DEPARTMENT OF HEALTH AND HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, MD 21244-1850 
 
Center for Medicaid, CHIP and Survey & Certification 
 
CMCS Informational Bulletin 
  
 
DATE:  February 2, 2011 
     
FROM:  Cindy Mann  
  Director 
  Center for Medicaid, CHIP and Survey & Certification (CMCS) 
 
SUBJECT:   Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act 
of 2010  Implications for Medicaid and CHIP 
 
This bulletin provides information about a provision in the Tax Relief, Unemployment Insurance 
Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), which was signed into law on 
December 17, 2010.  Section 728 of this Act disregards federal tax refunds or advance payments 
with respect to a refundable tax credit, received after December 31, 2009, as income and as 
resources (for a period of 12 months after receipt) for purposes of determining eligibility for all 
federal or federally-assisted programs, including Medicaid and the Childrens Health Insurance 
program (CHIP).  Section 728 also provides that these tax refunds and advance payments are not 
to be taken into account in determining the amount or extent of benefits provided under any 
program subject to this provision, including Medicaid and CHIP. 
 
This provision became effective December 17, 2010, and applies to tax refunds or advance 
payments received after December 31, 2009, but before January 1, 2013.  Because the 2011 tax 
season has already begun, States are encouraged to move expeditiously to implement this 
provision. The following is a more detailed description of how the specific requirements of 
Section 728 apply under Medicaid and, where applicable, under CHIP. 
 
Definition of Income Under Medicaid and CHIP 
 
Tax refunds and advance payments are not to be counted as income when determining eligibility 
under Medicaid or CHIP for the recipient of the payment, or for any other individual.  Therefore, 
in addition to not counting the refund or payment as income to the individual, any payment made 
is not countable as income when determining Medicaid or CHIP eligibility for a spouse or other 
family members. Tax refunds and advance payments may not be counted as income to someone 
else even if they are given to that person.  This also applies to 209(b) States that use more 
restrictive Medicaid eligibility criteria than are used by the Supplemental Security Income (SSI) 
program.   
 
Treatment as a Countable Resource Under Medicaid and CHIP 
 
Tax refunds and advance payments are not counted as an available resource for a period of 12 
months following the month of receipt of the payment.  This means that during the time a  Page 2  CMCS Informational Bulletin 
 
payment is exempt from being counted as a resource to the individual, it also is not countable as 
a resource to anyone else.  Under Medicaid, this also applies in 209(b) States.  However, if any 
portion of the payment is still retained by the individual after the 12-month period expires, that 
portion then becomes a countable resource for both Medicaid and CHIP. 
 
Transfers of Assets and Treatment of Trusts Under Medicaid (Not Applicable to CHIP) 
 
The legislation also provides that a tax refund or advance payment is not to be counted in 
determining the amount or extent of Medicaid benefits or assistance.  This effectively precludes 
applying penalties under section 1917(c) of the Social Security Act to individuals who, in 
applying for long term care benefits under the Medicaid program during the period in which tax 
refunds or advance payments are not countable either as income or resources (January 1, 2010 
through December 31, 2013), dispose of part or all of the refunds or advance payments in a 
manner that normally would be considered a transfer of assets for less than fair market value. 
 
Section 728 also precludes counting as available in any way refunds or advance payments that 
may, during the exempt period, be placed in trusts which would normally be governed by the 
trust provisions at section 1917(d) of the Act.  Assessing a transfer penalty, or counting such 
payments placed in a trust during the exempt period as available income or resources, would 
effectively treat the refunds or payments in a manner that could affect Medicaid eligibility and/or 
benefits.    However, if given away or placed in a trust after the end of the exempt period, 
payments would be subject to transfer penalties or being counted under the Medicaid trust 
provisions, as applicable.  
 
Post-Eligibility Treatment of Income Under Medicaid (Not Applicable to CHIP)    
 
Tax refunds or advance payments are not countable as income for purposes of the post-eligibility 
treatment of income provisions applicable to institutionalized individuals and certain individuals 
eligible for services under a home and community-based waiver.  Counting these payments as 
income would result in increasing the individuals income under post-eligibility, which in turn 
would result in Medicaid reducing its payment to the provider.  Therefore, the amount of benefits 
payable by Medicaid on behalf of the individual would effectively be reduced.  Such a reduction 
would violate the requirements of section 728. 
 
Use of section 1902(r)(2) to Disregard State Tax Refunds or Advance Payments  
 
Section 728 does not apply to any refunds or advance payments for State or local taxes.  
However, States have the authority under section 1902(r)(2) of the Social Security Act to 
disregard both as income and resources State and local tax refunds and advance payments in the 
same manner such federal tax payments are disregarded under section 728.  We encourage States 
to make use of this authority for all eligibility groups subject to section 1902(r)(2).  States 
wishing to use this authority should submit a Medicaid State plan amendment in the standard 
format used for section 1902(r)(2) income and resource disregards.  States can also implement 
similar income and resource disregards under their CHIP programs. 
 
  Page 3  CMCS Informational Bulletin 
 
We hope you will find this information helpful.  Questions regarding this legislation may be 
directed to Roy Trudel, Division of Eligibility, Enrollment and Outreach, Children and Adults 
Health Programs Group, at (410) 786-3417 or via email at roy.trudel@cms.hhs.gov.