By WK Editorial Staff
Beginning in 2020, California will impose an individual health care mandate. Residents must obtain health care coverage, unless they qualify for an exemption. Those who fail to obtain coverage may owe a penalty on their California income tax returns.
Individual shared responsibility penalty. California will impose the penalty for each month that an individual fails to enroll in and maintain minimum essential coverage for:
- the individual,
- the individual’s spouse, or
- the individual’s dependents.
The penalty for a tax year equals the lesser of:
- the total monthly penalty amounts for the year; or
- 1/12 of the state average premium for California Health Benefit Exchange bronze plans, multiplied by the number of months in which the failure occurred.
The monthly penalty equals 1/12 of the greater of:
- $695 per adult plus $347.50 per child that failed to maintain required coverage during the month, up to a maximum of $2,085, or
- 2.5 percent of the excess of the individual’s household income for the year over the amount of gross income that would trigger a state income tax return filing requirement.
The specified dollar amounts are subject to cost of living adjustments.
For tax years during which a similar federal penalty applies, California will reduce the state penalty. It will reduce the penalty, but not below zero, by the amount of the federal penalty imposed for each month during which a state penalty applies.
Exemptions from imposition of penalty. California will not impose a penalty on an individual for a month in which any of the following apply:
- the individual’s required contribution, determined on an annual basis, for coverage for the month exceeds 8.3 percent of the individual’s household income for the tax year; or
- the individual does not have enough income to trigger a return filing requirement for the tax year.
California also will not impose a penalty with respect to any household member for a month if:
- the last day of the month occurred during a period in which the household member did not maintain minimum essential coverage, but
- the period was a continuous period of three months or less.
Information returns. Entities that provide required coverage to individuals must file information returns with the Franchise Tax Board. The returns are due annually by March 31. They must also provide written statements to covered individuals. The statements are due annually by January 31. An entity that fails to file a required information return may be subject to a penalty of $50 per covered individual for the tax year.
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