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HHS Rules Address Same-sex Couples and the ACA's Premium Tax Credit
Practical Law Legal Update 8-543-8445 (Approx. 4 pages)
HHS Rules Address Same-sex Couples and the ACA's Premium Tax Credit
by Practical Law Employee Benefits & Executive Compensation
| Published on 01 Oct 2013 • USA (National/Federal) |
The Department of Health and Human Services (HHS) has announced that the eligibility rules for premium tax credits under the Affordable Care Act (ACA) treat same-sex spouses in the same manner as opposite sex spouses. As a result, same-sex spouses, like opposite-sex spouses, must file joint returns to be eligible for the tax credit.
On September 27, 2013, HHS issued guidance, for purposes of the health insurance exchanges (also known as marketplaces), announcing that:
- The eligibility rules for exchange-related premium tax credits under the Affordable Care Act (ACA) treat same-sex spouses in the same manner as opposite sex spouses.
- Same-sex spouses therefore must file joint returns to be eligible for the tax credit.
The guidance was issued in light of:
- The Supreme Court's United States v. Windsor decision, which held that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional (see Legal Update, Supreme Court: DOMA Section 3 is Unconstitutional and Proposition 8 Proponents Lack Standing).
- IRS Revenue Ruling 2013-17 (IRS Ruling), which recognized same-sex marriages for federal income tax purposes (see Legal Update, IRS Adopts Same-sex Marriage Recognition Rule).
Under the ACA's premium tax credit rules, contained in Section 36B of the Internal Revenue Code (IRC), individuals and families with certain incomes are eligible for a premium tax credit for health insurance purchased through an exchange, which may be paid in advance, and for cost-sharing subsidies (see Practice Note, Health Insurance Exchanges and Related Requirements under the ACA and Legal Update, IRS Final Regulations Clarify Premium Tax Credit Rules). Eligibility determinations for advance payment of premium tax credits and cost-sharing are:
- Made by the exchanges.
- Related to the IRS' rules under Section 36B for the premium tax credit.
In its guidance, HHS noted that under the IRS Ruling, the eligibility rules for the Section 36B premium tax credit treat same-sex spouses and opposite-sex spouses in the same manner. As a result, premium tax credits are available to an eligible individual with a same-sex spouse:
- Regardless of where the individual lives (that is, a "place of celebration" rule, rather than a "place of domicile" rule applies).
- Provided that the individual and his or her spouse file a joint return for the tax year.
For purposes of the premium tax credit and the cost-sharing subsidies:
- An individual's family size must include his or her spouse.
- The individual's household income must reflect the spouse's modified adjusted gross income.
According to HHS, the federal exchanges will implement the IRS Ruling as applicable to advance payments of the premium tax credit and cost-sharing reductions beginning October 1, 2013 (the date that open enrollment under the exchanges began), regarding married couples that attest that they expect to file a joint tax return for the 2014 tax year.
The HHS guidance adds that state-based exchanges must implement the guidance (including interim workarounds) as soon as reasonably practical.
Practical Impact
With this guidance, HHS joins IRS and DOL (for certain purposes) in adopting a "state of celebration" approach for determining who is a spouse for purposes of a federal benefit (see Legal Update, DOL Adopts Same-sex Marriage Recognition Rule for ERISA Purposes). However, in Fact Sheet #28F, the DOL earlier announced that it would evaluate whether a same-sex couple is married under the Family and Medical Leave Act by looking to the state of the employee's residence (see Legal Update, Labor Department Begins Extension of Federal Benefits to Same-sex Spouses in States Recognizing Gay Marriage).