New Jersey Enacts Shared Responsibility Healthcare Tax
On May 30, 2018, New Jersey Governor Phil Murphy signed legislation A. 3380 into law. Known as the “New Jersey Health Insurance Market Preservation Act,” this legislation now creates a state level individual health insurance mandate.
The state legislation is intended to counter a change that was made under the federal Tax Cuts and Jobs Act (TCJA) to the post-2018 federal penalty percentage for failure to meet the individual mandate under the federal Affordable Care Act (ACA). The ACA reset this percentage to zero percent. The New Jersey law now effectively reverses that federal policy.
Effective January 1, 2019, New Jersey residents will be required to maintain health care coverage that meets the minimum coverage thresholds in effect under the individual mandate requirements of the ACA, or face a New Jersey-imposed shared responsibility tax if they fail to do so. After 2018, New Jersey residents without health care insurance coverage meeting the applicable ACA individual mandate requirements, will be subject to a New Jersey state tax. This tax will be imposed at the penalty rate that was in effect under the ACA pursuant to Section 5000A of the Internal Revenue Code prior to the change made by the TCJA.
With certain exceptions, the amount of the New Jersey shared responsibility tax will now be the same as the federal penalty amount under the ACA. The state revenues from this tax are to be used as part of a New Jersey state reinsurance program designed to help health insurers in New Jersey make payments on certain of their most costly claims. The new law also requires the New Jersey treasurer to adopt regulations necessary to reflect the differences between the new state law and the federal individual mandate provisions of the ACA. Additionally, applicable entities, such as employers and insurers that provide minimum essential health care coverage to individuals in New Jersey, will be required to submit information about those individuals and their health insurance coverage to the state treasurer.
However, the New Jersey tax will not apply to any individual whose gross taxable income is below the minimum amount for determining whether a New Jersey Gross Income Tax return is required, i.e. $10,000 for single filers, or $20,000 for married filing joint filers.
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