6) Tax Penalty Exemptions

  • Question 1

    Are there specific tax penalty exemptions available for American Indians/Alaska Natives (AI/ANs)?


    There are two exemptions from the tax penalty for not having health insurance available to AI/ANs.  The “Indian exemption” is available to members of Federally-recognized tribes, including shareholders of Alaska Native village or regional corporations.  The other exemption (which is sometimes referred to as a “hardship” exemption) is available to individuals who are eligible for services from Indian health care providers.  There are two routes to apply for the Indian-specific exemptions from the tax penalty:

    • Application filed with Marketplace: Individuals may apply to a Marketplace at any time during the year using a paper application.  If approved, the applicant is provided an Exemption Certificate Number (ECN).
    • Federal income tax filing process:  An individual may claim an exemption from the tax penalty directly during the federal income tax filing process without needing to apply for an exemption through a Marketplace.  For the 2014 coverage year, the federal income tax filing period begins on January 1, 2015 and continues through April 15, 2015, or later if a filing extension is requested.

    The Tribal Self-Governance Advisory Committee presented a Webinar on this topic on October 22, 2014, download the Webinar here.

  • Question 2

    Who provides the certification for the exemption from the tax penalty for not having health insurance coverage?


    When applying through a Marketplace for one of the two Indian-specific exemptions from the tax penalty for not having health insurance coverage, the same application form is used.  (The application form can be accessed and printed from here).

    Applications for the exemptions from the tax penalty for not having health insurance coverage are to be mailed to the federal Department of Health and Human Services (HHS) processing center at Health Insurance Marketplace – Exemption Processing, 465 Industrial Blvd., London, KY 40741.  In some instances, a state may process applications from its state residents.

    An Exemption Certificate Number (ECN) is to be issued by HHS for each individual who receives an exemption from the tax penalty.  For individuals who receive one of the two Indian-specific exemptions, the certificate of exemption number is applicable for prior periods and for current and future years.  Unless someone’s eligibility status changes, individuals issued one of the Indian-specific exemptions can keep and use the certificate of exemption number for their entire life.

    The ECN will be mailed to the applicant after HHS verifies eligibility.  HHS is currently relying on an outside contractor to process the applications.

  • Question 3

    Sometimes CMS refers to a “Native American Hardship Exemption.” What is this?


    As outlined above in Question 1, there are two Indian-specific exemptions from the tax penalty for not maintaining health insurance coverage.  Sometimes, CMS staff members mix or combine their references to these exemptions.  Technically, the “hardship” exemption is an eligibility category established under the administrative authority delegated to the HHS Secretary under the ACA.  The “Indian exemption” was written into the ACA itself and is sometimes referred to as a “statutory exemption”.

  • Question 4

    Is there a deadline for the Indian-specific exemptions?


    No, there is no deadline for the Indian-specific exemptions from the tax penalty.  The Indian-specific exemptions apply retrospectively and prospectively without a time limit.

  • Question 5

    Is there a new exemption application for American Indians/Alaska Natives? I heard it was revised. Other than the information on the HealthCare.gov Website, are there instructions to use in filling out the Indian-specific exemption application?


    A revised application for an Exemption Certificate Number was issued in March of 2014. Revised instructions were issued as well.

    The exemption application, listed under “Form to apply for exemption for American Indians and Alaska Natives and others who are eligible for services from an Indian health care provider,” is available here.

    The Instructions, released on March 25, 2014, cover all of the exemption types and are available here (Updated link – 2/12/2016)

    On pages 11 and 12 of the Instructions, explanations are provided for the Indian-specific exemptions.  One important point to emphasize is–as indicated in items 7 and 9.  Do not answer questions 8 and 9 if you answer “yes” to question 7.  If answering “yes” on question 7, skip the rest of the page.

  • Question 6

    Does a tribal member have to apply and send in an exemption for American Indian status? I was told they could wait until they file their taxes in 2015 and then just show their tribal card or CDIB card to their preparer and get the exemption. Is this true?


    For the exemption for a “Member of an Indian Tribe” (which includes shareholders in Alaska Native village and regional corporations), an individual may claim the exemption when filing federal income taxes for the 2014 tax year in January – April 2015. Further, with a recent joint announcement by HHS and the Internal Revenue Service, individuals eligible for services from Indian health care providers are able to claim this hardship exemption through the federal tax filing process as well.  (Previously, these individuals could only apply through a Marketplace.)

  • Question 7

    Do American Indians/Alaska Natives (AI/ANs) from a federally-recognized Tribe or AI/AN descendants have to file a hardship exemption document with the Internal Revenue Service if they participate in employer health insurance coverage, Medicaid, or Medicare


    An individual (whether an Indian or not) will not need to file a hardship exemption if the individual has employer-sponsored insurance or has coverage through Medicaid or Medicare.

  • Question 8

    Do individuals with a letter of descendancy apply for the Indian exemption or the hardship exemption? There is nothing on the hardship exemption application for descendants. What forms of documentation for Self-Governance Tribes are acceptable?


    If a descendant is not enrolled in a federally-recognized tribe but is eligible for IHS-funded services, the individual would apply for the IHS-eligible exemption rather than the Indian exemption.  The same application form is used for both types of exemptions.  (The application form can be accessed and printed here.)  As to documentation to support the IHS-eligible hardship exemption, a variety of documents are acceptable.  A list of documentation types are contained in the instructions for the two Indian-specific exemptions.  One acceptable document is a letter from an Indian health care provider (IHS or Tribal provider) stating that the patient is eligible for IHS-funded services.

  • Question 9

    I mailed in applications for me and my family members for the exemption from the tax penalty available to American Indians and Alaska Natives (AI/ANs). I also included with the application copies of the documentation showing that we qualify. Three months have passed, and I haven’t heard back yet. Is there a phone number I can call to ask about my application? Although I kept copies of my application, should I send in a new application?


    Please direct your inquiry to:  Nancy Goetschius, a contact at the Centers for Medicare and Medicaid Services (CMS) of the Department of Health and Human Services (HHS).  She can be reached atnancy.goetschius@cms.hhs.gov.

    Sending in a second set of applications is an option, but it is best to first contact the CMS staff member identified above.  HHS/CMS has recently stated that it is in the process of clearing up a backlog of applications.

    As you did, always keep copies of what you submitted.  As a reminder, do not send in original documents (such as a tribal member card), because the original documents will not be returned.

    Finally, there is not a rush to get an exemption certificate.  The exemptions from the tax penalty for AI/ANs can be used for current and future years and for past years.  For example, if an exemption certificate is received in 2015, it can be used for 2014, 2015, and all future years.

    If an Exemption Certificate Number (ECN) is not received from HHS prior to the due date for filing federal income taxes, an individual may claim an exemption directly on the application form without using the ECN.

  • Question 10

    Many IHS clinics serve non-Indian spouses. Does this make them eligible for the hardship exemption under the “IHS-eligible” definition?


    Yes, spouses of an eligible Indian are eligible if the Tribe passed a Tribal resolution that makes spouses eligible to receive services from IHS.  One form of documentation that is acceptable for a non-Indian spouse is a letter from the Indian health care provider stating that the non-Indian spouse is eligible for IHS-funded services.

  • Question 11

    We partner with a volunteer tax program. Are there references or training materials that we can get to the tax preparers for the Indian exemption ahead of time to give them a heads up?


    A Webinar, titled “Indian-specific Exemptions from ACA Tax Penalty for Not Maintaining Minimum Essential Coverage, Current Status, October 22, 2014,” is available here.  A tax preparer may also access the exemption application at www.healthcare.gov/exemptions/.

    In addition, the TSGAC has prepared materials and a Webinar on Indian-specific issues under the Affordable Care Act.  The material was presented by Mim Dixon in a Webinar sponsored by the TSGAC.  The materials and a recording of the Webinar are here.

  • Question 12

    Are patients provided an Exemption Certificate Number at the time when they file their taxes?


    No, they are not.

    When someone is claiming an exemption from the tax penalty under one of the two Indian-specific exemptions, the individual has two options: (1) a tax filer can simply claim the exemption on the tax forms, providing Social Security Numbers and other requested information; or (2) first apply through a Marketplace to receive an Exemption Certificate Number (ECN) and then use the ECN on the tax forms when filing federal income tax returns.

    If using the first option (simply claiming an exemption on the tax forms without first going through the Marketplace to receive an ECN), an individual will not need—nor receive—an ECN.

  • Question 13

    If a Tribe is participating in the Tribal Premium Sponsorship, and paying the premium for the Tribal member, is the Tribal member responsible for tax penalty or it the Tribe? Is this the reason for filing for an exemption?


    Thank you for the question, or actually two questions.

    1. First, the “exemption” refers to not being required to pay a penalty for not having health insurance coverage. So, an individual might apply for an exemption if he or she (or a family member) did not have health insurance coverage and wants to be excused from having to pay a penalty.
    2. Second, with regard to premium sponsorship, a “penalty” does not apply to a sponsored individual, nor to the sponsoring entity (for example, a tribe or a tribal health organization). But, there may be a need to repay (i.e., pay back to the federal government) any extra premium tax credits that may have been paid by the federal government to the insurance plan on behalf of the enrollee. This might occur if an enrollee projected their income to be a certain amount for the year (and the premium tax credit was calculated and paid out by the federal government based on that projected income), but the sponsored enrollee ultimately had more income for the year.
    3. When an overpayment of premium tax credits occurs, the enrollee is required to pay the funds back through the federal income tax filing process. But to protect the sponsored enrollee, many tribal sponsorship programs commit to reimbursing the enrollee for any repayments to the federal government that are owed during the federal income tax filing process.
  • Question 14

    We have a tax preparer in our community that is telling her Native American customers that they will be required to provide the ECN when filing their taxes next year. She is sending them away with the application and they are calling us for assistance. I have not heard this but have not participated in many calls or webinars lately. Is the ECN going to be a requirement?


    Answer:  Use of an ECN – or Exemption Certification Number – is not and is not going to be a requirement when filing federal income taxes and claiming an exemption from the penalty for not having health insurance coverage.  In fact, the federal government has proposed the elimination of the application process whereby individuals secure an ECN.

    When filing your tax forms for 2015, it is permitted but not a requirement to have or use an ECN.  For subsequent year, filers can continue to use an ECN if they have one, but the federal government will not be issuing ECNs to additional individuals.  Individuals will claim the exemption by simply checking the appropriate boxes on the tax form.

  • Question 15

    I am Tlingit and so is my son. My husband is not American Indian / Alaska Native. Can he be exempted from having insurance since we are married?


    Your husband would not be eligible for an exemption from having insurance as a result of being your husband, at least not under American Indian / Alaska Native exemption.

    Here is a web link to the list of other types of exemption categories. It is possible your husband might be eligible for one of these other exemption categories.  https://www.healthcare.gov/health-coverage-exemptions/