In-home care payments qualified for income exclusion

Plain-English summary

A state department asked how to treat payments to individual providers who care for eligible aged, blind, or disabled recipients in the providers' homes under four in-home supportive-care programs. The IRS found that the programs' purpose and design resembled foster care programs and that the payments resembled difficulty-of-care payments. It ruled that payments under all four programs were excludable from the providers' gross income under IRC § 131 when the eligible recipient lived in the provider's home. The department therefore did not have to report those payments under IRC §§ 6041 or 6051 as wages subject to income tax or income tax withholding. The payments could still be wages subject to FICA and FUTA taxes unless an exception applied.

Ruling snapshot

• Question: Did payments under four state in-home supportive-care programs qualify as excludable difficulty-of-care payments when the care recipient lived in the provider's home?
• Outcome: Approved for all four programs
• Key authorities: IRC §§ 61, 131, 3121, 3306, 3402, 6041, and 6051; Notice 2014-7

Full text (IRS public release)

 Internal Revenue Service                                    Department of the Treasury
                                                             Washington, DC 20224

Number: 201623003                                            Third Party Communication: None
Release Date: 6/3/2016                                       Date of Communication: Not Applicable
Index Numbers: 131.02-00,
                                                             Person To Contact:
6041.08-00, 6051.00-00
                                                              -----------------------, ID No. ------------------
                                                             ----------------------------------------------------
                                                             Telephone Number:
                                                             --------------------
                                                             Refer Reply To:
----- ----------------------                                 CC:ITA:4
---------------------                                        PLR-127776-15
------------------------------------------------------       Date:
------------------------------------                         March 01, 2016
--------------------------------


 Legend

 Taxpayer = -----------------------------------------------------------------
 State = ------------
 State Statute = ------------------------------------------------------------------------------------------------
 -----------------------------------------------------------------------------------------------------------
 State Statute §§ p-q = --------------------------------------------------------
 State Statute § r = ----------------------------------------------
 State Statute § s = ------------------------------------------------
 State Statute § t = ------------------------------------------------
 Manual §§ u-v = ----------------------------------------------------------------------------------------------
 -----------------------------------------------------------------------------------------------------------
 State Statute § w = --------------------------------------------
 State Statute § x = ------------------------------------------------
 Program A = --------------------------------------------
 Program B = --------------------------------------------------------
 Program C = ---------------------------------------------
 Program D = -----------------------------------------------------
 Program E = ------------------------
 Department = -------------------------------------------------------------
 State Plan Amendment y = -----------------------------------------
 State Plan Amendment z = ---------------------------------------------

 Dear ---------------
PLR-127776-15                                2

The Taxpayer, a department of State, requested rulings on whether certain payments to
individual care providers under State’s in-home supportive care programs will be treated
as difficulty of care payments excludable from the gross income of the provider under
section 131 of the Internal Revenue Code (Code), and, therefore, the Taxpayer is not
required under section 6041 or 6051 to report the payments as wages subject to income
tax.

The Taxpayer is responsible for directing and overseeing State’s in-home supportive
care programs. These programs assist qualifying aged, blind, or disabled persons who
are unable to perform one or more activities of daily living independently and who
cannot remain safely at home without assistance. See State Statute §§ p-q, § r, § s and
§ t; and Manual §§ u-v.

State Statute § w requires the Taxpayer to perform the duties and obligations, including
making tax returns and withholding tax, of the care recipient as employer under State
Statute § w.

The Taxpayer requested rulings regarding payments made to individual care providers
under the following programs when the care recipient lives in the care provider’s home:

   (1) State’s program pursuant to section 1905(a)(24) of the Social Security Act (SSA),
       known as Program A;
   (2) State’s program pursuant to section 1915(j) of the SSA, known as Program B;
   (3) State’s program pursuant to section 1915(k) of the SSA, known as Program C,
       and
   (4) State’s state-funded residual program, known as Program D.

The Taxpayer requested rulings that payments made under the above programs be
treated the same as the payments described in Notice 2014-7, 2014-4 I.R.B. 445,
available at www.irs.gov/irb/2014-4_IRB/ar06.html, with the result that it may look to the
Q&As on the Notice for information on its reporting and withholding obligations.

Specifically, the Taxpayer requested the following rulings:

      (1) Medicaid payments made under Program A, pursuant to section 1905 of the
      SSA, to an individual care provider for in-home supportive care provided for an
      eligible recipient (whether related or unrelated) who resides in the provider’s home
      will be treated as difficulty of care payments excludable from the gross income of
      the provider under section 131 of Code, and, therefore, the Taxpayer is not
      required under section 6041 or 6051 to report these payments as wages to the
      care provider subject to income tax. Further, the Taxpayer may treat these
      payments the same as the excludable payments described in Notice 2014-7, and
      it may look to the Q&As on the Notice for information on its reporting and
      withholding obligations.
PLR-127776-15                                3


      (2) Medicaid payments made under Program B, pursuant to section 1915(j) of the
      SSA, to an individual care provider for in-home supportive care provided for an
      eligible recipient (whether related or unrelated) who resides in the provider’s home
      will be treated as difficulty of care payments excludable from the gross income of
      the provider under section 131 of the Code, and, therefore, the Taxpayer is not
      required under section 6041 or 6051 to report these payments as wages subject
      to income tax. Further, the Taxpayer may treat these payments the same as the
      excludable payments described in Notice 2014-7, and it may look to the Q&As on
      the Notice for information on its reporting and withholding obligations.

      (3) Medicaid payments made under Program C, pursuant to section 1915(k) of the
      SSA, to an individual care provider for in-home supportive care provided for an
      eligible recipient (whether related or unrelated) who resides in the care provider’s
      home will be treated as difficulty of care payments excludable from the gross
      income of the provider under section 131 of the Code, and, therefore, the
      Taxpayer is not required under section 6041 or 6051 to report these payments as
      wages subject to income tax. Further, the Taxpayer may treat these payments
      the same as the excludable payments described in Notice 2014-7, and it may look
      to the Q&As on the Notice for information on its reporting and withholding
      obligations.

      (4) State-funded payments made under Program D to an individual care provider
      for in-home supportive care provided for an eligible recipient (whether related or
      unrelated) who resides with the provider will be treated as difficulty of care
      payments excludable from the gross income of the provider under section 131 of
      the Code, and, therefore, the Taxpayer is not required under section 6041 or 6051
      to report these payments as wages subject to income tax. Further, the Taxpayer
      may treat these payments the same as the excludable payments described in
      Notice 2014-7, and it may look to the Q&As on the Notice for information on its
      reporting and withholding obligations.

I. BACKGROUND

State offers in-home supportive care to aged, blind, or disabled individuals under three
Medicaid programs funded by State and the federal government and a fourth program
funded solely by State. The comprehensive federal Medicaid program in State is
Program E, which is administered by the Department. The Department is the
designated single state agency for the administration and supervision of Program E.
The Department has delegated the administration of its in-home supportive care
programs to the Taxpayer.

All four of State’s in-home supportive care programs are administered by the county
welfare departments (CWDs) under the direction and oversight of the Taxpayer, a
PLR-127776-15                                  4

department of State. For all four programs, a county processes applications for
assistance, determines income and resource eligibility, assesses the type and level of
care necessary for an individual to safely remain at home, authorizes services under the
individual’s plan of care, and implements the care provider enrollment requirements.
For all four programs, the Taxpayer facilitates the federal and state funding to the
CWDs, and the Taxpayer operates the information and payroll system for all four
programs. For all four programs, care recipients (as employers) and individual care
providers (as employees) verify, sign, and submit bi-monthly timesheets. For all four
programs, the Taxpayer is required to perform all the federal tax-related duties and
obligations that the care recipient would have been required to perform as the employer
of the care provider.

II. PROGRAM DESCRIPTIONS

Title XIX of the Social Security Act (SSA) authorizes federal grants to states for medical
assistance to low-income persons who are age 65 or over, blind, or disabled. These
medical assistance programs are jointly financed by the federal and state governments
and are administered by the states. Within broad federal rules, each state decides
eligible groups, types and range of services, payment levels for services, and
administrative and operating procedures. See 42 CFR § 430.0.

A. State Program A pursuant to Section 1905 of the SSA

Section 1905(a)(24) of the SSA, 42 USC § 1396d(a)(24), includes in the definition of
“medical assistance” personal care services furnished to an individual who is not an
inpatient or resident of a hospital, nursing facility, intermediate care facility for persons
with intellectual disabilities, or institution for mental disease that are (A) authorized by a
physician in accordance with a plan of treatment or (at the option of the state) otherwise
authorized for the individual in accordance with a service plan approved by the state,
(B) provided by a qualified individual who is not a member of the individual’s family, and
(C) provided in the home or other permissible location.

Program A, pursuant to section 1905(a)(24) of the SSA and State Statute § r, includes
as “medical assistance” certain personal care services and ancillary services that are
subordinate to personal care services. To be eligible for these services, the individual
must be categorically needy and have a chronic, disabling condition that causes
functional impairment that is expected to last at least 12 consecutive months or that is
expected to result in death within 12 months and must be unable to remain safely at
home without these services. As a condition of receiving services under Program A, the
applicant must obtain a certification from a licensed health care professional that the
applicant is unable to perform some activities of daily living and that, without assistance
with activities of daily living, the applicant is at risk of placement in out-of-home care.
See State Statute § x. For Program A, a care provider may not be a spouse of the care
PLR-127776-15                                  5

recipient or the parent of a care recipient who is a minor child (definition of family
member). See State Statute § r.

B. Program B pursuant to Section 1915(j) of the SSA

Section 1915(j) of the SSA, 42 USC 1396n(j), includes as “medical assistance” payment
for part or all of the cost of self-directed personal assistance services (other than room
and board) under the state plan that are provided pursuant to a written plan of care to
individuals for whom there has been a determination that, but for the provision of such
services, the individuals would require and receive personal care services under the
state plan, or home and community-based services provided pursuant to a waiver under
subsection (c) of section 1915 of the SSA. Self-directed personal assistance services
may not be provided under subsection (j) to individuals who reside in a home or
property that is owned, operated, or controlled by a provider of services who is not
related by blood or marriage.

For purposes of section 1915(j) of the SSA, “self-directed personal assistance services”
means personal care services and related services, or home and community-based
services otherwise available under the state plan or subsection (c) of section 1915 of
the SSA, that are provided to an eligible participant under an approved self-directed
service plan. At the election of the state, a participant may choose to use any individual
capable of providing the assigned tasks, including a legally liable relative, as a paid
provider of the services.

Pursuant to State Statute § s, State amended its Medicaid plan under Title XIX of the
SSA to include a section 1915(j) program, known as Program B. See State Statute § s;
State Plan Amendment y. As a condition of receiving services under Program B, the
applicant must obtain a certification from a licensed health care professional that the
applicant is unable to perform some activities of daily living and that, without assistance
with activities of daily living, the applicant is at risk of placement in out-of-home care.
See State Statute § x. State allows a legally liable relative to be a paid provider. See
State Plan Amendment y.

C. State Program C pursuant to Section 1915(k) of the SSA

Section 1915(k) of the SSA, 42 USC § 1396n(k), includes in the definition of “medical
assistance” certain home and community-based attendant services and supports for
individuals who are eligible for medical assistance under the state plan and whose
income does not exceed 150 percent of the poverty line or, if greater, the income level
applicable for an individual who has been determined to require an institutional level of
care to be eligible for nursing facility services under the state plan, and for whom that
there has been a determination that, but for the provision of such services, the individual
would require the level of care provided in a hospital, a nursing facility, an intermediate
PLR-127776-15                                   6

care facility for persons with intellectual disabilities, or an institution for mental disease,
the cost of which could be reimbursed under the state plan.

Section 1915(k) of the SSA generally includes as “medical assistance” home and
community-based attendant services and supports to eligible individuals, as needed, to
assist in accomplishing activities of daily living, instrumental activities of daily living, and
health-related tasks through hands-on assistance, supervision, or cueing. A family
member may be a paid provider. See 42 USC § 1396n(k)(1)(A)(iv)(III).

Pursuant to State Statute § t, State amended its Medicaid plan under Title XIX of the
SSA to include a section 1915(k) program, known as Program C. See State Statute § t;
State Plan Amendment z. Program C requires, in part, a determination, at least
annually, that, in the absence of home and community-based attendant services and
supports, the individual would require the level of care furnished in a hospital, a nursing
facility, an intermediate care facility for individuals with intellectual disabilities, an
institution providing psychiatric services for individuals under age 21, or an institution for
mental diseases for individuals age 65 or over, the cost of which could be reimbursed
under the State plan.

D. Program D State-funded Residual Program

State Statute §§ p-q describe the residual in-home supportive care program funded
solely by State, known as Program D. Program D provides in-home supportive care for
aged, blind, or disabled persons, who cannot remain safely at home without assistance
and who are not eligible for a State/Federal Medicaid program. Supportive services
include personal care services and other supportive services that enable the care
recipient to live at home. As a condition of receiving services under Program D, the
applicant must obtain a certification from a licensed health care professional that the
applicant is unable to perform some activities of daily living and that, without assistance
with activities of daily living, the applicant is at risk of placement in out-of-home care.
See State Statute § x.

III. LAW

Section 61(a) of the Code provides that, except as otherwise provided, gross income
means income from whatever source derived, including compensation for services.

Section 131(a) of the Code excludes qualified foster care payments from the gross
income of a foster care provider.

Section 131(b)(1) of the Code defines a qualified foster care payment, in part, as any
payment under a foster care program of a state or a political subdivision of a state that
is either (1) paid to the foster care provider for caring for a qualified foster individual in
the foster care provider’s home, or (2) a difficulty of care payment.
PLR-127776-15                                 7


Section 131(b)(2) of the Code defines a qualified foster individual as any individual who
is living in a foster family home in which the individual was placed by an agency of a
state or a political subdivision of a state or by a qualified foster care placement agency.

Section 131(b)(3) of the Code defines a qualified foster care placement agency, in part,
as a placement agency that is licensed or certified for the foster care program of a state
or a political subdivision of a state.

Section 131(c) of the Code defines difficulty of care payments as compensation to a
foster care provider for the additional care required because the qualified foster
individual has a physical, mental, or emotional handicap. The provider must provide the
care in the provider’s foster family home, a state must determine the need for this
compensation, and the payor must designate the compensation for this purpose. In the
case of any foster home, difficulty of care payments are not excludable to the extent that
the payments are for more than 10 qualified foster individuals who have not attained
age 19 or 5 qualified foster individuals who have attained age 19. See § 131(c)(2).

Notice 2014-7 provides that the Internal Revenue Service (Service) will treat qualified
Medicaid waiver payments as difficulty of care payments under section 131(c) of the
Code that are excludable from the gross income of the individual care provider. The
Notice defines qualified Medicaid waiver payments as payments by a state, a political
subdivision of a state, or an entity that is a certified Medicaid provider, under a Medicaid
waiver program to an individual care provider for nonmedical support services provided
under a plan of care to an eligible individual (whether related or unrelated) living in the
individual care provider’s home. The Notice addresses only payments under a state
Medicaid Home and Community-Based Services waiver program under section 1915(c)
of the SSA.

Q&A1at www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-
Excludable-From-Income, provides that whether the Service will treat payments
received by an individual care provider under a state program other than a section
1915(c) program as difficulty of care payments excludable from the gross income of the
provider under section 131 of the Code will depend on the nature of the payments and
the purpose and design of the program.

Section 3402(a) of the Code, relating to income tax withholding, generally requires
every employer making a payment of wages to deduct and withhold upon those wages
a tax determined in accordance with prescribed tables or computational procedures.

Section 6041(a) of the Code provides, in part, that all persons engaged in a trade or
business and making payments in the course of the trade or business to another person
of wages or other fixed or determinable gains, profits, and income of $600 or more in
any taxable year must render a return of information in the form and manner prescribed
PLR-127776-15                                8

by regulations.

Section 1.6041-1(b) of the Income Tax Regulations (regulations) clarifies that the term
"all persons engaged in a trade or business" includes states and their subdivisions.

Section 1.6041-1(c) of the regulations provides that income is fixed when it is to be paid
in amounts definitely predetermined and that it is determinable whenever there is a
basis of calculation by which the amount to be paid may be ascertained.

Section 1.6041-2(a) of the regulations provides that wages, as defined in section 3401,
paid to an employee must be reported on Form W-2, “Wage and Tax Statement.”

Section 6051(a) of the Code provides that employers must furnish the tax return copy
and the employee's copy of Form W-2 to employees for remuneration paid during the
calendar year. The Form W-2 must show, among other information, the total amount of
wages paid subject to withholding of income tax, the total amount of wages paid subject
to social security and Medicare taxes, and the total amounts of income tax and social
security and Medicare taxes deducted and withheld. Section 6051(d) of the Code and
section 31.6051-2(a) of the Employment Tax Regulations provide that employers must
file a copy of the Form W-2 with the Social Security Administration.

IV. ANALYSIS

A. Payments under State’s In-Home Supportive Care Programs Will Be Treated as
Excludable Difficulty of Care Payments

The underlying rationale in Notice 2014-7 for treating certain Medicaid waiver payments,
pursuant to section 1915(c) of the SSA, as difficulty of care payments excludable from
the gross income of the provider under section 131 of the Code is the similarity in the
purpose and design of Medicaid waiver programs and foster care programs. The Notice
provides:

      Section 131 does not explicitly address whether payments under Medicaid
      waiver programs are qualified foster care payments. Medicaid waiver programs
      and state foster care programs, however, share similar oversight and purposes.
      The purpose of Medicaid waiver programs and the legislative history of § 131
      reflect the fact that home care programs prevent the institutionalization of
      individuals with physical, mental, or emotional handicaps. See 128 Cong. Rec.
      26905 (1982) (stating that “[difficulty of care payments] are not income to the
      [foster] parents, regardless of whether they, dollar for dollar only cover expenses.
      [These] parents are saving the taxpayers’ money by preventing
      institutionalization of these children.”); S. Rep. No. 97–139 at 481 (1981)
      (describing the purpose of the amendment to 42 USC §1396n, allowing Medicaid
      waivers for home and community-based services, as “[permitting] the Secretary
PLR-127776-15                                  9

       to waive the current definition of covered [M]edicaid services to include certain
       nonmedical support services, other than room and board, which are provided
       pursuant to a plan of care to an individual otherwise at risk of being
       institutionalized and who would, in the absence of such services be
       institutionalized”). Both programs require state approval and oversight of the
       care of the individual in the provider’s home. The programs share the objective
       of enabling individuals who otherwise would be institutionalized to live in a family
       home setting rather than in an institution, and both difficulty of care payments
       and Medicaid waiver payments compensate for the additional care required.

Whether certain payments under State’s in-home supportive care programs will be
treated as difficulty of care payments excludable from the gross income of the provider
under section 131 of the Code depends on an analysis of the purpose and design of the
programs and the nature of the payments.

1. Purpose of State’s In-Home Supportive Care Programs

Eligibility for State’s four in-home supportive care programs varies by program, but all
programs have the shared purpose of preventing institutionalization and enabling an
eligible individual to be cared for in a home setting. Both Program C, pursuant to
section 1915(k) of the SSA and State Statute § t, and a Medicaid waiver program under
section 1915(c) of the SSA require a determination that the individual needs an
institutional level of care. Specifically, section 1915(k)(1) requires a determination that,
but for the provision of home and community-based attendant services and supports,
the individual would require care in a hospital, a nursing facility, an intermediate care
facility, or an institution for mental diseases.

Programs A, B, and D provide for care to individuals who are at risk of
institutionalization. As a condition of receiving in-home supportive care, these programs
require that an applicant or recipient obtain a certification from a licensed health care
professional that the individual is unable to perform one or more activities of daily living
independently and that, without services to assist the individual with activities of daily
living, the individual is at risk of placement in out-of-home care. See State Statute § x.
The certification must include, at a minimum, both of the following: (1) a statement that
the individual is unable to perform independently one or more activities of daily living,
and that one or more of the services available under the in-home supportive care
program is recommended to prevent the need for an out-of-home placement; and (2) a
description of any condition or functional limitation that has resulted in, or contributed to,
the need for assistance. See State Statute § x.

Thus, the purpose of all four of State’s in-home supportive care programs is similar to
the purpose of foster care programs as stated in Notice 2014-7: That is, both State’s in-
home supportive care programs and foster care programs prevent institutionalization of
PLR-127776-15                                 10

individuals with physical, mental, or emotional handicaps and enable such individuals to
be cared for in a home setting.

2. Design of State’s In-Home Supportive Care Programs

All four of State’s in-home supportive care programs are administered by the county
welfare departments (CWDs) under the direction and oversight of the Taxpayer, a
department of State. For all four programs, a county processes applications for
assistance, determines income and resource eligibility, assesses the type and level of
care necessary for an individual to remain safely at home, authorizes services under the
individual’s plan of care, and implements the care provider enrollment requirements.

Thus, the design of all four of State’s in-home supportive care programs is similar to the
design of foster care programs: That is, both State’s in-home supportive care programs
and foster care programs require state approval and oversight of the care in the
provider’s home.

3. Nature of Payments under State’s In-Home Supportive Care Programs

The nature of the payments is similar under all four of State’s in-home supportive care
programs. For example, Program C provides for home and community-based attendant
services and supports that include assistance with the activities of daily living, the
instrumental activities of daily living, and health-related tasks. Similarly, the services
provided under Program A and Program B include personal care services and ancillary
services subordinate to personal care services.

The nature of the payments to individual care providers under all four of State’s in-home
supportive care programs is similar to the nature of difficulty of care payments. Difficulty
of care payments compensate a provider for the additional care required because an
individual has a physical, mental, or emotional handicap. Similarly, an in-home
supportive care provider receives compensation for the additional care required by an
individual who needs assistance with one or more activities of daily living to remain
safely at home and to prevent institutionalization. See State Statutes §§ q, r, s, and t;
and State Plan Amendments y and z.

Accordingly, the purpose and design of all four of State’s in-home supportive care
programs are similar to the purpose and design of foster care programs, and the nature
of the described payments to providers is similar to the nature of difficulty of care
payments under section 131 of the Code. Therefore, payments under all four of State’s
in-home supportive care programs to an individual care provider for in-home supportive
care provided for an eligible recipient who resides in the provider’s home will be treated
as difficulty of care payments excludable from the gross income of the provider under
section 131.
PLR-127776-15                              11

B. Taxpayer’s Reporting and Withholding Obligations in General

In general, payments made to an individual care provider as an employee of the care
recipient as employer are wages that would be: (1) includable in the provider’s gross
income and subject to income tax under section 61(a)(1) of the Code, (2) reportable on
Form W-2 under sections 6041 and 6051, and (3) subject to income tax withholding
under section 3402. However, payments made to an individual care provider that are
excludable from the gross income of the provider under section 131 are not reportable
under section 6041 or 6051 as wages subject to income tax and income tax withholding.
Nevertheless, payments made to an individual care provider generally are wages
subject to taxes under the Federal Insurance Contributions Act (FICA) (also known as
social security and Medicare taxes) and the Federal Unemployment Tax Act (FUTA)
unless an exception applies.

Specifically, if the care recipient (and not an outside agency) is the employer of the
individual care provider, the FICA tax rules for domestic service (household work done
in or around the care recipient employer’s home) may apply. Under those rules,
payments for services performed for a spouse or a child and services performed for a
parent by a child under the age of 21 generally are not subject to FICA tax under
section 3121(b)(3)(B) of the Code. In addition, if wages for domestic services paid
during a calendar year are below a threshold ($2,000 for 2016), the wages are not
subject to FICA tax under sections 3121(a)(7)(B) and 3121(x). Similarly, payments for
services performed for a spouse or a child and services performed for a parent by a
child under the age of 21 are not subject to FUTA tax under section 3306(c)(5). In
addition, there is a dollar threshold for wages paid to all household employees for
purposes of FUTA tax under section 3306(a)(3).

Accordingly, for those payments that are excludable from an individual care provider's
gross income under section 131 of the Code, the Taxpayer is not required under section
6041 or 6051 to report the payments as wages subject to income tax and income tax
withholding. However, the Taxpayer may be required under sections 6041 and 6051 to
report the payments as wages to the individual care provider subject to FICA and FUTA
taxes, unless one of the exceptions applies. In addition, the Taxpayer may look to the
Q&As on Notice 2014-7 (in particular, Q&As 15 - 20), available on irs.gov at
https://www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-Excludable-
From-Income, and Publication 926, Household Employer’s Tax Guide, also available on
irs.gov, for further information on its reporting and withholding obligations.

V. CONCLUSIONS

For the reasons explained above, the described payments under all four of State’s in-
home supportive care programs will be treated as difficulty of care payments excludable
from the gross income of the provider under section 131 of the Code. Specifically, the
following rulings are granted:
PLR-127776-15                                12


    (1) Medicaid payments made under Program A, pursuant to section 1905 of the
        SSA, to an individual care provider for in-home supportive care provided for an
        eligible recipient (whether related or unrelated) who resides in the provider’s
        home will be treated as difficulty of care payments excludable from the gross
        income of the provider under section 131 of the Code. Therefore, the Taxpayer
        is not required under section 6041 or 6051 to report these payments as wages
        subject to income tax.

    (2) Medicaid payments made under Program B, pursuant to section 1915(j) of the
        SSA, to an individual care provider for in-home supportive care provided for an
        eligible recipient (whether related or unrelated) who resides in the provider’s
        home will be treated as difficulty of care payments excludable from the gross
        income of the provider under section 131 of the Code. Therefore, the Taxpayer
        is not required under section 6041 or 6051 to report these payments as wages
        subject to income tax.

    (3) Medicaid payments made under Program C, pursuant to section 1915(k) of the
        SSA, to an individual care provider for in-home supportive care provided for an
        eligible recipient (whether related or unrelated) who resides in the provider’s
        home will be treated as difficulty of care payments excludable from the gross
        income of the provider under section 131 of the Code. Therefore, the Taxpayer
        is not required under section 6041 or 6051 to report these payments as wages
        subject to income tax.

    (4) State-funded payments made under Program D to an individual care provider for
        in-home supportive care provided for an eligible recipient (whether related or
        unrelated) who resides in the provider’s home will be treated as difficulty of care
        payments excludable from the gross income of the provider under section 131 of
        the Code. Therefore, the Taxpayer is not required under section 6041 or 6051
        to report these payments as wages subject to income tax.

The rulings contained in this letter are based upon information and representations
submitted by the Taxpayer and accompanied by a penalty of perjury statement
executed by an appropriate party. While this office has not verified any of the material
submitted in support of the request for rulings, it is subject to verification on
examination.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.
PLR-127776-15                                  13

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent. All taxpayer identifying
information has been redacted as required under section 6110(c).

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.

                                       Sincerely,


                                       Donna Welsh
                                       Senior Technician Reviewer, Branch 4
                                       (Income Tax & Accounting)