability. This paragraph (c)(3)(v)(A)(3)
does not apply for an individual who, with reckless disregard for the
facts, provides incorrect information to an Exchange concerning the
portion of the annual premium for coverage for the employee or related
individual under the plan.
(4) Wellness incentives and employer contributions to health
reimbursement arrangements. The Commissioner may provide rules in
published guidance, see Sec. 601.601(d)(2) of this chapter, for
determining how wellness incentives and amounts made available under a
health reimbursement arrangement are treated in determining the
affordability of eligible employer-sponsored coverage under this
paragraph (c)(3)(v).
(B) Affordability for part-year period. Affordability under
paragraph (c)(3)(v)(A) of this section is determined separately for
each employment period that is less than a full calendar year or for
the portions of an employer's plan year that fall in different taxable
years of an applicable taxpayer (a part-year period). An eligible
employer-sponsored plan is affordable for a part-year period if the
employee's annualized required contribution for self-only coverage
under the plan for the part-year period does not exceed the required
contribution percentage of the applicable taxpayer's household income
for the taxable year. The employee's annualized required contribution
is the employee's required contribution for the part-year period times
a fraction, the numerator of which is 12 and the denominator of which
is the number of months in the part-year period during the applicable
taxpayer's taxable year. Only full calendar months are included in the
computation under this paragraph (c)(3)(v)(B).
(C) Required contribution percentage. The required contribution
percentage is 9.5 percent. The percentage may be adjusted in published
guidance, see Sec. 601.601(d)(2) of this chapter, for taxable years
beginning after December 31, 2014, to reflect rates of premium growth
relative to growth in income and, for taxable years beginning after
December 31, 2018, to reflect rates of premium growth relative to
growth in the consumer price index.
(D) Examples. The following examples illustrate the provisions of
this paragraph (c)(3)(v). Unless stated otherwise, in each example the
taxpayer is single and has no dependents, the employer's plan is an
eligible employer-sponsored plan and provides minimum value, the
employee is not eligible for other minimum essential coverage, and the
taxpayer, related individual, and employer-sponsored plan have a
calendar taxable year:
Example 1. Basic determination of affordability. In 2014
Taxpayer C has household income of $47,000. C is an employee of
Employer X, which offers its employees a health insurance plan that
requires C to contribute $3,450 for self-only coverage for 2014 (7.3
percent of C's household income). Because C's required contribution
for self-only coverage does not exceed 9.5 percent of household
income, under paragraph (c)(3)(v)(A)(1) of this section, X's plan is
affordable for C, and C is eligible for minimum essential coverage
for all months in 2014.
Example 2. Basic determination of affordability for a related
individual. [Reserved]
Example 3. Determination of unaffordability at enrollment. (i)
Taxpayer D is an employee of Employer X. In November 2013 the
Exchange for D's rating area projects that D's 2014 household income
will be $37,000. It also verifies that D's required contribution for
self-only coverage under X's health insurance plan will be $3,700
(10 percent of household income). Consequently, the Exchange
determines that X's plan is unaffordable. D enrolls in a qualified
health plan and not in X's plan. In December 2014, X pays D a $2,500
bonus. Thus, D's actual 2014 household income is $39,500 and D's
required contribution for coverage under X's plan is 9.4 percent of
D's household income.
(ii) Based on D's actual 2014 household income, D's required
contribution does not exceed 9.5 percent of household income and X's
health plan is affordable for D. However, when D enrolled in a
qualified health plan for 2014, the Exchange determined that X's
plan was not affordable for D for 2014. Consequently, under
paragraph (c)(3)(v)(A)(3) of this section, X's plan is not
affordable for D and D is not eligible for minimum essential
coverage under X's plan for 2014.
Example 4. Determination of unaffordability for plan year. The
facts are the same as in Example 3, except that X's employee health
insurance plan year is September 1 to August 31. The Exchange for
D's rating area determines in August 2014 that X's plan is
unaffordable for D based on D's projected household income for 2014.
D enrolls in a qualified health plan as of September 1, 2014. Under
paragraph (c)(3)(v)(A)(3) of this section, X's plan is not
affordable for D and D is not eligible for minimum essential
coverage under X's plan for the coverage months September to
December 2014 and January through August 2015.
Example 5. No affordability information affirmatively provided
for annual redetermination. (i) The facts are the same as in Example
3, except the Exchange redetermines D's eligibility for advance
credit payments for 2015. D does not affirmatively provide the
Exchange with current information regarding affordability and the
Exchange determines that D's coverage is not affordable for 2015 and
approves advance credit payments based on information from the
previous enrollment period. In 2015, D's required contribution for
coverage under X's plan is 9.4 percent of D's household income.
(ii) Because D does not respond to the Exchange notification and
the Exchange makes an affordability determination based on
information from an earlier year, the employee safe harbor in
paragraph (c)(3)(v)(A)(3) of this section does not apply. D's
required contribution for 2015 does not exceed 9.5 percent of D's
household income. Thus, X's plan is affordable for D for 2015 and D
is eligible for minimum essential coverage for all months in 2015.
Example 6. Determination of unaffordability for part of plan
year (part-year period). (i) Taxpayer E is an employee of Employer X
beginning in May 2015. X's employee health insurance plan year is
September 1 to August 31. E's required contribution for self-only
coverage for May through August is $150 per month ($1,800 for the
full plan year). The Exchange for E's rating area projects E's
household income for purposes of eligibility for advance credit
payments as $18,000. E's actual household income for the 2015
taxable year is $20,000.
(ii) Under paragraph (c)(3)(v)(B) of this section, whether
coverage under X's plan is affordable for E is determined for the
remainder of X's plan year (May through August). E's required
contribution for a full plan year ($1,800) exceeds 9.5 percent of
E's household income (1,800/18,000 = 10 percent). Therefore, the
Exchange determines that X's coverage is unaffordable for May
through August. Although E's actual household income for 2015 is
$20,000 (and E's required contribution of $1,800 does not exceed 9.5
percent of E's household income), under paragraph (c)(3)(v)(A)(3) of
this section, X's plan is unaffordable for E for the part of the
plan year May through August 2015. Consequently, E is not eligible
for minimum essential coverage under X's plan for the period May
through August 2015.
Example 7. Affordability determined for part of a taxable year
(part-year period). (i) Taxpayer F is an employee of Employer X. X's
employee health insurance plan year is September 1 to August 31. F's
required contribution for self-only coverage for the period
September 2014 through August 2015 is $150 per month or $1,800 for
the plan year. F does not enroll in X's plan during X's open season
but enrolls in a qualified health plan for September through
December 2014. F does not request advance credit payments and does
not ask the Exchange for his rating
[[Page 30390]]
area to determine whether X's coverage is affordable for F. F's
household income in 2014 is $18,000.
(ii) Because F is a calendar year taxpayer and Employer X's plan
is not a calendar year plan, F must determine the affordability of
X's coverage for the part-year period in 2014 (September-December)
under paragraph (c)(3)(v)(B) of this section. F determines the
affordability of X's plan for the September through December 2014
period by comparing the annual premiums ($1,800) to F's 2014
household income. F's required contribution of $1,800 is 10 percent
of F's 2014 household income. Because F's required contribution
exceeds 9.5 percent of F's 2014 household income, X's plan is not
affordable for F for the part-year period September through December
2014 and F is not eligible for minimum essential coverage under X's
plan for that period.
(iii) F enrolls in Exchange coverage for 2015 and does not ask
the Exchange to approve advance credit payments or determine whether
X's coverage is affordable. F's 2015 household income is $20,000.
(iv) F must determine if X's plan is affordable for the part-
year period January 2015 through August 2015. F's annual required
contribution ($1,800) is 9 percent of F's 2015 household income.
Because F's required contribution does not exceed 9.5 percent of F's
2015 household income, X's plan is affordable for F for the part-
year period January through August 2015 and F is eligible for
minimum essential coverage for that period.
Example 8 Coverage unaffordable at year end. Taxpayer G is
employed by Employer X. In November 2014, the Exchange for G's
rating area determines that G is eligible for affordable employer-
sponsored coverage for 2015. G nonetheless enrolls in a qualified
health plan for 2015 but does not receive advance credit payments.
G's 2015 household income is less than expected and G's required
contribution for employer-sponsored coverage for 2015 exceeds 9.5
percent of G's actual 2015 household income. Under paragraph
(c)(3)(v)(A)(1) of this section, G is not eligible for minimum
essential coverage under X's plan for 2015.
(vi) Minimum value. An eligible employer-sponsored plan provides
minimum value only if the plan's share of the total allowed costs of
benefits provided to the employee under the plan (as determined under
guidance issued by the Secretary of Health and Human Services under
section 1302(d)(2) of the Affordable Care Act (42 U.S.C. 18022(d)(2)))
is at least 60 percent.
(vii) Enrollment in eligible employer-sponsored plan--(A) In
general. Except as provided in paragraph (c)(3)(vii)(B) of this
section, the requirements of affordability and minimum value do not
apply for months that an individual is enrolled in an eligible
employer-sponsored plan.
(B) Automatic enrollment. An employee or related individual is
treated as not enrolled in an eligible employer-sponsored plan for a
month in a plan year or other period for which the employee or related
individual is automatically enrolled if the employee or related
individual terminates the coverage before the later of the first day of
the second full calendar month of that plan year or other period or the
last day of any permissible opt-out period provided by the employer-
sponsored plan or in regulations to be issued by the Department of
Labor, for that plan year or other period.
(C) Examples. The following examples illustrate the provisions of
this paragraph (c)(3)(vii):
Example 1. Taxpayer H is employed by Employer X in 2014. H's
required contribution for self-only employer coverage exceeds 9.5
percent of H's 2014 household income. H enrolls in X's calendar year
plan for 2014. Under paragraph (c)(3)(vii)(A) of this section, H is
eligible for minimum essential coverage for 2014 because H is
enrolled in an eligible employer-sponsored plan for 2014.
Example 2. The facts are the same as in Example 1, except that
H terminates plan coverage on June 30, 2014. Under paragraph
(c)(3)(vii)(A) of this section, H is eligible for minimum essential
coverage under X's plan for January through June 2014 but is not
eligible for minimum essential coverage under X's plan for July
through December 2014.
Example 3. The facts are the same as in Example 1, except that
Employer X automatically enrolls H in the plan for calendar year
2015. H terminates the coverage on January 20, 2015. Under paragraph
(c)(3)(vii)(B) of this section, H is not eligible for minimum
essential coverage under X's plan for January 2015.
(4) Related individual not claimed as a personal exemption
deduction. An individual who may enroll in minimum essential coverage
because of a relationship to another person eligible for the coverage,
but for whom the other eligible person does not claim a personal
exemption deduction under section 151, is treated as eligible for
minimum essential coverage under the coverage only for months that the
related individual is enrolled in the coverage.
Sec. 1.36B-3 Computing the premium assistance credit amount.
(a) In general. A taxpayer's premium assistance credit amount for a
taxable year is the sum of the premium assistance amounts determined
under paragraph (d) of this section for all coverage months for
individuals in the taxpayer's family.
(b) Definitions. For purposes of this section--
(1) The cost of a qualified health plan is the premium the plan
charges; and
(2) The term coverage family refers to members of the taxpayer's
family who enroll in a qualified health plan and are not eligible for
minimum essential coverage (other than coverage in the individual
market).
(c) Coverage month--(1) In general. A month is a coverage month for
an individual if--
(i) As of the first day of the month, the individual is enrolled in
a qualified health plan through an Exchange;
(ii) The taxpayer pays the taxpayer's share of the premium for the
individual's coverage under the plan for the month by the unextended
due date for filing the taxpayer's income tax return for that taxable
year, or the full premium for the month is paid by advance credit
payments; and
(iii) The individual is not eligible for the full calendar month
for minimum essential coverage (within the meaning of Sec. 1.36B-2(c))
other than coverage described in section 5000A(f)(1)(C) (relating to
coverage in the individual market).
(2) Premiums paid for a taxpayer. Premiums another person pays for
coverage of the taxpayer, taxpayer's spouse, or dependent are treated
as paid by the taxpayer.
(3) Examples. The following examples illustrate the provisions of
this paragraph (c):
Example 1. (i) Taxpayer M is single with no dependents. In
December 2013, M enrolls in a qualified health plan for 2014 and the
Exchange approves advance credit payments. M pays M's share of the
premiums. On May 15, 2014, M enlists in the U.S. Army and is
eligible immediately for government-sponsored minimum essential
coverage.
(ii) Under paragraph (c)(1) of this section, January through May
2014 are coverage months for M. June through December 2014 are not
coverage months because M is eligible for minimum essential coverage
for those months. Thus, under paragraph (a) of this section, M's
premium assistance credit amount for 2014 is the sum of the premium
assistance amounts for the months January through May.
Example 2. (i) Taxpayer N has one dependent, S. S is eligible
for government-sponsored minimum essential coverage. N is not
eligible for minimum essential coverage. N enrolls in a qualified
health plan for 2014 and the Exchange approves advance credit
payments. On August 1, 2014, S loses eligibility for minimum
essential coverage. N terminates enrollment in the qualified health
plan that covers only N and enrolls in a qualified health plan that
covers N and S for August through December 2014. N pays all premiums
not covered by advance credit payments.
(ii) Under paragraph (c)(1) of this section, January through
December of 2014 are coverage months for N and August through
December are coverage months for N and S. N's premium assistance
credit amount for
[[Page 30391]]
2014 is the sum of the premium assistance amounts for these coverage
months.
Example 3. (i) O and P are the divorced parents of T. Under the
divorce agreement between O and P, T resides with P and P claims T
as a dependent. However, O must pay premiums for health insurance
for T. P enrolls T in a qualified health plan for 2014. O pays the
portion of T's qualified health plan premiums not covered by advance
credit payments.
(ii) Because P claims T as a dependent, P (and not O) may claim
a premium tax credit for coverage for T. See Sec. 1.36B-2(a). Under
paragraph (c)(2) of this section, the premiums that O pays for
coverage for T are treated as paid by P. Thus, the months when T is
covered by a qualified health plan and not eligible for other
minimum essential coverage are coverage months under paragraph
(c)(1) of this section in computing P's premium tax credit under
paragraph (a) of this section.
Example 4. Q, an American Indian, enrolls in a qualified health
plan for 2014. Q's tribe pays the portion of Q's qualified health
plan premiums not covered by advance credit payments. Under
paragraph (c)(2) of this section, the premiums that Q's tribe pays
for Q are treated as paid by Q. Thus, the months when Q is covered
by a qualified health plan and not eligible for other minimum
essential coverage are coverage months under paragraph (c)(1) of
this section in computing Q's premium tax credit under paragraph (a)
of this section.
(d) Premium assistance amount. The premium assistance amount for a
coverage month is the lesser of--
(1) The premiums for the month for one or more qualified health
plans in which a taxpayer or a member of the taxpayer's family enrolls;
or
(2) The excess of the adjusted monthly premium for the applicable
benchmark plan over 1/12 of the product of a taxpayer's household
income and the applicable percentage for the taxable year.
(e) Adjusted monthly premium. The adjusted monthly premium is the
premium an issuer would charge for the applicable benchmark plan to
cover all members of the taxpayer's coverage family, adjusted only for
the age of each member of the coverage family as allowed under section
2701 of the Public Health Service Act (42 U.S.C. 300gg). The adjusted
monthly premium is determined without regard to any premium discount or
rebate under the wellness discount demonstration project under section
2705(d) of the Public Health Service Act (42 U.S.C. 300gg-4(d)) and may
not include any adjustments for tobacco use.
(f) Applicable benchmark plan--(1) In general. Except as otherwise
provided in this paragraph (f), the applicable benchmark plan for each
coverage month is the second lowest cost silver plan (as described in
section 1302(d)(1)(B) of the Affordable Care Act (42 U.S.C.
18022(d)(1)(B))) offered through the Exchange for the rating area where
the taxpayer resides for--
(i) Self-only coverage for a taxpayer--
(A) Who computes tax under section 1(c) (unmarried individuals
other than surviving spouses and heads of household) and is not allowed
a deduction under section 151 for a dependent for the taxable year;
(B) Who purchases only self-only coverage for one individual; or
(C) Whose coverage family includes only one individual; and
(ii) Family coverage for all other taxpayers.
(2) Family coverage. The applicable benchmark plan for family
coverage is the second lowest cost silver plan that applies to the
members of the taxpayer's coverage family (such as a plan covering two
adults if the members of a taxpayer's coverage family are two adults).
(3) Silver level plan not covering a taxpayer's family. If one or
more silver level plans for family coverage offered through an Exchange
do not cover all members of a taxpayer's coverage family under one
policy (for example, because of the relationships within the family),
the premium for the applicable benchmark plan determined under
paragraphs (f)(1) and (f)(2) of this section may be the premium for a
single policy or for more than one policy, whichever is the second
lowest cost silver option.
(4) Family members residing at different locations. [Reserved]
(5) Plan closed to enrollment. A qualified health plan that is not
open to enrollment by a taxpayer or family member at the time the
taxpayer or family member enrolls in a qualified health plan is
disregarded in determining the applicable benchmark plan.
(6) Benchmark plan terminates or closes to enrollment during the
year. A qualified health plan that is the applicable benchmark plan
under this paragraph (f) for a taxpayer does not cease to be the
applicable benchmark plan solely because the plan or a lower cost plan
terminates or closes to enrollment during the taxable year.
(7) Examples. The following examples illustrate the rules of this
paragraph (f). Unless otherwise stated, in each example the plans are
open to enrollment to a taxpayer or family member at the time of
enrollment and are offered through the Exchange for the rating area
where the taxpayer resides:
Example 1. Single taxpayer enrolls. Taxpayer M is single, has no
dependents and enrolls in a qualified health plan. Under paragraph
(f)(1)(i) of this section, M's applicable benchmark plan is the
second lowest cost silver plan providing self-only coverage for M.
Example 2. Family enrolls. The facts are the same as in Example
1, except that M, her spouse N, and their dependent enroll in a
qualified health plan. Under paragraphs (f)(1)(ii) and (f)(2) of
this section, M's and N's applicable benchmark plan is the second
lowest cost silver plan covering M, N, and their dependent.
Example 3. Single taxpayer enrolls with nondependent. Taxpayer O
is single and resides with his daughter, K, but may not claim K as a
dependent. O purchases family coverage for himself and K. Under
paragraphs (f)(1)(i)(A) and (f)(1)(i)(C) of this section, O's
applicable benchmark plan is the second lowest cost silver plan
providing self-only coverage for O. However, K may qualify for a
premium tax credit if K is otherwise eligible. See paragraph (h) of
this section.
Example 4. Single taxpayer enrolls with dependent and
nondependent. The facts are the same as in Example 3, except that O
also resides with his teenage son, L, and claims L as a dependent. O
purchases family coverage for himself, K, and L. Under paragraphs
(f)(1)(ii) and (f)(2) of this section, O's applicable benchmark plan
is the second lowest cost silver plan covering O and L.
Example 5. Children only enroll. The facts are the same as in
Example 4, except that O enrolls only K and L in the coverage. Under
paragraph (f)(1)(i)(C) of this section, O's applicable benchmark
plan is the second lowest cost silver plan providing self-only
coverage for L.
Example 6. Applicable benchmark plan unrelated to coverage
purchased. Taxpayers P and Q, who are married, reside with Q's two
teenage daughters, M and N, whom they claim as dependents. P and Q
purchase self-only coverage for P and family coverage for Q, M, and
N. Under paragraphs (f)(1)(ii) and (f)(2) of this section, P's and
Q's applicable benchmark plan is the second lowest cost silver plan
covering P, Q, M, and N.
Example 7. Change in coverage family. Taxpayer R is single and
has no dependents when she enrolls in a qualified health plan for
2014. On August 1, 2014, R has a child, O, whom she claims as a
dependent for 2014. R enrolls in a qualified health plan covering R
and O effective August 1. Under paragraph (f)(1)(i) of this section,
R's applicable benchmark plan for January through July is the second
lowest cost silver plan providing self-only coverage for R. Under
paragraphs (f)(1)(ii) and (f)(2) of this section, R's applicable
benchmark plan for the months August through December is the second
lowest cost silver plan covering R and O.
Example 8. Minimum essential coverage for some coverage months.
Taxpayer S claims his daughter, P, as a dependent. S and P enroll in
a qualified health plan for 2014. S, but not P, is eligible for
government-sponsored minimum essential coverage for September to
December 2014. Thus, under paragraph (c)(1)(iii) of this section,
January through December are coverage months for P and January
through August are coverage months for S. Because, under paragraphs
(d) and (f)(1) of this section, the premium assistance amount for a
coverage month is
[[Page 30392]]
computed based on the applicable benchmark plan for that coverage
month, S's applicable benchmark plan for January through August is
the second lowest cost silver plan under paragraphs (f)(1)(ii) and
(f)(2) of this section covering S and P. Under paragraph
(f)(1)(i)(C) of this section, S's applicable benchmark plan for
September through December is the second lowest cost silver plan
providing self-only coverage for P.
Example 9. Family member eligible for minimum essential coverage
for the taxable year. The facts are the same as in Example 8, except
that S is not eligible for government-sponsored minimum essential
coverage for any months and P is eligible for government-sponsored
minimum essential coverage for the entire year. Under paragraph
(f)(1)(i)(C) of this section, S's applicable benchmark plan is the
second lowest cost silver plan providing self-only coverage for S.
Example 10. Qualified health plans not covering certain
families. (i) Taxpayers V and W are married and live with W's
mother, K, whom they claim as a dependent. The Exchange for their
rating area offers self-only and family coverage at the silver level
through Issuers A, B, and C, who each offer only one silver level
plan. Issuers A and B respectively charge V and W a monthly premium
of $900 and $700 for family coverage, but do not allow individuals
to enroll a parent in family coverage. Issuers A and B respectively
charge $600 and $400 for self-only coverage for K. Issuer C offers a
qualified health plan that provides family coverage for V, W, and K
under one policy for a $1,200 monthly premium. Thus, the Exchange
offers the following silver level options for covering V's and W's
coverage family:
Issuer A: $1,500 for premiums for two policies ($900 for V and
W, $600 for K)
Issuer B: $1,100 for premiums for two policies ($700 for V and
W, $400 for K)
Issuer C: $1,200 for premiums for one policy ($1,200 for V, W,
and K)
(ii) Because some silver level qualified health plans for family
coverage offered on the Exchange do not cover all members of their
coverage family under one policy, under paragraph (f)(3) of this
section, the premium for V's and W's applicable benchmark plan may
be the premium for a single policy or for more than one policy. The
coverage offered by Issuer C is the second lowest cost silver level
option for covering V's and W's family. The premium for their
applicable benchmark plan is the premium for the Issuer C coverage.
Example 11. (i) The facts are the same as in Example 10, except
that Issuer B covers V, W, and K under one policy for a premium of
$1,100, and Issuer C does not allow individuals to enroll parents in
family coverage. Issuer C charges a monthly premium of $700 for
family coverage for V and W and a monthly premium of $500 for self-
only coverage for K. Thus, the Exchange offers the following silver
level options for covering V's and W's coverage family:
Issuer A: $1,500 for premiums for two policies ($900 for V and
W, $600 for K)
Issuer B: $1,100 for premiums for one policy ($1,100 for V, W,
and K)
Issuer C: $1,200 for premiums for two policies ($700 for V and
W, $500 for K)
(ii) The coverage offered by Issuer C is the second lowest cost
silver level option for covering V's and W's family. The premium for
their applicable benchmark plan is the premiums for the two policies
available through Issuer C.
Example 12. Family members residing in different locations.
[Reserved]
Example 13. Qualified health plan closed to enrollment. Taxpayer
Y has two dependents, R and S. Y, R, and S enroll in a qualified
health plan. The Exchange for the rating area where the family
resides offers silver level plans J, K, L, and M, which are the
first, second, third, and fourth lowest cost silver plans covering
Y's family. When Y's family enrolls, Plan J is closed to enrollment.
Under paragraph (f)(5) of this section, Plan J is disregarded in
determining Y's applicable benchmark plan, and Plan L is Y's
applicable benchmark plan.
Example 14. Benchmark plan closes to new enrollees during the
year. (i) Taxpayers X, Y, and Z each have coverage families
consisting of two adults. In the rating area where X, Y, and Z
reside, Plan 2 is the second lowest cost silver plan and Plan 3 is
the third lowest cost silver plan covering the two adults in each
coverage family offered through the Exchange. The X and Y families
each enroll in a qualified health plan that is not the applicable
benchmark plan (Plan 4) in November during the annual open
enrollment period. Plan 2 closes to new enrollees the following
June. Thus, on July 1, Plan 3 is the second lowest cost silver plan
available to new enrollees through the Exchange. The Z family
enrolls in a qualified health plan in July.
(ii) Under paragraphs (f)(1), (f)(2), and (f)(6) of this
section, the applicable benchmark plan is Plan 2 for X and Y for all
coverage months during the year. The applicable benchmark plan for Z
is Plan 3, because Plan 2 is not open to enrollment through the
Exchange when the Z family enrolls.
Example 15. Benchmark plan terminates for all enrollees during
the year. The facts are the same as in Example 14, except that Plan
2 terminates for all enrollees on June 30. Under paragraphs (f)(1),
(f)(2), and (f)(6) of this section, Plan 2 is the applicable
benchmark plan for X and Y for all coverage months during the year,
and Plan 3 is the applicable benchmark plan for Z.
(g) Applicable percentage--(1) In general. The applicable
percentage multiplied by a taxpayer's household income determines the
taxpayer's required share of premiums for the benchmark plan. This
required share is subtracted from the adjusted monthly premium for the
applicable benchmark plan when computing the premium assistance amount.
The applicable percentage is computed by first determining the
percentage that the taxpayer's household income bears to the Federal
poverty line for the taxpayer's family size. The resulting Federal
poverty line percentage is then compared to the income categories
described in the table in paragraph (g)(2) of this section (or
successor tables). An applicable percentage within an income category
increases on a sliding scale in a linear manner and is rounded to the
nearest one-hundredth of one percent. The applicable percentages in the
table may be adjusted in published guidance, see Sec. 601.601(d)(2) of
this chapter, for taxable years beginning after December 31, 2014, to
reflect rates of premium growth relative to growth in income and, for
taxable years beginning after December 31, 2018, to reflect rates of
premium growth relative to growth in the consumer price index.
(2) Applicable percentage table.
------------------------------------------------------------------------
Household income percentage of Federal Initial Final
poverty line percentage percentage
------------------------------------------------------------------------
Less than 133%.......................... 2.0 2.0
At least 133% but less than 150%........ 3.0 4.0
At least 150% but less than 200%........ 4.0 6.3
At least 200% but less than 250%........ 6.3 8.05
At least 250% but less than 300%........ 8.05 9.5
At least 300% but less than 400%........ 9.5 9.5
------------------------------------------------------------------------
(3) Examples. The following examples illustrate the rules of this
paragraph (g):
Example 1. A's household income is 275 percent of the federal
poverty line for A's family size for that taxable year. In the table
in paragraph (g)(2) of this section, the initial percentage for a
taxpayer with household income of 250 to 300 percent of the Federal
poverty line is 8.05 and the final percentage is 9.5. A's Federal
poverty line percentage of
[[Page 30393]]
275 percent is halfway between 250 percent and 300 percent. Thus,
rounded to the nearest one-hundredth of one percent, A's applicable
percentage is 8.78, which is halfway between the initial percentage
of 8.05 and the final percentage of 9.5.
Example 2. (i) B's household income is 210 percent of the
Federal poverty line for B's family size. In the table in paragraph
(g)(2) of this section, the initial percentage for a taxpayer with
household income of 200 to 250 percent of the Federal poverty line
is 6.3 and the final percentage is 8.05. B's applicable percentage
is 6.65, computed as follows.
(ii) Determine the excess of B's Federal poverty line percentage
(210) over the initial household income percentage in B's range
(200), which is 10. Determine the difference between the initial
household income percentage in the taxpayer's range (200) and the
ending household income percentage in the taxpayer's range (250),
which is 50. Divide the first amount by the second amount:
210-200 = 10
250-200 = 50
10/50 = .20.
(iii) Compute the difference between the initial premium
percentage (6.3) and the second premium percentage (8.05) in the
taxpayer's range; 8.05-6.3 = 1.75.
(iv) Multiply the amount in the first calculation (.20) by the
amount in the second calculation (1.75) and add the product (.35) to
the initial premium percentage in B's range (6.3), resulting in B's
applicable percentage of 6.65:
.20 x 1.75 = .35
6.3 + .35 = 6.65.
(h) Plan covering more than one family--(1) In general. If a
qualified health plan covers more than one family under a single
policy, each applicable taxpayer covered by the plan may claim a
premium tax credit, if otherwise allowable. Each taxpayer computes the
credit using that taxpayer's applicable percentage, household income,
and the benchmark plan that applies to the taxpayer under paragraph (f)
of this section. In determining whether the amount computed under
paragraph (d)(1) of this section (the premiums for the qualified health
plan in which the taxpayer enrolls) is less than the amount computed
under paragraph (d)(2) of this section (the benchmark plan premium
minus the product of household income and the applicable percentage),
the premiums paid are allocated to each taxpayer in proportion to the
premiums for each taxpayer's applicable benchmark plan.
(2) Example. The following example illustrates the rules of this
paragraph (h):
Example. (i) Taxpayers A and B enroll in a single policy under a
qualified health plan. B is A's 25-year old child who is not A's
dependent. B has no dependents. The plan covers A, B, and A's two
additional children who are A's dependents. The premium for the plan
in which A and B enroll is $15,000. The premium for the second
lowest cost silver family plan covering only A and A's dependents is
$12,000 and the premium for the second lowest cost silver plan
providing self-only coverage to B is $6,000. A and B are applicable
taxpayers and otherwise eligible to claim the premium tax credit.
(ii) Under paragraph (h)(1) of this section, both A and B may
claim premium tax credits. A computes her credit using her household
income, a family size of three, and a benchmark plan premium of
$12,000. B computes his credit using his household income, a family
size of one, and a benchmark plan premium of $6,000.
(iii) In determining whether the amount in paragraph (d)(1) of
this section (the premiums for the qualified health plan A and B
purchase) is less than the amount in paragraph (d)(2) of this
section (the benchmark plan premium minus the product of household
income and the applicable percentage), the $15,000 premiums paid are
allocated to A and B in proportion to the premiums for their
applicable benchmark plans. Thus, the portion of the premium
allocated to A is $10,000 ($15,000 x $12,000/$18,000) and the
portion allocated to B is $5,000 ($15,000 x $6,000/$18,000).
(i) [Reserved]
(j) Additional benefits--(1) In general. If a qualified health plan
offers benefits in addition to the essential health benefits a
qualified health plan must provide under section 1302 of the Affordable
Care Act (42 U.S.C. 18022), or a State requires a qualified health plan
to cover benefits in addition to these essential health benefits, the
portion of the premium for the plan properly allocable to the
additional benefits is excluded from the monthly premiums under
paragraph (d)(1) or (d)(2) of this section.
(2) Method of allocation. The portion of the premium properly
allocable to additional benefits is determined under guidance issued by
the Secretary of Health and Human Services. See section 36B(b)(3)(D).
(3) Examples. The following examples illustrate the rules of this
paragraph (j):
Example 1. (i) Taxpayer B enrolls in a qualified health plan
that provides benefits in addition to the essential health benefits
the plan must provide (additional benefits). The monthly premium for
the plan in which B enrolls is $385 (Amount 1), of which $35 is
allocable to the additional benefits. The premium for B's applicable
benchmark plan is $440, of which $40 is allocable to the additional
benefits. The excess of the premium for B's applicable benchmark
plan over B's $60 contribution amount (which is the product of B's
household income and the applicable percentage) is $380 per month
(Amount 2).
(ii) Under this paragraph (j), the premium for the qualified
health plan in which B enrolls and the applicable benchmark premium
each is reduced by the portion of the premium that is allocable to
the additional benefits provided under that plan. Therefore, Amount
1 is reduced to $350 ($385-$35), the premium for B's applicable
benchmark plan is reduced to $400 ($440-$40), and Amount 2 is
reduced to $340 ($400 less $60). B's premium assistance amount for a
coverage month is $340, the lesser of Amount 1 and Amount 2.
Example 2. (i) The facts are the same as in Example 1, except
that B's applicable benchmark plan provides no benefits in addition
to the essential health benefits required to be provided by the
plan. Thus, under paragraph (j) of this section, only the amount of
the monthly premium for the plan in which B enrolls is reduced by
the portion of the premium that is allocable to the additional
benefits provided under that plan, and Amount 1 is $350 ($385-$35).
The premium for B's applicable benchmark plan is not reduced under
this paragraph (j), and Amount 2 is $380 ($440-$60). B's premium
assistance amount for a coverage month is $350, the lesser of these
two amounts.
(k) Pediatric dental coverage--(1) In general. For purposes of
determining the amount of the monthly premium a taxpayer pays for
coverage under paragraph (d)(1) of this section, if an individual
enrolls in both a qualified health plan and a plan described in section
1311(d)(2)(B)(ii) of the Affordable Care Act (42 U.S.C.
13031(d)(2)(B)(ii)) (a stand-alone dental plan), the portion of the
premium for the stand-alone dental plan that is properly allocable to
pediatric dental benefits that are essential benefits required to be
provided by a qualified health plan is treated as a premium payable for
the individual's qualified health plan.
(2) Method of allocation. The portion of the premium for a stand-
alone dental plan properly allocable to pediatric dental benefits is
determined under guidance issued by the Secretary of Health and Human
Services.
(3) Example. The following example illustrates the rules of this
paragraph (k):
Example. (i) Taxpayer C and C's dependent, R, enroll in a
qualified health plan. The premium for the plan in which C and R
enroll is $7,200 ($600/month) (Amount 1). The plan does not provide
dental coverage. C also enrolls in a stand-alone dental plan
covering C and R. The portion of the premium for the dental plan
allocable to pediatric dental benefits that are essential health
benefits is $240 ($20 per month). The excess of the premium for C's
applicable benchmark plan over C's contribution amount (the product
of C's household income and the applicable percentage) is $7,260
($605/month) (Amount 2).
(ii) Under this paragraph (k), the amount C pays for premiums
(Amount 1) for purposes of computing the premium assistance amount
is increased by the portion of the premium for the stand-alone
dental plan allocable to pediatric dental benefits that are
essential
[[Page 30394]]
health benefits. Thus, the amount of the premiums for the plan in
which C enrolls is treated as $620 for purposes of computing the
amount of the premium tax credit. C's premium assistance amount for
each coverage month is $605 (Amount 2), the lesser of Amount 1
(increased by the premiums allocable to pediatric dental benefits)
and Amount 2.
(l) Families including individuals not lawfully present--(1) In
general. If one or more individuals for whom a taxpayer is allowed a
deduction under section 151 are not lawfully present (within the
meaning of Sec. 1.36B-1(g)), the percentage a taxpayer's household
income bears to the Federal poverty line for the taxpayer's family size
for purposes of determining the applicable percentage under paragraph
(g) of this section is determined by excluding individuals who are not
lawfully present from family size and by determining household income
in accordance with paragraph (l)(2) of this section.
(2) Revised household income computation--(i) Statutory method. For
purposes of paragraph (l)(1) of this section, household income is equal
to the product of the taxpayer's household income (determined without
regard to this paragraph (l)(2)) and a fraction--
(A) The numerator of which is the Federal poverty line for the
taxpayer's family size determined by excluding individuals who are not
lawfully present; and
(B) The denominator of which is the Federal poverty line for the
taxpayer's family size determined by including individuals who are not
lawfully present.
(ii) Comparable method. The Commissioner may describe a comparable
method in additional published guidance, see Sec. 601.601(d)(2) of
this chapter.
Sec. 1.36B-4 Reconciling the premium tax credit with advance credit
payments.
(a) Reconciliation--(1) Coordination of premium tax credit with
advance credit payments--(i) In general. A taxpayer must reconcile the
amount of credit allowed under section 36B with advance credit payments
on the taxpayer's income tax return for a taxable year. A taxpayer
whose premium tax credit for the taxable year exceeds the taxpayer's
advance credit payments may receive the excess as an income tax refund.
A taxpayer whose advance credit payments for the taxable year exceed
the taxpayer's premium tax credit owes the excess as an additional
income tax liability.
(ii) Responsibility for advance credit payments. A taxpayer must
reconcile all advance credit payments for coverage of any member of the
taxpayer's family. If advance credit payments are made for coverage of
an individual for whom no taxpayer claims a personal exemption
deduction, the taxpayer who attests to the Exchange to the intention to
claim a personal exemption deduction for the individual as part of the
determination that the taxpayer is eligible for advance credit payments
for coverage of the individual must reconcile the advance credit
payments.
(iii) Advance credit payment for a month in which an issuer does
not provide coverage. For purposes of reconciliation, a taxpayer does
not have an advance credit payment for a month if the issuer of the
qualified health plan in which the taxpayer or a family member is
enrolled does not provide coverage for that month.
(2) Credit computation. The premium assistance credit amount is
computed on the taxpayer's return using the taxpayer's household income
and family size for the taxable year. Thus, the taxpayer's contribution
amount (household income for the taxable year times the applicable
percentage) is determined using the taxpayer's household income and
family size at the end of the taxable year. The applicable benchmark
plan for each coverage month is determined under Sec. 1.36B-3(f).
(3) Limitation on additional tax--(i) In general. The additional
tax imposed under paragraph (a)(1) of this section on a taxpayer whose
household income is less than 400 percent of the Federal poverty line
is limited to the amounts provided in the table in paragraph (a)(3)(ii)
of this section (or successor tables). For taxable years beginning
after December 31, 2014, the limitation amounts may be adjusted in
published guidance, see Sec. 601.601(d)(2) of this chapter, to reflect
changes in the consumer price index.
(ii) Additional tax limitation table.
----------------------------------------------------------------------------------------------------------------
Limitation amount for
taxpayers whose tax is Limitation amount for
Household income percentage of Federal poverty line determined under all other taxpayers
section 1(c)
----------------------------------------------------------------------------------------------------------------
Less than 200%................................................ $300 $600
At least 200% but less than 300%.............................. 750 1,500
At least 300% but less than 400%.............................. 1,250 2,500
----------------------------------------------------------------------------------------------------------------
(4) Examples. The following examples illustrate the rules of this
paragraph (a). In each example the taxpayer enrolls in a higher cost
qualified health plan than the applicable benchmark plan:
Example 1. Household income increases. (i) Taxpayer A is single
and has no dependents. The Exchange for A's rating area projects A's
2014 household income to be $27,925 (250 percent of the Federal
poverty line for a family of one, applicable percentage 8.05). A
enrolls in a qualified health plan. The annual premium for the
applicable benchmark plan is $5,200. A's advance credit payments are
$2,952, computed as follows: benchmark plan premium of $5,200 less
contribution amount of $2,248 (projected household income of $27,925
x .0805) = $2,952.
(ii) A's household income for 2014 is $33,622, which is 301
percent of the Federal poverty line for a family of one (applicable
percentage 9.5). Consequently, A's premium tax credit for 2014 is
$2,006 (benchmark plan premium of $5,200 less contribution amount of
$3,194 (household income of $33,622 x .095)). Because A's advance
credit payments for 2014 are $2,952 and A's 2014 credit is $2,006, A
has excess advance payments of $946. Under paragraph (a)(1) of this
section, A's tax liability for 2014 is increased by $946. Because
A's household income is between 300 percent and 400 percent of the
Federal poverty line, if A's excess advance payments exceeded
$1,250, under the limitation of paragraph (a)(3) of this section,
A's additional tax liability would be limited to that amount.
Example 2. Household income increases, repayment limitation
applies. The facts are the same as in Example 1, except that A's
household income for 2014 is $43,560 (390 percent of the Federal
poverty line for a family of one, applicable percentage 9.5).
Consequently, A's premium tax credit for 2014 is $1,062 ($5,200
benchmark plan premium less contribution amount of $4,138 (household
income of $43,560 x .095)). A's advance credit payments for 2014 are
$2,952; therefore, A has excess advance payments of $1,890. Because
A's household income is between 300 percent and 400 percent of the
Federal poverty line, A's additional tax liability for the taxable
year is $1,250 under the repayment limitation of paragraph (a)(3) of
this section.
Example 3. Household income decreases. The facts are the same as
in Example 1, except that A's actual household income for 2014 is
$22,340 (200 percent of the Federal poverty line for a family of
one, applicable
[[Page 30395]]
percentage 6.3). Consequently, A's premium tax credit for 2014 is
$3,793 ($5,200 benchmark plan premium less contribution amount of
$1,407 (household income of $22,340 x .063)). Because A's advance
credit payments for 2014 are $2,952, A is allowed an additional
credit of $841 ($3,793 less $2,952).
Example 4. Family size decreases. (i) Taxpayers B and C are
married and have two children, K and L (ages 17 and 20), whom they
claim as their dependents in 2013. The Exchange for their rating
area projects their 2014 household income to be $63,388 (275 percent
of the Federal poverty line for a family of four, applicable
percentage 8.78). B and C enroll in a qualified health plan for 2014
that covers the four family members. The annual premium for the
applicable benchmark plan is $14,100. B's and C's advance credit
payments for 2014 are $8,535, computed as follows: benchmark plan
premium of $14,100 less contribution amount of $5,565 (projected
household income of $63,388 x .0878) = $8,535.
(ii) In 2014, B and C do not claim L as their dependent.
Consequently, B's and C's family size for 2014 is three, their
household income of $63,388 is 332 percent of the Federal poverty
line for a family of three (applicable percentage 9.5), and the
annual premium for their applicable benchmark plan is $12,000. Their
premium tax credit for 2014 is $5,978 ($12,000 benchmark plan
premium less $6,022 contribution amount (household income of $63,388
x .095)). Because B's and C's advance credit payments for 2014 are
$8,535 and their 2014 credit is $5,978, B and C have excess advance
payments of $2,557. B's and C's additional tax liability for 2014
under paragraph (a)(1) of this section, however, is limited to
$2,500 under paragraph (a)(3) of this section.
Example 5. Repayment limitation does not apply. (i) Taxpayer D
is single and has no dependents. The Exchange for D's rating area
approves advance credit payments for D based on 2014 household
income of $39,095 (350 percent of the Federal poverty line for a
family of one, applicable percentage 9.5). D enrolls in a qualified
health plan. The annual premium for the applicable benchmark plan is
$5,200. D's advance credit payments are $1,486, computed as follows:
benchmark plan premium of $5,200 less contribution amount of $3,714
(projected household income of $39,095 x .095) = $1,486.
(ii) D's actual household income for 2014 is $44,903, which is
402 percent of the Federal poverty line for a family of one. D is
not an applicable taxpayer and may not claim a premium tax credit.
Additionally, the repayment limitation of paragraph (a)(3) of this
section does not apply. Consequently, D has excess advance payments
of $1,486 (the total amount of the advance credit payments in 2014).
Under paragraph (a)(1) of this section, D's tax liability for 2014
is increased by $1,486.
Example 6. Coverage for less than a full taxable year. (i)
Taxpayer F is single and has no dependents. In November 2013, the
Exchange for F's rating area projects F's 2014 household income to
be $27,925 (250 percent of the Federal poverty line for a family of
one, applicable percentage 8.05). F enrolls in a qualified health
plan. The annual premium for the applicable benchmark plan is
$5,200. F's monthly advance credit payment is $246, computed as
follows: benchmark plan premium of $5,200 less contribution amount
of $2,248 (projected household income of $27,925 x .0805) = $2,952;
$2,952/12 = $246.
(ii) F begins a new job in August 2014 and is eligible for
employer-sponsored minimum essential coverage for the period
September through December 2014. F discontinues her Exchange
coverage effective November 1, 2014. F's household income for 2014
is $28,707 (257 percent of the Federal poverty line for a family
size of one, applicable percentage 8.25).
(iii) Under Sec. 1.36B-3(a), F's premium assistance credit
amount is the sum of the premium assistance amounts for the coverage
months. Under Sec. 1.36B-3(c)(1)(iii), a month in which an
individual is eligible for minimum essential coverage other than
coverage in the individual market is not a coverage month. Because F
is eligible for employer-sponsored minimum essential coverage as of
September 1, only the months January through August of 2014 are
coverage months.
(iv) If F had 12 coverage months in 2014, F's premium tax credit
would be $2,832 (benchmark plan premium of $5,200 less contribution
amount of $2,368 (household income of $28,707 x .0825)). Because F
has only eight coverage months in 2014, F's credit is $1,888
($2,832/12 x 8). Because F does not discontinue her Exchange
coverage until November 1, 2014, F's advance credit payments for
2014 are $2,460 ($246 x 10). Consequently, F has excess advance
payments of $572 ($2,460 less $1,888) and F's tax liability for 2014
is increased by $572 under paragraph (a)(1) of this section.
Example 7. Changes in coverage months and applicable benchmark
plan. (i) Taxpayer E claims one dependent, F. E is eligible for
government-sponsored minimum essential coverage. E enrolls F in a
qualified health plan for 2014. The Exchange for E's rating area
projects E's 2014 household income to be $30,260 (200 percent of the
Federal poverty line for a family of two, applicable percentage
6.3). The annual premium for E's applicable benchmark plan is
$5,200. E's monthly advance credit payment is $275, computed as
follows: benchmark plan premium of $5,200 less contribution amount
of $1,906 (projected household income of $30,260 x .063) = $3,294;
$3,294/12 = $275.
(ii) On August 1, 2014, E loses her eligibility for government-
sponsored minimum essential coverage. E enrolls in the qualified
health plan that covers F for August through December 2014. The
annual premium for the applicable benchmark plan is $10,000. The
Exchange computes E's monthly advance credit payments for the period
September through December to be $675 as follows: benchmark plan
premium of $10,000 less contribution amount of $1,906 (projected
household income of $30,260 x .063) = $8,094; $8,094/12 = $675. E's
household income for 2014 is $28,747 (190 percent of the Federal
poverty line, applicable percentage 5.84).
(iii) Under Sec. 1.36B-3(c)(1), January through July of 2014
are coverage months for F and August through December are coverage
months for E and F. Under paragraph (a)(2) of this section, E must
compute her premium tax credit using the premium for the applicable
benchmark plan for each coverage month. E's premium assistance
credit amount for 2014 is the sum of the premium assistance amounts
for all coverage months. E reconciles her premium tax credit with
advance credit payments as follows:
Advance credit payments (Jan. to July)....... $1,925 ($275 x 7)
Advance credit payments (Aug. to Dec.)....... 3,375 ($675 x 5)
----------------
Total advance credit payments............ 5,300
Benchmark plan premium (Jan. to July)........ 3,033 (($5,200/12) x 7)
Benchmark plan premium (Aug. to Dec.)........ 4,167 (($10,000/12) x 5)
----------------
Total benchmark plan premium............. 7,200
Contribution amount (taxable year household 1,679 ($28,747 x .0584)
income x applicable percentage).
----------------
Credit (total benchmark plan premium less 5,521
contribution amount).
(iv) E's advance credit payments for 2014 are $5,300. E's
premium tax credit is $5,521. Thus, E is allowed an additional
credit of $221.
Example 8. Part-year coverage and changes in coverage months and
applicable benchmark plan. (i) The facts are the same as in Example
7, except that F is eligible for government-sponsored minimum
essential coverage for January and February 2014, and E enrolls F in
a qualified health plan beginning in March 2014. Thus, March through
July are coverage months for F and August through December are
coverage months for E and F.
(ii) E reconciles her premium tax credit with advance credit
payments as follows:
[[Page 30396]]
Advance credit payments (March to July)...... $1,375 ($275 x 5)
Advance credit payments (Aug. to Dec.)....... 3,375 ($675 x 5)
----------------
Total advance credit payments............ 4,750
Benchmark plan premium (March to July)....... 2,167 (($5,200/12) x 5)
Benchmark plan premium (Aug. to Dec.)........ 4,167 (($10,000/12) x 5)
----------------
Total benchmark plan premium............. 6,334
Contribution amount for 10 coverage months 1,399 ($28,747 x .0584 x 10/12)
(taxable year household income x applicable
percentage x 10/12).
----------------
Credit (total benchmark plan premium less 4,935
contribution amount).
(iii) E's advance credit payments for 2014 are $4,750. E's
premium tax credit is $4,935. Thus, E is allowed an additional
credit of $185.
Example 9. Advance credit payments for months an issuer does not
provide coverage. (i) Taxpayer F enrolls in a qualified health plan
for 2014 and the Exchange approves advance credit payments. F pays
the portion of the premium not covered by advance credit payments
for January through April of 2014 but fails to make payments in May,
June, and July. As a result, the issuer of the qualified health plan
initiates the 3-month grace period under section
1412(c)(2)(B)(iv)(II) of the Affordable Care Act and 45 CFR
156.270(d). During the grace period the issuer continues to receive
advance credit payments on behalf of F. On July 1 the issuer
rescinds F's coverage retroactive to the end of the first month of
the grace period, May 31.
(ii) Under paragraph (a)(1)(iii) of this section, F does not
take into account advance credit payments for June or July of 2014
when reconciling the premium tax credit with advance credit payments
under paragraph (a)(1) of this section.
(b) Changes in filing status--(1) In general. Except as provided in
paragraph (b)(2) or (b)(3) of this section, a taxpayer whose marital
status changes during the taxable year computes the premium tax credit
by using the applicable benchmark plan or plans for the taxpayer's
marital status as of the first day of each coverage month. The
taxpayer's contribution amount (household income for the taxable year
times the applicable percentage) is determined using the taxpayer's
household income and family size at the end of the taxable year.
(2) Taxpayers who marry during the taxable year--(i) In general.
Taxpayers who marry during and file a joint return for the taxable year
may compute the additional tax imposed under paragraph (a)(1) of this
section under paragraph (b)(2)(ii) of this section. Only taxpayers who
are unmarried at the beginning of the taxable year and are married
(within the meaning of section 7703) at the end of the taxable year, at
least one of whom receives advance credit payments, may use this
alternative computation.
(ii) Alternative computation of additional tax liability--(A) In
general. The additional tax liability determined under this paragraph
(b)(2)(ii) is equal to the excess of the taxpayers' advance credit
payments for the taxable year over the amount of the alternative
marriage-year credit. The alternative marriage-year credit is the sum
of both taxpayers' alternative premium assistance amounts for the pre-
marriage months and the premium assistance amounts for the marriage
months. This paragraph (b)(2)(ii) may not be used to increase the
additional premium tax credit computed under paragraph (a)(1)(i) of
this section.
(B) Alternative premium assistance amounts for pre-marriage months.
Taxpayers compute the alternative premium assistance amounts for each
taxpayer for each full or partial month the taxpayers are unmarried as
described in paragraph (a)(2) of this section, except that each
taxpayer treats the amount of household income as one-half of the
actual household income for the taxable year and treats family size as
the number of individuals in the taxpayer's family prior to the
marriage. The taxpayers may include a dependent of the taxpayers for
the taxable year in either taxpayer's family size for the pre-marriage
months.
(C) Premium assistance amounts for marriage months. Taxpayers
compute the premium assistance amounts for each full month the
taxpayers are married as described in paragraph (a)(2) of this section.
(3) Taxpayers not married to each other at the end of the taxable
year. Taxpayers who are married (within the meaning of section 7703) to
each other during a taxable year but are not married to each other on
the last day of the taxable year, and who are enrolled in the same
qualified health plan at any time during the taxable year, must
allocate the premium for the applicable benchmark plan, the premium for
the plan in which the taxpayers enroll, and the advance credit payments
for the period the taxpayers are married during the taxable year. The
taxpayers may allocate these items to each former spouse in any
proportion but must allocate all items in the same proportion. If the
taxpayers cannot agree on an allocation, 50 percent of the premium for
the applicable benchmark plan, the premiums for the plan in which the
taxpayers enroll, and the advance credit payments for the married
period are allocated to each taxpayer. If a plan covers only one of
these taxpayers for any period during a taxable year, the amounts for
that period are allocated entirely to that taxpayer.
(4) Married taxpayers filing separate returns. The premium tax
credit is allowed to married (within the meaning of section 7703)
taxpayers only if they file joint returns. See Sec. 1.36B-2(b)(2). A
married taxpayer who receives advance credit payments and files an
income tax return as married filing separately has received excess
advance payments. Taxpayers who receive advance credit payments as
married taxpayers and do not file a joint return must allocate the
advance credit payments equally to each taxpayer. The repayment
limitation described in paragraph (a)(3) of this section applies to
each taxpayer based on the household income and family size reported on
that taxpayer's return.
(5) Taxpayers filing returns as head of household and married
filing separately. If taxpayers enroll in one qualified health plan and
receive advance credit payments based on a filing status of married
filing a joint tax return, and one taxpayer properly files a tax return
as head of household and the other taxpayer files a tax return as
married filing separately for that taxable year, advance credit
payments are allocated to each taxpayer equally for any period the
taxpayers are enrolled in the same qualified health plan.
(6) Examples. The following examples illustrate the provisions of
this paragraph (b). In each example the taxpayer enrolls in a higher
cost qualified health plan than the applicable benchmark plan:
Example 1. Taxpayers marry during the taxable year, general rule
for computing additional tax. (i) P is a single taxpayer with no
dependents. In 2013 the Exchange for the rating area where P resides
determines that P's 2014 household income will be $40,000 (358
percent of the Federal poverty line,
[[Page 30397]]
applicable percentage 9.5). P enrolls in a qualified health plan.
The premium for the applicable benchmark plan is $5,200. P's monthly
advance credit payment is $117, computed as follows: $5,200
benchmark plan premium minus contribution amount of $3,800 ($40,000
x .095) equals $1,400 (total advance credit payment); $1,400/12 =
$117.
(ii) Q is a single taxpayer with two dependents. In 2013 the
Exchange for the rating area where Q resides determines that Q's
2014 household income will be $35,000 (183 percent of the Federal
poverty line, applicable percentage 5.52). Q enrolls in a qualified
health plan. The premium for the applicable benchmark plan is
$10,000. Q's monthly advance credit payment is $672, computed as
follows: $10,000 benchmark plan premium minus contribution amount of
$1,932 ($35,000 x .0552) equals $8,068 (total advance credit);
$8,068/12 = $672.
(iii) P and Q marry on July 17, 2014 and enroll in a single
policy for a qualified health plan covering four family members,
effective August 1, 2014. The premium for the applicable benchmark
plan is $14,000. Based on household income of $75,000 and a family
size of four (325 percent of the Federal poverty line, applicable
percentage 9.5), the Exchange approves advance credit payments of
$573 per month, computed as follows: $14,000 benchmark plan premium
minus contribution amount of $7,125 ($75,000 x .095) equals $6,875
(total advance credit); $6,875/12 = $573.
(iv) P and Q file a joint return for 2014 and report $75,000 in
household income and a family size of four. P and Q compute their
credit at reconciliation under paragraph (b)(1) of this section.
They use the premiums for the applicable benchmark plans that apply
for the months married and the months not married, and their
contribution amount is based on their Federal poverty line
percentage at the end of the taxable year. P and Q reconcile their
premium tax credit with advance credit payments as follows:
Advance payments for P (Jan. to July)................... $819
Advance payments for Q (Jan. to July)................... 4,704
Advance payments for P and Q (Aug. to Dec.)............. 2,865
---------------
Total advance payments.............................. 8,388
===============
Benchmark plan premium for P (Jan. to July)............. 3,033
Benchmark plan premium for Q (Jan. to July)............. 5,833
Benchmark plan premium for P and Q (Aug. to Dec.)....... 5,833
---------------
Total benchmark plan premium........................ 14,699
===============
Contribution amount (taxable year household income x 7,125
applicable percentage).................................
---------------
Credit (total benchmark plan premium less 7,574
contribution amount)...............................
Additional tax.......................................... 814
(v) P's and Q's tax liability for 2014 is increased by $814
under paragraph (a)(1) of this section.
Example 2. Taxpayers marry during the taxable year, alternative
computation of additional tax. (i) The facts are the same as in
Example 1, except that P and Q compute their additional tax
liability under paragraph (b)(2)(ii) of this section. P's and Q's
additional tax is the excess of their advance credit payments for
the taxable year ($8,388) over their alternative marriage-year
credit, which is the sum of the alternative premium assistance
amounts for the pre-marriage months and the premium assistance
amounts for the marriage months.
(ii) P and Q compute the alternative marriage-year credit as
follows:
Alternative premium assistance amounts for
pre-marriage months:
Benchmark plan premium for P (Jan. to $3,033 (($5,200/12) x 7)
July).
Contribution amount (\1/2\ taxable year 2,078 ($37,500 x .095 x 7/12)
household income x applicable
percentage) x 7/12).
Alternative premium assistance amount for 955 ($3,033-$2,078)
P's pre-marriage months.
Benchmark plan premium for Q (Jan. to 5,833 (($10,000/12) x 7)
July).
Contribution amount (\1/2\ taxable year 1,339 ($37,500 x .0612 x 7/12)
household income x applicable percentage
x 7/12).
Alternative premium assistance amount for 4,494 ($5,833-$1,339)
Q's pre-marriage months.
Premium assistance amount for marriage
months:
Benchmark plan premium for P and Q (Aug. 5,833 (($14,000/12 x 5)
to Dec.).
Contribution amount (taxable year 2,969 ($75,000 x .095 x 5/12)
household income x applicable percentage
x 5/12).
Premium assistance amount for marriage 2,864 ($5,833-$2,969)
months.
Alternative marriage-year credit (sum of premium assistance amounts
for pre-marriage months and marriage months): $955 + $4,494 + $2,864 =
$8,313.
(iii) P and Q reconcile their premium tax credit with advance
credit payments by determining the excess of their advance credit
payments ($8,388) over their alternative marriage-year credit ($8,313).
P and Q must increase their tax liability by $75 under paragraph (a)(1)
of this section.
Example 3. Taxpayers marry during the taxable year, alternative
computation of additional tax, alternative marriage-year tax credit
exceeds advance credit payments. The facts are the same as in
Example 2, except that the amount of P's and Q's advance credit
payments is $8,301. Thus, their alternative marriage-year credit
($8,313) exceeds the amount of their advance credit payments
($8,301). Under paragraph (b)(2)(ii)(A) of this section, the amount
of additional tax liability and additional tax credit that P and Q
report on their tax return is $0.
Example 4. Taxpayers marry during the taxable year, alternative
computation of additional tax. (i) Taxpayer R is single and has no
dependents. In 2013, the Exchange for the rating area where R
resides determines that R's 2014 household income will be $40,000
(358 percent of the Federal poverty line, applicable percentage
9.5). R enrolls in a qualified health plan. The premium for the
applicable benchmark plan is $5,200. R's monthly advance credit
payment is $117, computed as follows: $5,200 benchmark plan premium
minus contribution amount of $3,800 ($40,000 x .095) = $1,400 (total
advance credit); $1,400/12 = $117.
(ii) Taxpayer S is single with no dependents. In 2013, the
Exchange for the rating area where S resides determines that S's
2014 household income will be $20,000 (179 percent of the Federal
poverty line, applicable percentage 5.33). S enrolls in a qualified
health plan. The premium for the applicable benchmark plan is
$5,200. S's monthly advance credit payment is $345, computed as
follows: $5,200 benchmark plan premium minus contribution amount of
$1,066 ($20,000 x .0533) = $4,134 (total advance credit); $4,134/12
= $345.
(iii) R and S marry in September 2014 and enroll in a single
policy for a qualified health plan covering them both, beginning
October 1, 2014. The premium for the applicable benchmark plan is
$10,000. Based on
[[Page 30398]]
household income of $60,000 and a family size of two (397 percent of
the Federal poverty line, applicable percentage 9.5), R's and S's
monthly advance credit payment is $358, computed as follows: $10,000
benchmark plan premium minus contribution amount of $5,700 ($60,000
x .095) = $4,300; $4,300/12 = $358. R's and S's advance credit
payments for 2014 are $5,232, computed as follows:
Advance payments for R (Jan. to Sept.)....... $1,053 ($117 x 9)
Advance payments for S (Jan. to Sept.)....... 3,105 ($345 x 9)
Advance payments for R and S (Oct. to Dec.).. 1,074 ($358 x 3)
----------------
Total advance payments................... 5,232
(iv) R and S file a joint return for 2014 and report $62,000 in
household income and a family size of two (410 percent of the FPL
for a family of 2). Thus, under Sec. 1.36B-2(b)(2), R and S are not
applicable taxpayers for 2014 and may not claim a premium tax credit
for 2014. However, they compute their additional tax liability under
paragraph (b)(2)(ii) of this section. R's and S's additional tax is
the excess of their advance credit payments for the taxable year
($5,232) over their alternative marriage-year credit, which is the
sum of the alternative premium assistance amounts for the pre-
marriage months and the premium assistance amounts for the marriage
months. In this case, R and S have no premium assistance amounts for
the married months because their household income is over 400
percent of the Federal poverty line for a family of 2.
(v) R and S compute their alternative marriage-year credit as
follows:
Premium assistance amount for pre-marriage
months:
Benchmark plan premium for R (Jan. to $3,900 (($5,200/12) x 9)
Sept.).
Contribution amount ((\1/2\ taxable year 2,053 ($31,000 x .0883 x 9/12)
household income x applicable
percentage) x 9/12).
Premium assistance amount for R's pre- 1,847 ($3,900 - $2,053)
marriage months.
Benchmark plan premium for S (Jan. to 3,900 (($5,200/12) x 9)
Sept.).
Contribution amount ((\1/2\ taxable year 2,053 ($31,000 x .0883 x 9/12)
household income x applicable
percentage) x 9/12).
Premium assistance amount for S's pre- 1,847 ($3,900-$2,053)
marriage months.
Premium assistance amount for marriage months 0
Alternative marriage-year credit (sum of premium assistance
amounts for pre-marriage months and marriage months): $1,847 + 1,847
+ 0 = $3,694.
(vi) R and S reconcile their premium tax credit with advance
credit payments by determining the excess of their advance credit
payments ($5,232) over their alternative marriage-year credit
($3,694). R and S must increase their tax liability by $1,538 under
paragraph (a)(1) of this section.
Example 5. (i) Taxpayers marry during the taxable year, no
additional tax liability. The facts are the same as in Example 4,
except that S has no income and is enrolled in Medicaid for January
through September 2014 and R's and S's household income for 2014 is
$37,000 (245 percent of the Federal poverty line, applicable
percentage 7.88). Their advance credit payments for 2014 are $2,707
($1,053 for R for January to September and $1,654 for R and S for
October to December). Their premium tax credit for 2014 is $3,484
(total benchmark premium of $6,400 less contribution amount of
$2,916).
(ii) Because R's and S's premium tax credit of $3,484 exceeds
their advance credit payments of $2,707, R and S are allowed an
additional credit of $707. Although R and S marry in 2014, paragraph
(b)(2) of this section (the alternative computation of additional
tax for taxpayers who marry during the taxable year) does not apply
because they do not owe additional tax for 2014.
Example 6. Taxpayers divorce during the taxable year, 50 percent
allocation. (i) Taxpayers V and W are married and have two
dependents. In 2013, the Exchange for the rating area where the
family resides determines that their 2014 household income will be
$76,000 (330 percent of the Federal poverty line for a family of 4,
applicable percentage 9.5). V and W enroll in a qualified health
plan for 2014. The premium for the applicable benchmark plan is
$14,100. The Exchange approves advance credit payments of $573 per
month, computed as follows: $14,100 benchmark plan premium minus V
and W's contribution amount of $7,220 ($76,000 x .095) equals $6,880
(total advance credit); $6,880/12 = $573.
(ii) V and W divorce on June 17, 2014, and obtain separate
qualified health plans beginning July 1, 2014. V enrolls based on
household income of $60,000 and a family size of three (314 percent
of the Federal poverty line, applicable percentage 9.5). The premium
for the applicable benchmark plan is $10,000. The Exchange approves
advance credit payments of $358 per month, computed as follows:
$10,000 benchmark plan premium minus V's contribution amount of
$5,700 ($60,000 x .095) equals $4,300 (total advance credit);
$4,300/12 = $358.
(iii) W enrolls based on household income of $16,420 and a
family size of one (147 percent of the Federal poverty line,
applicable percentage 3.82). The premium for the applicable
benchmark plan is $5,200. The Exchange approves advance credit
payments of $381 per month, computed as follows: $5,200 benchmark
plan premium minus W's contribution amount of $627 ($16,420 x .0382)
equals $4,573 (total advance credit); $4,573/12 = $381. V and W do
not agree on an allocation of the premium for the applicable
benchmark plan, the premiums for the plan in which they enroll, and
the advance credit payments for the period they were married in the
taxable year.
(iv) V and W each compute their credit at reconciliation under
paragraph (b)(1) of this section, using the premiums for the
applicable benchmark plans that apply to them for the months married
and the months not married, and the contribution amount based on
their Federal poverty line percentages at the end of the taxable
year. Under paragraph (b)(3) of this section, because V and W do not
agree on an allocation, V and W must equally allocate the benchmark
plan premium ($7,050) and the advance credit payments ($3,438) for
the six-month period January through June 2014 when they are married
and enrolled in the same qualified health plan. Thus, V and W each
are allocated $3,525 of the benchmark plan premium ($7,050/2) and
$1,719 of the advance credit payments ($3,438/2) for January through
June.
(v) V reports on his 2014 tax return $60,000 in household income
and family size of three. W reports on her 2014 tax return $16,420
in household income and family size of one. V and W reconcile their
premium tax credit with advance credit payments as follows:
------------------------------------------------------------------------
V W
------------------------------------------------------------------------
Allocated advance payments (Jan. to June)..... $1,719 $1,719
Actual advance payments (July to Dec.)........ 2,148 2,286
-------------------------
[[Page 30399]]
Total advance payments.................... 3,867 4,005
Allocated benchmark plan premium (Jan. to 3,525 3,525
June)........................................
Actual benchmark plan premium (July to Dec.).. 5,000 2,600
-------------------------
Total benchmark plan premium.............. 8,525 6,125
Contribution amount (taxable year household 5,700 627
income x applicable percentage)..............
-------------------------
Credit (total benchmark plan premium less 2,825 5,498
contribution amount).....................
Additional credit............................. ........... 1,493
Additional tax................................ 1,042 ...........
------------------------------------------------------------------------
(vi) Under paragraph (a)(1) of this section, on their tax
returns V's tax liability is increased by $1,042 and W is allowed
$1,493 as additional credit.
Example 7. Taxpayers divorce during the taxable year, allocation
in proportion to household income. (i) The facts are the same as in
Example 6, except that V and W decide to allocate the benchmark plan
premium ($7,050) and the advance credit payments ($3,438) for
January through June 2014 in proportion to their household incomes
(79 percent and 21 percent). Thus, V is allocated $5,570 of the
benchmark plan premiums ($7,050 x .79) and $2,716 of the advance
credit payments ($3,438 x .79), and W is allocated $1,481 of the
benchmark plan premiums ($7,050 x .21) and $722 of the advance
credit payments ($3,438 x .21). V and W reconcile their premium tax
credit with advance credit payments as follows:
------------------------------------------------------------------------
V W
------------------------------------------------------------------------
Allocated advance payments (Jan. to June)..... $2,716 $722
Actual advance payments (July to Dec.)........ 2,148 2,286
-------------------------
Total advance payments.................... 4,864 3,008
Allocated benchmark plan premium (Jan. to 5,570 1,481
June)........................................
Actual benchmark plan premium (July to Dec.).. 5,000 2,600
-------------------------
Total benchmark plan premium.............. 10,570 4,081
Contribution amount (taxable year household 5,700 627
income x applicable percentage)..............
-------------------------
Credit (total benchmark plan premium less 4,870 3,454
contribution amount).....................
Additional credit............................. 6 446
------------------------------------------------------------------------
(ii) Under paragraph (a)(1) of this section, on their tax
returns V is allowed an additional credit of $6 and W is allowed an
additional credit of $446.
Example 8. Married taxpayers filing separate tax returns. (i)
Taxpayers X and Y are married and have two dependents. In 2013, the
Exchange for the rating area where the family resides determines
that their 2014 household income will be $76,000 (330 percent of the
Federal poverty line for a family of 4, applicable percentage 9.5).
W and Y enroll in a qualified health plan for 2014. The premium for
the applicable benchmark plan is $14,100. X's and Y's monthly
advance credit payment is $573, computed as follows: $14,100
benchmark plan premium minus X's and Y's contribution amount of
$7,220 ($76,000 x .095) equals $6,880 (total advance credit);
$6,880/12 = $573.
(ii) X and Y file income tax returns for 2014 using a married
filing separately filing status. X reports household income of
$60,000 and a family size of three (314 percent of the Federal
poverty line). Y reports household income of $16,420 and a family
size of one (147 percent of the Federal poverty line).
(iii) Because X and Y are married but do not file a joint return
for 2014, X and Y are not applicable taxpayers and are not allowed a
premium tax credit for 2014. See Sec. 1.36B-2(b)(2). Under
paragraph (b)(4) of this section, half of the advance credit
payments ($6,880/2 = $3,440) is allocated to X and half is allocated
to Y for purposes of determining their excess advance payments. The
repayment limitation described in paragraph (a)(3) of this section
applies to X and Y based on the household income and family size
reported on each return. Consequently, X's tax liability for 2014 is
increased by $2,500 and Y's tax liability for 2014 is increased by
$600.
Example 9. (i) The facts are the same as in Example 8, except
that X and Y live apart for over 6 months of the year and X properly
files an income tax return as head of household. Under section
7703(b), X is treated as unmarried and therefore is not required to
file a joint return. If X otherwise qualifies as an applicable
taxpayer, X may claim the premium tax credit based on the household
income and family size X reports on the return. Y is not an
applicable taxpayer and is not eligible to claim the premium tax
credit.
(ii) X must reconcile the amount of credit with advance credit
payments under paragraph (a) of this section. The premium for the
applicable benchmark plan covering X and his two dependents is
$9,800. X's premium tax credit is computed as follows: $9,800
benchmark plan premium minus X's contribution amount of $5,700
($60,000 - .095) equals $4,100.
(iii) Under paragraph (b)(5) of this section, half of the
advance payments ($6,880/2 = $3,440) is allocated to X and half is
allocated to Y. Thus, X is entitled to $660 additional premium tax
credit ($4,100 - $3,440). Y has $3,440 excess advance payments,
which is limited to $600 under paragraph (a)(3) of this section.
Sec. 1.36B-5 Information reporting by Exchanges.
(a) Information required to be reported. An Exchange must report to
the Internal Revenue Service and each taxpayer the following
information for the qualified health plan or plans in which the
taxpayer or a member of the taxpayer's family enrolls through the
Exchange--
(1) The premium for the applicable benchmark plans used to compute
advance credit payments and the period coverage was in effect;
(2) The total premium for the coverage in which the taxpayer or
family member enrolls without reduction for advance credit payments;
(3) The aggregate amount of any advance credit payments;
(4) The name, address and Social Security number (SSN) of the
primary insured and the name and SSN or adoption taxpayer
identification number of each other individual covered under the
policy;
(5) All information provided to the Exchange at enrollment or
during the taxable year, including any change in
[[Page 30400]]
circumstances, necessary to determine eligibility for and the amount of
the premium tax credit;
(6) Any other information required in published guidance, see Sec.
601.601(d)(2) of this chapter, necessary to determine whether a
taxpayer has received excess advance payments.
(b) Time of reporting. [Reserved]
(c) Manner of reporting. The Commissioner may provide rules in
published guidance, see Sec. 601.601(d)(2) of this chapter, for the
manner of reporting under this section.
0
Par. 3. Section 1.6011-8 is added to read as follows:
Sec. 1.6011-8 Requirement of income tax return for taxpayers who
claim the premium tax credit under section 36B.
(a) Requirement of return. A taxpayer who receives advance payments
of the premium tax credit under section 36B must file an income tax
return for that taxable year on or before the fifteenth day of the
fourth month following the close of the taxable year.
(b) Effective/applicability date. This section applies for taxable
years ending after December 31, 2013.
0
Par. 4. In Sec. 1.6012-1, paragraph (a)(2)(viii) is added to read as
follows:
Sec. 1.6012-1 Individuals required to make returns of income.
(a) * * *
(2) * * *
(viii) For rules relating to returns required of taxpayers who
receive advance payments of the premium tax credit under section 36B,
see Sec. 1.6011-8(a).
* * * * *
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
0
Par. 5. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
0
Par. 6. In Sec. 602.101, paragraph (b) is amended by adding an entry
in numerical order to the table to read as follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(b) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described Control No.
------------------------------------------------------------------------
* * * * *
1.36B-5................................................. 1545-2232
* * * * *
------------------------------------------------------------------------
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: May 16, 2012.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2012-12421 Filed 5-18-12; 11:15 am]
BILLING CODE 4830-01-P