Thursday, December 23, 2010

Tax Refunds not countable for Public Assistance

Little known provision is part of new Tax Relief Act

By Jeffrey A. Marshall, CELA*

The Tax Relief Act of 2010 includes a provision that requires that tax refunds received in 2011 and 2012 are to be disregarded for 12 months for purposes of determining eligibility for federally funded assistance programs like Medicaid or SSI.  

This important new provision is found in Section 728 of the Tax Relief Act.  It reads:  

728. REFUNDS DISREGARDED IN THE ADMINISTRATION OF FEDERAL PROGRAMS AND FEDERALLY ASSISTED PROGRAMS.
(a) In General- Subchapter A of chapter 65 is amended by adding at the end the following new section:
`SEC. 6409. REFUNDS DISREGARDED IN THE ADMINISTRATION OF FEDERAL PROGRAMS AND FEDERALLY ASSISTED PROGRAMS.
`(a) In General- Notwithstanding any other provision of law, any refund (or advance payment with respect to a refundable credit) made to any individual under this title shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds.
`(b) Termination- Subsection (a) shall not apply to any amount received after December 31, 2012.'.
(b) Clerical Amendment- The table of sections for such subchapter is amended by adding at the end the following new item:
`Sec. 6409. Refunds disregarded in the administration of Federal programs and federally assisted programs.'.
(c) Effective Date- The amendments made by this section shall apply to amounts received after December 31, 2009.


The Congressional Joint Committee on Taxation’s explanation of this provision is as follows:

“Under this provision, any tax refund (or advance payment with respect to a refundable credit) received by an individual after December 31, 2009 begins a period of 12 months during which such refund may not be taken into account as a resource for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds. The provision terminates on December 31, 2012.”

Thanks to New York attorney Steve Silverberg for initially pointing out this interesting aspect of the new tax law. 

Update: On February 2, 2011, CMS published an informational bulletin as guidance to state Medicaid agencies on how to administer Section 728's requirement to disregard federal tax refunds or advance payments.

No comments: