Premium Tax Credit

Issuing agencies

Abstract

This document contains proposed regulations that would amend regulations regarding an individual taxpayer's eligibility for a premium tax credit (PTC), the computation of a PTC, and an individual's tax liability due to excess advance payments of the PTC. The proposed regulations would affect taxpayers who enroll themselves or a family member in individual health insurance coverage through a Health Insurance Exchange and may be allowed a PTC for this coverage. This document also provides a notice of a public hearing on these proposed regulations.

Full Text

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<title>Federal Register, Volume 91 Issue 198 (Thursday, October 15, 2026)</title>
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[Federal Register Volume 91, Number 198 (Thursday, October 15, 2026)]
[Proposed Rules]
[Pages 65494-65510]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-21056]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-101576-26]
RIN 1545-BS15


Premium Tax Credit

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations that would amend 
regulations regarding an individual taxpayer's eligibility for a 
premium tax credit (PTC), the computation of a PTC, and an individual's 
tax liability due to excess advance payments of the PTC. The proposed 
regulations would affect taxpayers who enroll themselves or a family 
member in individual health insurance coverage through a Health 
Insurance Exchange and may be allowed a PTC for this coverage. This 
document also provides a notice of a public hearing on these proposed 
regulations.

DATES: Electronic or written comments must be received by November 30, 
2026. A telephonic public hearing on this proposed regulation has been 
scheduled for December 8, 2026, at 10 a.m. ET. Requests to speak and 
outlines of topics to be discussed at the public hearing must be 
received by November 30, 2026. If no outlines are received by November 
30, 2026, the public hearing will be cancelled. Requests to attend the 
public hearing must be received by 5 p.m. ET on December 4, 2026.

ADDRESSES: Commenters are strongly encouraged to submit public comments 
electronically. Submit electronic submissions via the Federal 
eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a> (indicate IRS and 
REG-101576-26) by following the online instructions for submitting 
comments. Requests for the public hearing must be submitted as 
prescribed in the ``Comments and Public Hearing'' section. Once 
submitted to the Federal eRulemaking Portal, comments cannot be edited 
or withdrawn. The Department of the Treasury (Treasury Department) and 
the IRS will publish for public availability any comments submitted to 
the IRS's public docket. Send paper submissions to: CC:PA:01:PR (REG-
101576-26), Room 5503, Internal Revenue Service, P.O. Box 7604, Ben 
Franklin Station, Washington, DC 20044. We encourage commenters to 
include supporting facts, research, and evidence in their

[[Page 65495]]

comments. When doing so, commenters are encouraged to provide citations 
to the published materials referenced, including active hyperlinks. 
Likewise, commenters who reference materials which have not been 
published are encouraged to upload relevant data collection 
instruments, data sets, and detailed findings as a part of their 
comment. Providing such citations and documentation will assist us in 
analyzing the comments.
    Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a 
summary of not more than 100 words in length of this proposed rule, in 
plain language, may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Mia Romano at (202) 317-4718; concerning submissions of comments or the 
public hearing, please contact Publications and Regulations Section at 
(202) 317-6901 (not toll-free numbers) or by email at 
<a href="/cdn-cgi/l/email-protection#49393c2b25202a212c283b20272e3a09203b3a672e263f"><span class="__cf_email__" data-cfemail="b6c6c3d4dadfd5ded3d7c4dfd8d1c5f6dfc4c598d1d9c0">[email&#160;protected]</span></a> (preferred).

SUPPLEMENTARY INFORMATION:

Authority

    This notice of proposed rulemaking contains proposed amendments 
that would amend the Income Tax Regulations (26 CFR part 1) under 
section 36B of the Internal Revenue Code (Code), as amended by sections 
71119 and 71301 through 71305 of Public Law 119-21, 139 Stat. 72, 306-
315, 321-325, (July 4, 2025), commonly known as the One, Big, Beautiful 
Bill Act (OBBBA). Section 36B(h) provides an express delegation of 
authority for the Secretary of the Treasury or the Secretary's delegate 
(Secretary) to prescribe such regulations as may be necessary to carry 
out section 36B, including regulations that provide for the 
coordination of the Premium Tax Credit (PTC) allowed under section 36B 
with the program for advance payment of the Premium Tax Credit (APTC) 
under section 1412 of the Affordable Care Act (ACA).\1\ The proposed 
regulations are also issued under the authority of section 7805(a) of 
the Code, which authorizes the Secretary to prescribe all needful rules 
and regulations for the enforcement of the Code including all rules and 
regulations as may be necessary by reason of any alteration of law in 
relation to internal revenue.
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    \1\ The Affordable Care Act refers to the Patient Protection and 
Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010), as 
amended by the Health Care and Education Reconciliation Act of 2010 
(Pub. L. 111-152, enacted on March 30, 2010).
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Background

I. Definition of ``Qualified Health Plan''

    Section 36B provides a PTC to applicable taxpayers who meet certain 
eligibility requirements, and who enroll, or enroll another member of 
the applicable taxpayer's family, as defined in Sec.  1.36B-1(d)(1), in 
a qualified health plan (QHP) through a Health Insurance Exchange 
(Exchange). Under section 36B(c)(3)(A) and Sec.  1.36B-1(c), the term 
``qualified health plan'' has the same meaning as in section 1301(a) of 
the Affordable Care Act (42 U.S.C. 18021(a)) but does not include a 
catastrophic plan described in section 1302(e) of the Affordable Care 
Act (42 U.S.C. 18022(e)). Individuals must, in general, enroll in a QHP 
during the open enrollment period for the coverage year, but Exchanges 
provide special enrollment periods (SEP) for enrollments during a 
coverage year if certain conditions are met.
    Section 71303(b) of the OBBBA amends section 36B(c)(3)(A) to 
provide that, for taxable years beginning after December 31, 2027, the 
term ``qualified health plan'' does not include any plan enrolled in 
through an Exchange that fails to provide a pre-enrollment verification 
process described in section 36B(c)(3)(A)(ii). Section 71304(a) of the 
OBBBA further amends section 36B(c)(3)(A) to provide that, for plan 
years beginning after December 31, 2025, the term ``qualified health 
plan'' does not include any plan enrolled in during a SEP described in 
section 36B(c)(3)(A)(iii) (relating to a SEP based on a change in an 
individual's expected household income).

II. Disallowing PTC During Periods of Medicaid Ineligibility Due to 
Alien Status

    Under section 36B(c)(1)(A) and Sec.  1.36B-2(b)(1), a taxpayer is, 
in general, not an applicable taxpayer eligible for a PTC unless the 
taxpayer's household income, as defined in section 36B(d)(2) and Sec.  
1.36B-1(e), for the taxable year, is at least 100 percent but not more 
than 400 percent of the Federal Poverty Level (FPL), as defined in 
Sec.  1.36B-1(h), for the taxpayer's family size. Prior to the OBBBA 
amendments, section 36B(c)(1)(B) treated a taxpayer with household 
income below 100 percent of the FPL for the taxpayer's family size as 
an applicable taxpayer if the taxpayer or a member of the taxpayer's 
family was an alien lawfully present in the U.S. and not eligible for 
the Medicaid program due to immigration status, and the taxpayer met 
the other applicable taxpayer requirements. Section 71302(a) of the 
OBBBA removed section 36B(c)(1)(B) effective for taxable years 
beginning after December 31, 2025. Thus, for taxable years after 
December 31, 2025, a taxpayer who is a lawfully present alien with 
household income below 100% of the FPL for the taxpayer's family size 
and who is ineligible for Medicaid due to his or her alien status is 
not eligible for the PTC.

III. Failure To Demonstrate Community Engagement

    Under section 36B, a PTC is allowed only for months that are 
``coverage months'' for a taxpayer or a member of the taxpayer's 
family. Section 1.36B-3(c)(1)(iii) provides that a month is not a 
coverage month for an individual if the individual is eligible for the 
full calendar month for minimum essential coverage (within the meaning 
of Sec.  1.36B-2(c)) other than coverage described in section 
5000A(f)(1)(C) of the Code (relating to coverage in the individual 
market). Under section 5000A(f)(1)(A) and Sec.  1.5000A-2, the term 
``minimum essential coverage'' includes coverage under Government-
sponsored programs such as Medicaid.
    Section 1.36B-2(c)(2)(i) provides that, for purposes of determining 
whether a month is a coverage month for an individual, an individual 
generally is considered eligible for Government-sponsored minimum 
essential coverage if the individual meets the criteria for coverage 
under a Government-sponsored program described in section 
5000A(f)(1)(A) as of the first day of the first full month the 
individual may receive benefits under the program. Government-sponsored 
programs typically require individuals who meet the criteria for 
eligibility under the program to complete certain requirements to 
receive benefits under the program. Under Sec.  1.36B-2(c)(2)(ii), an 
individual who fails, by the last day of the third full calendar month 
following the event that establishes eligibility for the Government-
sponsored minimum essential coverage, to complete the requirements to 
obtain that coverage is generally treated as eligible for the coverage 
as of the first day of the fourth calendar month following the event 
that establishes eligibility.
    Notwithstanding these provisions relating to eligibility for 
Government-sponsored minimum essential coverage, including Medicaid, 
Sec.  1.36B-2(c)(2)(v) provides that, in general, an individual is 
treated as not eligible for Medicaid for a period of coverage under a 
QHP if, when the individual enrolls in the QHP,

[[Page 65496]]

an Exchange conducts an eligibility determination or assessment (within 
the meaning of 45 CFR 155.302(b)) and determines or assesses the 
individual to be not eligible for Medicaid. However, Sec.  1.36B-
2(c)(2)(v) also provides that this rule does not apply for an 
individual who, with intentional or reckless disregard for the facts, 
provides incorrect information to an Exchange for the year of coverage.
    Under the section 36B regulations, a reckless disregard of the 
facts occurs if the taxpayer makes little or no effort to determine 
whether the information provided to the Exchange is accurate under 
circumstances that demonstrate a substantial deviation from the 
standard of conduct a reasonable person would observe. Likewise, a 
disregard of the facts is intentional if the taxpayer knows that 
information provided to the Exchange is inaccurate. See, e.g., Sec.  
1.36B-2(c)(2)(v).
    Section 71119(a) of the OBBBA added subsection (xx) to section 1902 
of the Social Security Act (42 U.S.C. 1396a) relating to an 
individual's eligibility for medical assistance under a State plan (or 
waiver of such plan) under title XIX of the Social Security Act 
(commonly referred to as the Medicaid statute). In general, section 
1902(xx) of the Social Security Act provides that States must require, 
as a condition of Medicaid eligibility, that ``applicable individuals'' 
(generally, individuals eligible for Medicaid's ``adult group'' or 
certain individuals eligible for medical assistance under demonstration 
programs authorized under section 1115 of the Social Security Act (42 
U.S.C. 1315)) demonstrate ``community engagement'' for at least one 
month (and up to three consecutive months, as specified by a State) 
immediately preceding the month during which the applicable individual 
applies for Medicaid. ``Community engagement'' is generally defined in 
section 1902(xx)(2) of the Social Security Act (42 U.S.C. 1396a(xx)(2)) 
as working not less than 80 hours in a month, completing not less than 
80 hours of community service in a month, participating in a work 
program for not less than 80 hours in a month, being enrolled in an 
educational program at least half-time, or a combination of these 
activities adding up to not less than 80 hours a month. Applicable 
individuals can also demonstrate community engagement by meeting 
certain income requirements. Once enrolled, applicable individuals are 
subject to ongoing community engagement requirements.
    Some individuals are either excepted or excluded from community 
engagement requirements under section 1902(xx) of the Social Security 
Act (42 U.S.C. 1396a(xx)). States must implement community engagement 
requirements no later than January 1, 2027, unless the Secretary of the 
Department of Health and Human Services grants the state a good faith 
effort exemption to delay implementation under section 1902(xx)(11)(A) 
of the Social Security Act (42 U.S.C. 1396a(xx)(11)(A)), not to extend 
beyond December 31, 2028.
    For purposes of the definition of coverage month under section 
36B(c)(2)(B), section 1902(xx)(7)(B) of the Social Security Act (42 
U.S.C. 1396a(xx)(7)(B)) provides that an individual is deemed to be 
eligible for minimum essential coverage under section 
5000A(f)(1)(A)(ii) (the Medicaid program under title XIX of the Social 
Security Act) for a month if the individual would have been eligible 
for Medicaid but for a failure to meet the requirement to demonstrate 
community engagement under 42 U.S.C. 1396a(xx)(1).

IV. Definition of Coverage Month

    Section 1.36B-3(c)(1) provides that a month is a coverage month for 
an individual if, (i) as of the first day of the month, the individual 
is enrolled in a QHP through an Exchange; (ii) the taxpayer pays the 
taxpayer's share of the enrollment premium by the unextended due date 
for the taxpayer's income tax return for the taxable year, the full 
premium for the month is paid by advance credit payments, or the amount 
of the premium paid (including by advance credit payments) for the 
month is sufficient to avoid termination of the individual's coverage 
for that month under one of the scenarios described in Sec.  1.36B-
3(c)(4); and (iii) the individual is not eligible for the full calendar 
month for minimum essential coverage (within the meaning of Sec.  
1.36B-2(c)) other than coverage described in section 5000A(f)(1)(C) of 
the Code (relating to coverage in the individual market).
    Section 71303(a) of the OBBBA adds sections 36B(c)(5) and 36B(c)(6) 
effective for taxable years beginning after December 31, 2027.
    Section 36B(c)(5)(A) generally provides that a month is not a 
coverage month for an individual unless the Exchange through which the 
individual enrolls in QHP coverage verifies for such month using 
applicable enrollment information provided or verified by the 
applicant, the individual's eligibility (i) to enroll in the plan 
through the Exchange, and (ii) for any APTC for the coverage. Section 
36B(c)(5)(B) specifies the applicable enrollment information that 
Exchanges must verify. This includes, to the extent relevant, household 
income and family size, whether the individual is an eligible alien, 
``any health coverage status or eligibility for coverage'', and place 
of residence, along with information not specifically identified in 
section 36B(c)(5) that the Secretary (in consultation with the 
Secretary of Health and Human Services) determines to be necessary to 
the verification prescribed in section 36B(c)(5)(A). Section 
36B(c)(5)(E) also allows the Secretary to provide verification waivers 
for individuals who enroll in a QHP during a SEP based on a change in 
family size.
    Section 36B(c)(6) provides that the term ``coverage month'' does 
not include, with respect to any individual covered by a QHP, any month 
for which the Exchange through which the individual enrolled does not 
meet the requirements of 45 CFR 155.305(f)(4)(iii), as published in the 
Federal Register on June 25, 2025 (90 FR 27074). These Exchange 
requirements relate to individuals who fail to reconcile their APTC 
with the PTC that they are allowed on the tax return for a prior 
enrollment year and, consequently, are determined ineligible for APTC. 
The prior enrollment year is the year of QHP coverage for which the 
Exchange would use tax data to verify household income and family size.
    Section 1312 of the Affordable Care Act (42 U.S.C. 18032) provides 
that an individual is not eligible to enroll in a QHP unless the 
individual resides in the State that established the Exchange through 
which the individual is seeking to enroll. In addition, an individual 
is not eligible to enroll in a QHP if the individual is not, or is not 
reasonably expected to be for the entire period for which enrollment is 
sought, a citizen or national of the U.S., or an alien lawfully present 
in the U.S. These enrollment eligibility requirements are described in 
greater detail under 45 CFR 155.305(a).
    Sections 1411 and 1412 of the Affordable Care Act (42 U.S.C. 18081 
and 18082) in relevant part, require the establishment of a program for 
determining eligibility for enrolling in a QHP and for APTC.

V. Computation of PTC for Families With Individuals Not Lawfully 
Present and Individuals Lawfully Present But Not Eligible Aliens

    Section 1.36B-3(a) provides that the premium assistance credit 
amount is the sum of the premium assistance amounts determined under 
Sec.  1.36B-3(d) for all coverage months for individuals in the 
taxpayer's family. Under Sec.  1.36B-3(d)(1), the premium assistance 
amount

[[Page 65497]]

for a coverage month is the lesser of (i) the enrollment premiums, 
which are the premiums for the month reduced by any amounts that were 
refunded or unpaid as of the unextended due date for filing the 
taxpayer's income tax return for the taxable year, for one or more QHPs 
in which a taxpayer or a member of the taxpayer's family enrolls; or 
(ii) the excess of the adjusted monthly premium for the applicable 
benchmark plan over \1/12\ of the product of a taxpayer's household 
income and the applicable percentage for the taxable year. The adjusted 
monthly premium for the applicable benchmark plan is defined in Sec.  
1.36B-3(e) and the applicable percentage is defined in Sec.  1.36B-
3(g).
    For taxable years beginning before January 1, 2027, section 
36B(e)(1)(A) provides that if one or more individuals in a taxpayer's 
family (including the taxpayer) are aliens not lawfully present (within 
the meaning of section 36B(e)(2)), the enrollment premiums and adjusted 
monthly premiums for the applicable benchmark plan otherwise taken into 
account in determining the taxpayer's PTC must be reduced by the 
portion of such premiums attributable to the individuals who are aliens 
not lawfully present. In addition, section 36B(e)(1)(B) and Sec.  
1.36B-3(l) provide that in determining the taxpayer's applicable 
percentage, (i) the percentage the taxpayer's household income bears to 
the FPL for the taxpayer's family size is determined by excluding 
aliens who are not lawfully present from family size and (ii) by 
treating household income as equal to the product of the taxpayer's 
household income and a fraction, the numerator of which is the FPL for 
the taxpayer's family size determined by excluding aliens who are not 
lawfully present, and the denominator of which is the FPL for the 
taxpayer's family size determined by including aliens who are not 
lawfully present.
    Section 71301(a) of the OBBBA amended section 36B(e)(1) to expand 
the applicability of section 36B(e)(1) to the QHP coverage of 
individuals in a taxpayer's family (including the taxpayer) who are 
aliens lawfully present in the U.S. but are not eligible aliens. 
Section 71301(a) of the OBBBA also adds a definition of the term 
``eligible alien'' to section 36B(e)(2). The OBBBA section 71301 
amendments to section 36B are effective for taxable years beginning 
after December 31, 2026.

VI. Multiple Families Enrolled in One Policy

    Section 1.36B-3(h) provides that if a QHP covers more than one 
family under a single policy, each applicable taxpayer covered by the 
plan may claim a PTC, if otherwise allowable. In addition, in 
determining for a month the lesser of the enrollment premiums or the 
excess of the benchmark plan premium over \1/12\ of the product of 
household income and the applicable percentage, the enrollment premiums 
for the month are allocated to each taxpayer in proportion to the 
premiums for each taxpayer's applicable benchmark plan.

VII. Excess APTC Repayment Limitation

    Section 36B(f)(1) provides that, if APTC is paid for the QHP 
coverage of a taxpayer or another member of the taxpayer's family, the 
taxpayer's PTC allowed under section 36B is reduced by the amount of 
the APTC. Under section 36B(f)(2), if the taxpayer's APTC exceeds the 
PTC that would have been allowed had no APTC been paid, the taxpayer 
must increase tax liability for the taxable year of the coverage. For 
taxable years beginning before January 1, 2026, the tax liability 
increase was equal to the excess of the APTC over the PTC (excess 
APTC), unless a repayment limitation in section 36B(f)(2)(B) applied to 
the taxpayer and the amount of the repayment limitation was less than 
the excess APTC. This excess APTC repayment limitation is reflected in 
Sec.  1.36B-4(a)(3)(ii). In addition, Sec.  1.36B-4(a)(3)(iii) provides 
the excess APTC limitation that must be used by taxpayers who claim a 
section 162(l) deduction for their QHP premiums. Section 71305 of the 
OBBBA removed the section 36B(f)(2)(B) repayment limitation for taxable 
years beginning after December 31, 2025. Thus, for taxable years 
beginning after December 31, 2025, a taxpayer's tax liability for the 
taxable year of the coverage is increased by the full amount of the 
excess APTC.

VIII. Reporting of QHP Information by Exchanges

    Section 36B(f)(3) and Sec.  1.36B-5 require Exchanges to report to 
taxpayers and the IRS certain information relating to QHP enrollment. 
This information is reported to taxpayers on IRS Form 1095-A, Health 
Insurance Marketplace Statement. The Centers for Medicare & Medicaid 
Services (CMS), part of the Department of Health and Human Services 
(HHS), is responsible for the Form 1095-A reporting for Exchanges that 
use the Federal eligibility and enrollment platform (Federally-
facilitated Exchanges, or FFEs, and State-based Exchanges on the 
Federal platform, or SBE-FPs). States with their own platforms (State-
based Exchanges or SBEs) are responsible for the Form 1095-A reporting 
for individuals who enroll in their State-based Exchange. Among the 
items Exchanges must report are (i) enrollment premiums for the plan or 
plans enrolled in (excluding the portion of the premiums allocable to 
benefits in excess of essential health benefits), and (ii) for plans 
for which APTC is paid, the premium for the applicable benchmark plan 
for purposes of computing advance credit payments and the amount of the 
advance credit payments.

Explanation of Provisions

    The proposed regulations would amend the regulations under section 
36B to reflect the amendments to section 36B made by sections 71301 
through 71305 of the OBBBA. The proposed regulations would also amend 
the regulations under section 36B to reflect section 71119(a) of the 
OBBBA's addition of subsection (xx)(7)(B) to section 1902 of the Social 
Security Act (42 U.S.C. 1396a) regarding an individual's eligibility 
for Medicaid for purposes of determining whether a month is a coverage 
month under section 36B(c)(2)(B).

I. Change to the Definition of ``Qualified Health Plan''

    To reflect the amended definition of the term ``qualified health 
plan'' in section 36B(c)(3)(A) provided by sections 71303(b) and 
71304(a) of the OBBBA, the proposed regulations would amend the 
definition of ``qualified health plan'' in Sec.  1.36B-1(c). The 
proposed regulations would provide that the term ``qualified health 
plan'' does not include any plan enrolled in through an Exchange if the 
Exchange fails to provide a pre-enrollment verification process through 
which an applicant may, beginning not later than August 1 of the year 
prior to the enrollment year, verify with the Exchange the applicant's 
household income and eligibility for enrollment in a plan for the plan 
year beginning in the subsequent year. For the pre-enrollment 
verification process that Exchanges must provide, see 45 CFR part 155 
and any successor or other applicable regulations as may be 
promulgated.
    In addition, the proposed regulations would amend the definition of 
``qualified health plan'' in Sec.  1.36B-1(c) to provide that, for the 
purposes of section 36B, the term ``qualified health plan'' does not 
include any plan enrolled in during a SEP provided by an Exchange on 
the basis of the percentage that the individual's expected household 
income bears to the FPL for the individual's family size (income-based 
SEP), and not in connection with the occurrence of an event or change 
in

[[Page 65498]]

circumstances specified by the Secretary of Health and Human Services 
for such purposes.

II. Determination of ``Applicable Taxpayer''

    To reflect the OBBBA's removal of section 36B(c)(1)(B), which 
allowed a taxpayer with household income less than 100 percent of the 
FPL for the taxpayer's family size to be treated as an applicable 
taxpayer if the taxpayer is a lawfully present alien not eligible for 
the Medicaid program due to immigration status, the proposed 
regulations would remove the reiteration of that rule in Sec.  1.36B-
2(b)(5).

III. Deemed Eligibility for Minimum Essential Coverage When Ineligible 
for Medicaid Solely Because of Failure To Demonstrate Community 
Engagement

    To reflect section 1902(xx)(7)(B) of the Social Security Act (42 
U.S.C. 1396a(xx)(7)(B)), as added by section 71119(a) of the OBBBA, the 
proposed regulations would amend Sec.  1.36B-2(c)(2)(ii) to provide 
that an individual who is determined or assessed (within the meaning of 
45 CFR 155.302(a) and (b)) by an Exchange to be not eligible for 
Medicaid solely because the individual failed to meet the requirement 
to demonstrate community engagement under 42 U.S.C. 1396a(xx)(1) is 
treated as being eligible for minimum essential coverage under section 
5000A(f)(1)(A)(ii) as of the first month the individual would have been 
enrolled in Medicaid but for the failure to meet the requirement to 
demonstrate community engagement under 42 U.S.C. 1396a(xx)(1). See 
proposed Sec.  1.36B-2(c)(2)(ii)(B). The months the individual was 
ineligible for Medicaid solely for failing to meet the requirement to 
demonstrate community engagement would not be coverage months for the 
individual.
    The proposed regulations would also provide that the proposed rule 
in Sec.  1.36B-2(c)(2)(ii)(B) ceases to apply once the individual is 
determined or assessed by an Exchange to be, or becomes, no longer 
ineligible for Medicaid solely for failing to demonstrate community 
engagement. See proposed Sec.  1.36B-2(c)(2)(ii)(C). For example, 
assume a taxpayer in January is determined ineligible for Medicaid 
solely for failing to meet the requirement to demonstrate community 
engagement. The taxpayer enrolls in a QHP without APTC and pays all of 
the premiums for the coverage. In March, the taxpayer's income 
increases to above the taxpayer's state's Medicaid eligibility income 
threshold. The taxpayer may be eligible for a PTC beginning in March 
when the taxpayer's income increases above the taxpayer's state's 
Medicaid income threshold because the taxpayer has become ineligible 
for Medicaid for a reason other than failing to meet the requirement to 
demonstrate community engagement.
    For purposes of determining eligibility for a PTC, the proposed 
regulations would disregard an Exchange's determination or assessment 
that an individual is no longer ineligible for Medicaid for failing to 
meet the requirement to demonstrate community engagement if the 
Exchange's determination or assessment is based on incorrect 
information provided by the individual with intentional or reckless 
disregard for the facts. See proposed Sec.  1.36B-2(c)(2)(vi). The 
proposed regulations would use the same standard for intentional or 
reckless disregard of the facts as used in the existing regulations.
    To reflect section 1902(xx) of the Social Security Act, the 
proposed regulations would provide that the rule in Sec.  1.36B-
2(c)(2)(v)(A), which treats an individual as not eligible for Medicaid 
for a period of coverage under a QHP if an Exchange determines or 
assesses the individual to be not eligible for Medicaid, does not apply 
for individuals determined or assessed by an Exchange to be ineligible 
for Medicaid, solely for failing to meet the requirement to demonstrate 
community engagement. See proposed Sec.  1.36B-2(c)(2)(v)(B).
    Proposed regulation Sec.  1.36B-2(c)(2)(v)(C) would also provide 
that, once an Exchange determines or assesses an individual to be 
ineligible for Medicaid for a reason other than failing to meet the 
requirement to demonstrate community engagement, the individual is 
treated as not eligible for Medicaid for the individual's period of 
coverage under a QHP and, therefore, those months may be coverage 
months for the individual. However, proposed regulation Sec.  1.36B-
2(c)(2)(vi) would disregard an Exchange's determination or assessment 
that an individual is ineligible for Medicaid for a reason other than 
failing to meet the requirement to demonstrate community engagement if 
the Exchange's determination or assessment is based on incorrect facts 
provided by the individual with intentional or reckless disregard for 
the facts.

IV. Changes to the Definition of ``Coverage Month''

a. General Verification Rule
    As noted previously, section 71303(a) of the OBBBA, effective for 
taxable years beginning after December 31, 2027, adds section 36B(c)(5) 
to provide that a month is not a coverage month for a taxpayer unless 
the Exchange through which the taxpayer or another member of the 
taxpayer's family enrolls in QHP coverage, using applicable enrollment 
information, verifies the individual's eligibility (i) to enroll in the 
plan through the Exchange, and (ii) for any APTC for the coverage. 
Because section 36B(c)(5)(A) requires, for coverage month purposes, 
verification of an individual's eligibility to enroll in a QHP and for 
any APTC, if relevant, verification is required for any individual for 
whom a month is to be treated as a coverage month. Therefore, this 
requirement applies regardless of whether the enrollee requests APTC 
for their coverage. Exceptions associated with changes in family size 
are further explained below in section IV.b of this proposed rule.
    Section 36B(c)(5)(B)(ii) specifies that applicable enrollment 
information includes whether an individual is an eligible alien, but 
section 36B(c)(5)(B) does not expressly identify citizenship, status as 
a national of the U.S., or lawful presence as applicable enrollment 
information. In addition to eligible aliens, U.S. citizens, nationals 
of the U.S., and other aliens who are lawfully present are also 
eligible to enroll in a QHP and an Exchange also verifies these 
statuses for enrollment eligibility. See 42 U.S.C. 18032 and 18081. 
Accordingly, pursuant to the authority of the Secretary under section 
36B(c)(5)(B)(v), in consultation with the HHS Secretary, to require 
verification of other items deemed necessary, these proposed 
regulations would provide that information regarding whether an 
individual is a U.S. citizen, a national of the U.S., or an alien 
lawfully present in the U.S., is applicable enrollment information 
necessary to verify eligibility to enroll in a QHP through an Exchange 
and, if applicable, eligibility for APTC. Consistent with this proposed 
rule, a month would not be a coverage month for an individual if the 
Exchange through which the individual enrolled fails to verify the 
individual's place of residence and that the individual is a U.S. 
citizen, a national of the U.S., or an alien lawfully present in the 
U.S.
    The proposed regulations would provide that a month may be a 
coverage month for an individual who does not request APTC if the 
Exchange verifies

[[Page 65499]]

only the QHP enrollment eligibility information discussed in the 
previous paragraph (the individual's place of residence and that the 
individual is a U.S. citizen, a national of the U.S., or an alien 
lawfully present in the U.S.). Similarly, a month of enrollment may be 
a coverage month for an individual who does request APTC but for whom 
no APTC is paid, provided the Exchange verifies enrollment eligibility 
information. However, months of enrollment would not be coverage months 
for an individual if the Exchange is unable to verify an individual's 
eligibility to enroll in the QHP. For example, if the Exchange enrolls 
an individual in coverage while verification is pending, but the 
Exchange is subsequently unable to verify the individual's eligibility 
to enroll in the QHP, then the months of enrollment before the 
individual was removed from the coverage would not be coverage months 
for that individual.
    In addition, the proposed regulations would provide that a month 
for which APTC is paid for an individual is not a coverage month for 
the individual if the Exchange through which the individual enrolled 
fails to verify relevant applicable enrollment information. The 
Treasury Department and the IRS believe the language in section 
36B(c)(5)(B) ``any health coverage status or eligibility for coverage'' 
is referring to eligibility for minimum essential coverage, other than 
individual market coverage. This is consistent with the function of 
section 36B(c)(5)(A), which provides rules regarding when a month is 
not a coverage month for an individual, and with section 36B(c)(2)(B), 
under which a month is not a coverage month for an individual if the 
individual is eligible for minimum essential coverage other than 
individual market coverage.
    Therefore, the proposed regulations would provide that a month for 
which APTC is paid for an individual is not a coverage month for the 
individual unless the Exchange through which the individual enrolled 
verifies all of the following items: the prescribed verification items 
related to enrollment such as residency, and whether the individual is 
a U.S. citizen, national of the U.S., or an alien lawfully present in 
the U.S.; the household income and family size of the taxpayer who is 
expected to file an income tax return for the year of coverage 
reconciling the APTC for the individual's coverage with the PTC allowed 
for the coverage; whether the individual is eligible for minimum 
essential coverage, other than individual market coverage; and, if the 
individual is a lawfully present alien, whether the individual is an 
eligible alien as defined in section 36B(e)(2)(B). In sum, for a month 
for which APTC is paid to be a coverage month, the Exchange must verify 
the applicable enrollment information for both eligibility to enroll in 
a QHP and eligibility for APTC.
    Regarding the verification requirements for Exchanges in section 
36B(c)(5), the process Exchanges must follow to verify that an 
individual is eligible to enroll in a QHP and, if applicable, eligible 
for APTC for the coverage is provided in section 1411 and 1412 of the 
Affordable Care Act (42 U.S.C. 18081 and 18082) and the regulations in 
45 CFR part 155 subpart D and any successor or other applicable 
regulations as may be promulgated (collectively, the CMS regulations). 
The CMS regulations address the process for all individuals, including 
current enrollees seeking to re-enroll in a QHP and enrollees with a 
change in circumstances that affects applicable enrollment information 
during the plan year. If an Exchange follows the process described in 
the CMS regulations with respect to verifying that an individual is 
eligible to enroll in a QHP through the Exchange, including the process 
for an individual's re-enrollment, and verifies the information 
necessary to establish that the individual is eligible to enroll and, 
if applicable, eligible for APTC, under the CMS regulations, then 
section 36B(c)(5) will not cause a month to fail to be a coverage month 
for the individual.
b. Changes To Verified Information During a Plan Year
    The Treasury Department and the IRS anticipate that forthcoming CMS 
proposed regulations would provide that once an Exchange learns of a 
change in circumstances relating to a QHP enrollee, the Exchange will, 
in general, seek to verify that information before adjusting the 
enrollee's current enrollment, including the amount of APTC being paid 
for the coverage, when applicable. Once an Exchange has verified the 
relevant applicable enrollment information for an individual for a plan 
year, section 36B(c)(5) will not cause a month to fail to be a coverage 
month for the individual for the remainder of the plan year provided 
the Exchange follows the procedures in the CMS regulations for 
eligibility and verification relating to enrollee-reported changes in 
circumstances.
    For example, assume all items in section 36B(c)(5)(B) have been 
verified for an individual and the individual is enrolled in a QHP and 
is determined to be eligible for APTC in the amount of $250 per month 
beginning in January of a plan year. In June of the plan year, the 
individual informs the Exchange that the individual's projected 
household income will be less than previously projected and verified, 
which would make the individual eligible for more than $250 of APTC per 
month. If the Exchange maintains the current amount of $250 of APTC per 
month and increases APTC only after it verifies the new lower household 
income amount, the section 36B(c)(5) verification requirements will be 
met for this individual. However, if the enrollee informs the Exchange 
that the enrollee's projected household income will be more than 
previously projected and verified, which would make the enrollee 
eligible for less than $250 of APTC per month, section 36B(c)(5) does 
not prevent the Exchange from immediately implementing the lower APTC 
amount, prior to verification of the new information.
    It is further anticipated that forthcoming CMS proposed regulations 
would provide one exception to this general rule that is consistent 
with section 36B(c)(5)(E). This one exception would be for situations 
in which the Secretary provides a verification waiver under section 
36B(c)(5)(E). Under section 36B(c)(5)(E), the Secretary may waive the 
verification requirement in section 36B(c)(5)(A) in the case of an 
individual who is eligible to enroll in a QHP through an Exchange 
``during a SEP provided by the Exchange on the basis of a change in the 
family size of the individual.'' Primarily, a waiver in this context 
would permit the Exchange to pay APTC for the individual's QHP coverage 
before verification of the individual's eligibility for enrollment and 
APTC is completed.
    The rules under 45 CFR 155.420 for SEPs do not explicitly identify 
which SEPs are based on a change in family size. The proposed 
regulations would identify the SEPs triggered by the events described 
in 45 CFR 155.420(d)(2)(i) and (ii) as SEPs based on change in family 
size referred to in section 36B(c)(5)(E). Generally, these triggering 
events are (1) when a qualified individual gains a dependent, which for 
purposes of the SEP rules, means any individual who is or may become 
eligible for coverage under the terms of a QHP because of a 
relationship to an enrollee, including an enrollee's spouse (rather 
than being limited to a dependent as defined under section 152); (2) 
when an enrollee loses a dependent or dependent status through divorce; 
and (3) upon the death of an enrollee or a dependent of the enrollee. 
Thus, the proposed regulations

[[Page 65500]]

would provide that the Secretary's authority to waive verification 
under section 36B(c)(5)(E) applies with respect to all individuals 
eligible to enroll in a QHP, including current enrollees, during a SEP 
that is triggered by an event described in 45 CFR 155.420(d)(2)(i) or 
(ii) by waiving, for coverage month purposes, the requirement to verify 
applicable enrollment information provided to an Exchange during the 
SEP.
c. Reconciliation of APTC for an Individual's Prior Plan Years
    Section 36B(c)(6), as added by section 71303(a) of the OBBBA, 
provides that the term ``coverage month'' does not include, with 
respect to any individual covered by a QHP, any month for which the 
Exchange does not meet the requirements of 45 CFR 155.305(f)(4)(iii), 
as published in the Federal Register on June 25, 2025 (90 FR 27074), 
applied as though it applied to all plan years after 2025, with respect 
to the individual. Title 45 CFR 155.305(f)(4)(iii) relates to any 
individual determined to be ineligible for APTC for failing to 
reconcile APTC with the actual PTC allowed on the tax return for the 
year of coverage for the prior year of QHP coverage for which the 
Exchange would use tax data to verify household income and family size. 
The proposed regulations would provide that, for taxable years 
beginning after December 31, 2027, a month is not a coverage month for 
an individual for months APTC is paid if the Exchange through which the 
individual enrolled has failed to comply with section 36B(c)(6) for the 
month.

V. Eligible Alien Requirement and Conforming Amendments to PTC 
Computation

    The proposed regulations would amend Sec.  1.36B-3 to reflect the 
OBBBA's expansion of the limitation on aliens' eligibility for the PTC 
in section 36B(e)(1) to encompass individuals in a taxpayer's family 
who are aliens lawfully present in the U.S., but who are not eligible 
aliens, as defined in section 36B(e)(2)(B). The OBBBA section 71301 
amendments to section 36B are effective for taxable years beginning 
after December 31, 2026. Specifically, the proposed regulations would 
amend Sec.  1.36B-3 to provide that, in determining the premium 
assistance amount under Sec.  1.36B-3(d)(1), a taxpayer must reduce 
both the enrollment premiums under Sec.  1.36B-3(d)(1)(i) and the 
applicable benchmark plan premium under Sec.  1.36B-3(d)(1)(ii) by the 
portion of the premiums attributable to any individual in the 
taxpayer's family enrolled in a QHP who is an alien not lawfully 
present in the U.S. or, if a lawfully present alien, is not an eligible 
alien. In addition, the proposed regulations would expand Sec.  1.36B-
3(l), which now applies to taxpayers with a family member who is an 
alien not lawfully present in the U.S., to also apply to taxpayers with 
a family member who is a lawfully present alien, but not an eligible 
alien.
    The proposed regulations would also amend Sec.  1.36B-3(h) relating 
to the manner in which, in computing the PTC, the enrollment premiums 
for a QHP are allocated among multiple families enrolled in the QHP. 
The proposed regulations would provide that if (1) a QHP covers more 
than one family on a single policy and (2) one or more of the families 
have individuals enrolled in the QHP who are aliens not lawfully 
present or, in the case of aliens who are lawfully present, are not 
eligible aliens, then taxpayers must allocate enrollment premiums in 
accordance with Sec.  1.36B-3(h)(2). Because the actual enrollment 
premium is a single amount for the policy and is not family specific, 
an allocation is required to appropriately reflect the correct amount 
of enrollment premiums for each family when computing the PTC. 
Consequently, this allocation must exclude individuals enrolled in the 
QHP who are aliens not lawfully present or, in the case of aliens who 
are lawfully present, are not eligible aliens.
    The proposed rule would provide that a taxpayer's allocation of the 
monthly enrollment premium equals the total monthly enrollment premium 
for the policy (including the premium attributable to any individuals 
not lawfully present or if lawfully present, not eligible aliens), 
multiplied by the ratio of the monthly applicable benchmark plan 
premium for the taxpayer's family, which is determined by excluding any 
alien who is not lawfully present, or a lawfully present alien but not 
an eligible alien, to the monthly applicable benchmark plan premium for 
all families enrolled in the policy, which is determined by including 
any alien who is not lawfully present or, if an alien lawfully present, 
is not an eligible alien. Using the applicable benchmark plan premium 
for all families enrolled in the policy, including any individuals who 
are not lawfully present or, if lawfully present aliens, are not 
eligible aliens, as the denominator ensures that the full monthly 
enrollment premium is consistently allocated across all families who 
share the same policy.

VI. Elimination of Excess APTC Repayment Limitation

    The proposed regulations would revise Sec.  1.36B-4(a)(3) to 
reflect the OBBBA amendment to section 36B(f)(2)(B), which eliminates 
the limitation on the amount of excess APTC that a taxpayer is required 
to repay for taxable years beginning after December 31, 2025. 
Consequently, when reconciling APTC on a taxpayer's Federal income tax 
return for such taxable year, the full amount by which APTC exceeds PTC 
allowed under section 36B increases the taxpayer's tax liability for 
that taxable year.

VII. Information Reporting by Exchanges

    Section 1.36B-5 provides the QHP enrollment information that 
Exchanges must report to taxpayers, on Form 1095-A, Health Insurance 
Marketplace Statement, and to the IRS. Taxpayers use this information 
to compute their PTC and to reconcile the APTC paid for their coverage 
and the coverage of other family members with the PTC the taxpayer is 
allowed.
    To conform to the changes to section 36B(e) made by section 71301 
of the OBBBA relating to the computation of the PTC for the QHP 
coverage of individuals who are lawfully present aliens but not 
eligible aliens, the proposed regulations would amend Sec.  1.36B-5. 
Specifically, the proposed regulations would provide that in the case 
of taxpayers for whom APTC was paid, Exchanges must exclude from the 
amount of the reported enrollment premiums and the benchmark plan 
premiums reported on Form 1095-A and to the IRS, the portion of the 
premiums allocable to individuals in the tax filer's family who are 
aliens not lawfully present or who are lawfully present aliens but not 
eligible aliens.

Proposed Applicability Dates

    Proposed Sec. Sec.  1.36B-1(o) and 1.36B-3(n), would provide that 
proposed Sec. Sec.  1.36B-1(c)(2) and 1.36B-3(c)(6) and (7), 
respectively, apply to taxable years beginning after December 31, 2027. 
Proposed Sec.  1.36B-1(o) would provide that proposed Sec.  1.36B-
1(c)(3) applies to plan years beginning on or after October 15, 2026. 
Proposed Sec.  1.36B-2(e) would remove Sec.  1.36B-2(b)(5) for taxable 
years beginning on or after October 15, 2026. Proposed Sec.  1.36B-2(e) 
would provide that proposed Sec.  1.36B-2(b)(5)(i) and (b)(6) apply to 
taxable years beginning on or after October 15, 2026. See section 
7805(b)(1)(B). Proposed Sec.  1.36B-4(c)(3) would provide that Sec.  
1.36B-4(a)(3) will not apply to taxable years beginning on

[[Page 65501]]

or after October 15, 2026. Proposed Sec. Sec.  1.36B-2(e), 1.36B-3(n), 
and 1.36B-5(h) would provide that proposed Sec.  1.36B-2(c)(2)(ii), 
(v), (vi), and (c)(2)(vii)(G) through (I); proposed Sec.  1.36B-
3(d)(2), (h), (l)(1), and (l)(2)(i); and proposed Sec.  1.36B-
5(c)(1)(iv) and (viii), and (c)(3)(iii), respectively, apply to taxable 
years beginning after December 31, 2026. See section 7805(b)(1)(B). 
While certain sections of the proposed regulations apply to tax years 
and plan years beginning on or after October 15, 2026, the related 
statutory provisions are effective for tax years and plan years 
beginning on or after December 31, 2025, and supersede any conflicting 
provisions in the existing regulations as of that date.

Special Analyses

I. Regulatory Planning and Review--Economic Analysis

    Executive Orders 12866 and 13563 direct agencies to assess costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). Executive Order 13563 
emphasizes the importance of quantifying both costs and benefits, 
reducing costs, harmonizing rules, and promoting flexibility.
    The proposed regulations have been designated by the Office of 
Management and Budget's (OMB's) Office of Information and Regulatory 
Affairs (OIRA) as subject to review under Executive Order 12866 
pursuant to the Memorandum of Agreement (MOA, July 4, 2025) between the 
Treasury Department and the OMB regarding review of tax regulations. 
OIRA has determined that the proposed rulemaking is significant under 
section 3(f) of Executive Order 12866 and subject to review under 
Executive Order 12866 and section 1(b) of the MOA. Accordingly, the 
proposed regulations have been reviewed by OMB.
a. Need for Regulation
    The OBBBA revised the eligibility and computational rules for an 
individual taxpayer's PTC, and these proposed regulations are necessary 
to comply with the OBBBA amendments to section 36B.
b. The Statute and the Proposed Regulations
    The OBBBA amended section 36B of the Code. Additionally, the OBBBA 
amendment to section 1902 of the Social Security Act affects the 
section 36B ``coverage month'' determination.
    Section 71301(a) expands the existing section 36B(e)(1) rule that 
excludes family members who are not lawfully present from PTC 
computations. The amendment, effective for taxable years beginning 
after December 31, 2026, also excludes lawfully present alien family 
members who are not ``eligible aliens.'' The proposed regulations would 
require taxpayers to reduce the enrollment premiums and premiums for 
the applicable benchmark plan allocable to family members who are not 
lawfully present or who are aliens lawfully present but not eligible 
aliens, apply that reduction after any multiple family allocation of 
enrollment premiums, and exclude those individuals from certain 
household income calculations used for applicable percentage purposes.
    Section 71302(a) removes the rule in section 36B(c)(1)(B) that 
previously treated certain taxpayers with household income below 100 
percent of the applicable FPL as applicable taxpayers if they, or a 
family member, were lawfully present aliens not eligible for Medicaid 
because of immigration status, effective for taxable years beginning 
after December 31, 2025. The proposed regulations would remove the 
corresponding regulatory provision.
    Section 71119 added section 1902(xx)(7)(B) to the Social Security 
Act and provides, for section 36B coverage month purposes, that an 
individual is deemed eligible for Medicaid minimum essential coverage 
for a month if the individual would have been eligible for Medicaid but 
for a failure to meet a community engagement requirement under section 
1902(xx)(1). The proposed regulations would provide that this deemed 
Medicaid eligibility starts when Medicaid would otherwise have begun, 
blocks use of the Exchange Medicaid ineligibility safe harbor in these 
cases, ends once Medicaid ineligibility arises for another reason, and 
preserves an anti-abuse rule for intentional or reckless misstatements.
    Section 71303(a) adds section 36B(c)(5), effective for taxable 
years beginning after December 31, 2027. Section 36B(c)(5) makes 
Exchange verification a condition of having a coverage month and, under 
the related amendment to section 36B(c)(3)(A), of having a QHP for 
section 36B purposes. The proposed regulations would provide that a 
month is not a coverage month for an individual who enrolls in a QHP 
unless the Exchange verifies the individual's residence and 
citizenship, national status, or lawful presence for the month. For 
individuals for whom APTC is paid, the proposed regulations would also 
provide that a month is not a coverage month for an individual unless 
the Exchange verifies the individual's household income, family size, 
absence of other minimum essential coverage, and eligible alien status 
where relevant. The proposed regulations would further coordinate these 
tax rules with Exchange procedures for re-enrollment and changes in 
circumstances by tying tax consequences to whether Exchange 
verification requirements have been satisfied.
    Section 71303(a) also adds section 36B(c)(6), which provides that a 
month is not a coverage month for an individual covered by a QHP if the 
Exchange fails to satisfy the applicable prior reconciliation 
requirements with respect to that individual.\2\ That prior 
reconciliation requirement generally requires the Exchange to check 
whether advance credit payments were made for the tax filer, or the tax 
filer's spouse if the tax filer is married, and whether or not the tax 
filer or spouse failed to file the required Federal income tax return 
and reconcile those advance credit payments for the relevant prior year 
used in the Exchange's verification process. Thus, the proposed 
regulations would provide that, for individuals for whom advance credit 
payments are made, a month is not a coverage month when the Exchange 
fails to carry out the procedures needed to verify whether prior 
reconciliation requirements were satisfied.
---------------------------------------------------------------------------

    \2\ Section 36B(c)(6) cites to the reconciliation requirements 
of 45 CFR 155.305(f)(4)(iii), as published in the Federal Register 
on June 25, 2025.
---------------------------------------------------------------------------

    Section 71304(a) amends section 36B(c)(3)(A) to provide that, for 
plan years beginning after December 31, 2025, the term ``qualified 
health plan'' does not include certain plans enrolled in through 
income-based SEPs. The proposed regulations would clarify that this 
exclusion applies when no qualifying event or specified change in 
circumstances exists.
    Section 36B(c)(5)(E), added by section 71303(a), authorizes the 
Secretary to waive the section 36B(c)(5)(A) verification requirement 
for an individual who enrolls in a QHP through an Exchange during a SEP 
based on a change in family size. The proposed regulations would 
identify change in family size SEPs based on the events described in 45 
CFR 155.420(d)(2)(i) and (ii), which generally include gaining a 
dependent, losing a dependent or dependent status through divorce or 
legal separation, and the death of an enrollee or dependent. The 
proposed regulations would provide

[[Page 65502]]

that the waiver applies for all individuals eligible to enroll in a 
QHP, including current enrollees, during a SEP triggered by one of 
those events, by waiving, for coverage month purposes, the requirement 
to verify applicable enrollment information provided to an Exchange 
during the SEP.
    Section 71305 removes section 36B(f)(2)(B), effective for taxable 
years beginning after December 31, 2025. Section 36B(f)(2)(B) 
previously limited the amount by which taxpayers below 400 percent of 
the FPL had to increase tax liability when advance credit payments 
exceeded the PTC properly allowed. The proposed regulations would make 
conforming changes by amending Sec.  1.36B-4(a)(3)(i) to provide that 
the repayment limitation does not apply for taxable years beginning 
after December 31, 2025. The proposed regulations would make conforming 
changes by amending Sec.  1.36B-4(a)(3)(iii) to provide that the tax 
liability increase that must be used by taxpayers claiming a section 
162(l) deduction for their QHP premiums applies only for taxable years 
beginning before January 1, 2026.
    Section 36B(f)(3) and the existing regulations require Exchanges to 
report monthly enrollment premiums, applicable benchmark-plan premiums, 
and advance credit payments on Form 1095-A and to the IRS. The proposed 
regulations would amend Sec.  1.36B-5 to provide that, for taxpayers 
for whom advance credit payments were made, Exchanges must exclude from 
the enrollment premium and premium for the applicable benchmark plan 
amounts reported on Form 1095-A and to the IRS the portion allocable to 
family members who are not lawfully present or are aliens lawfully 
present but not eligible aliens. The proposed regulations would also 
conform the mid-month enrollment reporting rules to ensure that, when 
the revised reporting rule applies, amounts attributable to such 
individuals are excluded from the relevant enrollment premium and 
applicable benchmark plan premium reporting. These reporting changes 
apply for taxable years beginning after December 31, 2026.
c. Baseline
    The Treasury Department and the IRS have assessed the benefits and 
costs of the proposed regulations relative to a no-action baseline 
reflecting anticipated Federal income tax-related behavior in the 
absence of these proposed regulations.
d. Affected Entities and Taxpayers
    The proposed regulations are expected to affect about 15.6 million 
total individuals enrolled in Exchange coverage, including 13.5 million 
enrollees potentially eligible to claim PTC.
    The proposed regulations may also affect the 22 State-Based 
Exchanges that administer eligibility, verification, and reporting 
processes for those enrollees. The costs and benefits associated with 
Exchange administration of those processes are expected to be addressed 
in forthcoming regulations issued by the Department of Health and Human 
Services.
e. Economic Effects of the Proposed Regulations
    The proposed regulations would clarify the amended statute and the 
preexisting regulations by clarifying when Exchange enrollment produces 
section 36B consequences and how premium amounts must be computed and 
reported. The proposed regulations provide rules describing how 
eligibility, reporting, and coverage-month consequences would be 
operationalized. In the absence of regulatory clarification, similarly 
situated taxpayers could face inconsistent Exchange treatment, less 
reliable reporting information, and greater uncertainty regarding 
whether months of enrollment are coverage months and how the PTC must 
be computed when completing their Federal income tax returns. The 
proposed regulations provide clarity and should result in fewer amended 
tax returns. This should allow Exchanges and issuers to implement the 
amended statute with greater predictability and allow taxpayers to 
determine their correct Federal income tax liability with greater 
certainty.
i. Eligible-Alien Reporting Approach Reduces Reporting and 
Implementation Burdens
    The proposed regulations would also reduce reporting and 
implementation burdens in the eligible-alien context by selecting a 
narrower reporting approach for Form 1095-A. The proposed rule would 
require Exchanges, for taxpayers for whom APTC was paid, to exclude 
from reported enrollment premiums and premiums for the applicable 
benchmark plan the portions allocable to individuals who are lawfully 
present but not eligible aliens. An alternative to the proposed 
regulations would extend that reporting rule to unsubsidized enrollees. 
That alternative would require reporting adjustments for approximately 
2.1 million unsubsidized Exchange enrollees, representing 13 percent of 
total Exchange enrollees in 2028, even though Exchanges generally would 
not otherwise need to determine eligible-alien status for those 
enrollees for purposes of administering APTC. This alternative was not 
chosen because Treasury and the IRS expected that it would require 
Exchanges to incur significant administrative costs. The costs and 
benefits associated with Exchange administration of the eligibility, 
verification, and reporting processes are expected to be addressed in 
parallel regulations issued by the Department of Health and Human 
Services. See Patient Protection and Affordable Care Act, HHS Notice of 
Benefit and Payment Parameters for 2027; and Basic Health Program, 91 
FR 29526 (May 20, 2026) (addressing Exchange eligibility and 
verification requirements and administration of advance payments of the 
premium tax credit). Under current regulations, Exchanges do not verify 
eligible-alien status for non-financial-assistance applicants. Treasury 
and the IRS estimate that the proposed regulations, relative to the 
alternative, would reduce the cost and disruption of system changes, 
and avoid a broader redesign of Exchange reporting and related data 
submissions. For affected APTC households, the proposed narrower 
approach would also improve the alignment between Form 1095-A reporting 
and the amounts relevant to section 36B reconciliation, which should 
reduce misreporting on Form 8962, Premium Tax Credit (PTC). For 
example, assume a household consists of one U.S. citizen and one 
lawfully present individual who is not an eligible alien, and that each 
individual has a monthly premium of $500. Reporting the $1,000 premium 
on Form 1095-A would not reflect the premium amount that the household 
should use in computing their allowable PTC. Conversely, leaving the 
amount blank would require the taxpayer to manually determine the 
correct amount to use, potentially by contacting the issuer. The 
proposed regulations would instead require a premium of $500 to be 
reported on Form 1095-A, thus enabling the taxpayer to complete Form 
8962 using the amount reported on Form 1095-A. This should reduce 
taxpayer burden and the risk that taxpayers will miscalculate or 
misreport the premium amount they use to determine the PTC.
ii. Verification and Family-Size SEP Waiver
    The proposed regulations would also produce important economic 
effects through the verification provisions. The OBBBA gave the 
Secretary authority, in consultation with HHS, to specify additional 
criteria necessary for

[[Page 65503]]

verification. The proposed regulations would exercise that authority by 
requiring Exchanges to verify, for enrollment eligibility, an 
individual's place of residence and that the individual is a U.S. 
citizen, a national of the U.S., or an alien lawfully present in the 
United States. The proposed regulations would also clarify that, for 
months for which APTC is paid, Exchanges must verify both enrollment-
eligibility items and the items relevant to APTC eligibility. An 
alternative would have been to omit the additional criteria necessary 
for verification. Relative to the alternative, the proposed regulations 
would strengthen program integrity because they align coverage-month 
treatment with the prerequisites for Exchange enrollment and APTC. For 
example, assume two individuals enroll in full-price Exchange coverage 
without APTC. The Exchange verifies the first individual's eligibility 
to enroll, including residence and citizenship, national, or lawful-
presence status, but is unable to verify the second individual's 
eligibility to enroll and removes the second individual from coverage 
after the applicable verification process. The proposed regulations 
would clarify that section 36B(c)(5) does not prevent the first 
individual's months of enrollment from being coverage months solely 
because no APTC was paid, while the second individual's months of 
unverified enrollment would not be coverage months for purposes of the 
PTC. Relative to the alternative, the proposed regulations would also 
reduce the risk that credits are paid for months that should not be 
subsidized. As proposed, the regulations would also reduce burdens on 
States and Exchanges by giving them an administrable set of criteria to 
implement rather than leaving the consequences of section 36B(c)(5) to 
case-by-case interpretation. The administrative costs, operational 
effects, and benefits associated with Exchange eligibility, 
verification, and reporting procedures are expected to be evaluated in 
parallel regulations issued by the Department of Health and Human 
Services.
    The proposed regulations would also make a separate policy choice 
under section 36B(c)(5)(E) to apply the family-size SEP waiver broadly 
to any SEP triggered by a change in family size. As proposed, that 
waiver would extend to the SEP categories identified by cross-reference 
to the CMS rules, including newborn, adoption, or foster-care events, 
marriage, and loss of dependent through death, divorce, or legal 
separation. An alternative to the proposed broad waivers would be a 
partial waiver that did not include all the categories listed in the 
CMS rules. Such an alternative would be operationally complex and could 
create gaps or delays in access to subsidized coverage for vulnerable 
populations. HHS, in consultation with the Treasury Department, 
identified a risk that, while verification remained pending for an 
individual in the household, the SEP window could expire or that 
families could face full-price premiums while. Relative to the 
alternative, the broader waiver should reduce the risk of delayed or 
disrupted coverage in family-change situations and should reduce the 
out-of-pocket health care costs and administrative strain that would 
arise if affected households were required to complete full 
verification before any APTC could be applied. The Treasury Department 
and the IRS estimate that roughly 50,000 families with newborns will 
benefit.
    To assess the impact of the family-size SEP waiver, the Treasury 
Department and the IRS analyzed data on Exchange enrollment and APTC 
extracted from information returns, specifically Form 1095-A. Based on 
that analysis, approximately 0.3 percent of Exchange plans with APTC 
include a newborn during the plan year. The average monthly APTC 
associated with newborn coverage is estimated to be approximately $222. 
The estimated number of newborns in APTC households, 50,000 newborns, 
is then multiplied by the average monthly APTC attributable to newborn 
coverage and by the expected duration of verification-related delay 
absent the waiver, 2 months, resulting in approximately $22 million in 
APTC that could be delayed for affected households under an alternative 
rule that did not waive verification for newborn-related family-size 
SEPs.
iii. Medicaid Community Engagement
    The proposed regulations would also clarify how the new Medicaid 
community engagement requirement operates for section 36B purposes. In 
general, an individual who is eligible for or enrolled in Medicaid is 
treated as having minimum essential coverage and therefore is not 
eligible for the PTC for that month. As of February of 2026, CMS 
reported that approximately 68 million individuals were enrolled in 
Medicaid, making the interaction of PTC and Medicaid eligibility rules 
relevant to a substantial population. The statute deems an individual 
to be eligible for minimum essential coverage if the individual would 
have been eligible for Medicaid but for failure to meet community 
engagement requirements, but it did not fully specify how that deemed-
minimum essential coverage rule should operate when the individual 
later becomes ineligible for Medicaid for a different reason. The 
proposed regulations would resolve that question by providing that once 
an individual is no longer ineligible for Medicaid solely because of 
failure to meet the requirement to demonstrate community engagement, 
the deemed-minimum essential coverage treatment no longer applies. They 
would also provide that if, after enrollment in a QHP, the Exchange 
later determines or assesses the individual to be ineligible for 
Medicaid for a reason other than failure to meet the requirement to 
demonstrate community engagement, the ordinary rule treating the 
individual as not eligible for Medicaid can apply from that later 
month.
    This approach provides an administrable and well-targeted balance 
by tying the application of the community engagement requirement to the 
reason for Medicaid ineligibility in the relevant month. The proposed 
rule would preserve program integrity by preventing taxpayers who 
remain subject to the Medicaid community engagement requirement from 
avoiding that requirement through qualified health plan enrollment. At 
the same time, it would allow taxpayers whose circumstances change so 
that community engagement is no longer the sole reason for Medicaid 
ineligibility to be treated under the ordinary section 36B rules for 
later months. The result should be greater certainty at enrollment and 
tax filing and fewer disputes about whether an earlier Medicaid 
determination continues to control after a later change in 
circumstances.
iv. Elimination of Excess APTC Repayment Limitations
    The elimination of the excess APTC repayment limitation is expected 
to increase the amount of excess APTC that affected taxpayers must 
repay when filing their Federal income tax returns. The Treasury 
Department and the IRS estimate that, in 2028, approximately 3.7 
million returns will include a repayment of excess APTC.

II. Paperwork Reduction Act

    These proposed regulations do not impose any additional information 
collection requirements in the form of reporting, recordkeeping 
requirements, or third-party disclosure statements. Taxpayers who claim 
PTC on their income tax returns are required to file Form 8962. The 
proposed regulations, if finalized, would require the IRS to revise the 
instructions for Form 8962.

[[Page 65504]]

For purposes of the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(c)), the reporting burden associated with the collection of 
information for Form 8962 will be reflected in the PRA submission 
associated with income tax returns under the OMB control number 1545-
0074. To the extent there is a change in burden because of these 
proposed regulations, the change in burden will be reflected in the 
updated burden estimates for Form 8962. Nothing in these proposed 
regulations affects any information reporting requirements for 
employers, including the reporting required under sections 6055 and 
6056, which is done on Form 1095-B, Health Coverage, and Form 1095-C, 
Employer-Provided Health Insurance Offer and Coverage, respectively.
    In addition, these proposed regulations, if finalized, would amend 
Sec.  1.36B-5, which requires Exchanges to report information to the 
IRS and to taxpayers. This information enables taxpayers to claim a PTC 
on their tax return and to comply with the requirement in Sec.  1.36B-4 
to reconcile the APTC paid on their behalf with the PTC they may claim. 
Exchanges use Form 1095-A to report the information provided in Sec.  
1.36B-5 to taxpayers. The proposed regulations, if finalized, will 
require the IRS to revise the instructions for recipients of Form 1095-
A and the instructions for Exchanges completing Form 1095-A. For 
purposes of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(c)), 
the reporting burden associated with the collection of information for 
Form 1095-A will be reflected in the PRA submission associated with 
Form 1095-A under the OMB control number 1545-2232. To the extent there 
is a change in burden because of these final regulations, the change in 
burden will be reflected in the updated burden estimates for Form 1095-
A.

III. Regulatory Flexibility Act

    When an agency issues a proposed rulemaking, the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) (RFA) requires the agency to 
``prepare and make available for public comment an initial regulatory 
flexibility analysis'' that ``describe[s] the impact of the proposed 
rule on small entities.'' See 5 U.S.C. 603(a). The term ``small 
entities'' is defined in 5 U.S.C. 601 to mean ``small business,'' 
``small organization,'' and ``small governmental jurisdiction,'' which 
are also defined in 5 U.S.C. 601. Small business size standards define 
whether a business is ``small'' and have been established for types of 
economic activities, or industry, generally under the North American 
Industry Classification System (NAICS). See title 13, part 121 of the 
Code of Federal Regulations (Small Business Size Regulations). The size 
standards look at various factors, including annual receipts, number of 
employees, and amount of assets, to determine whether the business is 
small. See title 13, Sec.  121.201 of the Code of Federal Regulations 
for the Small Business Size Standards by NAICS Industry.
    Section 605 of the RFA provides an exception to the requirement to 
prepare an initial regulatory flexibility analysis if the agency 
certifies that the proposed rulemaking will not have a significant 
economic impact on a substantial number of small entities. The Treasury 
Department and the IRS hereby certify that these proposed regulations 
will not have a significant economic impact on a substantial number of 
small entities. This certification is based on the fact that the 
majority of the effect of the proposed regulations falls on individual 
taxpayers, and entities will experience only small changes.

IV. Section 7805(f)

    Pursuant to section 7805(f) of the Code, these proposed regulations 
have been submitted to the Chief Counsel for the Office of Advocacy of 
the Small Business Administration for comment on their impact on small 
business.

V. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits and take certain 
other actions before issuing a final rule that includes any Federal 
mandate that may result in expenditures in any one year by a State, 
local, or Tribal government, in the aggregate, or by the private 
sector, of $100 million (updated annually for inflation). This proposed 
regulation does not include any Federal mandate that may result in 
expenditures by State, local, or Tribal governments, or by the private 
sector in excess of that threshold.

VI. Executive Order 13132: Federalism

    E.O. 13132 (Federalism) prohibits an agency from publishing any 
rule that has federalism implications if the rule either imposes 
substantial, direct compliance costs on State and local governments, 
and is not required by statute, or preempts State law, unless the 
agency meets the consultation and funding requirements of section 6 of 
the Executive order. This proposed regulation does not have federalism 
implications and does not impose substantial direct compliance costs on 
State and local governments or preempt State law within the meaning of 
the Executive order.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to comments that are submitted timely to 
the IRS as prescribed in this preamble in the ADDRESSES section. The 
Treasury Department and the IRS request comments on all aspects of the 
proposed regulations, including the economic impact of the proposed 
regulations. Any comments submitted will be made available at 
<a href="http://www.regulations.gov">www.regulations.gov</a> or upon request. Once submitted to the Federal 
eRulemaking Portal, comments cannot be edited or withdrawn.
    A telephonic public hearing is being held on December 8, 2026, 
beginning at 10 a.m. ET. The rules of 26 CFR 601.601(a)(3) apply to the 
hearing. Persons who wish to present oral comments at the hearing must 
submit an outline of the topics to be discussed as well as the time to 
be devoted to each topic by November 30, 2026. A period of ten minutes 
will be allocated to each person for making comments. After the 
deadline for receiving outlines has passed, the IRS will prepare an 
agenda containing the schedule of speakers. Copies of the agenda will 
be made available free of charge. If no outlines of the topics to be 
discussed at the hearing are received by November 30, 2026, the public 
hearing will be cancelled. If the public hearing is cancelled, a notice 
of cancellation of the public hearing will be published in the Federal 
Register.
    Individuals who want to testify by telephone at the public hearing 
must send an email to <a href="/cdn-cgi/l/email-protection#25555047494c464d4044574c4b4256654c57560b424a53"><span class="__cf_email__" data-cfemail="6b1b1e09070208030e0a1902050c182b021918450c041d">[email&#160;protected]</span></a> to receive the telephone 
number and access code for the hearing. The subject line of the email 
must contain the regulation number REG-101576-26 and the language 
TESTIFY Telephonically. For example, the subject line may say: Request 
to TESTIFY Telephonically at Hearing for REG-101576-26.
    Individuals who want to attend the public hearing telephonically 
without testifying must also send an email to <a href="/cdn-cgi/l/email-protection#ff8f8a9d93969c979a9e8d9691988cbf968d8cd1989089"><span class="__cf_email__" data-cfemail="037376616f6a606b6662716a6d6470436a71702d646c75">[email&#160;protected]</span></a> to 
receive the telephone number and access code for the hearing. The 
subject line of the email must contain the regulation number REG-
101576-26 and the language ATTEND Hearing Telephonically. For example, 
the subject line may say: Request to ATTEND Hearing Telephonically for 
REG-101576-26. Requests to attend the public hearing must be received 
by 5:00 p.m. ET on December 4, 2026.

[[Page 65505]]

    Hearings will be made accessible to people with disabilities. To 
request special assistance during the hearing, contact the Publications 
and Regulations Section of the Office of Associate Chief Counsel 
(Procedure and Administration) by sending an email to 
<a href="/cdn-cgi/l/email-protection#f08085929c999398959182999e9783b0998283de979f86"><span class="__cf_email__" data-cfemail="bececbdcd2d7ddd6dbdfccd7d0d9cdfed7cccd90d9d1c8">[email&#160;protected]</span></a> (preferred) or by telephone at (202) 317-6901 
(not a toll-free number) by December 3, 2026.

Statement of Availability of IRS Documents

    Guidance cited in this preamble is published in the Internal 
Revenue Bulletin and is available from the Superintendent of Documents, 
U.S. Government Publishing Office, Washington, DC 20402, or by visiting 
the IRS website at <a href="https://www.irs.gov">https://www.irs.gov</a>.

Drafting Information

    The principal author of these proposed regulations is Mia C. Romano 
of the Office of Associate Chief Counsel (Income Tax and Accounting). 
However, other personnel from the Treasury Department and the IRS 
participated in the development of the regulations.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, the Treasury Department and the IRS propose to amend 
26 CFR part 1 as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order for Sec.  1.36B-3(c)(6)(i) and 1.36B-
3(c)(6)(iii) to read in part as follows:

    Authority: 26 U.S.C. 7805 * * *
* * * * *
    Section 1.36B-3(c)(6)(i) also issued under 26 U.S.C. 
36B(c)(5)(B)(v).
    Section 1.36B-3(c)(6)(iii) also issued under 26 U.S.C. 
36B(c)(5)(E).
* * * * *

0
Par. 2. Section 1.36B-1 is amended by revising paragraphs (c) and 
(o)(1), and adding paragraph (o)(4) to read as follows:


Sec.  1.36B-1   Premium tax credit definitions.

* * * * *
    (c) Qualified health plan--(1) In general. Except as provided in 
paragraphs (c)(2) and (3) of this section, the term ``qualified health 
plan'' has the same meaning as in section 1301(a) of the Affordable 
Care Act (42 U.S.C. 18021(a)) but does not include a catastrophic plan 
described in section 1302(e) of the Affordable Care Act (42 U.S.C. 
18022(e)).
    (2) Pre-enrollment verification process required. The term 
``qualified health plan'' does not include any plan enrolled in through 
an Exchange that fails to provide a pre-enrollment verification process 
through which an applicant may, beginning not later than August 1, 
verify with the Exchange the applicant's household income and 
eligibility for enrollment in a plan for the plan year beginning in the 
subsequent year.
    (3) Certain special enrollment periods. The term ``qualified health 
plan'' does not include any plan enrolled in during a special 
enrollment period provided for by an Exchange--
    (i) On the basis of the percentage that the individual's expected 
household income bears to the Federal poverty line for the individual's 
family size as is prescribed by the Secretary of Health and Human 
Services for purposes of the enrollment period; and
    (ii) Not in connection with the occurrence of an event or change in 
circumstances specified by the Secretary of Health and Human Services 
for such purposes.
* * * * *
    (o) * * *
    (1) Except as provided in paragraphs (o)(2) through (4) of this 
section, this section applies to taxable years ending after December 
31, 2013.
* * * * *
    (4) Paragraph (c)(2) of this section applies to taxable years 
beginning after December 31, 2027. Paragraph (c)(3) of this section 
applies to plan years beginning on or after October 15, 2026.
0
Par. 3. Section 1.36B-2 is amended by:
0
1. Removing paragraph (b)(5) and redesignating paragraphs (b)(6) and 
(7) as new paragraphs (b)(5) and (6), respectively;
0
2. Revising the introductory text of newly redesignated paragraph 
(b)(5)(i);
0
3. Revising newly redesignated paragraph (b)(5)(ii);
0
4. Removing newly redesignated paragraphs (b)(5)(iii) and (iv);
0
5. In newly redesignated paragraph (b)(6), removing the language ``or 
(b)(6)'';
0
6. Revising paragraphs (c)(2)(ii) and (v);
0
7. Redesignating paragraph (c)(2)(vi) as paragraph (c)(2)(vii) and 
adding new paragraph (c)(2)(vi);
0
8. In newly redesignated paragraph (c)(2)(vii), designating Example 1 
through Example 6 as paragraphs (c)(2)(vii)(A) through (F), 
respectively;
0
9. In newly designated paragraph (c)(2)(vii)(C), removing the language 
``Example 2'' and adding the language ``paragraph (c)(2)(vii)(B) of 
this section (Example 2)'' in its place;
0
10. In newly designated paragraph (c)(2)(vii)(F), removing the language 
``Example 5'' and adding the language ``paragraph (c)(2)(vii)(E) of 
this section (Example 5)'' in its place;
0
11. Adding paragraphs (c)(2)(vii)(G), (H), and (I); and
0
12. Revising paragraphs (e)(1), (2), and (6) and adding paragraph 
(e)(7).
    The revisions and additions read as follows:


Sec.  1.36B-2  Eligibility for premium tax credit.

* * * * *
    (b) * * *
    (5) * * *
    (i) * * * A taxpayer whose household income for a taxable year is 
less than 100 percent of the Federal poverty line for the taxpayer's 
family size is treated as an applicable taxpayer for the taxable year 
if--
* * * * *
    (ii) Exceptions. This paragraph (b)(5) does not apply for an 
individual who, with intentional or reckless disregard for the facts, 
provides incorrect information to an Exchange for the year of coverage. 
A reckless disregard of the facts occurs if the taxpayer makes little 
or no effort to determine whether the information provided to the 
Exchange is accurate under circumstances that demonstrate a substantial 
deviation from the standard of conduct a reasonable person would 
observe. A disregard of the facts is intentional if the taxpayer knows 
the information provided to the Exchange is inaccurate.
* * * * *
    (c) * * *
    (2) * * *
    (ii) Obligation to complete certain requirements to obtain 
coverage--(A) Administrative requirements. An individual who meets the 
criteria for eligibility for government-sponsored minimum essential 
coverage must complete certain administrative requirements in order to 
receive benefits. Except as provided in paragraph (c)(2)(ii)(B) of this 
section, an individual who fails by the last day of the third full 
calendar month following the event that establishes eligibility under 
paragraph (c)(2)(i) of this section to complete the requirements to 
obtain government-sponsored minimum essential coverage (other than a 
veteran's health care program) is treated as eligible for government-
sponsored minimum essential coverage as of the first day of the fourth 
calendar month following the event that establishes eligibility.

[[Page 65506]]

    (B) Medicaid community engagement requirement. For taxable years 
beginning after December 31, 2026, an individual who is determined or 
assessed (within the meaning of 45 CFR 155.302(b)) by an Exchange to be 
not eligible for Medicaid solely because the individual failed to meet 
the requirement to demonstrate community engagement under 42 U.S.C. 
1396a(xx)(1) is treated as eligible for minimum essential coverage 
under section 5000A(f)(1)(A)(ii) as of the later of the first day of 
the first full month the individual would have been eligible to receive 
benefits under the Medicaid program or the first day of the first 
calendar month beginning after the assessment or determination that the 
individual would have been eligible for Medicaid but for the failure to 
meet the requirement to demonstrate community engagement under 42 
U.S.C. 1396a(xx)(1).
    (C) No longer ineligible for failing to demonstrate community 
engagement. For any month in which an individual described in paragraph 
(c)(2)(ii)(B) of this section is determined or assessed by an Exchange 
to be, or becomes, no longer ineligible for Medicaid solely for failing 
to meet the requirement to demonstrate community engagement under 42 
U.S.C. 1396a(xx)(1), paragraph (c)(2)(ii)(B) of this section does not 
apply.
* * * * *
    (v) Determination of Medicaid or Children's Health Insurance 
Program (CHIP) ineligibility--(A) In general. Except as provided in 
paragraph (c)(2)(v)(B) of this section, an individual is treated as not 
eligible for Medicaid, CHIP, or a similar program such as a Basic 
Health Program, for a period of coverage under a qualified health plan 
if, when the individual enrolls in the qualified health plan, an 
Exchange conducts an eligibility determination or, if applicable, 
eligibility assessment (within the meaning of 45 CFR 155.302(b)) for 
Medicaid, CHIP, or a similar program and determines or assesses the 
individual to be not eligible for coverage under the program.
    (B) Determination of Medicaid community engagement. For taxable 
years beginning after December 31, 2026, paragraph (c)(2)(v)(A) of this 
section does not apply for an individual who is determined or assessed 
by an Exchange to be not eligible for Medicaid solely because the 
individual failed to meet the requirement to demonstrate community 
engagement under 42 U.S.C. 1396a(xx)(1).
    (C) Determination of Medicaid ineligibility after enrollment. If an 
individual treated as eligible for Medicaid due to an Exchange 
determination or assessment that the individual was ineligible for 
Medicaid as described in paragraph (c)(2)(ii)(B) of this section 
enrolls in a qualified health plan and, after the enrollment, an 
Exchange conducts an eligibility determination or, if applicable, 
eligibility assessment (within the meaning of 45 CFR 155.302(b)) for 
Medicaid and determines or assesses the individual to be not eligible 
for Medicaid for a reason other than the individual failing to meet the 
requirement to demonstrate community engagement under 42 U.S.C. 
1396a(xx)(1), then the individual is treated as not eligible for 
Medicaid for the period of coverage under the qualified health plan as 
of the first day of the first calendar month after the Exchange makes 
such determination or assessment.
    (vi) Inapplicability due to intentional or reckless disregard of 
the facts. Paragraphs (c)(2)(ii)(C), (c)(2)(v)(A), and (c)(2)(v)(C) of 
this section do not apply for an individual who, with intentional or 
reckless disregard for the facts, provides incorrect information to an 
Exchange for the year of coverage. A reckless disregard of the facts 
occurs if the taxpayer makes little or no effort to determine whether 
the information provided to the Exchange is accurate under 
circumstances that demonstrate a substantial deviation from the 
standard of conduct a reasonable person would observe. A disregard of 
the facts is intentional if the taxpayer knows that information 
provided to the Exchange is inaccurate.
    (vii) * * *
    (G) Example 7: Medicaid ineligibility determination--community 
engagement. Taxpayer H is determined to be ineligible for Medicaid as 
of January 1, 2027, solely because of H's failure to meet the 
requirement to demonstrate community engagement under 42 U.S.C. 
1396a(xx)(1). H begins a new job in March of 2027 that makes H 
ineligible for Medicaid due to H's income being above the income 
threshold for Medicaid eligibility in H's state. In March, H goes to 
the Exchange in H's rating area and enrolls in a qualified health plan 
and is determined to be eligible for advance credit payments beginning 
in April 2027. H was not enrolled in a qualified health plan before 
April 2027. Under paragraph (c)(2)(v)(A) of this section, H is treated 
as ineligible for Medicaid for the period of H's qualified health plan 
coverage in 2027 because, when H enrolled in a qualified health plan, 
the Exchange determined that H was ineligible for Medicaid for a reason 
other than failing to meet the requirement to demonstrate community 
engagement under 42 U.S.C. 1396a(xx)(1).
    (H) Example 8-(1) Mid-year Medicaid ineligibility redetermination--
community engagement. The facts are the same as in paragraph 
(c)(2)(vii)(G) of this section (Example 7), except that H enrolled in a 
qualified health plan as of January 1, 2027, and paid the total amount 
of the premiums for the coverage for January through March. Thus, 
January and February are not coverage months for H because H's 
ineligibility for Medicaid for those months is solely due to H's 
failure to meet the requirement to demonstrate community engagement 
under 42 U.S.C. 1396a(xx)(1).
    (2) No longer ineligible for failing to demonstrate community 
engagement. Because H's income for March is above the income threshold 
for Medicaid eligibility in H's state, March is the month H becomes no 
longer ineligible for Medicaid solely for failing to meet the 
requirement to demonstrate community engagement under 42 U.S.C. 
1396a(xx)(1), as described in paragraph (c)(2)(ii)(C) of this section. 
For March, H does not meet the criteria for eligibility for Medicaid as 
described in paragraph (c)(2)(i) of this section and March may be a 
coverage month for H.
    (3) Determination of Medicaid ineligibility after enrollment. Under 
paragraph (c)(2)(v)(C) of this section, H is treated as ineligible for 
Medicaid in April and the months of H's 2027 enrollment after April. 
This is because after H's January enrollment in a qualified health 
plan, the Exchange conducted an eligibility determination for Medicaid 
in March and determined H to be ineligible for Medicaid for a reason 
other than failing to meet the requirement to demonstrate community 
engagement under 42 U.S.C. 1396a(xx)(1). Thus, April, the first 
calendar month after the Exchange made such determination, and the 
months after April in which H was enrolled in a qualified health plan, 
may be coverage months for H.
    (I) Example 9-(1) Mid-year Medicaid eligibility redetermination--
community engagement. Taxpayer J is determined by an Exchange to be 
ineligible for Medicaid as of January 1, 2027, solely because of J's 
failure to meet the requirement to demonstrate community engagement 
under 42 U.S.C. 1396a(xx)(1). J enrolls in a qualified health plan 
through the Exchange as of January 1, 2027, and is determined to be 
ineligible for advance credit payments consistent with paragraph 
(c)(2)(ii)(B) of

[[Page 65507]]

this section. Subsequently, J meets the requirement to demonstrate 
community engagement under 42 U.S.C. 1396a(xx)(1) and meets the 
criteria for eligibility for Medicaid as described in paragraph 
(c)(2)(i) of this section as of April 1, 2027.
    (2) No longer ineligible for failing to demonstrate community 
engagement. Because J becomes eligible for Medicaid as of April 1, 
2027, J is no longer ineligible for Medicaid solely for failing to meet 
the requirement to demonstrate community engagement under 42 U.S.C. 
1396a(xx)(1), as described in paragraph (c)(2)(ii)(C) of this section. 
Thus, paragraph (c)(2)(ii)(B) of this section does not apply to J 
starting with the month of April 2027.
    (3) Administrative requirements. Under paragraph (c)(2)(ii)(A) of 
this section, J must complete certain administrative requirements 
necessary to receive Medicaid benefits because J meets the criteria for 
eligibility for Medicaid as described in paragraph (c)(2)(i) of this 
section. If J does not complete the administrative requirements 
necessary to enroll in Medicaid by June 30, 2027, which is the last day 
of the third full calendar month following the event that establishes 
J's eligibility (J meeting the requirement to demonstrate community 
engagement and, thus, the criteria for eligibility for Medicaid), J is 
treated as eligible for government-sponsored minimum essential coverage 
under paragraph (c)(2)(ii)(A) of this section as of July 1, 2027, the 
first day of the fourth calendar month following the event that 
establishes J's eligibility.
* * * * *
    (e) * * *
    (1) Except as provided in paragraphs (e)(2) through (7) of this 
section, this section applies to taxable years ending after December 
31, 2013.
    (2) Paragraph (c)(2)(vi) of this section applies to taxable years 
beginning after December 31, 2026. The last three sentences of Sec.  
1.36B-2(c)(2)(v) as contained in 26 CFR part 1 edition revised as of 
April 1, 2025, apply to taxable years beginning after December 31, 
2016, and ending before January 1, 2027. Paragraph (b)(5)(i) of this 
section applies to taxable years beginning on or after October 15, 
2026. Section 1.36B-2(b)(6)(i) as contained in 26 CFR part 1 edition 
revised as of April 1, 2025, applies to taxable years ending after 
December 31, 2013, and beginning before October 15, 2026. Paragraphs 
(b)(5)(ii), (c)(3)(i), and (c)(3)(iii)(A), the last three sentences of 
paragraph (c)(3)(v)(A)(3), and paragraph (c)(4) of this section apply 
to taxable years beginning after December 31, 2016. Section 1.36B-
2(b)(6), (c)(3)(i), (c)(3)(iii)(A), and (c)(4) as contained in 26 CFR 
part 1 edition revised as of April 1, 2016, apply to taxable years 
ending after December 31, 2013, and beginning before January 1, 2017.
* * * * *
    (6) Paragraph (c)(2)(v) of this section applies to taxable years 
beginning after December 31, 2026. The first sentence of Sec.  1.36B-
2(c)(2)(v) as contained in 26 CFR part 1 edition revised as of April 1, 
2025, applies to taxable years beginning on or after January 1, 2025, 
and ending before January 1, 2027. The first sentence of Sec.  1.36B-
2(c)(2)(v) as contained in 26 CFR part 1 edition revised as of April 1, 
2024, applies to taxable years ending after December 31, 2013, and 
beginning before January 1, 2025.
    (7) Paragraphs (c)(2)(ii) and (c)(2)(vii)(G) through (I) of this 
section apply to taxable years beginning after December 31, 2026. 
Paragraph (c)(2)(ii) of this section as contained in 26 CFR part 1 
edition revised as of April 1, 2025, applies to taxable years beginning 
before December 31, 2026. Paragraph (b)(6) of this section applies to 
taxable years beginning on or after October 15, 2026. Section 1.36B-
2(b)(5) and (7) as contained in 26 CFR part 1 edition revised as of 
April 1, 2025, applies to taxable years ending after December 31, 2013, 
and beginning before October 15, 2026.
0
Par. 4. Section 1.36B-3 is amended by:
0
1. Revising paragraph (c)(1);
0
2. Redesignating paragraph (c)(6) as paragraph (c)(8) and adding new 
paragraph (c)(6);
0
3. Adding paragraph (c)(7);
0
4. In newly redesignated paragraph (c)(8), designating Example 1 
through Example 4 as paragraphs (c)(8)(i) through (iv), respectively.
0
5. In newly designated paragraph (c)(8)(i), redesignating paragraphs 
(c)(8)(i)(i) and (ii) as paragraphs (c)(8)(i)(A) and (B), respectively.
0
6. In newly designated paragraph (c)(8)(ii), redesignating paragraphs 
(c)(8)(ii)(i) and (ii) as paragraphs (c)(8)(ii)(A) and (B), 
respectively.
0
7. In newly designated paragraph (c)(8)(iii), redesignating paragraphs 
(c)(8)(iii)(i) and (ii) as paragraphs (c)(8)(iii)(A) and (B), 
respectively.
0
8. Redesignating paragraph (d)(2) as paragraph (d)(3), and adding new 
paragraph (d)(2);
0
9. In newly redesignated paragraph (d)(3), designating Example 1 
through Example 3 as paragraphs (d)(3)(i) through (iii), respectively.
0
10. In newly designated paragraph (d)(3)(ii), redesignating paragraphs 
(d)(3)(ii)(i) through (d)(3)(ii)(iii) as paragraphs (d)(3)(ii)(A) 
through (d)(3)(ii)(C), respectively.
0
11. In newly designated paragraph (d)(3)(iii), removing the language 
``Example 2 of this paragraph (d)(2)'' and adding the language 
``paragraph (d)(3)(ii) of this section (Example 2)'' in its place.
0
12. Revising paragraph (h);
0
13. Revising paragraphs (l)(1) and (l)(2)(i); and
0
14. Revising paragraph (n)(1), revising the first sentence of 
paragraphs (n)(2) and (3), and adding paragraphs (n)(5) and (6).
    The revisions and additions read as follows:


Sec.  1.36B-3   Computing the premium assistance credit amount.

* * * * *
    (c) * * *
    (1) In general. Except as provided in paragraphs (c)(6) and (7) of 
this section, a month is a coverage month for an individual if--
    (i) As of the first day of the month, the individual is enrolled in 
a qualified health plan through an Exchange;
    (ii) The taxpayer pays the taxpayer's share of the premium for the 
individual's coverage under the plan for the month by the unextended 
due date for filing the taxpayer's income tax return for that taxable 
year, the full premium for the month is paid by advance credit 
payments, or the amount of the premium paid (including by advance 
credit payments) for the month is sufficient to avoid termination of 
the individual's coverage for that month under one of the scenarios 
described in paragraph (c)(4) of this section; and
    (iii) The individual is not eligible for the full calendar month 
for minimum essential coverage (within the meaning of Sec.  1.36B-2(c)) 
other than coverage described in section 5000A(f)(1)(C) (relating to 
coverage in the individual market).
* * * * *
    (6) Verification requirements--(i) In general. A month is not a 
coverage month for an individual enrolled in a qualified health plan if 
the Exchange through which the individual enrolled fails to verify--
    (A) Enrollment eligibility--
    (1) The individual's place of residence meets the applicable 
residency standard in 45 CFR 155.305(a)(3);
    (2) The individual is a U.S. citizen, a national of the U.S., or an 
alien lawfully present in the U.S.; and
    (B) Advance credit payment eligibility. For individuals for whom 
advance credit payments are made--

[[Page 65508]]

    (1) The items in paragraph (c)(6)(i)(A) of this section;
    (2) The household income and family size of the taxpayer who is 
expected to file an income tax return for the year of coverage 
reconciling the advance credit payments for the individual's coverage 
with the premium tax credit allowed for the coverage;
    (3) That the individual is ineligible for minimum essential 
coverage, other than individual market coverage; and
    (4) If the individual is an alien lawfully present in the U.S., 
that the individual is an eligible alien as defined in section 
36B(e)(2)(B).
    (ii) Waiver of verification requirements. Paragraph (c)(6)(i) of 
this section does not apply for an individual's months of coverage in a 
qualified health plan in a plan year with respect to the applicable 
enrollment information described in paragraph (c)(6)(i) of this section 
provided during a special enrollment period that is triggered by an 
event described in 45 CFR 155.420(d)(2)(i) or (ii).
    (7) Failure to reconcile status. A month is not a coverage month 
for an individual for whom advance credit payments were made for the 
individual's qualified health plan coverage if the Exchange through 
which the individual enrolled failed to comply with section 36B(c)(6) 
for the month.
* * * * *
    (d) * * *
    (2) Reduction for amounts allocable to individuals not lawfully 
present or not eligible aliens. In determining the premium assistance 
amount in paragraph (d)(1) of this section for a taxpayer, if any 
individual in the taxpayer's family who is enrolled in a qualified 
health plan is not lawfully present or is an alien lawfully present but 
not an eligible alien, as defined in section 36B(e)(2)(B), the taxpayer 
must reduce the enrollment premiums under paragraph (d)(1)(i) of this 
section and the adjusted monthly premium for the applicable benchmark 
plan under paragraph (d)(1)(ii) of this section by the portion of the 
premiums attributable to such individual.
* * * * *
    (h) Plan covering more than one family under a single policy--(1) 
In general. If a qualified health plan covers more than one family 
under a single policy, each applicable taxpayer with a family member 
covered by the policy 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. Except as 
provided in paragraph (h)(2) of this section, in determining whether 
the amount computed under paragraph (d)(1)(i) of this section (the 
enrollment premiums) 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 
enrollment premiums are allocated to each taxpayer in proportion to the 
premiums for each taxpayer's applicable benchmark plan.
    (2) Allocation if an individual is not lawfully present or not an 
eligible alien--(i) In general. Except as provided in paragraph 
(h)(2)(ii) of this section, if a qualified health plan covers more than 
one family under a single policy and one or more individuals covered by 
the policy is not lawfully present, or is a lawfully present alien but 
not an eligible alien, then this paragraph (h)(2)(i) is used to 
determine the portion of the enrollment premiums for the policy 
allocable to each taxpayer with a family member covered by the policy 
for purposes of determining whether the amount under paragraph 
(d)(1)(i) of this section is less than the amount under paragraph 
(d)(1)(ii) of this section, as adjusted by paragraph (d)(2) of this 
section. Under this paragraph (h)(2)(i), the portion of the enrollment 
premiums allocated to a taxpayer with a family member covered by the 
policy is the enrollment premiums for the policy multiplied by a 
fraction, the numerator of which is the taxpayer's applicable benchmark 
plan premium, excluding individuals covered by the policy who are not 
lawfully present or who are lawfully present aliens but not eligible 
aliens, and the denominator of which is the amount the applicable 
benchmark plan premium would be if all of the individuals covered by 
the policy were treated as members of one coverage family, including 
individuals enrolled in the plan who are not lawfully present or who 
are lawfully present aliens but not eligible aliens.
    (ii) Allocation if an individual is not lawfully present or not an 
eligible alien and an individual is not in the coverage family. If a 
qualified health plan covers more than one family under a single policy 
and one or more individuals covered by the policy is not lawfully 
present, or is a lawfully present alien but not an eligible alien, and 
one or more individuals covered by the policy is not in a coverage 
family because, for example, the individual is eligible for minimum 
essential coverage, this paragraph (h)(2)(ii) is used to determine the 
portion of the enrollment premiums for the policy allocable to each 
taxpayer with a family member covered by the policy for purposes of 
determining whether the amount under paragraph (d)(1)(i) of this 
section is less than the amount under paragraph (d)(1)(ii) of this 
section as adjusted by paragraph (d)(2) of this section. For purposes 
of this paragraph (h)(2)(ii), the amount of the enrollment premium to 
be allocated (the net allocable premium) equals the enrollment premium 
for the policy multiplied by a fraction, the numerator of which is the 
amount the applicable benchmark plan premium would be if all of the 
individuals covered by the policy were treated as members of one 
coverage family, excluding individuals covered by the policy who are 
not lawfully present or who are lawfully present aliens but not 
eligible aliens, and the denominator of which is the amount the 
applicable benchmark plan premium would be if all of the individuals 
covered by the policy were members of one coverage family, including 
individuals covered by the policy who are not lawfully present or who 
are lawfully present aliens but not eligible aliens. The net allocable 
premium is then allocated to a taxpayer with a family member covered by 
the policy by multiplying the net allocable premium by a fraction, the 
numerator of which is the applicable benchmark plan premium for the 
taxpayer's coverage family, excluding individuals covered by the policy 
who are not lawfully present or who are lawfully present aliens but not 
eligible aliens, and the denominator of which is the amount the 
applicable benchmark plan premium would be if the members of the 
coverage families covered by the policy were treated as members of a 
single coverage family, excluding individuals covered by the policy who 
are not lawfully present or who are lawfully present aliens but not 
eligible aliens.
    (3) Examples. The following examples illustrate the rules of this 
paragraph (h):
    (i) Example 1. (A) Taxpayers A and B enroll in a qualified health 
plan under a single policy. 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 enrollment premium for 
the policy is $15,000. The applicable benchmark plan premium for A's 
coverage family of A and A's dependents is $12,000. The applicable 
benchmark plan premium for B's coverage family, which includes only B, 
is $6,000. A and B are applicable taxpayers and otherwise eligible to 
claim the premium tax credit.
    (B) Under paragraph (h)(1) of this section, both A and B may claim 
a premium tax credit. A computes her

[[Page 65509]]

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 an applicable benchmark 
plan premium of $6,000.
    (C) In determining whether the amount in paragraph (d)(1)(i) of 
this section (the enrollment premiums for the taxpayer) is less than 
the amount in paragraph (d)(1)(ii) of this section (the benchmark plan 
premium for the taxpayer minus the product of household income and the 
applicable percentage), the $15,000 enrollment premium for the policy 
is allocated to A and B in proportion to the premiums for their 
applicable benchmark plans. Thus, the portion of the enrollment premium 
allocated to A is $10,000 ($15,000 x $12,000/$18,000) and the portion 
allocated to B is $5,000 ($15,000 x $6,000/$18,000).
    (ii) Example 2. (A) Taxpayers C and D enroll in a qualified health 
plan under a single policy. D is C's 25-year old child and is not C's 
dependent. The plan also covers C's spouse and D's child who is a 
dependent of D. C, D, and D's child are U.S. citizens and C's spouse is 
lawfully present in the U.S. but not an eligible alien as defined in 
section 36B(e)(2)(B). The enrollment premium for the policy is $14,000. 
The applicable benchmark plan premium for C's coverage family is 
$5,500, which under paragraph (d)(2) of this section does not include 
the cost of covering C's spouse because C's spouse is an alien lawfully 
present in the U.S. but not an eligible alien. The applicable benchmark 
plan premium for D's coverage family of D and D's child is $7,150. If 
all of the individuals enrolled in the plan were treated as members of 
one coverage family, the applicable benchmark plan premium including 
C's spouse, who is an alien lawfully present but not an eligible alien, 
would be $15,400. C and D are applicable taxpayers and otherwise 
eligible to claim the premium tax credit.
    (B) Under paragraph (h)(1) of this section, both C and D may claim 
a premium tax credit. Because C's family and D's family are enrolled in 
the qualified health plan under a single policy and C's spouse, an 
alien lawfully present in the U.S. but not an eligible alien, is 
enrolled in the plan, paragraph (h)(2)(i) of this section applies to 
determine the enrollment premium for the policy C and D use in 
determining whether the amount in paragraph (d)(1)(i) of this section 
is less than the amount in paragraph (d)(1)(ii) of this section as 
adjusted by paragraph (d)(2) of this section. Under paragraph (h)(2)(i) 
of this section, C's enrollment premium is $5,000 ($14,000 x $5,500 
(C's applicable benchmark plan premium)/$15,400 (the applicable 
benchmark plan premium for all of the individuals enrolled in the plan, 
including C's spouse, if treated as members of one coverage family)). 
Under paragraph (h)(2)(i) of this section, D's enrollment premium is 
$6,500 ($14,000 (enrollment premium for the plan) x $7,150 (D's 
applicable benchmark plan premium)/$15,400 (the applicable benchmark 
plan premium for all of the individuals enrolled in the plan, including 
C's spouse, if treated as members of one coverage family)).
    (iii) Example 3. (A) The facts are the same as in paragraph 
(h)(3)(ii) of this section (Example 2) except that D's child is 
eligible for minimum essential coverage and therefore not a member of 
D's coverage family. Thus, paragraph (h)(2)(ii) of this section applies 
to determine the enrollment premiums that C and D use in determining 
whether the amount in paragraph (d)(1)(i) of this section is less than 
the amount in paragraph (d)(1)(ii) of this section as adjusted by 
paragraph (d)(2) of this section. If all of the individuals enrolled in 
the plan were treated as members of one coverage family, the applicable 
benchmark plan premium, excluding individuals enrolled in the plan who 
are not lawfully present or who are lawfully present aliens but not 
eligible aliens, would be $12,650, which includes all individuals 
enrolled in the plan except C's spouse, who is an alien lawfully 
present in the U.S. but not an eligible alien. The applicable benchmark 
plan premium for D's coverage family is $4,400, which does not include 
the cost of covering D's child, who is eligible for minimum essential 
coverage and thus not includible in D's coverage family. If the members 
of the coverage families enrolled in the plan were treated as members 
of a single coverage family, the applicable benchmark plan premium, 
excluding individuals enrolled in the plan who are not lawfully present 
or who are lawfully present aliens but not eligible aliens, would be 
$9,900, which excludes both D's child and C's spouse.
    (B) Under paragraph (h)(1) of this section, both C and D may claim 
premium tax credits. The net allocable premium for the plan is $11,500 
($14,000 (enrollment premium for the plan) x $12,650 (the applicable 
benchmark plan premium for all of the individuals enrolled in the plan, 
excluding C's spouse who is an alien lawfully present in the U.S. but 
not an eligible alien, if treated as members of one coverage family)/
$15,400 (the applicable benchmark plan premium for all of the 
individuals enrolled in the plan, including C's spouse, if treated as 
members of one coverage family)). Under paragraph (h)(2)(ii) of this 
section, C's enrollment premium is $6,389 ($11,500 (net allocable 
enrollment premium) x $5,500 (C's applicable benchmark plan premium)/
$9,900 (the total of C's and D's applicable benchmark plan premium)). 
Under paragraph (h)(2)(ii) of this section, D's enrollment premium is 
$5,111 ($11,500 x $4,400 (D's applicable benchmark plan premium)/$9,900 
(the total of C's and D's applicable benchmark plan premiums)).
* * * * *
    (l) * * *
    (1) In general. If one or more individuals for whom a taxpayer is 
allowed a deduction under section 151 are not lawfully present (within 
the meaning of Sec.  1.36B-1(g)) or, in the case of aliens who are 
lawfully present, are not eligible aliens, the percentage a taxpayer's 
household income bears to the Federal poverty line for the taxpayer's 
family size for purposes of determining the applicable percentage under 
paragraph (g) of this section is determined by excluding from family 
size individuals who are not lawfully present, or, in the case of 
aliens who are lawfully present, are not eligible aliens, and by 
determining household income in accordance with paragraph (l)(2) of 
this section.
    (2) * * *
    (i) Statutory method. For purposes of paragraph (l)(1) of this 
section, household income is equal to the product of the taxpayer's 
household income (determined without regard to this paragraph (l)(2)) 
and a fraction--
    (A) The numerator of which is the Federal poverty line for the 
taxpayer's family size determined by excluding individuals who are not 
lawfully present or, in the case of aliens who are lawfully present, 
are not eligible aliens; and
    (B) The denominator of which is the Federal poverty line for the 
taxpayer's family size determined by including individuals who are not 
lawfully present or, in the case of aliens who are lawfully present, 
are not eligible aliens.
* * * * *
    (n) * * *
    (1) Except as provided in paragraphs (n)(2) through (6) of this 
section, this section applies to taxable years ending after December 
31, 2013.
    (2) Paragraphs (d)(1) (except for paragraph (d)(1)(i)) and (d)(3) 
of this section apply to taxable years beginning after December 31, 
2016. * * *
    (3) Paragraphs (c)(4), (5), and (8) of this section apply to 
taxable years

[[Page 65510]]

beginning on or after January 1, 2025. * * *
* * * * *
    (5) Paragraphs (c)(6) and (7) of this section apply to taxable 
years beginning after December 31, 2027.
    (6) Paragraphs (d)(2), (h), (l)(1), and (l)(2)(i) of this section 
apply to taxable years beginning after December 31, 2026. Paragraphs 
(h), (l)(1), and (l)(2)(i) of this section as contained in 26 CFR part 
1 edition revised as of April 1, 2025, applies to taxable years ending 
after December 31, 2013, and beginning before January 1, 2027.
0
 Par. 5. Section 1.36B-4 is amended by revising paragraph (c) to read 
as follows:


Sec.  1.36B-4  Reconciling the premium tax credit with advance credit 
payments.

* * * * *
    (c) Applicability date--
    (1) Except as provided in paragraphs (c)(2) through (3) of this 
section, this section applies to taxable years ending after December 
31, 2013.
    (2) The last sentence of paragraphs (a)(1)(ii)(B)(1) and (2), and 
(a)(1)(ii)(C) of this section apply to taxable years ending on or after 
December 31, 2020.
    (3) Paragraph (a)(3) of this section applies to taxable years 
ending after December 31, 2013, and beginning before October 15, 2026.
0
Par. 6. Section 1.36B-5 is amended by:
0
1. Revising paragraphs (c)(1)(iv) and (viii);
0
2. Revising paragraph (c)(3)(iii)(B); and
0
3. Revising paragraph (h).
    The revisions read as follows:


Sec.  1.36B-5   Information reporting by Exchanges.

* * * * *
    (c) * * *
    (1) * * *
    (iv) For plans for which advance credit payments are made, the 
premium (excluding the premium allocated to benefits in excess of 
essential health benefits, see Sec.  1.36B-3(j), and the premium 
allocable to individuals in the tax filer's family enrolled in the plan 
who are not lawfully present or, in the case of aliens who are lawfully 
present, are not eligible aliens) for the applicable benchmark plan for 
purposes of computing advance credit payments;
* * * * *
    (viii) The monthly premium for the plan in which the individuals 
enroll, however--
    (A) The premium allocated to benefits in excess of essential health 
benefits is excluded, see Sec.  1.36B-3(j);
    (B) For plans for which advance credit payments are made, the 
premium allocable to individuals in the tax filer's family enrolled in 
the plan who are not lawfully present or, in the case of aliens who are 
lawfully present, are not eligible aliens, is excluded;
    (C) The premium for a stand-alone dental plan allocated to 
pediatric dental benefits is added, see Sec.  1.36B-3(k), but if a 
family (within the meaning of Sec.  1.36B-1(d)) is enrolled in more 
than one qualified health plan, the pediatric dental premium is added 
to the premium for only one qualified health plan; and
    (D) The amount is not reduced for advance credit payments;
* * * * *
    (3) * * *
    (iii) * * *
    (B) Certain mid-month enrollments and terminations. For information 
reporting that is due on or after January 1, 2019, if an individual's 
qualified health plan is terminated before the last day of a month, or 
if an individual is enrolled in coverage after the first day of a month 
and the coverage is effective on the date of the individual's birth, 
adoption, or placement for adoption or in foster care, or on the 
effective date of a court order, the amount reported under paragraphs 
(c)(1)(iv) and (v) of this section is the premium for the applicable 
benchmark plan for a full month of coverage (excluding the premium 
allocated to benefits in excess of essential health benefits), and the 
amount reported under paragraph (c)(1)(viii) of this section is the 
enrollment premium for the month, reduced by any amounts that were 
refunded. However, for information reporting for coverage months in 
taxable years beginning after December 31, 2026, any amount of the 
premiums allocable to individuals in the tax filer's family enrolled in 
the plan who are not lawfully present or, in the case of aliens who are 
lawfully present, are not eligible aliens must be excluded from the 
amount reported under paragraph (c)(1)(iv) of this section. In 
addition, for information reporting for coverage months in taxable 
years beginning after December 31, 2026, the amount reported as 
enrollment premiums for the month is the amount described under 
paragraph (c)(1)(viii) of this section, reduced by any amounts that 
were refunded and allocable to individuals in the tax filer's family 
enrolled in the plan who are lawfully present or, in the case of aliens 
who are lawfully present, are eligible aliens.
* * * * *
    (h) Applicability date.
    (1) Except as provided in paragraphs (h)(2) and (3) of this 
section, this section applies to taxable years ending after December 
31, 2013.
    (2) Paragraph (c)(3)(iii) of this section applies to taxable years 
beginning after December 31, 2026. Paragraph (c)(3)(iii) of this 
section as contained in 26 CFR part 1 edition revised as of April 1, 
2025, applies to taxable years beginning after December 31, 2018, and 
ending before January 1, 2027. The last sentence of paragraph (c)(3)(i) 
of this section applies to taxable years beginning after December 31, 
2018. Section 1.36B-5(c)(3) as contained in 26 CFR part 1 edition 
revised as of April 1, 2016, applies to information reporting for 
taxable years ending after December 31, 2013, and beginning before 
January 1, 2019.
    (3) Paragraphs (c)(1)(iv) and (viii) of this section apply to 
taxable years beginning after December 31, 2026. Paragraphs (c)(1)(iv) 
and (viii) of this section as contained in 26 CFR part 1 edition 
revised as of April 1, 2025, apply to taxable years ending after 
December 31, 2013, and beginning before January 1, 2027.

Frank J. Bisignano,
Chief Executive Officer.
[FR Doc. 2026-21056 Filed 10-14-26; 8:45 am]
BILLING CODE 4831-GV-P


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