Section 26000.61020 - Exemptions(a) A responsible individual shall not be liable for a penalty for any applicable household member for a month that includes a day on which the applicable household member is an exempt individual.(b) A penalty will not be imposed on an applicable individual who lacks affordable coverage. (1) An applicable individual lacks affordable coverage in a month if the applicable individual's required contribution (determined on an annual basis) for minimum essential coverage for the month exceeds the required contribution percentage 8.3 percent of the applicable household income. For purposes of this section, an applicable 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) For plan years beginning in any calendar year after 2019, the required contribution percentage is the percentage determined by the United States 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.(3) Eligible employer-sponsored plans (A) A responsible individual or applicable spouse or applicable dependent of the responsible individual is treated as eligible for coverage under an eligible employer-sponsored plan for a month during a plan year if the responsible individual or applicable spouse or applicable dependent of the responsible individual could have enrolled in the plan for any day in that month during an open or special enrollment period, regardless of whether the responsible individual or their applicable spouse or applicable dependent is eligible for any other type of minimum essential coverage.(B) An applicable individual eligible for coverage under an eligible employer-sponsored plan offered by the applicable individual's employer is not treated as eligible for coverage as an applicable dependent or applicable spouse of another applicable individual under an eligible employer-sponsored plan (for example, an eligible employer-sponsored plan offered by the employer of the applicable individual's spouse) for any month included in the plan year of the eligible employer-sponsored plan offered by the applicable individual's employer.(C) An applicable individual who was formerly employed or a formerly employed applicable individual's applicable dependent or applicable spouse, who may enroll in continuation coverage required under Federal law or a state law that provides comparable continuation coverage, or in retiree coverage under an eligible employer-sponsored plan, is eligible for coverage under an eligible employer-sponsored plan only if the applicable individual enrolls in the coverage.(D) In the case of an applicable individual who is eligible to purchase coverage under an eligible employer-sponsored plan sponsored by the applicable individual's employer, the required contribution is the portion of the annual premium that the applicable individual would pay (whether through salary reduction or otherwise) for the lowest cost self-only coverage. 1. In the case of an applicable household member who is eligible for coverage under an eligible employer-sponsored plan because of a relationship to a responsible individual, the required contribution is the portion of the annual premium that the responsible individual would pay (whether through salary reduction or otherwise) for the lowest cost family coverage that would cover the responsible individual and the responsible individual's applicable household members who are not otherwise exempt individuals.2. For each responsible individual and applicable household member described in this subsection, affordability 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 responsible individual. Coverage under an eligible employer-sponsored plan is affordable for a part-year period if the annualized required contribution for self-only coverage (in the case of the responsible individual) or family coverage (in the case of an applicable household member) under the plan for the part-year period does not exceed the required contribution percentage of the responsible individual's applicable household income for the taxable year.3. Amounts newly made available for the current plan year under a health reimbursement arrangement that a responsible individual may use to pay premiums, or may use to pay cost-sharing or benefits not covered by the primary plan in addition to premiums, are counted toward the responsible individual's required contribution if the health reimbursement arrangement would be integrated, as that term is used in Internal Revenue Service Notice 2013-54 (2013-40 IRB 287), with an eligible employer-sponsored plan for a responsible individual enrolled in the plan. The eligible employer-sponsored plan and the health reimbursement arrangement must be offered by the same employer. Employer contributions to a health reimbursement arrangement count toward a responsible individual's required contribution only to the extent the amount of the annual contribution is required under the terms of the plan or otherwise determinable within a reasonable time before the responsible individual must decide whether to enroll in the eligible employer-sponsored plan.4. Amounts made available for the current plan year under a cafeteria plan, within the meaning of Internal Revenue Code section 125, are taken into account in determining a responsible individual's or their applicable household members' required contribution if all of the following apply: a. The responsible individual may not opt to receive the amount as a taxable benefit;b. The responsible individual may use the amount to pay for minimum essential coverage; andc. The responsible individual may use the amount exclusively to pay for medical care, within the meaning of Internal Revenue Code section 213.5. Nondiscriminatory wellness program incentives, within the meaning of section 54.9802-1(f) of Title 26 of the Code of Federal Regulations, as it reads as of December 15, 2017, offered by an eligible employer-sponsored plan that affect premiums are treated as earned in determining a responsible individual's required contribution for purposes of affordability of an eligible employer-sponsored plan to the extent the incentives relate exclusively to tobacco use. Wellness program incentives that do not relate to tobacco use or that include a component unrelated to tobacco use are treated as not earned for this purpose.(4) A responsible individual is treated as ineligible for coverage under an eligible employer-sponsored plan for a month that is not described in this subparagraph. (A) The required contribution for an applicable individual who is only eligible to purchase minimum essential coverage in the individual market is the annual premium for the lowest cost bronze plan available in the individual market through the Exchange serving the rating area in which the applicable individual resides (without regard to whether the applicable individual purchased a qualified health plan though the Exchange), reduced by the maximum amount of any credit or subsidy allowable under Internal Revenue Code section 36 B and Title 25 of the Government Code 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. All applicable household members who have not otherwise been granted an exemption through the Exchange and who are not treated as eligible to purchase coverage under an eligible employer-sponsored plan shall be included to determine the required contribution.(B) For each applicable household member, affordability under this subsection is determined separately for each period 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 part-year period does not exceed the required contribution percentage of the responsible individual's applicable household income for the taxable year.(c)(1) A responsible individual and any applicable household members are exempt individuals for any taxable year for which the responsible individual's applicable household income is less than the filing threshold specified in paragraph (1) or (2) of subdivision (a) of section 18501 of the Revenue and Taxation Code for that taxable year.(2) A responsible individual and any applicable household members are exempt individuals for any taxable year for which the responsible individual's gross income is less than the filing threshold specified in paragraph (3) of subdivision (a) of section 18501 of the Revenue and Taxation Code for that taxable year.(3) A responsible individual is not required to file a California income tax return solely to claim the exemption described in this subsection. If a responsible individual has an applicable household income or gross income below the filing threshold and nevertheless files a California income tax return, the taxpayer may claim the exemption described in this subsection on the return.Cal. Code Regs. Tit. 18, § 26000.61020
1. New section filed 12-17-2020; operative 12-17-2020. Submitted to OAL for filing and printing only pursuant to Revenue and Taxation Code section 61030(c) (Register 2020, No. 51). Note: Authority cited: Section 61030, Revenue and Taxation Code. Reference: Section 61020, Revenue and Taxation Code.
1. New section filed 12-17-2020; operative 12/17/2020. Submitted to OAL for filing and printing only pursuant to Revenue and Taxation Code section 61030(c) (Register 2020, No. 51).