Count ACA premium tax credit take-up as filing a return to claim it

changelog.d/aca-ptc-files-on-take-up.fixed.md

@@ -0,0 +1 @@
+Count a tax unit that takes up the ACA premium tax credit as filing a return to claim it (26 CFR 1.6011-8(a)), so the filing gate on aca_ptc and on the California, Maryland and New Mexico premium programs no longer zeroes the credit of a tax unit that takes it up but would not otherwise file; a tax unit that neither files nor takes up the credit still gets none.

policyengine_us/tests/core/test_aca_ptc_filing_gate_invariants.py

@@ -0,0 +1,127 @@
+"""Invariants for the filing gate on the ACA premium tax credit.
+
+`aca_ptc` is the credit for a tax unit that files a return on which it can
+claim it (`files_return_for_aca_ptc`): one that files for any reason
+(`tax_unit_is_filer`) or that takes up the credit, since a taxpayer who
+receives advance payments must file and reconcile them (26 CFR 1.6011-8(a)).
+Hypothesis draws tax units with any benchmark premium, household income and
+required contribution, and runs each in all four combinations of filing and
+take-up. Each drawn example is one simulation, calculated for both years.
+For every tax unit:
+
+1. Taking up the credit never lowers `aca_ptc`.
+2. For a tax unit that takes up the credit, `aca_ptc` and `assigned_aca_ptc`
+   are the same whether or not it would file for another reason.
+3. A tax unit that neither files nor takes up the credit gets no `aca_ptc`
+   (the filing gate added for IRS filer data).
+4. A tax unit that files gets the same `aca_ptc` whether or not it takes up
+   the credit.
+5. Taking up coverage when the credit is $0 is no reason to file: a non-filer
+   that takes up but whose credit before the filing gate is $0 does not file
+   for it (`files_return_for_aca_ptc` is false), so state programs that read
+   it stay closed.
+
+Why Python: the YAML cases pin one combination each with fixed amounts; this
+checks every combination of filing and take-up against drawn benchmark
+premiums, incomes and contribution rates in one vectorized simulation, so a
+gate that drops the take-up leg, or that makes the credit depend on filing for
+a unit that takes it up, fails whatever the amounts. Cost, measured locally
+(macOS, shared host): about 4.5 s of test calls, under 10 s in pytest and 26
+to 39 s wall time including the model import, peak memory footprint 1.6 GB. It runs in the
+`core` group of the rest Python tests.
+"""
+
+import numpy as np
+from hypothesis import HealthCheck, given, settings
+from hypothesis import strategies as st
+
+from policyengine_us import Simulation
+
+YEARS = (2025, 2026)
+# (tax_unit_is_filer, takes_up_aca_if_eligible) for the four copies of a unit.
+COMBINATIONS = [(False, False), (False, True), (True, False), (True, True)]
+
+units = st.tuples(
+    st.integers(0, 30_000),  # slcsp
+    st.integers(0, 120_000),  # aca_magi
+    st.sampled_from([0.0, 0.02, 0.04, 0.085, 0.0996]),
+)
+
+
+def simulate(rows):
+    people, tax_units, households = {}, {}, {}
+    groups = {"marital_units": {}, "spm_units": {}, "families": {}}
+    index = 0
+    for slcsp, magi, share in rows:
+        for files, takes_up in COMBINATIONS:
+            person, members = f"person_{index}", [f"person_{index}"]
+            people[person] = {
+                "age": {year: 40 for year in YEARS},
+                "is_aca_ptc_eligible": {year: True for year in YEARS},
+            }
+            tax_units[f"tax_unit_{index}"] = {
+                "members": members,
+                "slcsp": {year: slcsp for year in YEARS},
+                "aca_magi": {year: magi for year in YEARS},
+                "aca_required_contribution_percentage": {year: share for year in YEARS},
+                "tax_unit_is_filer": {year: files for year in YEARS},
+                "takes_up_aca_if_eligible": {year: takes_up for year in YEARS},
+            }
+            households[f"household_{index}"] = {
+                "members": members,
+                "state_code": {year: "TX" for year in YEARS},
+            }
+            for name in groups:
+                groups[name][f"{name}_{index}"] = {"members": members}
+            index += 1
+    return Simulation(
+        situation={
+            "people": people,
+            "tax_units": tax_units,
+            "households": households,
+            **groups,
+        }
+    )
+
+
+@settings(
+    max_examples=6,
+    deadline=None,
+    derandomize=True,
+    suppress_health_check=[HealthCheck.too_slow, HealthCheck.data_too_large],
+)
+@given(
+    st.lists(units, min_size=4, max_size=24).map(
+        # A unit whose credit is positive, so properties 1-4 compare something, and
+        # one whose credit is zero, so property 5 does.
+        lambda rows: [(12_000, 30_000, 0.04), (5_500, 60_000, 0.0996), *rows]
+    )
+)
+def test_aca_ptc_filing_gate(rows):
+    simulation = simulate(rows)
+    for year in YEARS:
+        ptc = np.asarray(simulation.calculate("aca_ptc", year)).reshape(-1, 4)
+        assigned = np.asarray(simulation.calculate("assigned_aca_ptc", year)).reshape(
+            -1, 4
+        )
+        neither, takes_up_only, files_only, both = ptc.T
+        assert (ptc >= 0).all()
+        assert (both > 0).any(), "no unit with a positive credit"
+        # Property 1.
+        assert (takes_up_only >= neither).all() and (both >= files_only).all()
+        # Property 2.
+        np.testing.assert_allclose(takes_up_only, both)
+        np.testing.assert_allclose(assigned[:, 1], assigned[:, 3])
+        # Property 3.
+        assert (neither == 0).all()
+        # Property 4.
+        np.testing.assert_allclose(files_only, both)
+        # Property 5.
+        before = np.asarray(
+            simulation.calculate("aca_ptc_before_filing_gate", year)
+        ).reshape(-1, 4)[:, 1]
+        files = np.asarray(
+            simulation.calculate("files_return_for_aca_ptc", year)
+        ).reshape(-1, 4)[:, 1]
+        np.testing.assert_array_equal(files, before > 0)
+        assert (before == 0).any() and (before > 0).any()

policyengine_us/tests/policy/baseline/gov/aca/ptc/aca_ptc.yaml

@@ -132,7 +132,7 @@
   output:
     aca_ptc: 200
 
-- name: ACA PTC is zero for non-filers (IRC 36B(a) requires filing Form 8962)
+- name: ACA PTC is zero for non-filers who do not take it up (IRC 36B(a) requires filing Form 8962)
   absolute_error_margin: 0.01
   period: 2025
   input:
@@ -141,9 +141,29 @@
     aca_magi: 25_000
     aca_required_contribution_percentage: 0.04
     tax_unit_is_filer: false
+    # Nor does it take up the federal credit, so it files no return to claim it.
+    takes_up_aca_if_eligible: false
   output:
     aca_ptc: 0
 
+- name: A tax unit that takes up the PTC files to claim it, even if it would not file otherwise
+  # 26 CFR 1.6011-8(a): a taxpayer who receives advance payments "must file
+  # an income tax return for that taxable year ... and reconcile the advance
+  # credit payments"; a credit not paid in advance is claimed on Form 8962.
+  absolute_error_margin: 0.01
+  period: 2025
+  input:
+    is_aca_ptc_eligible: true
+    slcsp: 1_200
+    aca_magi: 25_000
+    aca_required_contribution_percentage: 0.04
+    tax_unit_is_filer: false
+    takes_up_aca_if_eligible: true
+  output:
+    files_return_for_aca_ptc: true
+    aca_ptc: 200  # 1200 - 0.04 * 25000 = 200
+    assigned_aca_ptc: 200
+
 - name: ACA PTC is paid to eligible filers (regression of filer gate)
   absolute_error_margin: 0.01
   period: 2025

policyengine_us/tests/policy/baseline/gov/aca/ptc/files_return_for_aca_ptc.yaml

@@ -0,0 +1,74 @@
+# A tax unit files a return that can claim the premium tax credit if it files
+# for any reason, or if it takes up the credit (26 CFR 1.6011-8(a); Form 1040
+# instructions, Chart C, item 5).
+
+- name: A filer that does not take up the credit
+  period: 2025
+  input:
+    tax_unit_is_filer: true
+    takes_up_aca_if_eligible: false
+  output:
+    files_return_for_aca_ptc: true
+
+- name: A non-filer that takes up a positive credit
+  period: 2025
+  input:
+    is_aca_ptc_eligible: true
+    slcsp: 1_200
+    aca_magi: 25_000
+    aca_required_contribution_percentage: 0.04
+    tax_unit_is_filer: false
+    takes_up_aca_if_eligible: true
+  output:
+    aca_ptc_before_filing_gate: 200  # 1200 - 0.04 * 25000
+    files_return_for_aca_ptc: true
+
+- name: A non-filer that takes up coverage when the credit is zero does not file for it
+  # $5,500 benchmark less 9.96% of $60,000 ($5,976) is below zero: there is
+  # no credit to claim and no advance payment to reconcile.
+  period: 2026
+  input:
+    is_aca_ptc_eligible: true
+    slcsp: 5_500
+    aca_magi: 60_000
+    aca_required_contribution_percentage: 0.0996
+    tax_unit_is_filer: false
+    takes_up_aca_if_eligible: true
+  output:
+    aca_ptc_before_filing_gate: 0
+    files_return_for_aca_ptc: false
+
+- name: A non-filer that does not take up the credit
+  period: 2025
+  input:
+    tax_unit_is_filer: false
+    takes_up_aca_if_eligible: false
+  output:
+    files_return_for_aca_ptc: false
+
+- name: Retired couple with only Social Security is not required to file but files to claim the credit
+  # Social Security of $30,000 and nothing else: none of it is taxable (the
+  # provisional income of $15,000 is under the $32,000 joint base amount), so
+  # gross income is zero and no return is required, and there is no earned
+  # income for an EITC. Taking up the credit makes it a filer for the credit.
+  period: 2025
+  input:
+    people:
+      head:
+        age: 62
+        social_security_retirement: 15_000
+      spouse:
+        age: 62
+        social_security_retirement: 15_000
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: TX
+  output:
+    taxable_social_security: [0, 0]
+    tax_unit_is_required_to_file: false
+    tax_unit_is_filer: false
+    files_return_for_aca_ptc: true

policyengine_us/tests/policy/baseline/gov/states/ca/hbex/premium_subsidy/ca_premium_subsidy_eligible.yaml

@@ -276,6 +276,8 @@
         members: [person1]
         aca_magi_fraction: 1.40
         tax_unit_is_filer: false
+        # Nor does it take up the federal credit, so it files no return to claim it.
+        takes_up_aca_if_eligible: false
     households:
       household:
         members: [person1]
@@ -401,3 +403,79 @@
         state_code: CA
   output:
     ca_premium_subsidy_eligible: false
+
+- name: Case 13b, an in-band CA unit that takes up the federal credit files and is eligible.
+  # Case 13 with take-up true and a positive federal credit ($6,000 benchmark
+  # less 4.19% of $22,000 = $5,078.20): a tax unit that takes up the credit
+  # files a return to claim or reconcile it (26 CFR 1.6011-8(a)), so the
+  # filing gate passes.
+  period: 2026
+  input:
+    people:
+      person1:
+        age: 40
+        is_aca_ptc_eligible: true
+    tax_units:
+      tax_unit:
+        members: [person1]
+        aca_magi_fraction: 1.40
+        slcsp: 6_000
+        aca_magi: 22_000
+        aca_required_contribution_percentage: 0.0419
+        tax_unit_is_filer: false
+        takes_up_aca_if_eligible: true
+    households:
+      household:
+        members: [person1]
+        state_code: CA
+  output:
+    ca_premium_subsidy_eligible: true
+
+- name: Case 13c, an in-band CA non-filer that takes up coverage with a zero federal credit is ineligible.
+  # The federal contribution (4% of $22,000 = $880) exceeds the $500
+  # benchmark, so there is no federal credit and no reason to file. Filer twin:
+  # Case 13d.
+  period: 2026
+  input:
+    people:
+      person1:
+        age: 40
+        is_aca_ptc_eligible: true
+    tax_units:
+      tax_unit:
+        members: [person1]
+        aca_magi_fraction: 1.40
+        slcsp: 500
+        aca_magi: 22_000
+        aca_required_contribution_percentage: 0.04
+        tax_unit_is_filer: false
+        takes_up_aca_if_eligible: true
+    households:
+      household:
+        members: [person1]
+        state_code: CA
+  output:
+    ca_premium_subsidy_eligible: false
+
+- name: Case 13d, the same unit filing for another reason is eligible.
+  period: 2026
+  input:
+    people:
+      person1:
+        age: 40
+        is_aca_ptc_eligible: true
+    tax_units:
+      tax_unit:
+        members: [person1]
+        aca_magi_fraction: 1.40
+        slcsp: 500
+        aca_magi: 22_000
+        aca_required_contribution_percentage: 0.04
+        tax_unit_is_filer: true
+        takes_up_aca_if_eligible: true
+    households:
+      household:
+        members: [person1]
+        state_code: CA
+  output:
+    ca_premium_subsidy_eligible: true