Treasury just released a letter explaining that survivors of domestic violence can qualify for the premium tax credits. The letter states in pertinent part that, “A married individual who is living apart from his or her spouse, and who is unable to file a joint return as a result of domestic abuse, will be permitted to claim a premium tax credit for 2014 while filing a tax return with a filing status of married filing separately.” Additionally, HHS released guidance explaining that such individuals will be able to enroll in the new marketplaces through May 31, 2014. At least going forward, the federal rules will ensure that such individuals are not left out of tax credits and the coverage programs that they desperately need – and the marketplaces will give these folks a few weeks to apply.
Particularly since we have been working to help survivors of domestic violence to access the premium tax credits all tax season, this news comes as a very welcome development. With just a few days left in open enrollment, though, the challenge to contact these individuals and share this news is quite daunting – but we have already started making calls. And the fact that domestic violence survivors now also have additional time to apply (through May 31st) is quite helpful to all consumer advocates, Navigators, and tax providers who work with these individuals.
We expect to receive additional guidance from the IRS this week on this topic.
More Detailed Explanation
Why in the world was this necessary? Prior to this announcement, the IRS had interpreted the statute at IRC § 36B(c)(1)(C) and the final rule at 26 CFR § 1.36B–2(b)(2) to mean that married individuals could only claim the premium tax credits if they were married filing jointly for the respective tax year. This requirement posed obvious problems for survivors of domestic violence who have not finalized a divorce (and who would normally file as married filing separately or head of household). The IRS acknowledged these concerns in May 2012, and the Service posted a partial fix for some individuals last month. Today’s news helps to ensure that more survivors of domestic violence will have access to the premium tax credits and qualified health plan coverage.
How many people might this affect? The CDC estimated in 2003 that “…1.3 million women are victims of physical assault by an intimate partner each year.” This may be an underestimate: more recent data from the 2010 National Intimate Partner and Sexual Violence Survey finds that, “The prevalence of severe physical violence victimization by an intimate partner in the 12 months prior to taking the survey was 2.7% among women compared to 2.0% among men.” And these statistics do not include sexual violence, which is reported separately.
Does this address all of the challenges for survivors of domestic violence who apply for premium tax credits? No. HHS’s application form still asks whether an applicant is married – and does not allow applicants to indicate that they are applying as head-of-household or married filing separate. Until HHS releases clarifying guidance and correct forms, we encourage survivors of domestic violence who need coverage to call the marketplace, explain their situation, and seek assistance.