Trade Adjustment Act Health Tax Credit Hardship Exemption Announced by IRS

The special health care tax credit for individuals and their families receiving trade adjustment assistance (TAA) or receiving payments from the Pension Benefit Guaranty Corporation was reinstated in 2015, retroactive to 2014. It had previously expired in 2013.

The Trade Preferences Extension Act of 2015 extended and modified the expired tax credit. This credit provided advanced payments for health insurance coverage for eligible individuals and families. The health care tax credit (HCTC) will now be available for coverage through 2019. General information including who can claim the tax credit is provided by the IRS here.

The previous process to claim the tax credit was also expected to be reinstated and be in operation by July 2016. Guidance released on August 12, 2016 asserts that reinstatement of the credit process is not yet operational. The guidance describes a “limited interim process” for the remainder of 2016 with the expectation that the full process will be implemented by January 2017.

As a result of this delay, individuals will be required to pay the full amount of any qualifying health coverage. Since payment of the full premium may be a hardship, the IRS has allowed that any eligible individual who is not enrolled in HCTC-qualified coverage for one or more months between July and December 2016 will be entitled to claim a hardship exemption from the individual shared responsibility requirement for months for which they were eligible for the HCTC. Further guidance detailing how to claim this exemption on individual tax returns will be forthcoming.

The full IRS announcement can be read here.