rp-14-37.pdf

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26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement;
determination of correct tax liability.
(Also §§ 36B, 5000A, 1.36B-2, 1.36B-2T, 1.36B-3, 1.36B-3T, 1.5000A-3.)

Rev. Proc. 2014-37

SECTION 1. PURPOSE

This revenue procedure provides indexing adjustments for certain provisions
under sections 36B and 5000A of the Internal Revenue Code. In particular, it updates
the Applicable Percentage Table in § 36B(b)(3)(A)(i). This table is used to calculate an
individual’s premium tax credit for taxable years beginning after calendar year 2014.
This revenue procedure also updates the required contribution percentage in
§ 36B(c)(2)(C)(i)(II), which is used to determine whether an individual is eligible for
affordable employer-sponsored minimum essential coverage under § 36B for plan years
beginning after calendar year 2014. Additionally, this revenue procedure cross-
references the required contribution percentage under § 5000A(e)(1)(A) for plan years
beginning after calendar year 2014, as determined under guidance issued by the
Department of Health and Human Services. This percentage is used to determine
whether an individual is eligible for an exemption from the individual shared
responsibility payment because of a lack of affordable minimum essential coverage.

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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)

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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

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premium growth between the preceding calendar year and 2013 over the rate of income
growth for that period.
SECTION 3. DEFINITIONS
.01 Premium Growth for the Preceding Calendar Year means the quotient
determined by dividing the projected per enrollee spending for employer-sponsored
private health insurance for the preceding calendar year by the projected per enrollee
spending for employer-sponsored private health insurance for the calendar year two
years prior. The projections are the National Health Expenditure Projections published
by the Centers for Medicare and Medicaid Services Office of the Actuary.
.02 Income Growth for the Preceding Calendar Year means the quotient determined
by dividing the projected GDP per capita for the preceding calendar year by projected
GDP per capita for the calendar year two years prior. The projections are the National
Health Expenditure Projections published by the Centers for Medicare and Medicaid
Services Office of the Actuary.
.03 Adjustment Ratio means the quotient determined by dividing (1) the premium
growth for the preceding calendar year by (2) the income growth for the preceding
calendar year.
.04 Applicable Percentage Table means the table provided for in § 36B(b)(3)(A)(i).
.05 Section 36B Required Contribution Percentage means the percentage provided
for in § 36B(c)(2)(C)(i)(II).
.06 Preceding Year Applicable Percentage Table means (1) the preceding calendar
year’s Applicable Percentage Table as calculated pursuant to this revenue procedure,

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or (2) for the 2015 calendar year, the Applicable Percentage Table provided in
§ 36B(b)(3)(A)(i) and § 1.36B-3T(g).
.07 Preceding Year Section 36B Required Contribution Percentage means (1) the
preceding calendar year’s Section 36B Required Contribution Percentage as calculated
pursuant to this revenue procedure, or (2) for the 2015 calendar year, the required
contribution percentage provided in § 36B(c)(2)(C)(i)(II) and § 1.36B-2T(c)(3)(v)(C).
SECTION 4. ADJUSTMENT METHODOLOGY
The Applicable Percentage Table is adjusted annually by multiplying each premium
percentage in the Preceding Year Applicable Percentage Table by the Adjustment
Ratio. The Section 36B Required Contribution Percentage is adjusted annually by
multiplying the Preceding Year Section 36B Required Contribution Percentage by the
Adjustment Ratio. The Applicable Percentage Table and the Section 36B Required
Contribution Percentage calculated under this revenue procedure are rounded to
hundredths of a percentage point.
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 compute the ratio of premium growth to income growth.
SECTION 5. ADJUSTED ITEMS

.01 Applicable Percentage Table for 2015. For taxable years beginning in 2015, the
Applicable Percentage Table for purposes of § 36B(b)(3)(A)(i) and § 1.36B-3T(g) is:

Household income percentage of Federal
poverty line:
Initial percentage Final percentage
Less than 133% 2.01% 2.01%

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At least 133% but less than 150% 3.02% 4.02%
At least 150% but less than 200% 4.02% 6.34%
At least 200% but less than 250% 6.34% 8.10%
At least 250% but less than 300% 8.10% 9.56%
At least 300% but not more than 400% 9.56% 9.56%

.02 Section 36B Required Contribution Percentage for 2015. For plan years
beginning in 2015, the required contribution percentage for purposes of
§ 36B(c)(2)(C)(i)(II) and § 1.36B-2T(c)(3)(v)(C) is 9.56%.
.03 Section 5000A Required Contribution Percentage. As specified in the Market
Standards for 2015 and Beyond final rule, 79 Fed. Reg. 30240 (May 27, 2014), for plan
years beginning in 2015, the Section 5000A required contribution percentage for
purposes of § 5000A(e)(1)(A) and § 1.5000A-3(e)(2) is 8.05%.
SECTION 6. EFFECTIVE DATE

This revenue procedure is effective for taxable years and plan years beginning after
December 31, 2014.
SECTION 7. DRAFTING INFORMATION

The principal author of this revenue procedure is Arvind Ravichandran of the Office
of Associate Chief Counsel (Income Tax and Accounting). For further information
regarding this revenue procedure, contact Mr. Ravichandran at (202) 317-4718 (not a
toll-free call).