Level 2

I have been looking at how to take advantage of the agreed upon allocation of a child who was thought to be a dependent upon application for coverage but was determined to have provided more than half his support. What I found causes me to step back from the more beneficial allocation. Firstly there was no advance premium tax credit for the plan which means I then needed to look at 26 CFR § 1.36B-3(h)(1). When I took a closer look at this guidance I then looked at 26 CFR § 1.36B-4(a)(1)(ii) which states, "This paragraph (a)(1)(ii)(B) does not apply to amounts allocated under § 1.36B-3(h) (qualified health plan covering more than one family) or if the shifting enrollee or enrollees are the only individuals enrolled in the qualified health plan." In other words the allocation allowed by (a)(1)(ii)(B)(2) is not allowed if the covered individual is subject to guidance listed on 26 CFR § 1.36B-3(h)(1) which gives guidance that the premium allocation should be based on tax household according to the SLCSP for that household and some examples are provided under the relevant section. I would be glad to be proven wrong on this as it is not in the best interest of my client.

https://www.law.cornell.edu/cfr/text/26/1.36B-4

https://www.law.cornell.edu/cfr/text/26/1.36B-3#h(1)

In general. If a qualified health plan covers more than one family under a single policy, each applicable taxpayer covered by the plan may claim a premium tax credit, if otherwise allowable. Each taxpayer computes the credit using that taxpayer's applicable percentage, household income, and the benchmark plan that applies to the taxpayer under paragraph (f) of this section. In determining whether the amount computed under paragraph (d)(1)(i) of this section (the premiums for the qualified health plan in which the taxpayer enrolls) is less than the amount computed under paragraph (d)(1)(ii) of this section (the benchmark plan premium minus the product of household income and the applicable percentage), the premiums paid are allocated to each taxpayer in proportion to the premiums for each taxpayer's applicable benchmark plan.

(2) Example. The following example illustrates the rules of this paragraph (h):

Example.
(i) Taxpayers A and B enroll in a single policy under a qualified health plan. B is A's 25-year old child who is not A's dependent. B has no dependents. The plan covers A, B, and A's two additional children who are A's dependents. The premium for the plan in which A and B enroll is $15,000. The premium for the second lowest cost silver family plan covering only A and A's dependents is $12,000 and the premium for the second lowest cost silver plan providing self-only coverage to B is $6,000. A and B are applicable taxpayers and otherwise eligible to claim the premium tax credit.
(ii) Under paragraph (h)(1) of this section, both A and B may claim premium tax credits. A computes her credit using her household income, a family size of three, and a benchmark plan premium of $12,000. B computes his credit using his household income, a family size of one, and a benchmark plan premium of $6,000.

(iii) In determining whether the amount in paragraph (d)(1)(i) of this section (the premiums for the qualified health plan A and B purchase) is less than the amount in paragraph (d)(1)(ii) of this section (the benchmark plan premium minus the product of household income and the applicable percentage), the $15,000 premiums paid are allocated to A and B in proportion to the premiums for their applicable benchmark plans. Thus, the portion of the premium allocated to A is $10,000 ($15,000 × $12,000/$18,000) and the portion allocated to B is $5,000 ($15,000 × $6,000/$18,000).