SECTION 2. BACKGROUND

.01 Under § 36B(a), certain taxpayers are allowed a refundable premium tax credit to help individuals and families afford health insurance purchased through an Exchange.

.02 Section 36B(b)(2) provides that a taxpayer’s premium tax credit is the lesser of the premiums for the plan or plans in which the taxpayer or one or more members of the taxpayer’s family enroll and the excess of the premiums for the applicable second lowest cost silver plan covering the taxpayer’s family, sometimes called the benchmark plan, over the taxpayer’s contribution amount. A taxpayer’s contribution amount is the product of the

taxpayer’s household income and an applicable percentage that increases as the taxpayer’s household income increases. The applicable percentage is determined under rules specified in § 36B(b)(3)(A)(i).

.03 Taxpayers must use the percentage table in § 36B(b)(3)(A)(i) to compute their applicable percentages. Section 36B(b)(3)(A)(ii) provides that, for taxable years beginning in 2015, the percentages in the table under § 36B(b)(3)(A)(i) must be adjusted to reflect the excess of the rate of premium growth over the rate of income growth for the preceding calendar year.

.04 Section 36B(c)(2)(B) provides that a coverage month does not include any month with respect to an individual if for such month the individual is eligible for minimum essential coverage other than eligibility for coverage in the individual market described in § 5000A(f)(1)(C). Under § 36B(c)(2)(C), an individual is not treated as eligible for employer-sponsored minimum essential coverage if the required contribution with respect to the plan exceeds 9.5 percent (the Section 36B Required Contribution Percentage) of the applicable taxpayer’s household income. Section 36B(c)(2)(C)(iv) provides that, for plan years beginning in 2015, the Section 36B Required Contribution Percentage is updated in the same manner that the applicable percentage is adjusted under § 36B(b)(3)(A)(ii).

.05 Temporary and final regulations released on July 24, 2014, (T.D. 9683) provide that the percentages in the Applicable Percentage Table and the Section 36B Required Contribution Percentage will be updated by the ratio of premium growth in the preceding calendar year to income growth in the preceding calendar year. See §§ 1.36B–2T(c)(3)(v)(C), and 1.36B– 3T(g)(1) of the temporary Income Tax Regulations.

.06 Sections 1.36B–2T(c)(3)(v)(C) and 1.36B–3T(g)(1) further provide that the percentages in the Applicable Percentage Table and the Section 36B Required Contribution Percentage may be further adjusted to reflect updates to the data used to compute the ratio of premium growth to income growth for the 2014 calendar year or updates to the data sources used to the

compute the ratio of premium growth to income growth.

.07 Starting in 2014, § 5000A provides for each individual to have minimum essential coverage for each month, qualify for an exemption, or make a payment (the individual shared responsibility payment) when filing his or her federal income tax return.

.08 Section 5000A(e)(1)(A) provides that an individual is exempt from § 5000A for a month if the individual’s required contribution for minimum essential coverage exceeds 8 percent (the Section 5000A required contribution percentage) of the individual’s household income. Section 5000A(e)(1)(D) provides that, for plan years beginning after 2014, the Section 5000A required contribution percentage is the percentage 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 that period.