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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG–148500–12]
RIN 1545–BL36

Shared Responsibility Payment for Not
Maintaining Minimum Essential
Coverage
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
AGENCY:

This document contains
proposed regulations relating to the
requirement to maintain minimum
essential coverage enacted by the
Patient Protection and Affordable Care
Act and the Health Care and Education
Reconciliation Act of 2010, as amended
by the TRICARE Affirmation Act and
Public Law 111–173. These proposed
regulations provide guidance on the
liability for the shared responsibility
payment for not maintaining minimum
essential coverage. This document also
provides notice of a public hearing on
these proposed regulations.
DATES: Comments must be received by
May 2, 2013. Outlines of topics to be
discussed at the public hearing
scheduled for May 29, 2013, at 10 a.m.,
must be received by May 3, 2013.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–148500–12), Room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be handdelivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–148500–12),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue NW.,
Washington, DC, or sent electronically
via the Federal eRulemaking Portal at
www.regulations.gov (IRS REG–148500–
12). The public hearing will be held in
the IRS Auditorium, Internal Revenue
Building, 1111 Constitution Avenue
NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations,
Sue-Jean Kim or John B. Lovelace, (202)
622–4960; concerning the submission of
comments, the public hearing, and to be
placed on the building access list to
attend the public hearing,
Oluwafunmilayo Taylor, (202) 622–7180
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:

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SUMMARY:

Paperwork Reduction Act
The collection of information
contained in this notice of proposed

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rulemaking has been submitted to the
Office of Management and Budget in
accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
3507(d)). Comments on the collection of
information should be sent 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, with copies to the Internal
Revenue Service, Attn: IRS Reports
Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224.
Comments on the collection of
information should be received by April
2, 2013. Comments are specifically
requested concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the IRS,
including whether the information will
have practical utility;
The accuracy of the estimated burden
associated with the proposed collection
of information;
How the quality, utility, and clarity of
the information to be collected may be
enhanced;
How the burden of complying with
the proposed collection of information
may be minimized, including through
the application of automated collection
techniques or other forms of information
technology; and
Estimates of capital or start-up costs
and costs of operation, maintenance,
and purchase of services to provide
information.
The collection of information in these
proposed regulations is in § 1.5000A–3
and § 1.5000A–4. The collection of
information is necessary to determine
whether the shared responsibility
payment provision applies to a taxpayer
and compute any shared responsibility
payment imposed on a taxpayer. The
likely respondents are individuals
required to file Federal income tax
returns under section 6012(a)(1) of the
Internal Revenue Code (Code).
The burden for the collection of
information contained in proposed
regulation § 1.5000A–3 and § 1.5000A–4
will be reflected in the burden on a form
that the IRS will create to request the
information in the proposed regulation.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control
number assigned by the Office of
Management and Budget.
Background
Under the Patient Protection and
Affordable Care Act, Public Law 111–
148 (124 Stat. 119 (2010)) and the

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Health Care and Education
Reconciliation Act of 2010, Public Law
111–152 (124 Stat. 1029 (2010))
(collectively, the Affordable Care Act),
the Federal government, State
governments, insurers, employers, and
individuals are entrusted with shared
responsibility to reform and improve the
availability, quality, and affordability of
health insurance coverage in the United
States. The Affordable Care Act expands
Medicaid eligibility for residents of
electing States and increases Federal
funding for the expansion. The
Affordable Care Act also provides
individuals and small businesses the
ability to purchase private health
insurance through State-based, State
Partnership, or Federally facilitated
competitive market places called
Affordable Insurance Exchanges
(Exchanges). Through Exchanges,
insurance companies will compete for
business on a level playing field and
qualified consumers will have a choice
of health plans to fit their needs.
In addition, the Affordable Care Act
includes various insurance market
reforms to increase the ability of
individuals to enroll in health insurance
coverage regardless of preexisting
conditions and to eliminate the ability
of insurers to charge higher premium
prices based on factors other than age,
tobacco use, rating area, or family size.
Moreover, the Affordable Care Act
builds upon the existing private
employer-based health insurance system
to ensure continued access to high
quality health insurance coverage at low
cost.
Finally, to ensure effective and
efficient implementation of the
insurance market reforms, the
Affordable Care Act requires a
nonexempt individual to maintain
minimum essential coverage or make a
shared responsibility payment. Section
1501(b) of the Affordable Care Act
added section 5000A to a new chapter
48 of subtitle D (Miscellaneous Excise
Taxes) of the Code effective for months
beginning after December 31, 2013.
Section 5000A was subsequently
amended by the TRICARE Affirmation
Act of 2010, Public Law 111–159 (124
Stat. 1123) and Public Law 111–173
(124 Stat. 1215).
Shared Responsibility Payment for Not
Maintaining Minimum Essential
Coverage
Section 5000A provides nonexempt
individuals with a choice: maintain
minimum essential coverage for
themselves and any nonexempt family
members or include an additional
payment with their Federal income tax
return. Section 5000A(a) and section

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5000A(b) provide that nonexempt
individuals must have minimum
essential coverage for each month
beginning after December 31, 2013, or
make an additional payment (the shared
responsibility payment) with their
Federal income tax return for the
taxable year that includes such month.
Under section 5000A(b)(3)(A), a
taxpayer is liable for the shared
responsibility payment if any
nonexempt individual who may be
claimed by the taxpayer as a dependent
for a taxable year does not have
minimum essential coverage in a month
included in that taxable year. Married
taxpayers filing a joint return for any
taxable year are jointly liable for any
shared responsibility payment imposed
for the year.
Exempt Individuals
Many individuals are exempt from the
shared responsibility payment,
including some whose religious beliefs
conflict with acceptance of the benefits
of private or public insurance and those
who do not have an affordable health
insurance coverage option available.
Section 1311(d)(4)(H) of the Affordable
Care Act (42 U.S.C. 18031(d)(4)(H))
directs Exchanges to issue to qualified
individuals certificates of exemption
from the requirement to maintain
minimum essential coverage or the
shared responsibility payment under
section 5000A. Section 1411 of the
Affordable Care Act (42 U.S.C. 18081)
generally provides procedures for
determining an individual’s eligibility
for various benefits relating to health
coverage, including exemptions from
the application of section 5000A. The
Department of Health and Human
Services and the Department of the
Treasury are working in close
coordination to release regulations and
other guidance related to Exchanges.
On March 27, 2012, the Department of
Health and Human Services released
final regulations related to the
establishment of, and the standards
applicable to, Exchanges (45 CFR 155.10
and following sections (Exchange
regulations)). Section 155.200(b) of the
Exchange regulations directs an
Exchange to issue exemption certificates
in accordance with sections
1311(d)(4)(H) and 1411 of the
Affordable Care Act (42 U.S.C.
18031(d)(4)(H), 18081). The Department
of Health and Human Services is
publishing proposed regulations
detailing the standards by which
Exchanges will issue certificates of
exemption under section 5000A. Patient
Protection and Affordable Care Act;
Exchange Functions: Eligibility for
Exemptions; Minimum Essential

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Coverage Provisions (to be codified at 45
CFR 155.600 and following sections).
Section 5000A(d) and (e) describe
individuals who are exempt from
making the shared responsibility
payment even if they do not have
minimum essential coverage for a given
month. Under section 5000A(d)(2)(A),
an individual is exempt for a month for
which an Exchange certifies that the
individual is a member of a recognized
religious sect or a division thereof
described in section 1402(g)(1) and is an
adherent of established tenets or
teachings of that sect or division.
Section 1402(g)(1) provides an
exemption from self-employment tax for
members of a qualified religious sect or
division thereof. A qualified religious
sect or division thereof described in
section 1402(g)(1) is a sect or division
thereof that the Commissioner of Social
Security finds: (1) has established tenets
or teachings by reason of which its
members and adherents are
conscientiously opposed to acceptance
of the benefits of any private or public
insurance that makes payments in the
event of death, disability, old age, or
retirement or makes payments toward
the cost of, or provides services for,
medical care (including the benefits of
any insurance system established by the
Social Security Act); (2) maintains, and
has maintained for a substantial period
of time, a practice whereby its members
make provision for its dependent
members that is reasonable in view of
their general level of living; and (3) has
been in existence at all times since
December 31, 1950.
Section 5000A(d)(2)(B) provides that
an individual is exempt for a month that
the individual is a member of a health
care sharing ministry. A health care
sharing ministry is an organization: (1)
which is described in section 501(c)(3)
and exempt from tax under section
501(a); (2) members of which share a
common set of ethical or religious
beliefs and share medical expenses
among themselves in accordance with
those beliefs, and regardless of the State
in which a member resides or is
employed; (3) members of which retain
membership even after they develop a
medical condition; (4) which has itself
(or a predecessor of which has) been in
existence at all times since December
31, 1999; (5) members of which have
continuously and without interruption
shared medical expenses since at least
December 31, 1999; and (6) which
conducts an annual audit performed by
an independent certified public
accounting firm in accordance with
generally accepted accounting
principles the report of which is made

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available to members of the public upon
request.
Section 5000A(d)(3) provides that an
individual is exempt for a month that
the individual is neither a citizen or
national of the United States nor an
alien lawfully present in the United
States.
Section 5000A(d)(4) provides that an
individual is exempt for a month that
the individual is incarcerated, except for
incarceration pending the disposition of
charges.
Section 5000A(e)(1) provides that an
individual is exempt for a month for
which the individual lacks access to
affordable minimum essential coverage.
For this purpose, an individual lacks
access to affordable coverage if the
individual’s required contribution
(determined on an annual basis) for
minimum essential coverage exceeds a
percentage (8 percent for 2014) of the
individual’s household income for the
most recent taxable year for which the
Secretary of Health and Human
Services, in consultation with the
Secretary, determines information is
available.
In general, section 5000A(c)(4)(B)
defines a taxpayer’s household income
as the sum of the taxpayer’s modified
adjusted gross income and the modified
adjusted gross income of any other
member of a taxpayer’s family (that is,
individuals for whom the taxpayer
properly claims a deduction under
section 151 (relating to the personal
exemption deduction)) who are required
to file a Federal income tax return.
Under section 5000A(c)(4)(C), modified
adjusted gross income means adjusted
gross income (within the meaning of
section 62) increased by amounts
excluded from gross income under
section 911 and tax-exempt interest a
taxpayer receives or accrues in the
taxable year. Unlike section
36B(d)(2)(B), modified adjusted gross
income for purposes of section 5000A
does not include Social Security
benefits that are not includable in gross
income. For purposes of determining
the affordability of minimum essential
coverage under section 5000A(e)(1), the
taxpayer’s household income is
increased by the portion of the required
contribution made through a salary
reduction arrangement and excluded
from gross income.
For purposes of determining
household income, a taxpayer’s family
includes all individuals for whom the
taxpayer properly claims a personal
exemption deduction under section 151
for the taxable year. See also § 1.36B–
1(d). Taxpayers may claim a personal
exemption deduction for themselves, a
spouse, and each of their dependents.

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Section 152 provides that a taxpayer’s
dependent may be a qualifying child or
qualifying relative, including an
unrelated individual who lives with the
taxpayer.
For an employee eligible to purchase
coverage under an eligible employersponsored plan, the required
contribution for purposes of the
exemption under section 5000A(e)(1) is
the employee’s share of the annual
premium for self-only coverage. For an
individual eligible to purchase coverage
under an eligible employer-sponsored
plan because the individual is related to
an employee, the determination of
whether the individual’s coverage is
affordable is made by reference to the
employee’s required contribution. For
all individuals who are ineligible to
purchase coverage under an eligible
employer-sponsored plan, the required
contribution is the annual premium for
the lowest cost bronze plan available on
the Exchange where the individual lives
reduced by the credit allowable under
section 36B for the taxable year
(determined as if the individual
enrolled in a plan through such
Exchange for the entire taxable year).
Section 5000A(e)(2) provides that an
individual is exempt for a month
included in a calendar year if the
individual’s household income for the
most recent taxable year for which
information is available is less than the
amount of gross income specified in
section 6012(a)(1) for the taxpayer.
Section 6012(a)(1) provides, for each
filing status, gross income thresholds
above which individuals are required to
file Federal income tax returns.
As described in this preamble,
income-based exemptions under section
5000A(e)(1) and section 5000A(e)(2) rely
upon household income for the most
recent taxable year that the Secretary of
Health and Human Services, after
consultation with the Secretary of
Treasury, determines information is
available. The Secretary of Health and
Human Services, after consultation with
the Secretary of the Treasury,
determined that the household income
for these exemptions that is available
and relevant is the household income
for the year for which an exemption is
being claimed. See section III.A.3.b. of
the preamble to Patient Protection and
Affordable Care Act; Exchange
Functions: Eligibility for Exemptions;
Minimum Essential Coverage Provisions
(to be codified at 45 CFR 155.600 and
following sections, and 45 CFR 156.600
and following sections). The
determination by the Secretary of Health
and Human Services is reflected in the
proposed regulations.

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Section 5000A(e)(3) provides that an
individual is exempt for a month that
the individual is a member of an Indian
tribe as defined in section 45A(c)(6).
Section 45A(c)(6) describes certain
Federally recognized Indian tribes
(including any qualified Alaska Native
village or regional or village
corporation). The Federally recognized
Indian tribes are listed in Indian Entities
Recognized and Eligible to Receive
Services from the United States Bureau
of Indian Affairs, 75 FR 60810 (Oct. 1,
2010), as supplemented by 75 FR
661124 (Oct. 27, 2010), or its successor.
Under section 5000A(e)(4), an
individual is exempt for a month the
last day of which occurs in a period
when the individual does not have
minimum essential coverage for a
continuous period of less than three
months (a short coverage gap). The
length of a gap in coverage is
determined without regard to the
calendar years in which months in the
gap occur. If an individual has more
than one short coverage gap in a
calendar year, the exemption applies
only to the earliest short coverage gap.
Section 5000A(e)(4) authorizes the
Secretary to issue regulations that
provide for collecting the shared
responsibility payment in cases where
gaps in coverage straddle more than one
taxable year.
Section 5000A(e)(5) provides that an
individual is exempt for a month that
the Exchange determines, in accordance
with guidance promulgated by the
Secretary of Health and Human
Services, the individual suffered a
hardship that prevented the individual
from obtaining coverage under a
qualified health plan. The Department
of Health and Human Services is
proposing rules on the criteria for
application of the hardship exemption.
Patient Protection and Affordable Care
Act; Exchange Functions: Eligibility for
Exemptions; Minimum Essential
Coverage (to be codified at 45 CFR
155.605(g)).
Computation of Shared Responsibility
Payment
Under section 5000A(c), the amount
of the shared responsibility payment for
any taxable year is generally the sum of
monthly penalty amounts for all months
in the taxable year in which any
nonexempt individual for whom the
taxpayer is liable under section
5000A(b) did not have minimum
essential coverage. The shared
responsibility payment amount for any
taxable year may not exceed an amount
equal to the national average premium
for bronze-level qualified health plans

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offered through Exchanges for the
applicable family size involved.
The monthly penalty amount for a
month is equal to 1⁄12 of the greater of
the following amounts: (1) The flat
dollar amount or (2) the percentage of
income. The flat dollar amount is the
lesser of the following amounts: (a) the
sum of the applicable dollar amounts for
all nonexempt individuals without
minimum essential coverage for whom
the taxpayer is liable or (b) 300 percent
of the applicable dollar amount. The
applicable dollar amount is $95 for
2014, $325 for 2015, and $695 for 2016,
and will be increased for calendar years
beginning after 2016 by a cost-of-living
adjustment. If a nonexempt individual
has not attained the age of 18 as of the
beginning of a month, the applicable
dollar amount for that individual is onehalf of the regular applicable dollar
amount.
The percentage of income is
calculated as the excess of the
taxpayer’s household income over the
taxpayer’s Federal income tax return
filing threshold under section
6012(a)(1), multiplied by a percentage
figure. The percentage figure is 1
percent for taxable years beginning in
2014, 2 percent for taxable years
beginning in 2015, and 2.5 percent for
taxable years beginning after 2015.
Minimum Essential Coverage
Section 5000A(f) defines minimum
essential coverage as one of the
following: (1) Coverage under a
specified government sponsored
program, (2) coverage under an eligible
employer-sponsored plan, (3) coverage
under a health plan offered in the
individual market within a State, (4)
coverage under a grandfathered health
plan, and (5) other health benefits
coverage that the Secretary of Health
and Human Services, in coordination
with the Secretary, recognizes for
purposes of section 5000A(f).
Under section 5000A(f)(1)(A),
specified government sponsored
programs include the following: (1) The
Medicare program under part A of title
XVIII of the Social Security Act, (2) the
Medicaid program under title XIX of the
Social Security Act, (3) the Children’s
Health Insurance Program (CHIP) under
title XXI of the Social Security Act, (4)
medical coverage under chapter 55 of
title 10, United States Code, including
the TRICARE program, (5) veterans
health care programs under chapter 17
or 18 of title 38, as determined by the
Secretary of Veterans Affairs, in
coordination with the Secretary of
Health and Human Services and the
Secretary of Treasury, (6) a health plan
under section 2504(e) of title 22 relating

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to Peace Corps volunteers, and (7) the
Nonappropriated Fund Health Benefits
Program of the Department of Defense,
established under section 349 of the
National Defense Authorization Act for
Fiscal Year 1995, Public Law 103–337
(10 U.S.C. 1587 note).
Under section 5000A(f)(2), an eligible
employer-sponsored plan is, with
respect to an employee, a group health
plan or group health insurance coverage
offered by an employer to the employee
that is: (1) a governmental plan, within
the meaning of section 2791(d)(8) of the
Public Health Service Act, or (2) any
other plan or coverage offered in the
small or large group market within a
State. An eligible employer-sponsored
plan also includes a grandfathered
health plan offered in a group market.
Under section 1251 of the Affordable
Care Act (42 U.S.C. 18011), a
grandfathered health plan is a group
health plan or health insurance coverage
that provided coverage as of the
enactment date of the Affordable Care
Act (March 23, 2010) or in which an
individual was enrolled as of that date.
See also § 54.9815–1251T(a) (providing
guidance regarding grandfathered health
plans).
As described in this preamble, the
Department of Health and Human
Services, in coordination with the
Treasury Department, may designate
other health benefits coverage as
minimum essential coverage. The
Department of Health and Human
Services is proposing a regulation that
provides criteria and a process by which
other types of coverage may be
designated as minimum essential
coverage. Patient Protection and
Affordable Care Act; Exchange
Functions: Eligibility for Exemptions;
Minimum Essential Coverage Provisions
(to be codified at 45 CFR 156.600 and
following sections).
Under section 5000A(f)(3), health
coverage that consists of coverage of
certain excepted benefits specified in
section 2791(c) of the Public Health
Service Act (42 U.S.C. 300gg–91(c)) is
not minimum essential coverage. There
are four categories of excepted benefits.
The first category includes accidental
death and dismemberment coverage,
disability insurance, general liability
insurance, automobile liability
insurance, workers’ compensation,
credit-only insurance (for example,
mortgage insurance), and coverage for
employer-provided on-site medical
clinics. See 42 U.S.C. 300gg–91(c)(1).
The second category of excepted
benefits includes limited-scope dental
or vision benefits, long-term care
benefits, and benefits provided under
certain health flexible spending

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arrangements. See 42 U.S.C. 300gg–
91(c)(2). The third category of excepted
benefits includes, but only if offered
under a policy, certificate, or contract of
insurance separate from, and not
coordinated with, any group or
individual health plan maintained by
the same plan sponsor, coverage only
for a specified disease or illness (for
example, cancer-only policies) or fixed
indemnity insurance (for example, a
policy that pays a fixed dollar amount,
such as $100, per day of hospitalization
or illness regardless of the amount of
medical expense incurred). See 42
U.S.C. 300gg–91(c)(3). The last category
of excepted benefits includes, but only
if offered under a policy, certificate, or
contract of insurance separate from the
primary health coverage, Medicare
supplemental polices (also known as
Medigap or MedSupp insurance),
TRICARE supplemental policies, and
similar supplemental coverage to
coverage under a group health plan. See
42 U.S.C. 300gg–91(c)(4).
Under section 5000A(f)(4), an
individual is treated as having
minimum essential coverage for a
month: (1) if the individual is a bona
fide resident of a United States
possession for the month or (2) if the
month occurs during any period
described in section 911(d)(1)(A) or
section 911(d)(1)(B) that is applicable to
the individual. Section 911(d)(1)(A) is
applicable to a citizen of the United
States who has a tax home outside the
United States and is a bona fide resident
of a foreign country or countries during
an uninterrupted period that includes
an entire taxable year. For example, an
individual who resides abroad for an
entire calendar year is treated as having
minimum essential coverage for each
month of that calendar year regardless
of whether the individual has health
coverage of any type. Section
911(d)(1)(B) is applicable to a U.S.
citizen or U.S. resident (within the
meaning of section 7701(b)) who has a
tax home outside the United States and
is present in a foreign country or
countries for at least 330 full days
during a period of 12 consecutive
months. In general, an individual who
meets either of the foregoing residency
requirements under section 911(d)(1) is
treated as a qualified individual for
purposes of section 911 and may elect
to exclude certain foreign earned
income and housing costs from gross
income.
Administration and Procedure
Under section 5000A(b)(2), an
individual liable for the shared
responsibility payment under section
5000A must report the payment with

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the individual’s Federal income tax
return for the taxable year including the
month or months for which the payment
is owed.
Under section 5000A(g)(1), the shared
responsibility payment is payable upon
notice and demand by the Secretary.
The shared responsibility payment is
generally assessed and collected in the
same manner as an assessable penalty
under subchapter B of chapter 68
(sections 6671 through 6725). Unlike the
assessable penalties, however, the
Secretary may not file notice of lien or
levy on the taxpayer’s property for
failing to pay the assessed shared
responsibility payment. Further, a
taxpayer may not be subject to criminal
prosecution or penalty for failing to pay
the assessed shared responsibility
payment in a timely manner.
Explanation of Provisions
1. Maintenance of Minimum Essential
Coverage and Liability for Shared
Responsibility Payment
The proposed regulations provide
that, for a month, a nonexempt
individual must either have minimum
essential coverage or pay the shared
responsibility payment.
a. Coverage for a Month
The proposed regulations provide
that, for any calendar month, an
individual is treated as having
minimum essential coverage if the
individual is enrolled in and entitled to
receive benefits under a program or plan
that is minimum essential coverage for
at least one day during the month.
b. Liability for Shared Responsibility
Payment
i. Liability for Dependents
Under section 5000A(b)(3)(A), if an
individual with respect to whom the
shared responsibility payment is
imposed for a month is another
individual’s dependent (as defined in
section 152) for the taxable year
including that month, the other
individual is liable for the shared
responsibility payment for the
dependent. The proposed regulations
clarify that a taxpayer is liable for the
shared responsibility payment imposed
with respect to any individual for a
month in a taxable year for which the
taxpayer may claim a personal
exemption deduction for the individual
(that is, the dependent) for that taxable
year. Whether the taxpayer actually
claims the individual as a dependent for
the taxable year does not affect the
taxpayer’s liability for the shared
responsibility payment for the
individual.

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The proposed regulations provide
special rules for determining liability for
the shared responsibility payment
attributable to individuals who are
adopted or placed in foster care during
a taxable year. If a taxpayer legally
adopts a child and is entitled to claim
the child as a dependent under section
151 for the taxable year when the
adoption occurs, the taxpayer is not
liable for a shared responsibility
payment attributable to the child for the
months before the adoption. Conversely,
if a taxpayer who is entitled to claim a
child as a dependent under section 151
for the taxable year places the child for
adoption during the year, the taxpayer
is not liable for a shared responsibility
payment attributable to the child for the
months after the adoption.
The proposed regulations define
shared responsibility family to include
all individuals for whom a taxpayer
(including a spouse, if married filing
jointly) is liable for the shared
responsibility payment. The proposed
regulations clarify that a taxpayer who
is an exempt individual remains liable
for a shared responsibility payment
imposed for a nonexempt dependent
who does not have minimum essential
coverage.
ii. Joint Liability
Section 5000A(b)(3)(B) provides that,
if an individual for whom the shared
responsibility payment is imposed for a
month files a joint return for the taxable
year including that month, the
individual and the individual’s spouse
are jointly liable for the shared
responsibility payment. The proposed
regulations clarify that whether one
spouse is an exempt individual does not
affect the joint liability of the two
spouses for the shared responsibility
payment.
2. Minimum Essential Coverage

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a. Government Sponsored Programs
Section 5000A(f)(1)(A) specifies
several government sponsored programs
as providing minimum essential
coverage by referring to the Federal law
authorizing a particular program. In
most cases, the relevant law describes a
single program or a discrete portion of
a larger program. For example, section
5000A(f)(1)(A)(i) lists Part A of the
Medicare program under title XVIII of
the Social Security Act. However, in
some cases, the relevant law establishes
programs with limited coverage. For
instance, some of the programs under
title XIX of the Social Security Act do
not provide a scope of benefits
comparable to the primary Medicaid
program under the same title. In

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addition, the Secretary of Veterans
Affairs, in coordination with the
Secretaries of Health and Human
Services and Treasury, determined that
only certain health care programs under
chapter 17 or 18 of title 38, United
States Code provide comprehensive
benefits. The programs with limited
coverage are similar to coverage
consisting of excepted benefits that is
not minimum essential coverage under
section 5000A(f)(3). Accordingly, the
proposed regulations identify limited
benefit programs under title XIX of the
Social Security Act that are not
minimum essential coverage and specify
comprehensive health care programs
under chapter 17 or 18 of title 38,
United States Code, that are minimum
essential coverage.
b. Eligible Employer-Sponsored Plans
i. In General
Section 5000A(f)(2) defines eligible
employer-sponsored plan, for an
employee, as a group health plan or
group health insurance coverage offered
by an employer to the employee that is
either of the following: (1) A
governmental plan (within the meaning
of section 2791(d)(8) of the Public
Health Service Act (PHSA) (42 U.S.C.
300gg–91(d)(8)) or (2) any other plan or
coverage offered in the small or large
group market within a State. The terms
group health plan and group health
insurance coverage are not defined in
section 5000A. However, section
5000A(f)(5) provides that any term used
in section 5000A that is also used in
title I of the Affordable Care Act has the
same meaning as when used in that
title.
Section 1301(b)(3) of the Affordable
Care Act (42 U.S.C. 18021(b)(3))
provides that group health plan has the
same meaning as in section 2791(a) of
the PHSA (42 U.S.C. 301gg–91(a)(1)).
Section 2791(a) of the PHSA provides
that group health plan means an
employee welfare benefit plan (as
defined in section 3(1) of the Employee
Retirement Income Security Act of 1974
(ERISA) (29 U.S.C. 1002(1)) to the extent
that the plan provides medical care (as
defined in section 2791(a)(2) of the
PHSA and including items and services
paid for as medical care) to employees
and their dependents directly or
through insurance, reimbursement, or
otherwise. Section 3(1) of ERISA defines
employee welfare benefit plan as any
plan, fund, or program established or
maintained by an employer or by an
employee organization, or by both, to
the extent that the plan, fund, or
program is established or maintained for
the purpose of providing for its

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participants or their beneficiaries,
through the purchase of insurance or
otherwise, various benefits, which may
include medical, surgical, or hospital
care or benefits.
Group health plans within the
meaning of section 1301(b)(3) of the
Affordable Care Act (42 U.S.C.
18021(b)(3)) include both insured health
plans and self-insured health plans.
Accordingly, a self-insured group health
plan is an eligible employer-sponsored
plan.
ii. Continuation and Retiree Coverage
Employers are required to offer
certain former employees continuation
coverage under Federal or State law.
Many employers offer health benefits
coverage to retired employees. Under
the PHSA and ERISA, group health
plans and employee welfare benefit
plans, respectively, include plans
offered to former employees.
Accordingly, the proposed regulations
clarify that coverage provided by an
employer to a former employee,
including coverage under the
Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA),
Public Law 99–272 (100 Stat. 82), and
retiree health coverage, qualifies as
coverage under an eligible employersponsored plan.
c. Other Health Benefits Coverage
Under section 5000A(f)(1)(E), the
Secretary of Health and Human
Services, in coordination with the
Secretary of the Treasury, may designate
other health benefits coverage as
minimum essential coverage. The
Department of Health and Human
Services is proposing rules providing
standards for determining whether
certain other types of health insurance
coverage constitute minimum essential
coverage and procedures for plan
sponsors to follow for a plan to be
identified as minimum essential
coverage under section 5000A. Patient
Protection and Affordable Care Act;
Exchange Functions: Eligibility for
Exemptions; Minimum Essential
Coverage Provisions (to be codified at 45
CFR 156.600 and following sections).
3. Exempt Individuals
a. In General
The term applicable individual is
used in section 5000A to describe an
individual who is subject to the
minimum essential coverage provision
under section 5000A(a). Section
5000A(d)(2) through section
5000A(d)(4) describe one category of
individuals who are not applicable
individuals for purposes of section

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5000A. Section 5000A(e)(1) through
5000A(e)(5) describe another category of
individuals who are exempt from
liability for the shared responsibility
payment imposed under section
5000A(b). Although the two categories
are distinct in the statute, the
consequence for individuals described
in either category is the same:
individuals in both categories are not
subject to the shared responsibility
payment for not maintaining minimum
essential coverage. Accordingly, the
proposed regulations refer to all
individuals described in section
5000A(d)(2), (d)(3), or (d)(4), or section
5000A(e)(1), (e)(2), (e)(3), (e)(4), or (e)(5),
as exempt individuals. For a month, a
nonexempt individual is any individual
who is alive for the entire month and is
not an exempt individual for the month.
The proposed regulations provide
that, in general, an individual is treated
as an exempt individual for a month if
the individual is an exempt individual
for at least one day in the month. In the
case of certain individuals who are
nonresident aliens (as defined in section
7701(b)(1)(B)), individuals whose
household income falls below the return
filing threshold, and individuals who
experience short coverage gaps, the
proposed regulations provide rules on
how to determine whether an individual
is exempt for a particular month. An
individual is exempt for all months
included in a taxable year when the
individual is a nonresident alien. In the
case of an individual whose household
income falls below the return filing
threshold for a taxable year, the
individual is exempt for all months in
the taxable year. In the case of an
individual experiencing a coverage gap,
the individual is exempt for a month
included in the first short coverage gap
in a calendar year.
b. Members of Recognized Religious
Sects or Divisions
Under section 5000A(d)(2)(A), an
individual is exempt for a month that
the individual has in effect a religious
conscience exemption certification.
Only an Exchange may grant a religious
conscience exemption certification.
Individuals who are members of a
recognized religious sect or division
thereof described in section 1402(g)(1)
and who are adherents of the
established tenets or teachings of the
sect or division are eligible to receive a
religious conscience exemption
certification.
c. Exempt Noncitizens
The proposed regulations clarify that
an individual who is not a citizen or
national of the United States is exempt

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for a month if the individual is not
lawfully present in the United States in
that month within the meaning of 45
CFR 155.20 (referring to lawful
immigration status within the United
States). In addition, an individual who
is not a citizen or national of the United
States is treated as not lawfully present
in the United States for a month in a
taxable year if the individual is a
nonresident alien as defined in section
7701(b)(1)(B) for that taxable year.
d. Incarcerated Individuals
Section 5000A(d)(4) provides that an
individual is exempt for a month for
which the individual is incarcerated
(other than incarceration pending the
disposition of charges). The proposed
regulations clarify that an individual
confined for at least one day in a jail,
prison, or similar penal institution or
correctional facility after the disposition
of charges is exempt for the month that
includes the day.
e. Individuals Who Cannot Afford
Coverage
Section 5000A(e)(1)(A) provides that
an individual is exempt for a month for
which the individual does not have
access to affordable minimum essential
coverage. For this purpose, an
individual does not have access to
affordable coverage for a month if the
individual’s required contribution
(determined on an annual basis) for
coverage for the month exceeds 8
percent of the taxpayer’s household
income for the taxable year. Under
section 5000A(e)(1)(D), for any plan year
beginning after 2014, the 8 percent
figure is replaced by the percentage
figure that the Secretary of Health and
Human Services determines reflects the
excess of the rate of premium growth
between the preceding calendar year
and 2013 over the rate of income growth
for the same period.
For purposes of determining
affordability of coverage, in accordance
with section 5000A(e)(1)(A), the
proposed regulations require that the
taxpayer’s household income be
increased by the portion of the required
contribution made through a salary
reduction arrangement and excluded
from gross income. In many cases,
information on the excluded amount
may not be available to the IRS or to the
employee. Comments are requested on
practicable ways, if any, in which the
required adjustment to household
income may be made with the
information available under sections
6051, 6055, 6056, or other provisions of
the Code.

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i. Individuals Eligible for Minimum
Essential Coverage Under an Eligible
Employer-Sponsored Plan
A. Eligibility for Coverage Under an
Eligible Employer-Sponsored Plan
If an individual is eligible for
coverage under an eligible employersponsored plan, whether as an
employee or as an individual related to
an employee, the individual’s
qualification for the lack of affordable
coverage exemption is determined
solely by reference to the cost of
coverage under the eligible employersponsored plan. The proposed
regulations clarify that an employee or
related individual is treated as eligible
for coverage under an eligible employersponsored plan for each month included
in the plan year if the employee or
related individual could have enrolled
in the plan for that month during an
open or special enrollment period.
The proposed regulations also clarify
that an employed individual who is
eligible for coverage under an eligible
employer-sponsored plan offered by the
individual’s employer is not treated as
eligible as a related individual for
coverage under a plan offered by the
employer of another employed
individual. Thus, if two or more
members of a family are employed and
their respective employers offer selfonly and family coverage under eligible
employer-sponsored plans, each
employed individual determines the
affordability of coverage using the
premium for the self-only coverage
offered by the individual’s employer.
Neither individual may determine the
affordability of coverage using the
premium for family coverage offered by
the other individual’s employer. In
these cases, each employed individual’s
self-only coverage may be treated as
affordable, even though the aggregate
cost of covering all employed
individuals may exceed 8 percent of the
family’s household income. The
Department of Health and Human
Services is proposing rules that would
permit families in these circumstances
to qualify for the hardship exemption
described in section 5000A(e)(5). Patient
Protection and Affordable Care Act;
Exchange Functions: Eligibility for
Exemptions; Minimum Essential
Coverage Provisions (to be codified at 45
CFR 155.605(g)).
The proposed regulations provide that
employee includes a former employee.
Thus, an individual eligible to enroll in
retiree coverage under a group health
plan that is an eligible employersponsored plan as defined in section
5000A(f)(2) is treated as eligible to
purchase minimum essential coverage

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under an eligible employer-sponsored
plan under the same rules applicable to
current employees. The treatment of
former employees is consistent with
other provisions of the Code, the PHSA,
and ERISA that apply to group health
plans of employers.
In addition, the proposed regulations
provide that an individual eligible to
enroll in continuation coverage required
under Federal law, such as COBRA, or
a comparable State law is eligible to
purchase minimum essential coverage
under an eligible employer-sponsored
plan only if the individual enrolls in the
coverage. This treatment of former
employees eligible for continuation
coverage is consistent with the rules
provided in § 1.36B–2(c)(3)(iv).

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B. Required Contribution for Employees
Eligible for Coverage Under an
Employer-Sponsored Plan
Section 5000A(e)(1)(B)(i) provides
that, in the case of an employee eligible
to purchase minimum essential
coverage through an eligible employersponsored plan, the required
contribution is the portion of the
annualized premium that the individual
would pay (without regard to whether
paid through salary reduction or
otherwise) for self-only coverage. The
proposed regulations clarify that, for an
employee eligible for coverage under an
eligible employer-sponsored plan, the
required contribution is the portion of
the annual premium that the employee
would pay for the lowest cost self-only
coverage.
C. Required Contribution for a Related
Individual Eligible for Coverage Under
an Eligible Employer-Sponsored Plan
Section 5000A(e)(1)(C) provides that,
in the case of a related individual
eligible to purchase minimum essential
coverage under an eligible employersponsored plan because of the
individual’s relationship with an
employee, the related individual’s
affordability determination is made by
reference to the employee’s required
contribution. The proposed regulations
provide that a related individual is an
individual who is eligible for coverage
under an eligible employer-sponsored
plan because of a relationship to an
employee and for whom a personal
exemption deduction under section 151
is properly claimed on the employee’s
Federal income tax return. For example,
an employee’s spouse is treated as a
related individual if the spouse files a
joint return with the employee and is
eligible for employer-sponsored
coverage only under the plan offered to
the employee. An individual who is
eligible to enroll in an eligible

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employer-sponsored plan by reason of a
relationship to an employee, but who is
not claimed as a dependent by the
employee, is not treated as a related
individual. For purposes of section
5000A, the unclaimed dependent’s
household income is independently
determined.
The proposed regulations clarify that
if an employee or related individual is
eligible to enroll in an eligible
employer-sponsored plan, any eligibility
for other coverage (for example,
government sponsored minimum
essential coverage) is disregarded for
purposes of the exemption for lack of
affordable coverage.
The proposed regulations further
clarify that the required contribution for
a related individual’s coverage is
determined by reference to the premium
for the lowest cost coverage under the
eligible employer-sponsored plan in
which the employee and all related
individuals who are included in the
employee’s family and not otherwise
exempt are eligible to enroll. Thus, the
required contribution for a spouse and
claimed dependents (who are not
otherwise exempt) is the premium that
the employee would pay for the lowest
cost coverage covering the employee,
the spouse, and the claimed
dependents. The required contribution
for self-only coverage under an eligible
employer-sponsored plan may cost less
than 8 percent of household income,
while the required contribution for
family coverage under the same
employer plan may cost more than 8
percent of household income. In such a
case, the employee is not exempt under
section 5000A(e)(1), while the
employee’s spouse and claimed
dependents are exempt.
Finally, some individuals who are
claimed as dependents by a taxpayer
may not be eligible for coverage under
the taxpayer’s eligible employersponsored plan. The affordability of
coverage for these individuals is
determined in the manner that applies
to them individually. Thus, if a taxpayer
is not allowed to enroll a niece who is
the taxpayer’s dependent in the
taxpayer’s eligible employer-sponsored
plan, the required contribution for the
niece is not determined by reference to
the cost of coverage under the plan.
Instead, unless the niece is eligible for
coverage under another eligible
employer-sponsored plan, her required
contribution is determined under the
rules applicable to individuals eligible
only to purchase coverage in the
individual market.

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ii. Individuals eligible only to purchase
coverage in the individual market
Section 5000A(e)(1)(B)(ii) defines the
term required contribution for an
individual eligible only to purchase
coverage in the individual market. The
proposed regulations clarify that, for
any individual who is not an employee
or related individual eligible for
minimum essential coverage under an
eligible employer-sponsored plan, the
required contribution is the premium
for the lowest cost bronze plan available
in the individual market through the
Exchange serving the rating area where
the individual resides, reduced by the
maximum amount of any premium tax
credit that would be allowable if the
individual were enrolled in the plan
offered through the Exchange.
As explained in this preamble, under
the proposed regulations, both the
annual premium for the applicable
lowest cost bronze plan and the credit
allowable under section 36B are
determined by reference to coverage for
those members of the individual’s
family who are not otherwise exempt
(nonexempt family). Consequently, the
required contribution is the same for all
members of a nonexempt family who
are ineligible for coverage under an
eligible employer-sponsored plan.
A. Premium for the Lowest Cost Bronze
Plan
The proposed regulations provide that
the lowest cost bronze plan is the lowest
cost bronze-level qualified health plan
available in the Exchange serving the
rating area that would cover all
members of the nonexempt family who
are ineligible for coverage under an
eligible employer-sponsored plan.
Accordingly, the premium for the
lowest cost bronze plan is the same for
all individuals in a nonexempt family.
The proposed regulations provide
special rules for determining the
premium for the lowest cost bronze plan
if the Exchange does not offer a bronzelevel plan that would cover the
taxpayer’s entire nonexempt family. The
proposed regulations provide that, in
general, the premium for the lowest cost
bronze plan is the sum of the premiums
for the lowest cost bronze plans that
would, taken together, cover the
taxpayer’s nonexempt family (for
example, for an uncle and two adult
dependent nieces, a self-only plan for
the uncle and a two-adult or family plan
for the nieces). Alternatively, the
proposed regulations provide that a
taxpayer may elect to use the premium
for the lowest cost bronze plan that
would apply to a set of individuals that
have the same characteristics as the

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taxpayer’s nonexempt family (such as
one adult plus children) as if one plan
covered all members of the taxpayer’s
shared responsibility family.
B. Credit Allowable Under Section 36B
In general, a premium tax credit is
allowable under section 36B for any
coverage month (within the meaning of
§ 1.36B–3(c)) that occurs in a taxable
year in which a taxpayer is an
applicable taxpayer (within the meaning
of § 1.36B–2(b)). A month is not a
coverage month for an individual, and
thus no premium tax credit is allowable
for the individual’s coverage, if the
individual is eligible for minimum
essential coverage other than coverage
offered in the individual market for that
month. In general, an applicable
taxpayer is a taxpayer whose household
income for the taxable year is between
100 percent and 400 percent of the
Federal poverty line for the taxpayer’s
family size.
Section 36B(b)(1) provides that the
premium tax credit for any taxable year
is the sum of the premium assistance
amounts with respect to all coverage
months occurring in the taxable year.
Under section 36B(b)(2), for any
coverage month, the premium assistance
amount is the lesser of the following: (1)
The monthly premiums for the month
for one or more qualified health plans
in which the taxpayer or a member of
the taxpayer’s family (coverage family)
is enrolled through the Exchange
serving the rating area where they reside
or (2) any excess of the adjusted
monthly premium for the month for the
applicable second lowest cost silver
plan for the taxpayer over an amount
equal to 1⁄2 of the product of the
applicable percentage and the taxpayer’s
household income for the taxpayer.
Section 36B, therefore, calculates the
allowable credit by treating the family
as a single, aggregated unit.
The proposed regulations take a
similar family-unit approach to
determine the affordability of Exchange
coverage. The proposed regulations
provide that, for purposes of section
5000A, each individual in the taxpayer’s
nonexempt family is treated as having
enrolled in a qualified health plan
through the appropriate Exchange for
purposes of determining the credit
allowable under section 36B. Therefore,
for each individual, a month is treated
as a coverage month if the individual is
ineligible for minimum essential
coverage other than coverage in the
individual market for the month. The
proposed regulations further provide
that the premium assistance amount for
the month is the amount that would be
allowable under the rules of section 36B

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if each member of the individual’s
nonexempt family enrolled in a
qualified health plan through an
Exchange. Accordingly, for a month that
an individual included in a nonexempt
family is eligible for minimum essential
coverage other than coverage in the
individual market, the month is not a
coverage month for that individual, the
individual is not included in the
coverage family for purposes of section
36B, and no premium assistance amount
is allowable for the coverage attributable
to such individual.
f. Household Income Below Return
Filing Threshold
Section 5000A(e)(2) provides that an
individual is exempt for a month in a
calendar year if the individual’s
household income for the taxable year is
less than the amount of gross income
specified in section 6012(a)(1) with
respect to the taxpayer. The proposed
regulations refer to ‘‘the amount of gross
income specified in section 6012(a)(1)
with respect to the taxpayer’’ (that is,
the minimum amount of gross income
that triggers the individual’s
requirement to file a Federal income tax
return under that section) as the
applicable filing threshold.
The proposed regulations further
clarify that, for any individual who is
properly claimed as a dependent, the
applicable filing threshold is that of the
taxpayer who claims the individual as a
dependent. Therefore, if a taxpayer is
exempt under section 5000A(e)(2), any
individual the taxpayer properly claims
as a dependent also is exempt as well.
The Treasury Department and the IRS
recognize that some taxpayers who do
not have sufficient gross income to
trigger a return filing requirement
nevertheless may have household
income that exceeds the return filing
threshold. For example, if a taxpayer
whose gross income is below the
applicable filing threshold files a
Federal income tax return in order to
claim certain tax benefits (such as the
earned income credit or additional child
tax credit) and claims a dependent
whose gross income triggers a return
filing requirement, the household
income (which combines the taxpayer’s
and the dependent’s income) may
exceed the filing threshold. The
Department of Health and Human
Services is proposing rules providing
that individuals in this circumstance
may qualify for a hardship exemption.
Patient Protection and Affordable Care
Act; Exchange Functions: Eligibility for
Exemptions; Minimum Essential
Coverage Provisions (to be codified at 45
CFR 155.605(g)). The Treasury
Department and the IRS are considering

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additional methods of accommodating
individuals in these circumstances.
g. Short Coverage Gap
The proposed regulations clarify that
a continuous period without minimum
essential coverage is determined by
reference to calendar months (for
example, January or February) in
conjunction with the coverage rule in
§ 1.5000A–1(b). Therefore, if an
individual is enrolled in and entitled to
receive benefits under a plan identified
as minimum essential coverage for one
day in a calendar month, the month is
not included in the continuous period
when determining the application of the
short coverage gap exemption. As a
result, the proposed regulations provide
that an individual qualifies for the short
coverage gap exemption if the
continuous period without minimum
essential coverage is less than three full
calendar months and is the first short
coverage gap in the individual’s taxable
year.
i. Coverage Gap Straddling Multiple
Taxable Years
In general, section 5000A(e)(4)(B)(i)
provides that the length of a continuous
period is determined without regard to
the calendar years in which months in
the period occur. However, whether an
individual had coverage during the last
month, or the last two months, of a
taxable year affects the determination of
whether any gap in coverage that the
individual experiences in the first
month, or the first and second months,
of the following taxable year qualifies as
a short coverage gap. Accordingly, if a
calendar year taxpayer has a continuous
period of 3 months or longer that starts
in November or December of one taxable
year and ends in the next taxable year,
then January and any ensuing months of
the second taxable year that are
included in the period are ineligible for
the short coverage gap exemption.
Section 5000A(e)(4) expressly
authorizes the Secretary to prescribe
rules for the collection of the shared
responsibility payment in cases in
which continuous periods include
months in more than one taxable year.
Each Federal income tax return covers
a single taxable year and requires the
taxpayer to account for coverage of the
taxpayer’s shared responsibility family
during the months included in that
taxable year. To require a taxpayer to
take into account months in the
following taxable year may delay or
impede the taxpayer’s ability to file a
timely Federal income tax return.
Accordingly, to provide taxpayers with
certainty when filing their Federal
income tax returns, the proposed

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regulations provide that an individual
who lacks minimum essential coverage
for a period no longer than the last two
months of a taxable year will be deemed
to have a short coverage gap exemption
for those months if the short coverage
gap is the first to occur in that taxable
year, without regard to whether the
individual is covered during the first
months of the following taxable year.

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ii. Coordination With Other Exemptions
The proposed regulations clarify that,
for purposes of determining whether a
short coverage gap applies, an
individual is treated as covered under
minimum essential coverage for a
month in which the individual qualifies
for a section 5000A exemption (other
than the short coverage gap exemption).
Therefore, the short coverage exemption
applies to a month in which no other
section 5000A exemption applies, and a
month in which an individual is
otherwise exempt is not taken into
account in determining the length of the
continuous period without coverage.
h. Claiming Section 5000A Exemptions
The exemptions for members of
recognized religious sects or divisions
and for individuals who have suffered a
hardship are available only to
individuals who have been certified as
meeting the relevant criteria by the
Exchange serving the rating area where
the individuals seeking the exemption
reside.
In addition, Exchanges will provide,
upon request, exemption certifications
for members of health care sharing
ministries, incarcerated individuals, and
members of Indian tribes. If an
individual receives an exemption
certification from an Exchange, the
taxpayer who is responsible for
accounting for that individual’s
coverage must provide information
about the certification on the taxpayer’s
Federal income tax return.
Alternatively, a taxpayer may claim any
of these exemptions on the taxpayer’s
Federal income tax return for the
taxable year.
Finally, the income-based exemptions
for individuals who lack affordable
coverage or have household income
below the applicable income tax return
filing threshold and the exemption for
short coverage gaps may be claimed
only on the individual’s Federal income
tax return for the applicable year. Thus,
an individual claiming the affordability
exemption under section 5000A(e)(1) for
part or all of a taxable year will do so
on the Federal income tax return that
reports the individual’s income
establishing qualification for the
exemption. An individual who has

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household income below the applicable
Federal income tax return filing
threshold and files a Federal income tax
return may claim the exemption under
section 5000A(e)(2) on the return.
However, an individual who has
household income below the applicable
Federal income tax return filing
threshold is not required to file a
Federal income tax return to claim the
exemption under section 5000A(e)(2).
Pursuant to section 6001, taxpayers
are required to maintain all records and
information substantiating any claim for
exemption on the taxpayer’s Federal
income tax return, regardless of whether
the individual was certified by an
Exchange as qualifying for an exemption
or first claimed the exemption on a
Federal income tax return.
4. Computation of Shared Responsibility
Payment
Under section 5000A(b)(1) and
5000A(b)(3)(A), a taxpayer is liable for
the shared responsibility payment with
respect to any nonexempt individual
who is included in the taxpayer’s shared
responsibility family. The maximum
annual amount of the shared
responsibility payment for a taxpayer is
the national average premium for the
bronze level plan available through
Exchanges that provides coverage for
the applicable family size involved. The
proposed regulations clarify that the
applicable family size involved for
purposes of identifying the appropriate
bronze level plan includes only the
nonexempt members of the taxpayer’s
shared responsibility family who do not
have minimum essential coverage.
Under section 5000A(c), the annual
amount of the shared responsibility
payment is the lesser of the applicable
national average bronze plan premium
or the sum of the monthly penalty
amounts. The monthly penalty amount
may vary month to month because of
changes in the composition of the
taxpayer’s shared responsibility family.
To provide a meaningful value with
which the sum of the monthly penalty
amounts are compared, the proposed
regulations provide that the applicable
national average bronze plan premium
must similarly be determined for each
month and then aggregated for
comparison with the sum of the
monthly penalty amounts.
Consequently, the applicable national
average bronze plan premium may vary
from month to month during the year to
account for changes in the taxpayer’s
shared responsibility family.

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5. Procedure and Administration
a. Inclusion With Federal Income Tax
Return
Section 5000A(b)(2) provides that the
shared responsibility payment for a
month must be included with a
taxpayer’s Federal income tax return for
the taxable year that includes the
month. The proposed regulations clarify
that the time for assessing the shared
responsibility payment is the same time
as that prescribed by section 6501 for
the taxable year including the month for
which the taxpayer is liable for the
payment.
b. Assessment and Collection
Section 5000A(g)(1) provides that the
shared responsibility payment is
payable upon notice and demand by the
Secretary and, except as provided in
section 5000A(g)(2), is assessed and
collected in the same manner as an
assessable penalty under subchapter B
of chapter 68 of the Code (sections 6671
through 6725). The proposed
regulations clarify that the shared
responsibility payment is not subject to
deficiency procedures of subchapter B
of chapter 63 of the Code. In addition,
the proposed regulations clarify that
interest on the shared responsibility
payment accrues in accordance with the
rules in section 6601. The proposed
regulations further provide that the
Secretary may offset any liability for the
shared responsibility payment against
any overpayment due the taxpayer, in
accordance with section 6402(a).
Applicability Date
These regulations are proposed to
apply for months beginning after
December 31, 2013.
Special Analyses
It has been determined that this notice
of proposed rulemaking 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. It also has
been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to the
proposed regulations. Pursuant to the
Regulatory Flexibility Act (RFA) (5
U.S.C. chapter 6), it is hereby certified
that the proposed regulations will not
have a significant economic impact on
a substantial number of small entities.
The applicability of the proposed
regulations is limited to individuals,
who are not small entities as defined by
the RFA (5 U.S.C. 601). Accordingly, the
RFA does not apply. Therefore, a
regulatory flexibility analysis is not

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Federal Register / Vol. 78, No. 22 / Friday, February 1, 2013 / Proposed Rules
required. Pursuant to section 7805(f) of
the Code, the proposed regulations have
been submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.

Before the proposed regulations are
adopted as final regulations,
consideration will be given to any
comments that are submitted timely to
the IRS as prescribed in this preamble
under the ‘‘Addresses’’ heading. The
Treasury Department and the IRS
request comments on all aspects of the
proposed rules. All comments will be
available at www.regulations.gov or
upon request.
A public hearing has been scheduled
for May 29, 2013, beginning at 10:00
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. In addition, all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area 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.
The rules of § 601.601(a)(3) of this
chapter apply to the hearing. Persons
who wish to present oral comments at
the hearing must submit electronic or
written comments, and an outline of the
topics to be discussed and the time to
be devoted to each topic (signed original
and eight (8) copies) by May 3, 2013. A
period of 10 minutes will be allotted to
each person for making comments. An
agenda showing the scheduling of the
speakers will be prepared after the
deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.

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Drafting Information
The principal authors of the proposed
regulations are William L. Candler and
Sue-Jean Kim, Office of the Associate
Chief Counsel (Income Tax &
Accounting). Other personnel from the
Treasury Department and the IRS
participated in the development of the
regulations.

Income taxes, Reporting and
recordkeeping requirements.

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Accordingly, 26 CFR part 1 is
proposed to be amended to read as
follows:
PART 1—INCOME TAXES

Comments and Public Hearing

List of Subjects in 26 CFR Part 1

Proposed Amendments to the
Regulations

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 1.5000A–4 also issued under 26
U.S.C. 5000A(e)(4).

Par 2. Sections 1.5000A–0 through
1.5000A–5 are added to read as follows:

■

§ 1.5000A–0

Table of contents.

This section lists the captions
contained in §§ 1.5000A–1 through
1.5000A–5.
§ 1.5000A–1 Maintenance of minimum
essential coverage and liability for the
shared responsibility payment.
(a) In general.
(b) Coverage under minimum essential
coverage.
(1) In general.
(2) Special rule for United States citizens
or residents residing outside the United
States or residents of territories.
(c) Liability for shared responsibility
payment.
(1) In general.
(2) Liability for dependents.
(i) In general.
(ii) Special rules for dependents adopted or
placed in foster care during the taxable year.
(A) Taxpayers adopting an individual.
(B) Taxpayers placing an individual for
adoption.
(C) Examples.
(3) Liability of individuals filing a joint
return.
(d) Definitions.
(1) Affordable Care Act.
(2) Qualified health plan.
(3) Exchange.
(4) Rating area.
(5) Shared responsibility family.
(6) Family.
(7) Household income.
(i) In general.
(ii) Modified adjusted gross income.
(8) Self-only coverage.
(9) Family coverage.
(10) Employee.
(11) Month.
§ 1.5000A–2 Minimum essential coverage.
(a) In general.
(b) Government sponsored program.
(c) Eligible employer-sponsored plan.
(1) In general.
(2) Group health plan.
(3) Group health insurance coverage.
(4) Large and small group market.
(5) Government sponsored program not
treated as eligible employer-sponsored plan.
(d) Plan in the individual market.
(e) Grandfathered health plan.
(f) Other health benefits coverage.
(g) Excepted benefits.

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§ 1.5000A–3 Exempt individuals.
(a) Members of recognized religious sects.
(1) In general.
(2) Exemption certification.
(b) Member of health care sharing
ministries.
(1) In general.
(2) Health care sharing ministry.
(c) Exempt noncitizens.
(1) In general.
(2) Exempt noncitizens.
(d) Incarcerated individuals.
(1) In general.
(2) Incarcerated.
(e) Individuals with no affordable coverage.
(1) In general.
(2) Required contribution percentage.
(i) In general.
(ii) Indexing.
(iii) Plan year.
(3) Individuals eligible for coverage under
eligible employer-sponsored plans.
(i) Eligibility.
(A) In general.
(B) Special rule for continuation coverage.
(ii) Required contribution for individuals
eligible for coverage under an eligible
employer-sponsored plan.
(A) Employees.
(B) Individuals related to employees.
(C) Required contribution for part-year
period.
(D) Examples.
(4) Individuals ineligible for coverage
under eligible employer-sponsored plans.
(i) Eligibility for coverage other than an
eligible employer-sponsored plan.
(ii) Required contribution for individuals
ineligible for coverage under eligible
employer-sponsored plans.
(A) In general.
(B) Applicable plan.
(1) In general.
(2) Lowest cost bronze plan does not cover
all individuals included in the taxpayer’s
nonexempt family.
(i) In general.
(ii) Simplified method for applicable plan
identification.
(C) Credit allowable under section 36B.
(D) Required contribution for part-year
period.
(iii) Examples.
(f) Household income below filing
threshold.
(1) In general.
(2) Applicable filing threshold.
(i) In general.
(ii) Certain dependents.
(g) Members of Indian tribes.
(h) Individuals with hardship exemption
certification.
(1) In general.
(2) Hardship exemption certification.
(i) [Reserved]
(j) Individuals with certain short coverage
gaps.
(1) In general.
(2) Short coverage gap.
(i) In general.
(ii) Coordination with other exemptions.
(iii) More than one short coverage gap
during calendar year.
(3) Continuous period.
(i) In general.
(ii) Continuous period straddling more
than one taxable year.

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(4) Examples.
(k) Claiming exemptions from the shared
responsibility payment.
(1) Exemptions requiring certification by
an Exchange.
(2) Exemptions that may be certified by an
Exchange or claimed on a Federal income tax
return.
(i) Exemption certified by an Exchange.
(ii) Exemption claimed on a Federal
income tax return.
(3) Exemptions that are claimed on Federal
income tax returns.
§ 1.5000A–4 Computation of shared
responsibility payment.
(a) In general.
(b) Monthly penalty amount.
(1) In general.
(2) Flat dollar amount.
(i) In general.
(ii) Applicable dollar amount.
(iii) Special applicable dollar amount for
individuals under age 18.
(iv) Indexing of applicable dollar amount.
(3) Excess income amount.
(i) In general.
(ii) Income percentage.
(c) Monthly national average bronze plan
premium.
(d) Examples.
§ 1.5000A–5 Administration and procedure.
(a) In general.
(b) Special rules.
(1) Waiver of criminal penalties.
(2) Limitations on liens and levies.
(3) Authority to offset against overpayment.
(c) Effective/applicability date.

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§ 1.5000A–1 Maintenance of minimum
essential coverage and liability for the
shared responsibility payment.

(a) In general. For each month during
the taxable year, a nonexempt
individual must have minimum
essential coverage or pay the shared
responsibility payment. For a month, a
nonexempt individual is an individual
in existence for the entire month who is
not an exempt individual described in
§ 1.5000A–3.
(b) Coverage under minimum
essential coverage—(1) In general. An
individual has minimum essential
coverage for a month in which the
individual is enrolled in and entitled to
receive benefits under a program or plan
identified as minimum essential
coverage in § 1.5000A–2 for at least one
day in the month.
(2) Special rule for United States
citizens or residents residing outside the
United States or residents of territories.
An individual is treated as having
minimum essential coverage for a
month—
(i) If the month occurs during any
period described in section 911(d)(1)(A)
or section 911(d)(1)(B) that is applicable
to the individual; or
(ii) If, for the month, the individual is
a bona fide resident of a possession of
the United States (as determined under
section 937(a)).

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(c) Liability for shared responsibility
payment—(1) In general. A taxpayer is
liable for the shared responsibility
payment for a month for which—
(i) The taxpayer is a nonexempt
individual without minimum essential
coverage; or
(ii) A nonexempt individual for whom
the taxpayer is liable under paragraph
(c)(2) or (c)(3) of this section does not
have minimum essential coverage.
(2) Liability for dependents—(i) In
general. For a month when a nonexempt
individual does not have minimum
essential coverage, if the nonexempt
individual is a dependent (as defined in
section 152) of another individual for
the other individual’s taxable year
including that month, the other
individual is liable for the shared
responsibility payment attributable to
the dependent’s lack of coverage. An
individual is a dependent of a taxpayer
for a taxable year if the individual
satisfies the definition of dependent
under section 152, regardless of whether
the taxpayer claims the individual as a
dependent on a Federal income tax
return for the taxable year. If an
individual may be claimed as a
dependent by more than one taxpayer in
the same calendar year, the taxpayer
who properly claims the individual as a
dependent for the taxable year is liable
for the shared responsibility payment
attributable to the individual. If more
than one taxpayer may claim an
individual as a dependent in the same
calendar year but no one claims the
individual as a dependent, the taxpayer
with priority under the rules of section
152 to claim the individual as a
dependent is liable for the shared
responsibility payment for the
individual.
(ii) Special rules for dependents
adopted or placed in foster care during
the taxable year—(A) Taxpayers
adopting an individual. If a taxpayer
adopts a nonexempt dependent (or
accepts a nonexempt dependent who is
an eligible foster child as defined in
section 152(f)(1)(C)) during the taxable
year and is otherwise liable for a
nonexempt dependent under paragraph
(c)(2)(i) of this section, the taxpayer is
liable under paragraph (c)(2)(i) of this
section for the nonexempt dependent
only for the full months in the taxable
year that follow the month in which the
adoption or acceptance occurs.
(B) Taxpayers placing an individual
for adoption. If a taxpayer who is
otherwise liable for a nonexempt
dependent under paragraph (c)(2)(i) of
this section places (or, by operation of
law, must place) the nonexempt
dependent for adoption or foster care
during the taxable year, the taxpayer is

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liable under paragraph (c)(2)(i) of this
section for the nonexempt dependent
only for the full months in the taxable
year that precede the month in which
the adoption or foster care placement
occurs.
(C) Examples. The following
examples illustrate the provisions of
this paragraph (c)(2)(ii). In each example
the taxpayer’s taxable year is a calendar
year.
Example 1. Taxpayers adopting a child. (i)
E and F, married individuals filing a joint
return, initiate proceedings for the legal
adoption of a 2-year old child, G, in January
2016. On May 15, 2016, G becomes the
adopted child (within the meaning of section
152(f)(1)(B)) of E and F, and resides with
them for the remainder of 2016. G meets all
requirements under section 152 to be E and
F’s dependent for 2016. Prior to the adoption,
G resides with H, an unmarried individual,
with H providing all of G’s support.
(ii) Under paragraph (c)(2) of this section,
E and F are not liable for a shared
responsibility payment attributable to G for
January through May of 2016, but are liable
for a shared responsibility payment
attributable to G, if any, for June through
December of 2016. H is not liable for a shared
responsibility payment attributable to G for
any month in 2016, because G is not H’s
dependent for 2016 under section 152.
Example 2. Taxpayers placing a child for
adoption. (i) The facts are the same as
Example 1, except the legal adoption occurs
on August 15, 2016. G meets all requirements
under section 152 to be H’s dependent for
2016.
(ii) Under paragraph (c)(2) of this section,
H is liable for a shared responsibility
payment attributable to G, if any, for January
through July of 2016, but is not liable for a
shared responsibility payment attributable to
G for August through December of 2016. E
and F are not liable for a shared
responsibility payment attributable to G for
any month in 2016, because G is not E and
F’s dependent for 2016 under section 152.

(3) Liability of individuals filing a
joint return. Married individuals (within
the meaning of section 7703) who file a
joint return for a taxable year are jointly
liable for any shared responsibility
payment for a month included in the
taxable year.
(d) Definitions. The definitions in this
paragraph (d) apply to this section and
§§ 1.5000A–2 through 1.5000A–5.
(1) Affordable Care Act. 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.
(2) Qualified health plan. Qualified
health plan has the same meaning as in
section 1301(a) of the Affordable Care
Act (42 U.S.C. 18021(a)).

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(3) Exchange. Exchange has the same
meaning as in 45 CFR 155.20.
(4) Rating area. Rating area has the
same meaning as in § 1.38B–1(n).
(5) Shared responsibility family.
Shared responsibility family means, for
a month, all nonexempt individuals for
whom the taxpayer (and the taxpayer’s
spouse, if the taxpayer is married and
files a joint return with the spouse) is
liable for the shared responsibility
payment under paragraph (c) of this
section.
(6) Family. A taxpayer’s family means
the individuals for whom the taxpayer
properly claims a deduction for a
personal exemption under section 151
for the taxable year.
(7) Household income—(i) In general.
Household income means the sum of—
(A) A taxpayer’s modified adjusted
gross income; and
(B) The aggregate modified adjusted
gross income of all other individuals
who—
(1) Are included in the taxpayer’s
family under paragraph (d)(6) of this
section; and
(2) Are required to file a Federal
income tax return for the taxable year
(determined without regard to the
exception under section 1(g)(7) to the
requirement to file a Federal income tax
return).
(ii) Modified adjusted gross income.
Modified adjusted gross income means
adjusted gross income (within the
meaning of section 62) increased by—
(A) Amounts excluded from gross
income under section 911; and
(B) Tax-exempt interest the taxpayer
receives or accrues during the taxable
year.
(8) Self-only coverage. Self-only
coverage means health insurance that
covers one individual.
(9) Family coverage. Family coverage
means health insurance that covers
more than one individual.
(10) Employee. Employee includes
former employees.
(11) Month. Month means calendar
month.

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§ 1.5000A–2

Minimum essential coverage.

(a) In general. Minimum essential
coverage means coverage under a
government sponsored program
(described in paragraph (b) of this
section), an eligible employer-sponsored
plan (described in paragraph (c) of this
section), a plan in the individual market
(described in paragraph (d) of this
section), a grandfathered health plan
(described in paragraph (e) of this
section), or other health benefits
coverage (described in paragraph (f) of
this section). Minimum essential
coverage does not include coverage

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described in paragraph (g) of this
section. All terms defined in this section
apply for purposes of this section and
§ 1.5000A–1 and §§ 1.5000A–3 through
1.5000A–5.
(b) Government sponsored program.
Government sponsored program means
any of the following:
(1) The Medicare program under part
A of title XVIII of the Social Security
Act (42 U.S.C. 1395c and following
sections);
(2) The Medicaid program under title
XIX of the Social Security Act (42 U.S.C.
1396 and following sections) other
than—
(i) Optional coverage of family
planning services under section
1902(a)(10)(A)(ii)(XXI) of the Social
Security Act (42 U.S.C.
1396a(a)(10)(A)(ii)(XXI));
(ii) Optional coverage of tuberculosisrelated services under section
1902(a)(10)(A)(ii)(XII) (42 U.S.C.
1396a(a)(10)(A)(ii)(XII));
(iii) Coverage of pregnancy-related
services under section
1902(a)(10)(A)(i)(IV) and
(a)(10)(A)(ii)(IX) (42 U.S.C.
1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX));
or
(iv) Coverage of medical emergency
services under 8 U.S.C. 1611(b)(1)(A), as
authorized by section 1903(v) of the
Social Security Act (42 U.S.C. 1396b(v)).
(3) The Children’s Health Insurance
Program (CHIP) under title XXI of the
Social Security Act (42 U.S.C 1397aa
and following sections);
(4) Medical coverage under chapter 55
of title 10, U.S.C., including coverage
under the TRICARE program;
(5) The following health care
programs under chapter 17 or 18 of title
38, U.S.C.:
(i) The medical benefits package
authorized for eligible veterans under 38
U.S.C. 1710 and 38 U.S.C. 1705;
(ii) The Civilian Health and Medical
Program of the Department of Veterans
Affairs (CHAMPVA) authorized under
38 U.S.C. 1781; and
(iii) The comprehensive health care
program authorized under 38 U.S.C.
1803 and 38 U.S.C. 1821 for certain
children of Vietnam Veterans and
Veterans of covered service in Korea
who are suffering from spina bifida.
(6) A health plan under section
2504(e) of title 22, U.S.C. (relating to
Peace Corps volunteers); and
(7) The Nonappropriated Fund Health
Benefits Program of the Department of
Defense, established under section 349
of the National Defense authorization
Act for Fiscal Year 1995 (Public Law
No. 103–337; 10 U.S.C. 1587 note).
(c) Eligible employer-sponsored
plan—(1) In general. Eligible employer-

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7325

sponsored plan means, with respect to
any employee, a group health plan
(whether an insured group health plan
or a self-insured group health plan) or
group health insurance coverage offered
by an employer to the employee, which
is—
(i) A governmental plan (within the
meaning of section 2791(d)(8) of the
Public Health Service Act (42 U.S.C.
300gg–91(d)(8)));
(ii) Any other plan or coverage offered
in the small or large group market
within a State;
(iii) A grandfathered health plan
(within the meaning of paragraph (e) of
this section) offered in a group market.
(2) Group health plan. Group health
plan has the same meaning as in section
2791(a) of the Public Health Service Act
(42 U.S.C. 300gg–91(a)(1)).
(3) Group health insurance coverage.
Group health insurance coverage has
the same meaning as in section 2791(b)
of the Public Health Service Act (42
U.S.C. 300gg–91(b)).
(4) Large and small group market.
Large group market and small group
market have the same meanings as in
section 1304(a)(3) of the Affordable Care
Act (42 U.S.C. 18024(a)(3)).
(5) Government sponsored program
not treated as eligible employersponsored plan. A government
sponsored program described in
paragraph (b) of this section is not an
eligible employer-sponsored plan.
(d) Plan in the individual market.
Plan in the individual market means
health insurance coverage offered to
individuals not in connection with a
group health plan, including a qualified
health plan offered by an Exchange.
(e) Grandfathered health plan.
Grandfathered health plan means any
group health plan or group health
insurance coverage to which section
1251 of the Affordable Care Act (42
U.S.C.18011) applies.
(f) Other health benefits coverage.
Minimum essential coverage includes
any plan or arrangement recognized by
the Secretary of Health and Human
Services as minimum essential coverage
for purposes of section 5000A under 45
CFR 156.600 and following sections.
(g) Excepted benefits. Minimum
essential coverage does not include any
health insurance coverage that consists
of excepted benefits that are described
in section 2791(c)(1), (c)(2), (c)(3), or
(c)(4) of the Public Health Service Act
(42 U.S.C. 300gg–91(c)).
§ 1.5000A–3

Exempt individuals.

(a) Members of recognized religious
sects—(1) In general. An individual is
an exempt individual for a month that
includes a day on which the individual

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has in effect a religious conscience
exemption certification described in
paragraph (a)(2) of this section.
(2) Exemption certification. A
religious conscience exemption
certification is issued by an Exchange in
accordance with the requirements of
section 1311(d)(4)(H) of the Affordable
Care Act (42 U.S.C. 18031(d)(4)(H)) and
45 CFR 155.605(c), 45 CFR 155.615(b)
and certifies that an individual is—
(i) A member of a recognized religious
sect or division thereof that is described
in section 1402(g)(1); and
(ii) An adherent of established tenets
or teachings of the sect or division as
described in that section.
(b) Member of health care sharing
ministries—(1) In general. An
individual is an exempt individual for
a month that includes a day on which
the individual is a member of a health
care sharing ministry.
(2) Health care sharing ministry. For
purposes of this section, health care
sharing ministry means an
organization—
(i) That is described in section
501(c)(3) and is exempt from tax under
section 501(a);
(ii) Members of which share a
common set of ethical or religious
beliefs and share medical expenses
among themselves in accordance with
those beliefs and without regard to the
State in which a member resides or is
employed;
(iii) Members of which retain
membership even after they develop a
medical condition;
(iv) That (or a predecessor of which)
has been in existence at all times since
December 31, 1999;
(v) Members of which have shared
medical expenses continuously and
without interruption since at least
December 31, 1999; and
(vi) That conducts an annual audit
performed by an independent certified
public accounting firm in accordance
with generally accepted accounting
principles and makes the annual audit
report available to the public upon
request.
(c) Exempt noncitizens—(1) In
general. An individual is an exempt
individual for a month that the
individual is an exempt noncitizen.
(2) Exempt noncitizens. For purposes
of this section, an individual is an
exempt noncitizen for a month if the
individual—
(i) Is not a U.S. citizen or U.S.
national for any day during the month;
and
(ii) Is either—
(A) A nonresident alien (within the
meaning of section 7701(b)(1)(B)) for the
taxable year that includes the month; or

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(B) An individual who is not lawfully
present (within the meaning of 45 CFR
155.20) in the United States on any day
in the month.
(d) Incarcerated individuals—(1) In
general. An individual is an exempt
individual for a month that includes a
day on which the individual is
incarcerated.
(2) Incarcerated. For purposes of this
section, the term incarcerated means
confined, after the disposition of
charges, in a jail, prison, or similar
penal institution or correctional facility.
(e) Individuals with no affordable
coverage—(1) In general. An individual
is an exempt individual for a month in
which the individual lacks affordable
coverage. For purposes of this paragraph
(e), an individual lacks affordable
coverage in a month if the individual’s
required contribution (determined on an
annual basis) for minimum essential
coverage for the month exceeds the
required contribution percentage (as
defined in paragraph (e)(2) of this
section) of the individual’s household
income. For purposes of this paragraph
(e), an individual’s household income is
increased by any amount of the required
contribution made through a salary
reduction arrangement that is excluded
from gross income.
(2) Required contribution
percentage—(i) In general. Except as
provided in paragraph (e)(2)(ii) of this
section, the required contribution
percentage is 8 percent.
(ii) Indexing. For plan years beginning
in any calendar year after 2014, the
required contribution percentage is the
percentage determined by the
Department of Health and Human
Services that reflects the excess of the
rate of premium growth between the
preceding calendar year and 2013 over
the rate of income growth for the period.
(iii) Plan year. For purposes of this
paragraph (e), plan year means the
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).
(3) Individuals eligible for coverage
under eligible employer-sponsored
plans—(i) Eligibility—(A) In general.
Except as provided in paragraph
(e)(3)(i)(B) of this section, an employee
or related individual (as defined in
paragraph (e)(3)(ii)(B) of this section) is
treated as eligible for 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 any day in
that month during an open or special
enrollment period, regardless of

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whether the employee or related
individual is eligible for any other type
of minimum essential coverage. For
purposes of this paragraph (e)(3), an
employee eligible for coverage under an
eligible employer-sponsored plan
offered by the employee’s employer is
not treated as eligible as a related
individual for coverage under an
eligible employer-sponsored plan (for
example, an eligible employersponsored plan offered by the employer
of the employee’s spouse) for any month
included in the plan year of the eligible
employer-sponsored plan offered by the
employee’s employer.
(B) Special rule for 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 coverage under an eligible
employer-sponsored plan only if the
individual enrolls in the coverage.
(ii) Required contribution for
individuals eligible for coverage under
an eligible employer-sponsored plan—
(A) Employees. In the case of an
employee who is eligible to purchase
coverage under an eligible employersponsored plan sponsored by the
employee’s employer, the required
contribution is the portion of the annual
premium that the employee would pay
(whether though salary reduction or
otherwise) for the lowest cost self-only
coverage.
(B) Individuals related to employees.
In the case of an individual who is
eligible for coverage under an eligible
employer-sponsored plan because of a
relationship to an employee and for
whom a personal exemption deduction
under section 151 is claimed on the
employee’s Federal income tax return
(related individual), the required
contribution is the portion of the annual
premium that the employee would pay
(whether through salary reduction or
otherwise) for the lowest cost family
coverage that would cover the employee
and all related individuals who are
included in the employee’s family and
are not otherwise exempt under
§ 1.5000A–3.
(C) Required contribution for partyear period. For each individual
described in paragraph (e)(3)(ii)(A) or
(e)(3)(ii)(B) of this section, affordability
under paragraph (e)(3) 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 the individual.
Coverage under an eligible employersponsored plan is affordable for a partyear period if the annualized required
contribution for self-only coverage (in

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Federal Register / Vol. 78, No. 22 / Friday, February 1, 2013 / Proposed Rules
the case of the employee) or family
coverage (in the case of a related
individual) under the plan for the partyear period does not exceed the
required contribution percentage of the
individual’s household income for the
taxable year. The annualized required
contribution is the required contribution
determined under paragraph (e)(3)(ii)(A)
or (e)(3)(ii)(B) of this section 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 individual’s taxable year. Only full
calendar months are included in the
computation under this paragraph
(e)(3)(ii)(C).
(D) Examples. The following
examples illustrate the application of
this paragraph (e)(3). Unless stated
otherwise, in each example, each
individual’s taxable year is a calendar
year, the individual is ineligible for any
other exemptions described in this
section for a month, the rate of premium
growth has not exceeded the rate of
income growth since 2013, and the
individual’s employer offers a single
plan that uses a calendar plan year and
is an eligible employer-sponsored plan
as described in § 1.5000A–2(c).

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Example 1. Unmarried employee with no
dependents. Taxpayer A is an unmarried
individual with no dependents. In November
2015, A is eligible to enroll in self-only
coverage under a plan offered by A’s
employer for calendar year 2016. If A enrolls
in the coverage, A is required to pay $5,000
of the total annual premium. In 2016, A’s
household income is $60,000. Under
paragraph (e)(3)(ii)(A) of this section, A’s
required contribution is $5,000, the portion
of the annual premium A pays for self-only
coverage. Under paragraph (e)(1) of this
section, A lacks affordable coverage for 2016
because A’s required contribution ($5,000) is
greater than 8 percent of A’s household
income ($4,800).
Example 2. Married employee with
dependents. Taxpayers B and C are married
and file a joint return for 2016. B and C have
two children, D and E. In November 2015, B
is eligible to enroll in self-only coverage
under a plan offered by B’s employer for
calendar year 2016 at a cost of $5,000 to B.
C, D, and E are eligible to enroll in family
coverage under the same plan for 2016 at a
cost of $20,000 to B. B, C, D, and E’s
household income is $90,000. Under
paragraph (e)(3)(ii)(A) of this section, B’s
required contribution is B’s share of the cost
for self-only coverage, $5,000. Under
paragraph (e)(1) of this section, B has
affordable coverage for 2016 because B’s
required contribution ($5,000) does not
exceed 8 percent of B’s household income
($7,200). Under paragraph (e)(3)(ii)(B) of this
section, the required contribution for C, D,
and E is B’s share of the cost for family
coverage, $20,000. Under paragraph (e)(1) of
this section, C, D, and E lack affordable

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coverage for 2016 because their required
contribution ($20,000) exceeds 8 percent of
their household income ($7,200).
Example 3. Plan year is a fiscal year. (i)
Taxpayer F is an unmarried individual with
no dependents. In June 2015, F is eligible to
enroll in self-only coverage under a plan
offered by F’s employer for the period July
2015 through June 2016 at a cost to F of
$4,750. In June 2016, F is eligible to enroll
in self-only coverage under a plan offered by
F’s employer for the period July 2016 through
June 2017 at a cost to F of $5,000. In 2016,
F’s household income is $60,000.
(ii) Under paragraph (e)(3)(ii)(C) of this
section, F’s annualized required contribution
for the period January 2016 through June
2016 is $4,750 ($2,375 paid for premiums in
2016 × 12/6). Under paragraph (e)(1) of this
section, F has affordable coverage for January
2016 through June 2016 because F’s
annualized required contribution ($4,750)
does not exceed 8 percent of F’s household
income ($4,800).
(iii) Under paragraph (e)(3)(ii)(C) of this
section, F’s annualized required contribution
for the period July 2016 to December 2016 is
$5,000 ($2,500 paid for premiums in 2016 x
12/6). Under paragraph (e)(1) of this section,
F lacks affordable coverage for July 2016
through December 2016 because F’s
annualized required contribution ($5,000)
exceeds 8 percent of F’s household income
($4,800).
Example 4. Eligibility for coverage under
an eligible employer-sponsored plan and
under government sponsored coverage.
Taxpayer G is unmarried and has one child,
H. In November 2015, H is eligible to enroll
in family coverage under a plan offered by
G’s employer for 2016. H is also eligible to
enroll in the CHIP program for 2016. Under
paragraph (e)(3)(i) of this section, H is treated
as eligible for coverage under an eligible
employer-sponsored plan for each month in
2016, notwithstanding that H is eligible to
enroll in government sponsored coverage for
the same period.

(4) Individuals ineligible for coverage
under eligible employer-sponsored
plans—(i) Eligibility for coverage other
than an eligible employer-sponsored
plan. An individual is treated as
ineligible for coverage under an eligible
employer-sponsored plan for a month
that is not described in paragraph
(e)(3)(i) of this section.
(ii) Required contribution for
individuals ineligible for coverage under
eligible employer-sponsored plans—(A)
In general. In the case of an individual
who is ineligible for coverage under an
eligible employer-sponsored plan, the
required contribution is the premium
for the applicable plan, reduced by the
maximum amount of any credit
allowable under section 36B for the
taxable year (determined as if the
individual was covered for the entire
taxable year by a qualified health plan
offered through the Exchange serving
the rating area where the individual
resides).

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7327

(B) Applicable plan—(1) In general.
Except as provided in paragraph
(e)(4)(ii)(B)(2) of this section, applicable
plan means the single lowest cost
bronze plan available in the individual
market through the Exchange serving
the rating area in which the individual
resides (without regard to whether the
individual purchased a qualified health
plan though the Exchange) that would
cover all individuals in the individual’s
nonexempt family. For purposes of this
paragraph (e)(4), an individual’s
nonexempt family means the family (as
defined in § 1.5000A–1(d)(6)) that
includes the individual, excluding any
family members who are otherwise
exempt under section 1.5000A–3 or are
treated as eligible for coverage under an
eligible employer-sponsored plan under
paragraph (e)(3)(i) of this section. The
premium for the applicable plan takes
into account rating factors (for example,
an individual’s age) that an Exchange
would use to determine the cost of
coverage.
(2) Lowest cost bronze plan does not
cover all individuals included in the
taxpayer’s nonexempt family—(i) In
general. If the Exchange serving the
rating area where the individual resides
does not offer a single bronze plan that
would cover all individuals included in
the individual’s nonexempt family, the
premium for the applicable plan is the
sum of the premiums for the lowest cost
bronze plans that are offered through
the Exchanges serving the rating areas
where one or more of the individuals
reside and that would, in the aggregate,
cover all the individuals in the
individual’s nonexempt family.
(ii) Simplified method for applicable
plan identification. In lieu of the
premium for the applicable plan
determined under paragraph
(e)(4)(ii)(B)(2)(i) of this section, a
taxpayer may irrevocably elect to use
the premium for the lowest cost bronze
plan offered by the Exchange serving the
rating area where the individual resides
that would cover individuals with the
characteristics (for example, the
individuals’ ages) of the individuals in
the taxpayer’s nonexempt family. For
example, if a taxpayer’s nonexempt
family includes one adult and two
children, the taxpayer may elect to use
the premium for the lowest cost bronze
plan that would cover individuals
having the same characteristics as the
adult and the two children in the
taxpayer’s nonexempt family. A
taxpayer makes the election by using the
simplified method described in this
paragraph (e)(4)(ii)(B)(2)(ii).
(C) Credit allowable under section
36B. For purposes of paragraph
(e)(4)(ii)(A) of this section, credit

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allowable under section 36B means the
maximum amount of the credit that
would be allowable to the individual (or
to the taxpayer who can properly claim
the individual as a dependent) under
section 36B if all members of the
individual’s nonexempt family enrolled
in a qualified health plan through the
Exchange serving the rating area where
the individual resides.
(D) Required contribution for partyear period. For each individual
described in paragraph (e)(4)(ii)(A) of
this section, affordability under
paragraph (e)(4) of this section is
determined separately for each period
described in paragraph (e)(4)(ii)(E) of
this section that is less than a 12-month
period. Coverage under a plan is
affordable for a part-year period if the
annualized required contribution for
coverage under the plan for the partyear period does not exceed the
required contribution percentage of the
individual’s household income for the
taxable year. The annualized required
contribution is the required contribution
determined under paragraph (e)(4)(ii)(A)
of this section 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 individual’s taxable
year. Only full calendar months are
included in the computation under this
paragraph (e)(4)(ii)(D).
(iii) Examples. The following
examples illustrate the provisions of
this paragraph (e)(4). Unless stated
otherwise, in each example the
taxpayer’s taxable year is a calendar
year, the rate of premium growth has
not exceeded the rate of income growth
since 2013, and the taxpayer is
ineligible for any of the exemptions
described in paragraphs (b) through (i)
of this section for a month.
Example 1. Unmarried employee with no
dependents. (i) Taxpayer G is an unmarried
individual with no dependents. G is
ineligible to enroll in any minimum essential
coverage other than coverage in the
individual market for all months in 2016.
The annual premium for the lowest cost
bronze self-only plan in G’s rating area (G’s
applicable plan) is $5,000. The adjusted
annual premium for the second lowest cost
silver self-only plan in G’s rating area (G’s
applicable benchmark plan within the
meaning of § 1.36B–3(f)) is $5,500. In 2016
G’s household income is $40,000, which is
358 percent of the Federal poverty line for
G’s family size for the taxable year.
(ii) Under paragraph (e)(4)(ii)(C) of this
section, the credit allowable under section
36B is determined pursuant to section 36B.
With household income at 358 percent of the
Federal poverty line, G’s applicable
percentage is 9.5. Because each month in
2016 is a coverage month (within the
meaning of § 1.36B–3(c)), G’s maximum

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credit allowable under section 36B is the
excess of G’s premium for the applicable
benchmark plan over the product of G’s
household income and G’s applicable
percentage ($1,700). Therefore, under
paragraph (e)(4)(ii)(A) of this section, G’s
required contribution is $3,300. Under
paragraph (e)(1) of this section, G lacks
affordable coverage for 2016 because G’s
required contribution ($3,300) exceeds 8
percent of G’s household income ($3,200).

The maximum credit allowable under section
36B is the excess of the premium for the
applicable benchmark plan over the product
of the household income and the applicable
percentage ($9,055). Therefore, under
paragraph (e)(4)(ii)(A) of this section, the
required contribution is $10,945. Under
paragraph (e)(1) of this section, U, V, W, and
X lack affordable coverage for 2016 because
their required contribution ($10,945) exceeds
8 percent of their household income ($4,000).

Example 2. Family. (i) In 2016 Taxpayers
M and N are married and file a joint return.
M and N have two children, P and Q. M, N,
P, and Q are ineligible to enroll in minimum
essential coverage other than coverage in the
individual market for a month in 2016. The
annual premium for M, N, P, and Q’s
applicable plan is $20,000. The adjusted
annual premium for M, N, P, and Q’s
applicable benchmark plan (within the
meaning of § 1.36B–3(f)) is $25,000. M and
N’s household income is $80,000, which is
347 percent of the Federal poverty line for a
family size of 4 for the taxable year.
(ii) Under paragraph (e)(4)(ii)(C) of this
section, the credit allowable under section
36B is determined pursuant to section 36B.
With household income at 347 percent of the
Federal poverty line, the applicable
percentage is 9.5. Because each month in
2016 is a coverage month (within the
meaning of § 1.36B–3(c)), the maximum
credit allowable under section 36B is the
excess of the premium for the applicable
benchmark plan over the product of the
household income and the applicable
percentage ($17,400). Therefore, under
paragraph (e)(4)(ii)(A) of this section, the
required contribution for M, N, P, and Q is
$2,600. Under paragraph (f)(2) of this section,
M, N, P, and Q have affordable coverage for
2016 because their required contribution
($2,600) does not exceed 8 percent of their
household income ($6,400).

Example 4. Family with some members
enrolled in government sponsored minimum
essential coverage. The facts are the same as
Example 3, except W and X enroll in CHIP
coverage on January 1, 2016. Under
paragraph (e)(4)(ii)(B), U, V, W, and X are
members of U and V’s nonexempt family for
2016. Therefore, the annual premium for the
applicable plan is the same as in Example 3
($20,000). The maximum credit allowable
under section 36B is also the same as in
Example 3 ($9,055). Under paragraph
(e)(4)(ii)(A) of this section, the required
contribution is $10,945. Under paragraph
(e)(1) of this section, U and V lack affordable
coverage for 2016 because their required
contribution ($10,945) exceeds 8 percent of
their household income ($4,000).

Example 3. Family with some members
eligible for government sponsored coverage.
(i) In 2016 Taxpayers U and V are married
and file a joint return. U and V have two
children, W and X. U and V are ineligible to
enroll in minimum essential coverage other
than coverage in the individual market for all
months in 2016; however, W and X are
eligible for coverage under CHIP for 2016 at
an annual cost of $1,000 per child. The
annual premium for U, V, W, and X’s
applicable plan is $20,000. The adjusted
annual premium for the second lowest cost
silver plan that would cover U and V (the
applicable benchmark plan (within the
meaning of § 1.36B–3(f)) is $12,500. U and
V’s household income is $50,000, which is
217 percent of the Federal poverty line for a
family size of 4 for the taxable year. W and
X do not enroll in CHIP coverage.
(ii) Under paragraph (e)(4)(ii)(C) of this
section, the credit allowable under section
36B is determined pursuant to section 36B.
With household income at 217 percent of the
Federal poverty line, the applicable
percentage is 6.89. Each month in 2016 is a
coverage month (within the meaning of
§ 1.36B–3(c)) for U and V, but no months in
2016 are coverage months for W and X
because they are eligible for CHIP coverage.

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Example 5. Simplified method for
applicable plan identification. (i) In 2016
Taxpayer Y, a 42-year old unmarried
individual, lives with her 17-year old
nephew, Z. Y properly claims Z as a
dependent for 2016. Neither Y nor Z is
eligible for minimum essential coverage other
than coverage in the individual market in
2016. The Exchange serving the rating area
where Y and Z reside does not offer any plan
that would cover them both. For 2016, the
annual premium for the lowest cost bronze
plan covering Y is $5,000, and the annual
premium for the lowest cost bronze plan
covering Z is $4,500. The premium for the
lowest cost bronze plan that would cover
individuals with the characteristics of Y and
Z that is offered in the Exchange serving the
rating area where Y and Z reside is $10,000.
(ii) Under paragraph (e)(4)(ii)(B), Z is
included in Y’s nonexempt family. Under
paragraph (e)(4)(ii)(B)(2)(i) of this section, the
premium for the applicable plan is the sum
of the premiums for the lowest cost bronze
plans that would cover Y and Z, or $9,500
($5,000 + $4,500). Alternatively, under
paragraph (e)(4)(ii)(B)(2)(ii) of this section, Y
may irrevocably elect to use the premium for
the lowest cost bronze plan that would cover
individuals with the characteristics of Y and
Z that is offered in the Exchange ($10,000) as
the premium for the applicable plan in
determining qualification for the exemption
described in paragraph (e)(1) of this section.

(f) Household income below filing
threshold—(1) In general. An individual
is an exempt individual for any taxable
year for which the individual’s
household income is less than the
applicable filing threshold.
(2) Applicable filing threshold—(i) In
general. For purposes of this section,
applicable filing threshold means the
amount of gross income that would
trigger an individual’s requirement to

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Federal Register / Vol. 78, No. 22 / Friday, February 1, 2013 / Proposed Rules
file a Federal income tax return under
section 6012(a)(1).
(ii) Certain dependents. The
applicable filing threshold for an
individual who is properly claimed as a
dependent by another taxpayer is equal
to the other taxpayer’s applicable filing
threshold.
(g) Members of Indian tribes. An
individual is an exempt individual for
a month that includes a day on which
the individual is a member of an Indian
tribe. For purposes of this section,
Indian tribe means a group or
community described in section
45A(c)(6).
(h) Individuals with hardship
exemption certification—(1) In general.
An individual is an exempt individual
for a month that includes a day on
which the individual has in effect a
hardship exemption certification
described in paragraph (h)(2) of this
section.
(2) Hardship exemption certification.
A hardship exemption certification is
issued by an Exchange under section
1311(d)(4)(H) of the Affordable Care Act
(42 U.S.C. 18031(d)(4)(H)) and 45 CFR
155.605(g) and 45 CFR 155.615(f) and
certifies that an individual has suffered
a hardship (as that term is defined in 45
CFR 166.605(g)) with respect to the
capability to obtain minimum essential
coverage.
(i) [Reserved]
(j) Individuals with certain short
coverage gaps—(1) In general. An
individual is an exempt individual for
a month the last day of which is
included in a short coverage gap.
(2) Short coverage gap—(i) In general.
Short coverage gap means a continuous
period of less than three months in
which the individual is not covered
under minimum essential coverage. If
the individual does not have minimum
essential coverage for a continuous
period of three or more months, none of
the months included in the continuous
period is treated as included in a short
coverage gap.
(ii) Coordination with other
exemptions. For purposes of this
paragraph (j), an individual is treated as
having minimum essential coverage for
a month in which an individual is
exempt under any of paragraphs (a)
through (h) of this section.
(iii) More than one short coverage gap
during calendar year. If a calendar year
includes more than one short coverage
gap, the exemption provided by this
paragraph (j) only applies to the earliest
short coverage gap.
(3) Continuous period—(i) In general.
Except as provided in paragraph (j)(3)(ii)
of this section, the number of months
included in a continuous period is

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determined without regard to the
calendar years in which months
included in that period occur.
(ii) Continuous period straddling
more than one taxable year. If an
individual does not have minimum
essential coverage for a continuous
period that begins in one taxable year
and ends in the next, for purposes of
applying this paragraph (j) to the first
taxable year, the months in the second
taxable year included in the continuous
period are disregarded. For purposes of
applying this paragraph (j) to the second
taxable year, the months in the first
taxable year included in the continuous
period are taken into account.
(4) Examples. The following examples
illustrate the provisions of this
paragraph (j). Unless stated otherwise,
in each example the taxpayer’s taxable
year is a calendar year and the taxpayer
is ineligible for any of the exemptions
described in paragraphs (a) through (h)
of this section for a month.
Example 1. Short coverage gap. Taxpayer
D has minimum essential coverage in 2016
from January 1 through March 2. After March
2, D does not have minimum essential
coverage until D enrolls in an eligible
employer-sponsored plan effective June 15.
Under § 1.5000A–1(b), for purposes of
section 5000A, D has minimum essential
coverage for January, February, March, and
June through December. D’s continuous
period without coverage is 2 months, April
and May. April and May constitute a short
coverage gap under paragraph (j)(2)(i) of this
section.
Example 2. Continuous period of 3 months
or more. The facts are the same as in
Example 1, except D’s coverage is not
effective until July 1. D’s continuous period
without coverage is 3 months, April, May,
and June. Under paragraph (j)(2)(i) of this
section, April, May, and June are not
included in a short coverage gap.
Example 3. Short coverage gap following
exempt period. Taxpayer E is incarcerated
from January 1 through June 2. E enrolls in
an eligible employer-sponsored plan effective
September 15. Under paragraph (d) of this
section, E is exempt for the period January
through June. Under paragraph (j)(2)(ii) of
this section, E is treated as having minimum
essential coverage for this period, and E’s
continuous period without minimum
essential coverage is 2 months, July and
August. July and August constitute a short
coverage gap under paragraph (j)(2)(i) of this
section.
Example 4. Continuous period covering
more than one taxable year. Taxpayer F, an
unmarried individual with no dependents,
has minimum essential coverage for the
period January 1 through October 15, 2016.
F is without coverage until enrolling in an
eligible employer-sponsored plan effective
February 15, 2017. F files his Federal income
tax return for 2016 on March 10, 2017. Under
paragraph (j)(3)(ii) of this section, November
and December of 2016 are treated as a short

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coverage gap. However, November and
December of 2016 are included in the
continuous period that includes January
2017. The continuous period for 2017 is over
3 months and, therefore, is not a short
coverage gap.
Example 5. Enrollment following loss of
coverage. The facts are the same as in
Example 4 except F loses coverage on June
15, 2017. F enrolls in a new eligible
employer-sponsored plan effective
September 15, 2017. The continuous period
without minimum essential coverage in July
and August of 2017 is two months and,
therefore, is a short coverage gap. Because
January 2017 was not part of a short coverage
gap, the earliest short coverage gap occurring
in 2017 is the gap that includes July and
August.
Example 6. Multiple coverage gaps. (i) The
facts are the same as in Example 5 except F
has minimum essential coverage for
November 2016. Under paragraph (j)(3)(ii) of
this section, December 2016 is treated as a
short coverage gap.
(ii) December 2016 is included in the
continuous period that includes January
2017. This continuous period is two months
and, therefore, January 2017 is the earliest
month in 2017 that is included in a short
coverage gap. Under paragraph (j)(2)(iii) of
this section, the exemption under this
paragraph (j) applies only to January 2017.
Thus, the continuous period without
minimum essential coverage in July and
August of 2017 is not a short coverage gap.

(k) Claiming exemptions from the
shared responsibility payment—(1)
Exemptions requiring certification by an
Exchange. An individual obtains a
religious conscience exemption
certification (described in paragraph (a)
of this section) or a hardship exemption
certification (described in paragraph (h)
of this section) from the Exchange
serving the rating area where the
individual resides. To claim the
exemption, the individual includes the
information specified in published
guidance of general applicability, see
§ 601.601(d)(2) of this chapter, with the
Federal income tax return for the
taxable year that includes the months
for which the exemption is sought.
(2) Exemptions that may be certified
by an Exchange or claimed on a Federal
income tax return—(i) Exemption
certified by an Exchange. The
exemptions for members of health care
sharing ministries (described in
paragraph (b) of this section),
incarcerated individuals (described in
paragraph (d) of this section), and
members of Indian tribes (described in
paragraph (g) of this section) may be
certified in the manner and within the
time specified in 45 CFR 155.610. To
claim the exemption, an individual
includes the information specified in
published guidance of general
applicability, see § 601.601(d)(2) of this

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chapter, with the Federal income tax
return for the taxable year that includes
the months for which the exemption is
sought.
(ii) Exemption claimed on a Federal
income tax return. Alternatively, an
individual, or a taxpayer who may claim
the individual as a dependent for the
taxable year, may claim the exemptions
for members of health care sharing
ministries (described in paragraph (b) of
this section), incarcerated individuals
(described in paragraph (d) of this
section), and members of Indian tribes
(described in paragraph (g) of this
section) without certification by an
Exchange by including the information
specified in published guidance of
general applicability, see § 601.601(d)(2)
of this chapter, with the Federal income
tax return for the taxable year that
includes the months for which the
exemption is sought.
(3) Exemptions that are claimed on
Federal income tax returns. The
exemptions for individuals who lack
affordable coverage (described in
paragraph (e) of this section),
individuals with household income
below the applicable return filing
threshold (described in paragraph (f) of
this section), and individuals with short
coverage gaps (described in paragraph
(j) of this section) may be claimed only
by including the information specified
in published guidance of general
applicability, see § 601.601(d)(2) of this
chapter, with the Federal income tax
return for the taxable year that includes
the months for which the exemption is
sought. Taxpayers are not required to
file Federal income tax returns solely to
claim the exemption for individuals
with household income below the
applicable return filing threshold
(described in paragraph (f) of this
section).

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§ 1.5000A–4 Computation of shared
responsibility payment.

(a) In general. For each taxable year
the shared responsibility payment is the
lesser of—
(1) The sum of the monthly penalty
amounts for each individual in the
shared responsibility family; or
(2) The sum of the monthly national
average bronze plan premiums for the
shared responsibility family.
(b) Monthly penalty amount—(1) In
general. Monthly penalty amount
means, for a month that a nonexempt
individual is not covered under
minimum essential coverage, 1/12
multiplied by the greater of—
(i) The flat dollar amount; or
(ii) The excess income amount.
(2) Flat dollar amount—(i) In general.
Flat dollar amount means the lesser of—

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(A) The sum of the applicable dollar
amounts for all individuals included in
the taxpayer’s shared responsibility
family; or
(B) 300 percent of the applicable
dollar amount (determined without
regard to paragraph (b)(2)(iii) of this
section) for the calendar year with or
within which the taxable year ends.
(ii) Applicable dollar amount. Except
as provided in paragraphs (b)(2)(iii) and
(b)(2)(iv) of this section, the applicable
dollar amount is—
(A) $95 in 2014;
(B) $325 in 2015; or
(C) $695 in 2016.
(iii) Special applicable dollar amount
for individuals under age 18. If an
individual has not attained the age of 18
on the first day of a month, the
applicable dollar amount for the
individual is equal to one-half of the
applicable dollar amount (as expressed
in paragraph (b)(2)(ii) of this section) for
the calendar year in which the month
occurs. For purposes of this paragraph
(b)(2)(iii), an individual attains the age
of 18 on the anniversary of the date
when the individual was born. For
example, an individual born on March
1, 1999, attains the age of 18 on March
1, 2017.
(iv) Indexing of applicable dollar
amount. In any calendar year after 2016,
the applicable dollar amount is $695 as
increased by the product of $695 and
the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year. For purposes of this
paragraph (b)(2)(iv) of this section, the
cost-of-living adjustment is determined
by substituting ‘‘calendar year 2015’’ for
‘‘calendar year 1992’’ in section
1(f)(3)(B). If any increase under this
paragraph (b)(2)(iv) is not a multiple of
$50, the increase is rounded to the next
lowest multiple of $50.
(3) Excess income amount—(i) In
general. Excess income amount means
the product of—
(A) The excess of the taxpayer’s
household income over the taxpayer’s
applicable filing threshold (as defined
in § 1.5000A–3(f)(2)); and
(B) The income percentage.
(ii) Income percentage. For purposes
of this section, income percentage
means—
(A) 1.0 percent for taxable years
beginning in 2013;
(B) 1.0 percent for taxable years
beginning in 2014;
(C) 2.0 percent for taxable years
beginning in 2015; or
(D) 2.5 percent for taxable years
beginning after 2015.
(c) Monthly national average bronze
plan premium. Monthly national
average bronze plan premium means,

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for a month for which a shared
responsibility payment is imposed, 1⁄12
of the annual national average premium
for qualified health plans that have a
bronze level of coverage, would provide
coverage for the taxpayer’s shared
responsibility family members who do
not have minimum essential coverage
for the month, and are offered through
Exchanges for plan years beginning in
the calendar year with or within which
the taxable year ends.
(d) Examples. The following examples
illustrate the provisions of this section.
In each example the taxpayer’s taxable
year is a calendar year and all members
of the taxpayer’s shared responsibility
family are ineligible for any of the
exemptions described in § 1.5000A–3
for a month.
Example 1. Unmarried taxpayer without
minimum essential coverage. (i) In 2016
Taxpayer G is an unmarried individual with
no dependents. G does not have minimum
essential coverage for any month in 2016. G’s
household income is $120,000. G’s
applicable filing threshold is $12,000. The
annual national average bronze plan
premium for G is $5,000.
(ii) For each month in 2016, under
paragraph (b)(2)(ii) of this section, G’s
applicable dollar amount is $695. Under
paragraph (b)(2) of this section, G’s flat dollar
amount is $695 (the lesser of $695 and $2,085
($695 × 3)). Under paragraph (b)(3) of this
section, G’s excess income amount is $2,700
(($120,000¥$12,000) × 0.025). Therefore,
under paragraph (b)(1) of this section, the
monthly penalty amount is $225 (the greater
of $58 ($695/12) or $225 ($2,700/12)).
(iii) The sum of the monthly penalty
amounts is $2,700 ($225 × 12). The sum of
the monthly national average bronze plan
premiums is $5,000 ($5,000/12 × 12).
Therefore, under paragraph (a) of this
section, the shared responsibility payment
imposed on G for 2016 is $2,700 (the lesser
of $2,700 or $5,000).
Example 2. Part-year coverage. The facts
are the same as in Example 1, except G has
minimum essential coverage for January
through June. The sum of the monthly
penalty amounts is $1,350 ($225 × 6). The
sum of the monthly national average bronze
plan premiums is $2,500 ($5,000/12 × 6).
Therefore, under paragraph (a) of this
section, the shared responsibility payment
imposed on G for 2016 is $1,350 (the lesser
of $1,350 or $2,500).
Example 3. Family without minimum
essential coverage. (i) In 2016, Taxpayers H
and J are married and file a joint return. H
and J have three children: K, age 21, L, age
15, and M, age 10. No member of the family
has minimum essential coverage for any
month in 2016. H and J’s household income
is $120,000. H and J’s applicable filing
threshold is $24,000. The annual national
average bronze plan premium for a family of
5 (2 adults, 3 children) is $20,000.
(ii) For each month in 2016, under
paragraphs (b)(2)(ii) and (b)(2)(iii) of this
section, the applicable dollar amount is
$2,780 (($695 × 3 adults) + (($695/2) × 2

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Federal Register / Vol. 78, No. 22 / Friday, February 1, 2013 / Proposed Rules
children)). Under paragraph (b)(2)(i) of this
section, the flat dollar amount is $2,085 (the
lesser of $2,780 and $2,085 ($695 × 3)).
Under paragraph (b)(3) of this section, the
excess income amount is $2,400
(($120,000¥$24,000) × 0.025). Therefore,
under paragraph (b)(1) of this section, the
monthly penalty amount is $200 (the greater
of $173.75 ($2,085/12) or $200 ($2,400/12)).
(iii) The sum of the monthly penalty
amounts is $2,400 ($200 × 12). The sum of
the monthly national average bronze plan
premiums is $20,000 ($20,000/12 × 12).
Therefore, under paragraph (a) of this
section, the shared responsibility payment
imposed on H and J for 2016 is $2,400 (the
lesser of $2,400 or $20,000).
Example 4. Change in shared responsibility
family during the year. (i) The facts are the
same as in Example 3, except J has minimum
essential coverage for January through June.
The annual national average bronze plan
premium for a family of 4 (1 adult, 3
children) is $18,000.
(ii) For the period January through June
2016, under paragraphs (b)(2)(ii) and
(b)(2)(iii) of this section the applicable dollar
amount is $2,085 (($695 × 2 adults) + (($695/
2) × 2 children)). Under paragraph (b)(2)(i) of
this section, the flat dollar amount is $2,085
(the lesser of $2,085 or $2,085 ($695 × 3)).
(iii) For the period July through December
2016, the applicable dollar amount is $2,780
(($695 × 3 adults) + (($695/2) × 2 children)).
Under paragraph (b)(2) of this section, the flat
dollar amount is $2,085 (the lesser of $2,780
or $2,085 ($695 × 3)). Under paragraph (b)(3)
of this section, the excess income amount is
$2,400 (($120,000¥$24,000) × 0.025).
Therefore, under paragraph (b)(1) of this
section, for January through June the monthly
penalty amount is $200 (the greater of
$173.75 ($2,085/12) or $200 ($2,400/12)). The
monthly penalty amount for July through
December is $200 (the greater of $173.75
($2,085/12) or $200 ($2,400/12)).
(iv) The sum of the monthly penalty
amounts is $2,400 ($200 × 12). The sum of
the monthly national average bronze plan
premiums is $19,000 ((($18,000/12) × 6) +
(($20,000/12) × 6))). Therefore, under
paragraph (a) of this section, the shared
responsibility payment imposed on H and J
for 2016 is $2,400 (the lesser of $2,400 or
$19,000).
Example 5. Eighteenth birthday during the
year. (i) In 2016 Taxpayers S and T are
married and file a joint return. S and T have
one child, U, who turns 18 years old on June
28. No member of the family has minimum
essential coverage for any month in 2016. S
and T’s household income is $60,000. S and
T’s applicable filing threshold is $24,000.
The annual national average bronze plan
premium for a family of 3 (2 adults, 1 child)
is $15,000.
(ii) For the period January through June
2016, under paragraphs (b)(2)(ii) and
(b)(2)(iii) of this section, the applicable dollar
amount is $1,737.50 (($695 × 2 adults) +
($695/2) × 1 child)). Under paragraph (b)(2)
of this section, the flat dollar amount is
$1,737.50 (the lesser of $1,737.50 or $2,085
($695 × 3)).
(iii) For the period July through December
2016, the applicable dollar amount is $2,085

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($695 × 3). Under paragraph (b)(2) of this
section, the flat dollar amount is $2,085 (the
lesser of $2,085 or $2,085 ($695 × 3)). Under
paragraph (b)(3) of this section, the excess
income amount is $900 (($60,000¥$24,000)
× 0.025). Therefore, under paragraph (b)(1) of
this section, for January through June the
monthly penalty amount is $144.79 (the
greater of $144.79 ($1,737.50/12) or $75
($900/12)). The monthly penalty amount for
July through December is $173.75 (the greater
of $173.75 ($2,085/12) or $75 ($900/12)).
(iv) The sum of the monthly penalty
amounts is $1,911.24 (($144.79 × 6) +
($173.75 × 6)). The sum of the monthly
national average bronze plan premiums is
$15,000 ($15,000/12 × 12). Therefore, under
paragraph (a) of this section, the shared
responsibility payment imposed on H and J
for 2016 is $1,911.24 (the lesser of $1,911.24
or $15,000).
§ 1.5000A–5
procedure.

Administration and

(a) In general. A taxpayer’s liability
for the shared responsibility payment
for a month must be reported on the
taxpayer’s Federal income tax return for
the taxable year that includes the
month. The time for assessing the
shared responsibility payment is the
same as that prescribed by section 6501
for the taxable year to which the Federal
income tax return on which the shared
responsibility payment is to be reported
relates. The shared responsibility
payment is payable upon notice and
demand by the Secretary, and except as
provided in paragraph (b) of this
section, is assessed and collected in the
same manner as an assessable penalty
under subchapter B of chapter 68 of the
Internal Revenue Code. Therefore, the
shared responsibility payment is not
subject to deficiency procedures of
subchapter B of chapter 63 of the
Internal Revenue Code. Interest on this
payment accrues in accordance with the
rules in section 6601.
(b) Special rules. Notwithstanding any
other provision of law—
(1) Waiver of criminal penalties. In
the case of a failure by a taxpayer to
timely pay the shared responsibility
payment, the taxpayer is not subject to
criminal prosecution or penalty for the
failure.
(2) Limitations on liens and levies. If
a taxpayer fails to pay the shared
responsibility payment imposed by this
section and §§ 1.5000A–1 through
1.5000A–4, the Secretary will not file
notice of lien with respect to any
property of the taxpayer, or levy on any
such property with respect to such
failure.
(3) Authority to offset against
overpayment. Nothing in this section
prohibits the Secretary from offsetting
any liability for the shared
responsibility payment against any

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overpayment due the taxpayer, in
accordance with section 6402(a).
(c) Effective/applicability date. This
section and §§ 1.5000A–1 through
1.5000A–4 apply for months beginning
after December 31, 2013.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2013–02141 Filed 1–30–13; 11:15 am]
BILLING CODE 4830–01–P

DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 100
[Docket Number USCG–2012–1098]
RIN 1625–AA08

SLR; Fajardo Offshore Grand Prix;
Rada Fajardo; Fajardo, PR
Coast Guard, DHS.
Notice of Proposed Rulemaking.

AGENCY:
ACTION:

The Coast Guard is
establishing a special local regulation on
the waters of Rada Fajardo in Fajardo,
Puerto Rico during the Fajardo Offshore
Grand Prix, a high speed boat race. The
event is scheduled to take place on
Sunday, March 17, 2013. Approximately
30 high-speed power boats will be
participating in the races. It is
anticipated that 25 spectator crafts will
be present during the races. The special
local regulation is necessary for the
safety of race participants, participant
vessels, spectators, and the general
public during the event. The special
local regulation will establish the
following three areas: One race area,
where all persons and vessels, except
those persons and vessels participating
in the high-speed boat races, are
prohibited from entering, transiting
through, anchoring in, or remaining
within; a buffer zone around the race
areas, where all persons and vessels,
except those persons and vessels
enforcing the buffer zone or transiting to
the race area, are prohibited from
entering, transiting through, anchoring
in, or remaining within; and a spectator
area, where all vessels are prohibited
from anchoring and from traveling in
excess of wake speed, unless authorized
by the Captain of the Port San Juan or
a designated representative.
DATES: Comments and related material
must be received by the Coast Guard on
or before February 7, 2013.
Requests for public meetings must be
received by the Coast Guard on or before
February 7, 2013.
SUMMARY:

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