Source: https://www.federalregister.gov/documents/2011/08/17/2011-20728/health-insurance-premium-tax-credit
Timestamp: 2017-11-24 22:32:37
Document Index: 565177466

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50931-50949 (19 pages)
i. Computing the Credit When Taxpayer's Marital Status Changes
Example 4. Married taxpayers filing separate tax returns.
https://www.federalregister.gov/d/2011-20728 https://www.federalregister.gov/d/2011-20728
This document contains proposed 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, and the Department of Defense and Full-Year Continuing Appropriations Act, 2011. These proposed regulations provide guidance to individuals who enroll in qualified health plans through Affordable Insurance Exchanges and claim the premium tax credit, and to Exchanges that make qualified health plans available to individuals and Start Printed Page 50932employers. This document also provides notice of a public hearing on these proposed regulations.
Send submissions to: CC:PA:LPD:PR (REG-131491-10), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-131491-10), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-131491-10). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.
The collection of information in these proposed regulations is in § 1.36B-5. The collection of information is necessary to 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). The likely respondents are Affordable Insurance Exchanges established under section 1311 or 1321 of the Patient Protection and Affordable Care Act (42 U.S.C. 13031 or 42 U.S.C. 18041).
The burden for the collection of information contained in proposed regulation § 1.36B-5 will be reflected in the burden on a form that the IRS will create to request the information in the proposed regulation.
Beginning in 2014, under 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), individuals and small businesses will be able to purchase private health insurance through State-based competitive marketplaces called Affordable Insurance Exchanges (Exchanges). Exchanges will offer Americans competition and choice. Insurance companies will compete for business on a level playing field, driving down costs. Consumers will have a choice of health plans to fit their needs and Exchanges will give individuals and small businesses the same purchasing power as big businesses. The Departments of Health and Human Services and Treasury are working in close coordination to release guidance related to Exchanges, in several phases. The first in this series was a Request for Comment relating to Exchanges, published in the Federal Register on August 3, 2010 (75 FR 45584). Second, Initial Guidance to States on Exchanges was issued on November 18, 2010. Third, proposed regulations on the application, review, and reporting process for waivers for State innovation was published in the Federal Register on March 14, 2011 (76 FR 13553). Fourth, two proposed regulations were published in the Federal Register on July 15, 2011 (76 FR 41866 and 76 FR 41930) to implement components of the Exchange and health insurance premium stabilization policies in the Affordable Care Act. Fifth, three proposed regulations, including this one, are being published in the Federal Register on August 17, 2011 to provide guidance on the eligibility determination process related to enrollment in a qualified health plan or insurance affordability program; on Medicaid, the Children's Health Insurance Program (CHIP), and other State health coverage programs; and these proposed regulations on the premium tax credit.
Under section 1411 of the Affordable Care Act (42 U.S.C. 18081), an Exchange makes an advance determination of credit eligibility for individuals enrolling in coverage through the Exchange and seeking financial assistance. Using information available at the time of enrollment, the Exchange determines (1) whether the individual meets the income and other requirements for advance credit payments, and (2) the amount of the advance payments. Advance payments are made monthly under section 1412 of the Affordable Care Act (42 U.S.C. 18082) to the issuer of the qualified health plan in which the individual enrolls.Start Printed Page 50933
To be eligible for a premium tax credit, an individual must be an applicable taxpayer. Under section 36B(c)(1), an applicable taxpayer is a taxpayer (1) With household income for the taxable year between 100 percent and 400 percent of the federal poverty line (FPL) for the taxpayer's family size, (2) who may not be claimed as a dependent by another taxpayer, and (3) who files a joint return if married.
Section 36B(b)(1) provides that the premium assistance credit amount is the sum of the premium assistance amounts for all coverage months in the taxable year for individuals in the taxpayer's family. 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 that cover a taxpayer or family member, or (2) the excess of the adjusted monthly premium for 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))) (the benchmark plan) that applies to the taxpayer over 1/12 of the product of the taxpayer's household income and the applicable percentage for the taxable year. The adjusted monthly premium, in general, is the premium an insurer would charge for the plan adjusted only for the ages of the covered individuals.
Individuals not lawfully present are not eligible to enroll in a qualified health plan through an Exchange. Accordingly, section 36B(e)(1)(A) provides that, for a household with at least one individual not lawfully present, the portion (if any) of the premium attributable to that individual is not included in determining the taxpayer's credit. Section 36B(e)(1)(B) provides that the family size for computing the FPL percentage for a family with at least one unlawfully present individual is determined by excluding the unlawfully present individual. Household income for computing the FPL percentage and determining the applicable percentage is the product of the taxpayer's household income (determined without regard to section 36B(e)) and a fraction, the numerator of which is the FPL for the taxpayer's family size excluding individuals who are not lawfully present, and the denominator of which is the FPL for the taxpayer's family size including individuals who are not lawfully present.
A taxpayer must reconcile the actual credit for the taxable year computed on the taxpayer's tax return with the amount of advance payments. If a taxpayer's credit amount exceeds the amount of the taxpayer's advance payments for the taxable year, the taxpayer may receive the excess as an income tax refund. If a taxpayer's advance payments exceed the taxpayer's credit amount, the taxpayer owes the excess as an additional income tax liability. However, section 36B(f)(2)(B) places a graduated set of caps on the additional tax liability for taxpayers with household income under 400 percent of the FPL. The repayment Start Printed Page 50934limitation amounts range from $600 to $2,500 (one-half that amount for single taxpayers) depending on FPL, and are adjusted to reflect changes in the cost of living beginning in 2015.
Section 36B(g) directs the Secretary of the Treasury to issue regulations that provide for coordinating the premium tax credit with the program for advance payments and for reconciling the credit and advance payments when the taxpayer's filing status changes during the taxable year.
The proposed regulations provide that a taxpayer is eligible for the credit for a taxable year if the taxpayer is an applicable taxpayer and the taxpayer or a member of the taxpayer's family (1) is enrolled in one or more qualified health plans through an Exchange established under section 1311 or 1321 of the Affordable Care Act (42 U.S.C. 13031 or 42 U.S.C. 18041) and (2) is not eligible for minimum essential coverage other than coverage in the individual market.
In general, to be an applicable taxpayer, a taxpayer must have household income that is at least 100 percent but not more than 400 percent of the FPL. Under section 36B(c)(1)(B), a lawfully present alien with household income under 100 percent of the FPL and not eligible for Medicaid is treated as having household income of 100 percent of the FPL for purposes of qualifying as an applicable taxpayer. The proposed regulations provide that premium assistance amounts for these taxpayers are computed based on actual household income. The proposed regulations define lawfully present by reference to 45 CFR 152.2, which determines lawful presence for purposes of the Pre-Existing Condition Insurance Plan Program.
Taxpayers with household incomes below 100 percent of the FPL (other than lawfully present aliens) are not eligible for the premium tax credit because they are eligible to receive assistance through Medicaid. However, an Exchange may approve a taxpayer for advance credit payments based on projecting a level of household income for the taxable year that makes the taxpayer ineligible for Medicaid. If, contrary to that projection, the taxpayer's actual household income for the taxable year is under 100 percent of the FPL (for example, because the taxpayer experiences a change in circumstances, such as a job loss, during the year), the taxpayer would not be an applicable taxpayer, and would not be eligible for the credit under the general rule. Accordingly, the proposed regulations provide a special rule treating a taxpayer with household income below 100 percent of the FPL as an applicable taxpayer if, when a taxpayer enrolls in a qualified health plan, an Exchange projects that household income for the taxpayer will be between 100 and 400 percent of the FPL for the taxable year and approves advance credit payments. Premium assistance amounts for these taxpayers also are computed based on actual household income and not a deemed household income that equals 100 percent of the FPL.
Under the proposed regulations, an individual generally is eligible for government-sponsored minimum essential coverage for any month that the individual meets the requirements for coverage under a government-sponsored program described in section 5000A(f)(1)(A). However, for purposes of the premium tax credit, an individual is eligible for minimum essential coverage under a veterans' health care program 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 Commissioner may define eligibility for specific government-sponsored programs further in published guidance of general applicability, see § 601.601(d)(2) of this chapter. For example, it is expected that future guidance will provide that a person is eligible for Medicaid on the basis of being blind or disabled or needing long-term care services only when a State Medicaid agency or the Social Security Administration, as appropriate, determines that the individual is blind or disabled or requires long-term care services.
A taxpayer whom an Exchange has determined to be ineligible for Medicaid, CHIP, or a similar program at the time of enrollment may end up with household income for the taxable year within the eligibility criteria for these Start Printed Page 50935programs. Therefore, the proposed regulations provide that an individual is treated as not eligible for Medicaid, CHIP, or a similar program for the months of coverage under a qualified health plan if an Exchange determines that the individual is not eligible when the individual enrolls. If the individual subsequently enrolls in Medicaid, CHIP, or a similar program, however, the full months of enrollment in the government-sponsored coverage are not coverage months.
Under section 36B(c)(2)(C), an individual generally is eligible for employer-sponsored minimum essential coverage only if the employee's share of the premiums is affordable and the coverage provides minimum value. An individual is treated as eligible for minimum essential coverage through an eligible employer-sponsored plan, however, if the individual actually enrolls in the coverage, including coverage that does not meet the requirements for affordability and minimum value.
Section 36B(c)(2)(C)(i) prescribes the standards for determining whether employer-sponsored coverage is affordable for an employee as well as for other individuals. In the case of an employee, under section 36B(c)(2)(C)(i), an employer-sponsored plan is not affordable if “the employee's required contribution (within the meaning of section 5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of the applicable taxpayer's household income” for the taxable year. This percentage may be adjusted after 2014.[1]
Although the affordability test for related individuals for purposes of the premium tax credit is based on the cost of self-only coverage, future proposed regulations under section 5000A are expected to provide that the affordability test for purposes of applying the individual responsibility requirement to related individuals is based on the employee's required contribution for employer-sponsored family coverage. Section 5000A addresses affordability for employees in section 5000A(e)(1)(B) and, separately, for related individuals in section 5000A(e)(1)(C).
The proposed regulations provide an employee safe harbor for individuals who were offered eligible employer-sponsored coverage that ultimately proves to be affordable based on household income for the taxable year but who declined the offer because, at the time of enrollment in a qualified health plan, the Exchange determined that the employer coverage would be unaffordable. Under the safe harbor, an eligible employer-sponsored plan is treated as unaffordable for an entire plan year. Thus, for the months during the plan year (which may coincide or overlap with the taxable year) a taxpayer will not lose credit eligibility because, as a result of changes during the taxable year, the employer coverage would have been affordable based on the household income for that taxable year. The taxpayer may, however, lose credit eligibility for other reasons, for example if the taxpayer's household income for Start Printed Page 50936the taxable year exceeds 400 percent of the FPL. Regulations under 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 employee safe harbor if the employer offered to its employees affordable coverage that otherwise meets the requirements of section 4980H.
Giving employers the ability to base their affordability calculations on their employees' wages (which employers know) instead of employees' household income (which employers generally do not know) is intended to provide a more workable and predictable method of facilitating affordable employer-sponsored coverage for the benefit of both employers and employees. Notwithstanding this safe harbor, employees' eligibility for a premium tax credit would continue to be based on affordability of employer-sponsored coverage relative to employees' household income. Accordingly, some employees—among the small percentage of employees whose household income is less than their wages from the employer—would receive a premium tax credit without resulting in an assessable payment by their employer. The Treasury Department and the IRS intend to issue a request for comments on this affordability safe harbor for employers.
Section 36B(c)(2)(C)(ii) provides that an eligible employer-sponsored plan generally provides minimum value if the plan's share of the total allowed costs of benefits provided under the plan is at least 60 percent of those costs. Under section 1302(d)(2) of the Affordable Care Act (42 U.S.C. 18022(d)(2)), regulations to be issued by the Secretary of Health and Human Services will apply in determining the percentage of “the total allowed costs of benefits” provided under a group health plan or health insurance coverage that are covered by that plan or coverage. The regulations under section 1302(d)(2) are expected to be proposed later this year and to reflect the fact that employer-sponsored group health plans and health insurance coverage in the large group market are not required to provide each of the essential health benefits or each of the 10 categories of benefits described in section 1302(b)(1) of the Affordable Care Act. It is also anticipated that the regulations will seek to further the objective of preserving the existing system of employer-sponsored coverage, but without permitting the statutory employer responsibility standards to be avoided. We also are contemplating whether to provide appropriate transition relief with respect to the minimum value requirement for employers currently offering health care coverage.
A taxpayer's credit is the sum of the premium assistance amounts for each coverage month in the taxable year. A premium assistance amount is computed for each coverage month during the taxable year based on several factors: household income, family size, applicable percentage, benchmark plan premium, and actual plan premium. A month during which no one in the taxpayer's family is enrolled in a qualified health plan through an Exchange is not a coverage month. A month is a coverage month only if the taxpayer pays the premium for coverage or receives the benefit of an advance payment. The premium assistance amount for a month that is not a coverage month is zero. Household income is determined on an annual basis and is prorated for each month to determine the monthly premium assistance amount. The applicable percentage is the same for each month because it is derived from annual household income and family size. A taxpayer's benchmark plan premium may change during the year if, for example, there are changes in the members of the household covered through the Exchange or the taxpayer moves to a new State with different plan rates.
Under section 36B(b)(2), the monthly premium for the applicable second lowest cost silver plan offered through an Exchange is the benchmark for computing a taxpayer's monthly premium assistance amount. To determine the amount of premium tax credit, a taxpayer must compute the difference between the premium for this plan and the applicable percentage of the taxpayer's household income, regardless of the qualified health plan the taxpayer purchases.
Under the proposed regulations, the “applicable” benchmark plan for a taxpayer is determined by finding the second lowest cost plan at the silver level that would cover those family members actually enrolled in a qualified health plan, not eligible for minimum essential coverage other than coverage in the individual market, not incarcerated, and lawfully present in the United States (the coverage family). Thus, the applicable benchmark plan is the self-only category of coverage for a taxpayer who files as single with no dependents, a taxpayer who purchases Start Printed Page 50937self-only coverage, and a taxpayer whose family includes only one individual who is not eligible for minimum essential coverage or one lawfully present individual (thus excluding from the credit computation the portion of the premium attributable to an individual not lawfully present, as required by section 36B(e)(1)(A)). If an Exchange offers more categories of coverage than self-only and family, the applicable benchmark plan is the coverage category that applies to the members of the taxpayer's coverage family.
Section 36B determines family size by reference to individuals for whom the taxpayer claims a personal exemption, and family coverage under some qualified health plans may not extend to certain tax dependents (for example, a niece). We note that the Department of Health and Human Services has requested comments in its proposed regulations on Exchanges on whether qualified health plans offered on an Exchange should be required to cover all members of the family if they live in the same Exchange service area. Pending the issuance of additional guidance on this issue by Health and Human Services, the proposed regulations provide that, if the applicable benchmark plan does not cover a taxpayer's full family, the applicable benchmark plan premium for these families is the sum of the premiums for the benchmark plans that cover the taxpayer's family (for example, for an uncle and two adult dependent nieces, a self-only benchmark plan for the uncle and a two-adult or family plan for the nieces). The applicable benchmark plan is similarly modified for taxpayers with family members residing in different rating areas (also known as Exchange service areas, see proposed 45 CFR155.20). However, the IRS and Treasury Department are considering other approaches for determining the applicable benchmark plan in these cases. For example, the applicable benchmark plan for these families could be the benchmark plan that would apply to the family composition (such as one adult plus children) if one plan covered all members of the taxpayer's family. Alternatively, the applicable benchmark plan premium could be the lesser of (1) the premium for a combination of plans that cover the taxpayer's entire family, or (2) the premium for a single plan that covers the taxpayer's entire family and is more expensive than the second lowest cost silver plan. Comments are requested on these and other possible approaches.
If a single qualified health plan covers more than one taxpayer's family (for example a plan that covers adult children under age 26 who are not tax dependents), the allowable section 36B credit is computed for each applicable taxpayer covered by the plan. An individual applicable percentage is determined for each taxpayer based on the taxpayer's household income and family size, and the separate applicable benchmark plan. The premiums for the qualified health plan the taxpayers purchase are allocated to each taxpayer in proportion to the premiums for each taxpayer's benchmark plan to determine whether the premiums paid are less than the benchmark premium minus the taxpayer's applicable percentage of household income.
Section 36B(b)(3)(E) provides that, for purposes of determining the amount of any monthly premium, if an individual enrolls in both a qualified health plan and a plan providing dental coverage as described in section 1311(d)(2)(B)(ii) of the Affordable Care Act (42 U.S.C. 13031(d)(2)(B)(ii)), the portion of the premium for the dental plan that is properly allocable to pediatric dental benefits that are essential health benefits is treated as a premium payable for the individual's qualified health plan. Thus, the portion of the premium for the separate pediatric dental coverage is added to the premium for the benchmark plan in computing the credit. Comments are requested on methods of determining the amount of the premium properly allocable to pediatric dental benefits.
The proposed regulations describe the requirements for reconciling advance payments of the credit with the actual credit amount and determining the amount of any resulting additional credit or additional income tax liability. The proposed regulations explain that the credit is computed by using the household income and family size for the taxable year, but premium assistance amounts for different coverage months may be based on different applicable benchmark plans if, for example, the taxpayer's family composition changes during the taxable year.
Section 36B(g)(2) directs the Secretary to provide regulations specifying how to reconcile advance payments with the actual credit when the taxpayer's filing status on the return claiming the credit differs from the filing status used to determine advance payments of the credit. Filing status may be any of the following: single, married filing jointly, married filing separately, head of household, or surviving spouse.
The proposed regulations provide that, for a taxpayer who has a change in marital status during the taxable year, the credit generally is computed according to the same rules that apply to other taxpayers, using the applicable benchmark plan or plans that apply to the taxpayer's marital status as of the first day of each month. However, the proposed regulations include special rules for computing the credit for taxpayers who divorce during the taxable year. Comments are requested on special rules for taxpayers who marry during the taxable year and for married taxpayers who face challenges in being able to file a joint return.
The proposed regulations provide that, for purposes of reconciliation, taxpayers who for some months during a taxable year were married (within the meaning of section 7703) and were covered by the same qualified health plan but are no longer married on the last day of the taxable year, may agree to allocate between themselves, in the same proportion, the premiums for the benchmark plan, premiums paid and advance credit payments made during the marriage. If the taxpayers do not agree on an allocation, the taxpayers must allocate 50 percent of these amounts to each taxpayer. If only one of Start Printed Page 50938the formerly married taxpayers was enrolled in the plan, 100 percent of the benchmark premiums, premiums for the plan that taxpayer purchases, and advance payments are allocated to that taxpayer.
For individuals who marry during a taxable year and receive advance credit payments during the time before they are married, the general rules for credit computation and reconciliation could lead to the individuals facing additional tax upon reconciliation, even if the Exchange accurately determines each individual's separate income for the year at the time of enrollment. This may occur, for example, in situations in which the combination of two individuals' household incomes and families results in the combined family having a higher FPL percentage than either of the component families would have had if the individuals had not married, and therefore having a higher applicable percentage or being ineligible for a credit. Comments are requested on rules providing relief to certain individuals who would owe additional tax because they marry during a taxable year when one or both individuals receive advance credit payments prior to marriage. Comments are requested on how the premium assistance credit amount should be computed in this circumstance, including how household income (which is required to be determined on an annual basis) and dependents for the taxable year would be taken into account in the credit computation.
A public hearing has been scheduled for November 17, 2011, at 10 a.m., in the auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. All visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.
End List of Subjects Start Printed Page 50939
This section lists the captions contained in §§ 1.36B-1 through 1.36B-5.
(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 §§ 1.36B-2 through 1.36B-5.
(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 include an individual who is exempt from the requirement to maintain minimum essential coverage under section 5000A.Start Printed Page 50940
(o) Effective/applicability date. This section and §§ 1.36B-2 through 1.36B-5 apply for taxable years ending after December 31, 2013.
(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) may not be covered by 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 § 1.36B-3(b)(2).
(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 § 1.36B-3(d).
(2) Government-sponsored minimum essential coverage—(i) In general. Except as provided in paragraph (c)(2)(ii) of this section, for purposes of section 36B, 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). The Commissioner may define eligibility for specific government-sponsored programs further in published guidance of general applicability, see § 601.601(d)(2) of this chapter.
(ii) Special rule for coverage under the veteran's health care program under chapter 17 or 18 of Title 38, U.S.C. An individual is eligible for minimum Start Printed Page 50941essential 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.
Delay in coverage effectiveness. On April 10, Taxpayer D applies for coverage under a government-sponsored health care program. D's application is approved on July 12 but her coverage is not effective until September 1. Under paragraph (c)(2)(iii)(A) of this section, D is eligible for government-sponsored minimum essential coverage on September 1.
Time of eligibility. Taxpayer E turns 65 on June 3 and becomes eligible for Medicare. Under section 5000A(f)(1)(A), Medicare is minimum essential coverage. However, E must enroll in Medicare to receive benefits. E enrolls in Medicare on June 11 and may receive benefits immediately. Under paragraph (c)(2)(iii)(A) of this section, E is eligible for government-sponsored minimum essential coverage on July 1, the first day of the first full month that E may receive benefits under the program.
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. E is treated as eligible for government-sponsored minimum essential coverage under paragraph (c)(2)(iii)(A) of this section as of August 1, the first day of the second month following the event that establishes eligibility (E turning 65).
Retroactive effect of eligibility. On April 10, 2015, Taxpayer G applies for coverage under the Medicaid program. G's application is approved on May 15, 2015, and her Medicaid coverage is effective as of April 1, 2015. Under paragraph (c)(2)(iii)(B) of this section, G is eligible for government-sponsored minimum essential coverage on June 1, 2015, the first day of the first calendar month after approval.
Determination of Medicaid ineligibility. In November 2014, Taxpayer H applies to the Exchange to enroll in a qualified health plan and for advance credit payments for 2015. The Exchange estimates that H's household income will be 140 percent of the federal poverty line for H's family size and determines that H is not eligible for Medicaid. The Exchange authorizes advance credit payments for H for 2015. H experiences a loss of household income in June 2015 but does not return to the Exchange in 2015 to apply for Medicaid benefits or report his change in income. H's household income for 2015 is 130 percent of the federal poverty line (within the Medicaid income threshold). Under paragraph (c)(2)(iv) of this section, H is treated as not eligible for Medicaid for 2015.
Mid-year Medicaid eligibility redetermination. The facts are the same as in Example 5, except that H returns to the Exchange in July 2015 and the Exchange determines H is eligible for Medicaid. The Exchange discontinues H's advance credit payments effective August 1. Under paragraphs (c)(2)(iii)(B) and (c)(2)(iv) of this section, H is treated as not eligible for Medicaid for the coverage months when H is covered by a qualified health plan. H is eligible for government-sponsored minimum essential coverage for the coverage months after H is approved for Medicaid, August through December 2015.
(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.
(2) Employee safe harbor. An employer-sponsored plan is treated as 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 Start Printed Page 50942employer-sponsored plan is not affordable.
(B) Required contribution percentage. The required contribution percentage is 9.5 percent. The percentage may be adjusted in published guidance of general applicability, see § 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.
(C) 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.
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.
Basic determination of affordability for a related individual. The facts are the same as in Example 1, except that C is married to J and X's plan requires C to contribute $5,300 for coverage for C and J for 2014 (11.3 percent of C's household income). Because C's required contribution for self-only coverage ($3,450) 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 J, and C and J are eligible for minimum essential coverage for all months in 2014.
Determination of unaffordability at enrollment. (i) Taxpayer D is an employee of Employer X. In November 2013 the Exchange in 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 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)(2) of this section, X's plan is treated as not affordable for D and D is treated as not eligible for minimum essential coverage for 2014.
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 in 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)(2) of this section, X's plan is treated as not affordable for D and D is treated as not eligible for minimum essential coverage under X's plan for the coverage months September to December 2014 and January through August 2015.
Determination of unaffordability for part of plan year. (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 in E's rating area determines 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) 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)(2) of this section, X's plan is treated as 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.
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 ask the Exchange in his rating area to determine whether X's coverage is affordable for F. 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's household income in 2014 is $18,000.
Coverage unaffordable at year end. Taxpayer G is employed by Employer X. In November 2014 the Exchange in 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 for 2015 and, if otherwise eligible, G may claim a premium tax credit.
Taxpayer H is employed by Employer X in 2014. H's required contribution for employer coverage exceeds 9.5 percent of H's 2014 household income. H enrolls in X's plan for 2014. Under paragraph (c)(3)(vii) of this section, H is eligible for minimum essential coverage for 2014 because H is enrolled in an eligible employer-sponsored plan for 2014.
(iii) The individual is not eligible for minimum essential coverage (within the meaning of § 1.36B-2(c)) other than coverage described in section 5000A(f)(1)(C) (relating to coverage in the individual market).
(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. On May 15, 2014, M enlists in the U.S. Army and is eligible immediately for government-sponsored minimum essential coverage.
(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 cancels 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.
(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 premiums to the insurance company.
(ii) Because P claims T as a dependent, P (and not O) may claim a premium tax credit for coverage for T. See § 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 are coverage months under paragraph (c)(1) of this section in computing P's premium tax credit under paragraph (a) of this section.
(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.
Single taxpayer with no dependents. Taxpayer V is single and resides with his 24-year-old daughter but may not claim her as a dependent. Taxpayer V purchases family coverage for himself and his daughter. The exchange in V's rating area offers only self-only and family coverage categories. Under paragraph (f)(1)(i)(A) of this section, V's applicable benchmark plan is the second lowest cost silver self-only plan. But see paragraph (h) of this section for computing the credit when multiple taxpayers are covered by one qualified health plan.
Single taxpayer with one dependent, two coverage categories. The facts are the same as in Example 1, except that V Start Printed Page 50944also resides with his teenage son and claims him as a dependent. V purchases family coverage for himself, his son, and his daughter. Under paragraph (f)(1)(ii) of this section, V's applicable benchmark plan is the second lowest cost silver family plan.
Single taxpayer with one dependent, multiple coverage categories. The facts are the same as in Example 2, except that the Exchange where V resides offers a category of coverage for one adult and children. Under paragraphs (f)(1)(ii) and (f)(2) of this section, V's applicable benchmark plan is the second lowest cost silver plan for one adult plus children.
Single taxpayer with one dependent, multiple coverage categories. The facts are the same as in Example 2, except that the Exchange where V resides offers a category of coverage for one adult and one child in addition to coverage for one adult and children. Under paragraphs (f)(1)(ii) and (f)(2) of this section, V's applicable benchmark plan is the second lowest cost silver plan for one adult and one child.
Applicable benchmark plan unrelated to coverage purchased. Taxpayers W and X, who are married, reside with X's two teenage daughters, whom they claim as dependents. The Exchange where W and X reside offers a category of coverage for one adult plus children. W and X purchase self-only coverage for W and one adult plus children coverage for X and X's daughters. Under paragraph (f)(1)(ii) of this section, W's and X's applicable benchmark plan is the second lowest cost silver family plan.
Minimum essential coverage for some coverage months. Taxpayer Y claims his daughter as a dependent. Y and his daughter enroll in a qualified health plan for 2014. The exchange in Y's rating area offers only self-only and family coverage categories. Y, but not his daughter, 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 Y's daughter and January through August are coverage months for Y. Because, under paragraphs (d) and (f)(1) of this section, the premium assistance amount for a coverage month is computed based on the applicable benchmark plan for that coverage month, Y's applicable benchmark plan for January through August is the second lowest cost silver family plan under paragraph (f)(1)(ii) of this section. Under paragraph (f)(1)(i)(C) of this section, Y's applicable benchmark plan for September through December is the second lowest cost silver self-only plan.
Family member eligible for minimum essential coverage for the taxable year. The facts are the same as in Example 6, except that Y is not eligible for government-sponsored minimum essential coverage for any months and Y's daughter is eligible for government-sponsored minimum essential coverage for the entire year. Under paragraph (f)(1)(i)(C) of this section, Y's applicable benchmark plan is the second lowest cost silver self-only plan.
Family required to buy multiple plans to obtain coverage. (i) Taxpayers X and Z are married and live in different Exchange rating areas. X and Z have one child, M, whom they claim as a dependent and who resides with X. X and M enroll in a qualified health plan covering one adult plus children through the Exchange in X's rating area, and Z enrolls in a qualified health plan providing self-only coverage through the Exchange in Z's rating area.
(ii) Under paragraph (f)(3) of this section, the premium for the applicable benchmark plan for computing X's and Z's premium assistance credit amount is the sum of the premium for the second lowest cost silver one adult plus children plan offered through the Exchange in X's rating area and the premium for the second lowest cost silver self-only plan offered through the Exchange in Z's rating area.
Benchmark plan closes to new enrollees during the year. 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 two adults offered through the Exchange. The X and Y families each enroll in a qualified health plan that is not the applicable benchmark plan in November during the regular 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. Under paragraphs (f)(1), (f)(2), and (f)(4) 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 offered through the Exchange when the Z family enrolls.
Benchmark plan terminates for all enrollees during the year. The facts are the same as in Example 9, except that Plan 2 terminates for all enrollees on June 30. Under paragraphs (f)(1), (f)(2), and (f)(4) 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 amount 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 of general applicability, see § 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.
At least 300% but less than 400% 9.5 9.5
(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:
(i) Taxpayers A and B enroll in a single 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 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 is $12,000 and the premium for the second lowest cost silver self-only plan is $6,000. A and B are applicable taxpayers and otherwise eligible to claim the premium tax credit.
(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 § 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.
(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 of general applicability, see Start Printed Page 50946§ 601.601(d)(2) of this chapter, to reflect changes in the consumer price index.
Limitation amount for taxpayers whose tax is determined under section 1(c)
Household income increases. (i) Taxpayer A is single and has no dependents. The Exchange in A's rating area projects A's 2014 household income to be $27,225 (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 $3,008 (benchmark plan premium of $5,200 less contribution amount of $2,192 (projected household income of $27,225 × .0805) = $3,008).
(ii) A's household income for 2014 is $32,800, 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 $2,084 (benchmark plan premium of $5,200 less contribution amount of $3,116 (household income of $32,800 × .095). Because A's advance credit payments for 2014 are $3,008 and A's 2014 credit is $2,084, A has excess advance payments of $924. Under paragraph (a)(1) of this section, A's tax liability for 2014 is increased by $924.
Household income decreases. The facts are the same as in Example 1, except that A's actual household income for 2014 is $21,780 (200 percent of the federal poverty line for a family of one, applicable percentage 6.3). Consequently, A's premium tax credit for 2014 is $3,828 ($5,200 benchmark plan premium less contribution amount of $1,372 (household income of $21,780 × .063)). Because A's advance credit payments for 2014 are $3,008, A is allowed an additional credit of $820 ($3,828 less $3,008).
(ii) In 2014 B and C do not claim their 20-year old child as their dependent. Consequently, B and C's family size for 2014 is three and their household income is 332 percent of the federal poverty line for a family of three (applicable percentage 9.5). Their premium tax credit for 2014 is $8,261 ($14,100 benchmark plan premium less $5,839 contribution amount (household income of $61,460 × .095)). Because B and C's advance credit payments for 2014 are $8,704 and their 2014 credit is $8,261, B and C have excess advance payments of $443. Under paragraph (a)(1) of this section, B and C's tax liability for 2014 is increased by $443. Because B and C's household income is below 400 percent of the federal poverty line, if B and C's excess advance payments exceeded $2,500, under the limitation of paragraph (a)(3) of this section, B and C's additional tax liability would be limited to that amount.
Repayment limitation does not apply. (i) Taxpayer D is single and has no dependents. The Exchange in D's rating area approves advance credit payments for D based on 2014 household income of $38,115 (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 $1,579 (benchmark plan premium of $5,200 less contribution amount of $3,621 (projected household income of $38,115 × .095) = $3,621).
(ii) D's actual household income for 2014 is $43,778, 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 $1,579 (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 $1,579.
Coverage for less than a full taxable year. (i) Taxpayer F is single and has no dependents. In November 2013 the Exchange in F's rating area projects F's 2014 household income to be $27,225 (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 $251 (benchmark plan premium of $5,200 less contribution amount of $2,192 (projected household income of $27,225 × .0805) = $3,008; $3,008/12 = $251).
(iii) Under § 1.36B-3(a), F's premium assistance credit amount is the sum of the premium assistance amounts for the coverage months. Under § 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 $2,890 (benchmark plan premium of $5,200 less contribution amount of $2,310 (household income of $28,000 × .0825)). Because F has only eight coverage months in 2014, F's credit is $1,927 ($2,890/12 × 8). Because F does not discontinue her Exchange coverage until November 1, 2014, F's advance credit payments for 2014 are $2,510 ($251 × 10). Consequently, F has excess advance payments of $583 ($2,510 less $1,927) and F's tax liability for 2014 is increased by $583 under paragraph (a)(1) of this section.
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 in E's rating area projects E's 2014 household income to be $29,420 (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 $279 (benchmark plan premium of $5,200 less contribution amount of $1,853 (projected household income of $29,420 × .063) = $3,347; $3,347/12 = $279).
(ii) On August 1, 2014, E loses her eligibility for government-sponsored minimum essential coverage. E cancels the qualified health plan that covers F and enrolls in a qualified health plan that covers E and 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 as $679 (benchmark plan premium Start Printed Page 50947of $10,000 less contribution amount of $1,853 (projected household income of $29,420 × .063) = $8,147; $8,147/12 = $679). E's household income for 2014 is $28,000 (190 percent of the federal poverty line, applicable percentage 5.84).
(iii) Under § 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) $1,953
Advance credit payments (Aug. to Dec.) 3,395
Total advance credit payments 5,348
Benchmark plan premium (Jan. to July) 3,033
Benchmark plan premium (Aug. to Dec.) 4,167
Contribution amount (taxable year household income × applicable percentage) 1,635
Credit (total benchmark plan premium less required contribution, assuming not more than premium paid) 5,565
(iv) E's advance credit payments for 2014 are $5,348. E's premium tax credit is $5,565. Thus, E is allowed an additional credit of $217.
Part-year coverage and changes in coverage months and applicable benchmark plan. (i) The facts are the same as in Example 7, except that both E and F are 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.
Advance credit payments (March to July) $1,395
Total advance credit payments 4,790
Benchmark plan premium (March to July) 2,167
Benchmark plan premium (Aug. to Dec.) 4,166
Total benchmark plan premium 6,333
Contribution amount for 10 coverage months (taxable year household income × applicable percentage × 10/12) 1,363
Credit (total benchmark plan premium less required contribution, assuming not more than premium paid) 4,970
(3) Married taxpayers filing separate tax returns. The premium tax credit is allowed to married taxpayers only if they file joint returns. See § 1.36B-2(b)(2). Married taxpayers who receive advance credit payments and file their income tax returns as married filing separately have received excess advance payments. The taxpayers must allocate the advance credit payments to each taxpayer equally for purposes of determining their excess advance payment amounts under paragraph (a)(1) of this section. 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.
Taxpayers marry during the taxable year. (i) P is a single taxpayer with no dependents. In 2013 the Exchange in the rating area where P resides determines that P's 2014 household income will be $40,000 (367 percent of the federal poverty line, applicable percentage 9.5). P enrolls in a qualified health plan. The premium for the applicable benchmark plan is $5,200. The Exchange approves advance credit payments of $117 per month, computed as follows: $5,200 benchmark plan premium minus contribution amount of $3,800 ($40,000 × .095) equals $1,400 (total advance credit); $1,400/12 = $117.
Advance payments for P (Jan. to June) $700
Advance payments for Q (Jan. to June) 6,036
Advance payments for P and Q (July to Dec.) 3,486
Total advance payments 10,222
Benchmark plan premium for P (Jan. to June) 2,600
Benchmark plan premium for Q (Jan. to June) 7,050
Benchmark plan premium for P and Q (July to Dec.) 7,050
Total benchmark plan premium 16,700
Credit (total benchmark plan premium less required contribution, assuming not more than premium paid) 9,575
Additional tax 647
(v) P's and Q's tax liability for 2014 is increased by $647 under paragraph (a)(1) of this section.
Taxpayers divorce during the taxable year, 50 percent allocation. (i) Taxpayers R and S are married and have two dependents. In 2013 the Exchange in the rating area where the family resides determines that their 2014 household income will be $76,000 (340 percent of the federal poverty line for a family of 4, applicable percentage 9.5). R and S 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 R and S's contribution amount of $7,220 ($76,000 × .095) equals $6,880 (total advance credit); $6,880/12 = $573.
Allocated advance payments (Jan. to June) $1,720 $1,720
Actual advance payments (July to Dec.) 4,200 2,292
Total advance payments 5,920 4,012
Actual benchmark plan premium (July to Dec.) 7,050 2,600
Total benchmark plan premium 10,575 6,125
Contribution amount (taxable year household income × applicable percentage) 5,700 611
Credit (total benchmark plan premium less required contribution, assuming not more than premium paid) 4,875 5,514
Additional credit 1,502
Additional tax 1,045
(vi) Under paragraph (a)(1) of this section, on their tax returns R's tax liability is increased by $1,045 and S is allowed $1,502 as additional credit.
Taxpayers divorce during the taxable year, allocation in proportion to household income. (i) The facts are the same as in Example 2, except that R and S decide to allocate the benchmark plan premium ($7,050) and the advance credit payments ($3,440) for January through June 2014 in proportion to their household incomes (79 percent and 21 percent). Thus, R is allocated $5,570 of the benchmark plan premiums ($7,050 × .79) and $2,718 of the advance credit payments ($3,440 × .79), and S is allocated $1,480 of the benchmark plan premiums ($7,050 × .21) and $722 of the advance credit payments ($3,440 × .21). R and S reconcile their premium tax credit with advance credit payments as follows:
Allocated advance payments (Jan. to June) $2,718 $722
Total advance payments 6,918 3,014
Allocated benchmark plan premium (Jan. to June) 5,570 1,480
Total benchmark plan premium 12,620 4,080
Credit (total benchmark plan premium less required contribution, assuming not more than premium paid) 6,920 3,469
Additional credit 2 455
(i) Taxpayers T and U are married and have two dependents. In 2013, the Exchange in the rating area where the family resides determines that their 2014 household income will be $76,000 (340 percent of the federal poverty line for a family of 4, applicable percentage 9.5). T and U 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 T and U's contribution amount of $7,220 ($76,000 × .095) equals $6,880 (total advance credit); $6,880/12 = $573.
(iii) Because T and U are married but do not file a joint return for 2014, T and U are not applicable taxpayers and are not allowed a premium tax credit for 2014. See § 1.36B-2(b)(2). Under paragraph (b)(3) of this section, half of the advance credit payments ($6,880/2 = $3,440) is allocated to T and half is allocated to U for purposes of determining their excess advance payments. The repayment limitation described in paragraph (a)(3) of this section applies to T and U based on the household income and family size reported on each return. Consequently, T's tax liability for 2014 is increased by $2,500 and U's tax liability for 2014 is increased by $600.
(7) Any other information required in published guidance of general applicability, see § 601.601(d)(2) of this chapter.
(b) Time and manner of reporting. The Commissioner may provide rules in published guidance of general applicability, see § 601.601(d)(2) of this chapter, for the time and manner of reporting under this section.
Par. 4. In § 1.6012-1, paragraph (a)(2)(viii) is added to read as follows:
§ 1.6012-1
(viii) For rules relating to returns required of taxpayers who receive advance payments of the premium tax credit under section 36B, see § 1.6011-8(a).
1. In addition, the statute provides for the Comptroller General, within 5 years of enactment, to conduct a study, including legislative recommendations, on the affordability of coverage, including whether the percentage of household income specified in section 36B(c)(2)(C) “is the appropriate level for determining whether employer-provided coverage is affordable for an employee and whether such level may be lowered without significantly increasing the costs to the Federal Government and reducing employer-provided coverage.” See section 1401(c)(1) of the Affordable Care Act.
[FR Doc. 2011-20728 Filed 8-12-11; 8:45 am]