REGION 5 ETA WORKFORCE DEVELOPMENT LETTER NO. 003-05
TO: STATE WORKFORCE SYSTEM ADMINISTRATORS
FROM: Byron Zuidema
BYRON ZUIDEMA
Regional Administrator
SUBJECT: Health Coverage Tax Credit for Eligible Trade Adjustment Assistance (TAA) and Alternative Trade Adjustment Assistance (ATAA) Recipients
1. Purpose. This memorandum outlines the requirements related to eligibility verification for TAA/ATAA recipients as part of the Health Coverage Tax Credit (HCTC) program (e.g. generating eligibility letters in certain cases for purposes of the HCTC).
2. References. Unemployment Insurance Program Letters (UIPLs) No. 02-03, October 10, 2002 and 24-03, April 14, 2003; Training Employment Guidance Letter No. 10-02, October 10, 2002.
3. Links. This Letter is in the Region 5 website archive at: http://www.doleta.gov/regions/reg05/Pages/LibraryIssuances.cfm
4. Background. The Trade Act of 2002 created a Federal tax credit which subsidizes health coverage for displaced workers certified to receive certain trade adjustment assistance benefits and for individuals receiving benefits from the Pension Benefit Guaranty Corporation (PBGC). This Federally-funded tax credit, referred to as the HCTC, pays 65 percent of the premium that eligible individuals pay for qualified health coverage. The IRS is responsible for administering the HCTC program.
The HCTC first became available during the 2002 tax year (UIPL 02-03), and States were required to issue an Internal Revenue Service (IRS) form 8887 for tax year 2002 to individuals who received trade adjustment assistance (or would have been eligible to receive trade adjustment assistance had their unemployment insurance been exhausted) during December 2002.
The Act provides two options for eligible individuals to receive the credit:
a. In advance, on a monthly basis, to help them pay for health plan premiums as they become due; or
b. When they file their Federal tax return.
The guidance in this Letter addresses the latter option as it relates to the State Workforce Agencies' (SWAs) responsibilities in generating eligibility letters in certain cases for purposes of the HCTC.
5. Action Required. IRS Form 8887 is obsolete and is no longer used as documentation of TAA eligibility by individuals who claim the HCTC. Therefore, State Workforce Agencies are not required to issue any IRS forms for the 2004 tax year. However, they should be prepared to respond to individuals who have been denied the credit by IRS and need to verify and obtain proof of their eligibility, for the purpose of claiming the HCTC on their Federal tax return for the 2004 tax year.
It is the responsibility of SWAs to identify potentially eligible TAA and ATAA recipients, as defined in the Trade Act of 2002, and to report those individuals to the HCTC program, through the UI Interstate Connection (ICON) Network. Information received in ICON files from the States is used to verify individuals' potential eligibility for HCTC.
The HCTC program transmits the eligibility data it receives from the SWAs to the IRS for processing yearly tax returns during the first week in January. This eligibility data identifies all individuals SWAs and PBGC reported as eligible at any time between January and December during the tax year. The IRS uses this list to place an indicator on each taxpayer's record allowing the claim to be processed.
Individuals who claim the tax credit on their Federal tax return and who do not have an indicator on their records identifying them as eligible TAA, ATAA, or PBGC recipients, will receive a letter issued by the IRS disallowing the credit. The letter will state that the individual has not been identified as a potentially eligible recipient for HCTC by either a SWA or the PBGC (i.e., an eligible TAA/ATAA or PBGC recipient).
The letter provides general eligibility information for claiming the credit and it directs individuals who believe they are entitled to the credit to contact the United States Department of Labor, Employment and Training Administration Help Line on 1.877.872.5627 (1.877.US2.JOBS), or the PBGC for assistance in obtaining proof of TAA, ATAA or PBGC status.
It is anticipated that a significant number of the individuals who claim the credit may not be TAA, ATAA, or PBGC recipients. To reduce any unnecessary contacts to SWAs, the USDOL/ ETA help line will attempt to screen individuals. Only individuals who believe they were part of a trade-affected worker group and were receiving income support benefits during the year that they claimed the HCTC will be referred to the SWAs. If the help line is unable to verify this information, the individual will be referred to the appropriate State TAA coordinator for verification.
In some situations, individuals may meet the definition of an eligible TAA or ATAA recipient, yet their names might not appear in the ICON data file transmission. For taxpayers who are denied the credit by the IRS because the SWA did not send the record by the deadline and the taxpayer is later determined to be an eligible TAA/ATAA recipient, the SWA must send a record to the HCTC program via the ICON network. Updating the ICON file alone will not allow the taxpayers to obtain the credit once they have submitted their tax return(s) to the IRS. These taxpayers must have a written communication from the SWA confirming their eligibility to verify their HCTC claim with the IRS.
When an individual seeks verification of his/her TAA/ATAA eligibility status for the purpose of claiming the HCTC on his/her Federal tax return, SWAs should:
a. Review the State's records to determine if the individual was an eligible TAA or ATAA recipient during the tax year.
b. Issue a letter to the inquiring individual that will either affirm that:
i. the individual received TRA/ATAA benefits in the tax year; or
ii. agency records do not indicate that the individual received TRA/ATAA benefits during the tax year.
Attachment A and Attachment B provide sample letters that the State can use as templates to respond to the individual taxpayers.
c. Complete their review and issue a letter to the individual within one month of the request.
The SWA's letter affirming that the individual meets the eligibility status will advise the individual to send a copy of the verification letter confirming eligibility status for the tax year to:
IRS Service Center
310 Lowell Street
Andover, MA 01810
The letter will also advise individuals to enclose the initial correspondence that they received from the IRS disallowing the HCTC claim. The SWA should advise the individual to retain a copy of the SWA verification letter for his/her records.
If a record has not previously been created and transmitted over the ICON or if an incorrect record was transmitted, the SWA should transmit corrected records for each month of eligibility via ICON with the appropriate adjustment code in accordance with the instructions in UIPL NO. 24-03.
Funding from National Emergency Grants (NEGs) is available to cover administrative costs for activities described in this memorandum and any other activities related to the HCTC. States must submit requests for funding according to the special application procedures for NEGs as outlined in Training Employment Guidance Letter (TEGL) No. 10-02.
6. Contact. Questions or comments about this Letter may be directed to Richard
Skinner on 312.596.5442. Questions or comments about the format of this Letter may be directed to Tom Coyne on 312.596.5435.
8. Effective Date. Immediate
9. Expiration Date. Continuing
10. Attachments.
Attachment A - Notification Letter: Affirmative
Attachment B - Notification Letter: Denial
[Date]
[HCTC Candidate Name]
[Candidate Street Address]
[City, State, Zip Code]
[Candidate SSN]
Subject: Health Coverage Tax Credit for 2004
Dear [HCTC Candidate]:
On [date], the [Agency] received your inquiry concerning your eligible Trade Adjustment Assistance (TAA)/Alternative Trade Adjustment Assistance (ATAA) recipient status for purposes of claiming the Health Coverage Tax Credit (HCTC), as part of the Trade Adjustment Assistance Reform Act of 2002. We understand that your inquiry was prompted by a notice you received from the Internal Revenue Service (IRS) stating that it was unable to process your HCTC claim for Tax Year 2004 as its records do not indicate that you are eligible for this tax credit.
After a review of your claim, we have determined that you were an eligible [TAA/ATAA] recipient in 2004, and therefore you may be eligible to claim the HCTC in 2004. If you received such benefits during any month in 2004 and did not enroll in the advance Health Coverage Tax Credit (HCTC) program, you may claim the HCTC on your 2004 tax return for those months in which you were both eligible and had qualified health coverage.
It is important that you keep a copy of this letter for your records in order to obtain the credit that may be owed to you. Since you have already received correspondence from the IRS denying your claim for the HCTC, please send this letter to the IRS to provide documentation to verify your claim. Mail this letter, along with a copy of the IRS correspondence you received denying your HCTC claim, to the IRS Andover Service Center at:
IRS Service Center
310 Lowell Street
Andover, MA 01810
In order to minimize the possibility of additional delays in processing your tax credit, please confirm that your personal information at the top of the letter is correct. If any of the above information is incorrect, make the appropriate corrections before you send this letter to the IRS. Additionally, please alert your State Workforce Agency of any changes in your personal information.
If you have any questions about the HCTC program, please call the HCTC Customer Contact Center call toll-free at 1-866-628-HCTC (4282) or visit the Web at www.irs.gov (keyword: HCTC). For information about issues related to your federal tax return, call the IRS at 1-800-829-1040 or visit the Web at www.irs.gov.
Sincerely,
[SWA Official]
ATTACHMENT B
[Date]
[HCTC Candidate Name]
[Candidate Street Address]
[City, State, Zip]
[Candidate SSN]
Subject: Health Coverage Tax Credit for 2004
Dear [HCTC Candidate]:
This letter is in response to your inquiry concerning your eligibility status related to certain benefits under the Trade Adjustment Assistance (TAA) program for purposes of the Health Coverage Tax Credit (HCTC) for the 2004 tax year.
According to our records, you did not receive income support benefits under the Trade Adjustment Assistance (TAA) program, nor were you eligible to receive these benefits in 2004. You also did not receive Alternative Trade Adjustment Assistance (ATAA). As a result, you are not eligible to claim the HCTC on your Federal tax return for any months in tax year 2004.
If you receive either of the benefits mentioned above under the TAA or the ATAA programs in the future, you will become potentially eligible for the HCTC. At that time, the HCTC program will mail you information on how to register for the credit.
If you have any questions about the HCTC program, please call the HCTC Customer Contact Center toll-free at 1-866-628-HCTC (4282) or visit the Web at www.irs.gov (keyword: HCTC). For information about issues related to your federal tax return, call the IRS at 1-800-829-1040 or visit the Web at www.irs.gov.
Sincerely,
[SWA Official]
