n-18-84.pdf

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Guidance under §§ 36B, 5000A, and 6011 on the suspension of personal exemption
deductions

Notice 2018-84

PURPOSE
Section 11041 of the Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054,
2082 (the Act), added § 151(d)(5) to the Internal Revenue Code (Code). Section
151(d)(5) reduces the amount of the personal exemption deduction to zero for taxable
years beginning after December 31, 2017, and before January 1, 2026. This notice
provides interim guidance clarifying how the reduction of the personal exemption
deduction to zero in § 151(d)(5) applies for purposes of certain rules under §§ 36B and
6011 relating to the premium tax credit and under § 5000A relating to the individual
shared responsibility provision. This notice also announces that the Department of the
Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to
amend the regulations under §§ 36B and 6011 to clarify the application of § 151(d)(5).
Until further guidance is issued, the interim guidance described in this notice applies for
purposes of the regulations under §§ 36B and 5000A and for purposes of § 1.6011-8(a).

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BACKGROUND
Section 151 generally allows a taxpayer to claim a personal exemption deduction
for the taxpayer, the taxpayer’s spouse, and any dependents, based on the exemption
amount defined in § 151(d). For tax years prior to 2018, a taxpayer claimed a personal
exemption deduction for an individual by putting the individual’s name and taxpayer
identification number (TIN) on the taxpayer’s income tax return, multiplying the number
of allowed exemptions by the exemption amount, and entering that amount on the tax
return.
Section 11041 of the Act added § 151(d)(5) to the Code. Section 151(d)(5)(A)
provides that, for taxable years beginning after December 31, 2017, and before January
1, 2026, the term “exemption amount” means zero. Section 151(d)(5)(B) provides that
the reduction of the exemption amount to zero “shall not be taken into account in
determining whether a [personal exemption] deduction is allowed or allowable, or
whether a taxpayer is entitled to a deduction under this section.” Thus, even though the
amount of the personal exemption deduction is reduced to zero, taxpayers are still
allowed personal exemption deductions under § 151 for purposes of other provisions of
the Code. See H.R. Rep. No. 115-466 at 203 n.16 (Conf. Rep.) (2017) (“The provision
[amendments to § 151] also clarifies that, for purposes of taxable years in which the
personal exemption is reduced to zero, this should not alter the operation of those
provisions of the Code which refer to a taxpayer allowed a deduction (or an individual
with respect to whom a taxpayer is allowed a deduction) under section 151.”).
Section 36B allows a premium tax credit to eligible individuals who enroll
themselves, their spouse, or any dependent (as defined in § 152) in a qualified health

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plan through an Exchange, and § 6011 provides general rules related to income tax
return filing requirements. The regulations under §§ 36B and 6011 include rules that
apply based on whether a taxpayer claims or claimed a personal exemption deduction
under § 151 for an individual. These rules affect eligibility for the premium tax credit,
computation of the premium tax credit, reconciliation of advance payments of the
premium tax credit, and income tax return filing requirements related to the premium tax
credit. Specifically, references such as “claim a personal exemption deduction,” “claims
a personal exemption deduction,” or “claimed as a personal exemption deduction,” are
included in §§ 1.36B-1(d); 1.36B-2(c)(4); 1.36B-4(a)(1)(ii)(B)(1), (a)(1)(ii)(B)(2),
(a)(1)(ii)(C), and (a)(4); and § 1.6011-8(a). The Treasury Department and the IRS
intend to amend the regulations under §§ 36B and 6011 to clarify the meaning of
claiming a personal exemption deduction for the taxable years for which the exemption
amount is reduced to zero.
Section 5000A provides that if a taxpayer, or dependent of the taxpayer who is
an applicable individual for whom the taxpayer is liable, is without minimum essential
coverage or a coverage exemption for one or more months in a taxable year, the
taxpayer must include an individual shared responsibility payment when filing his or her
federal income tax return. The regulations under § 5000A include rules that apply
based on whether a taxpayer claims or claimed a personal exemption deduction under
§ 151 for an individual. Specifically, § 1.5000A-1(d)(4) refers to a taxpayer who “claims
a deduction for a personal exemption,” and § 1.5000A-3(e)(3)(ii)(B) refers to
“an
individual for whom a personal exemption deduction ... is claimed.”

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Section 11081 of the Act reduced the amount of the shared responsibility
payment to zero for months beginning after December 31, 2018. Accordingly, although
this notice provides interim guidance related to § 5000A, the Treasury Department and
the IRS do not intend to propose regulations under § 5000A.
INTERIM GUIDANCE
Because the Act reduces the exemption amount to zero, taxpayers will no longer
claim a personal exemption deduction on their individual income tax returns by listing an
individual’s name and TIN, multiplying the number of allowed exemptions by the
exemption amount, and entering that amount on their tax return. Accordingly, taxpayers
may have questions about what it means to claim a personal exemption deduction for
purposes of the premium tax credit and the individual shared responsibility provision.
Until further guidance is issued, the following rules apply for purposes of the regulations
under §§ 36B and 5000A and for purposes of § 1.6011-8(a):
(1) A taxpayer is considered to have claimed a personal exemption deduction for
himself or herself for a taxable year if the taxpayer files an income tax return
for the year and does not qualify as a dependent of another taxpayer under
§ 152 for the year;
(2) A taxpayer is considered to have claimed a personal exemption deduction for
an individual other than the taxpayer if the taxpayer is allowed a personal
exemption deduction for the individual (taking into account § 151(d)(5)(B))
and lists the individual’s name and TIN on the Form 1040, U.S. Individual
Income Tax Return, or Form 1040NR, U.S. Nonresident Alien Income Tax
Return, the taxpayer files for the year.

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INFERENCE
No inference should be drawn from any provision of this notice concerning any
other provision of the Act or any other section of the Code.
EFFECTIVE/APPLICABILITY DATE
This notice applies to taxable years beginning in 2018.
DRAFTING INFORMATION
The principal author of this notice is Lisa Mojiri-Azad of the Office of Chief
Counsel (Income Tax and Accounting). For further information regarding this notice,
contact Ms. Mojiri-Azad or Steve Toomey at 202-317-4718 (not a toll-free number).