FINAL APPEAL DECISION

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Samson Bradley
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1 FINAL APPEAL DECISION Appeal Decision: Penalty Overturned in Full xx_ Penalty Overturned in Part Penalty Upheld Hearing Issue: Appeal of the 2015 Tax Year Penalty Hearing Date: November 18, 2016 Decision Date: February 9, 2017 AUTHORITY This hearing was conducted pursuant to the Massachusetts General Laws, Chapter 111M, Chapter 176Q, Chapter 30A and 801 CMR 1.02 and the rules and regulations promulgated thereunder. JURISDICTION Any person aggrieved by the assessment or potential assessment of the individual mandate penalty may file an appeal, pursuant to the provisions of Mass. General Laws Chapter 111M, Section 4 and 956 CMR HEARING RECORD The appellant appeared at the hearing which was held by telephone on November 18, The procedures to be followed during the hearing were reviewed with the appellant. The appellant was sworn in. Exhibits were marked and admitted in evidence with no objection from the appellant. Appellant testified. The hearing record consists of the appellant s testimony and the following documents which were admitted in evidence: Exhibit 1: Appeal Case Information from Schedule HC 2015 Exhibit 2: Statement of Grounds for Appeal 2015 signed on April 30, 2016 by Appellant with letter in support of appeal attached Exhibit 3: Notice of Hearing sent to Appellant dated October 18, 2016 Exhibit 4: Appellant s bank statements, March, September, and October, 2015 Exhibit 5: Connector s Final Appeal Decision for Tax Year 2012 dated December 23, 2013 FINDINGS OF FACT Page 1 of Appeal Number: PA15808

2 The record shows, and I so find: 1. Appellant, who turned 49 in October, 2015, filed a 2015 tax return as a single person with no dependents claimed (Exhibit 1). 2. Appellant lived in Dukes County, MA in 2015 (Exhibit 1). 3. Appellant s Federal Adjusted Gross Income for 2015 was $61,737 (Exhibit 1). 4. Appellant was employed as a carpenter in 2015; the appellant has worked for the same company for a number of years (Testimony of Appellant). 5. For some years, Appellant had health insurance through employment, but the coverage Appellant had did not meet the minimum creditable coverage standards set by the Commonwealth. Appellant lost this coverage in September, The employer has not offered health insurance after September, Appellant has not had insurance since. Appellant looked into getting health insurance during 2015, but felt the coverage was too expensive (Testimony of Appellant, Exhibit 5). 6. Appellant did not have insurance during Appellant has been assessed a penalty for twelve months. Appellant has appealed this assessment, claiming that the expense of purchasing health insurance would have caused the appellant to suffer a serious deprivation of basic necessities (Exhibits 1, 2). 7. I take administrative notice of the financial information set forth in Tables 1 through 6 in the DOR 2015 Massachusetts Schedule HC Health Care Instructions and Worksheets. Tables 3 and 4 incorporate affordability and premium schedules adopted by the Board of Directors for the Commonwealth Health Insurance Connector Authority for 2015 Table 2 sets forth income at 300% of the Federal poverty level and Tables 5 and 6 set forth tax penalties in effect for According to Table 3 of Schedule HC for 2015, an individual with no dependents with an adjusted gross income of $61,737 could afford to pay $414 per month for private insurance. According to Table 4, Appellant, age 48 and living in Dukes County, could have purchased private insurance for $298 per month. 9. According to Table 2 of Schedule HC for 2015, the Appellant, earning more than $35,010, did not meet the Commonwealth s income eligibility guidelines for the ConnectorCare program. 10. Appellant had the following monthly expenses for basic necessities in 2015: rent- $850 including heat and electricity; food-$400; gas for the truck-$280; telephone- $104; clothing- $50 on average; child support-$1,150. During 2015, the appellant had to pay $250 for tools for his job, $3,000 for dental work, $800 for college expenses Page 2 of Appeal Number: PA15808

3 for one of Appellant s children, and $800 for plane tickets for Appellant s children for visits. Appellant also had to save and set aside $7,000 for college tuition (Testimony of Appellant). 11. In March, September, and October, 2015, Appellant had over nine thousand dollars in Appellant s checking account at the beginning and end of each month. During these months, the appellant s checking account balance never went below $8,500 (Exhibit 4). 12. Appellant did not incur significant and unexpected increases in essential expenses as a result of domestic violence; the death of a spouse, family member, or partner who shared household expenses; the sudden responsibility for providing full care for an aging parent or other family member; or fire, flood, or other natural or manmade disaster in 2015 (Testimony of Appellant). 13. Appellant did not fall more than thirty days behind in rent payments in 2015, or receive any shut-off notices or have any utilities shut off (Testimony of Appellant). 14. As of the date of this hearing, Appellant still did not have health insurance (Testimony of Appellant). ANALYSIS AND CONCLUSIONS OF LAW The issue on appeal is whether the tax penalty assessed by the Massachusetts Department of Revenue for 2015 should be waived, either in whole or in part. G.L c. 111M, 2, also called the individual mandate, requires every adult resident of Massachusetts to obtain insurance coverage which meets minimum creditable coverage standards` [s]o long as it is deemed affordable under the schedule set by the board of directors for the Commonwealth Health Insurance Connector Authority. Residents who do not obtain insurance are subject to a tax penalty for each of the months that the individual did not have health insurance as required by the individual mandate. There is a three-month grace period to allow the taxpayer to obtain health insurance coverage or to make the transition between health insurance policies. See G. L. c. 111M, sec. 2(b) and for Tax Year 2010, Administrative Bulletin 03-10: Guidance Regarding M.G.L. c. 111M and M.G.L. c. 176Q, as implemented by 956 CMR 6.00, which interprets the 63-day gap in coverage to be three months. The Connector s regulations provide for a waiver of the tax penalty in the case of a financial hardship. See 956 CMR Appellant had no health insurance in The appellant has been assessed a tax penalty for twelve months. The appellant has appealed the penalty, claiming that the expense of purchasing health insurance would have caused the appellant to suffer a Page 3 of Appeal Number: PA15808

4 serious deprivation of basic necessities. See Exhibits 1 and 2. We need to consider whether the penalty assessed should be waived. To determine if the penalty should be waived in whole or in part, we must consider whether affordable insurance which met minimum creditable coverage standards was available to the appellant through employment, through the private market, or through a government-sponsored program. If affordable insurance was available, we must determine if such insurance was, in fact, not affordable to the appellant because the appellant experienced a financial hardship as defined in 956 CMR In 2015, Appellant had no access to affordable employer-sponsored health insurance. In the past, Appellant had insurance through employment, but as of September, 2012, Appellant s employer no longer offered coverage. See the testimony of the appellant which I find to be credible. According to Tables 3 and 4 of the HC schedule for 2015, Appellant, with an adjusted gross income of $61,737, was deemed able to afford health insurance on the private market. According to Table 3, an individual with no dependents with an adjusted gross income of $61,737 could afford to pay $414 per month for private insurance. According to Table 4, Appellant, age 48 and living in Dukes County, could have purchased private insurance for $298 per month. See Exhibit 1. Appellant would have had to enroll during the open enrollment period which started in late 2014 and ended on January 31, Once Appellant missed the open enrollment period, Appellant had no access to an individual plan through the Connector unless Appellant had a qualifying event. See 45 Code of Federal Regulations and which deal with open enrollment periods and special open enrollment periods. The appellant would not have been income-eligible for Connector Care coverage in See Table 2 of Schedule HC for There is no evidence in the record that Appellant was eligible for any other government-sponsored health insurance program during Appellant had access to affordable health insurance in Had Appellant applied through the Connector during the 2015 open enrollment period, Appellant would have been able to purchase affordable insurance with at least one option costing $298 per month. This cost is less that the amount deemed affordable for the appellant ($414 according to Table 3 of Schedule HC). Since affordable insurance was available to the appellant, we need to examine Appellant s claim that because of a financial hardship, the coverage was not affordable. Appellant did not incur significant and unexpected increases in essential expenses as a result of domestic violence; the death of a spouse, family member, or partner who shared household expenses; the sudden responsibility for providing full care for an aging parent or other family member; or fire, flood, or other natural or man-made disaster in Appellant also did not fall more than thirty days behind in rent payments Page 4 of Appeal Number: PA15808

5 in 2015, or receive any shut-off notices or have any utilities shut off. See the testimony of the appellant which I find to be credible and 956 Code of Massachusetts Regulations 6.08(1)(a-b) and (d). Appellant claimed that the cost of purchasing health insurance would cause the appellant to experience a serious deprivation of basic necessities. Appellant testified that Appellant had the following monthly expenses for basic necessities in 2015: rent-$850 including heat and electricity; food-$400; gas for the truck-$280; telephone- $104; clothing- $50 on average; child support-$1,150. During 2015, the appellant had to pay for tools for his job, $3,000 for dental work, $800 for college expenses for one of Appellant s children, and $800 for plane tickets for Appellant s children for visits. Appellant also had to save and set aside $7,000 for college tuition. I find this testimony credible. Appellant s income amounted to about $5,100 each month (before taxes). See Exhibit 1. If we consider car repairs, dental care expenses, plane tickets, and contributions to college expenses, Appellant is still left with about $4,400 a month. Appellant s expenses equal about $2,900 each month. In addition, I note that the appellant submitted bank statements for March, September, and October, 2015 which were admitted in evidence. During those months, at no time did the balance in Appellant s account dip below $8,500. See Exhibit 4. Based upon these facts, I find that Appellant did not experience a financial hardship such that the cost of purchasing insurance would have caused a serious deprivation of basic necessities. See 956 CMR 6.08(1)(e) and 6.08(3). Appellant had been assessed a penalty in the past and had appealed the assessment. In 2013, Appellant received a written decision regarding the appeal. Appellant knew about the Connector and the process for purchasing insurance through the agency. See Exhibit 5. I do take into account, however, that once Appellant missed the Connector s open enrollment period, Appellant had no access to affordable insurance. Because of this, I determine that Appellant s penalty should be waived in part. Appellant should note that this partial waiver of part of the penalty is based upon the facts that I have determined to be true for this 2015 appeal. Appellant should not assume that a similar determination will be made in the future should Appellant again be assessed a penalty for failure to have health insurance. PENALTY ASSESSED Number of Months Appealed: _12 Number of Months Assessed: 6 The Connector has notified the Department of Revenue that, pursuant to its decision, you should be assessed a penalty for Tax Year 2015 for the amount equal to one half of the lowest cost health insurance plan available to you for each month you have Page 5 of Appeal Number: PA15808

6 been assessed the penalty, as listed above, plus applicable interest back to the due date of the return without regard to extension. NOTIFICATION OF YOUR RIGHT TO APPEAL TO COURT If you disagree with this decision, you have the right to appeal to Court in accordance with Chapter 30A of the Massachusetts General Laws. To appeal, you must file a complaint with the Superior Court for the county where you reside, or Suffolk County Superior Court within thirty (30) days of your receipt of this decision. Cc. Connector Appeals Unit Hearing Officer Page 6 of Appeal Number: PA15808

FINAL APPEAL DECISION

FINAL APPEAL DECISION Appeal Decision: _xx Penalty Overturned in Full Penalty Overturned in Part Penalty Upheld Hearing Issue: Appeal of the 2015 Tax Year Penalty Hearing Date: November 21, 2016 Decision