Form 3853 Exemption Certificate Number: What You Need to Know

Form 3853 is used by California residents to report health coverage or claim an exemption from the state’s individual mandate penalty. If you qualify for an exemption, you may need an Exemption Certificate Number (ECN) to complete the form properly and avoid fines when filing your state tax return.

Understanding when an ECN is required and how to obtain one ensures compliance with California’s health coverage requirements.

Circumstances That Require an Exemption Certificate Number

An Exemption Certificate Number (ECN) is necessary for specific exemptions from California’s health coverage mandate. Some exemptions can be claimed directly on Form 3853, while others require prior approval from Covered California, the state’s health insurance marketplace.

A hardship exemption applies to individuals who faced financial or personal difficulties preventing them from obtaining health insurance, such as eviction, bankruptcy, or high medical expenses. These cases require verification, and Covered California issues an ECN upon approval, which must be entered on Form 3853.

A religious exemption is another category requiring an ECN. Individuals who are members of recognized religious sects that oppose insurance benefits must apply through Covered California. Without an ECN, they cannot claim the exemption and may be subject to penalties.

Types of Coverage Exemptions

California provides exemptions from the state’s health coverage mandate under specific circumstances. Some require an ECN from Covered California, while others can be claimed directly on Form 3853.

Hardship Exemptions

A hardship exemption applies to individuals who experienced financial or personal difficulties that made obtaining health insurance impossible. These situations must be documented and approved by Covered California before an ECN is issued. Qualifying hardships include homelessness, eviction, foreclosure, domestic violence, the death of a close family member, or unexpected medical expenses that resulted in substantial debt.

For example, an individual with medical bills exceeding 10% of their annual income who could not afford insurance premiums may qualify. Another example is someone who filed for bankruptcy in the past six months and could not maintain health coverage.

To apply, individuals must submit an application to Covered California with supporting documentation, such as eviction notices, medical bills, or court records. If approved, they receive an ECN, which must be entered on Form 3853 when filing their state tax return. Without this number, the exemption cannot be claimed, and the individual may face a penalty of $850 per adult and $425 per dependent child for the 2023 tax year, as stated in the California Revenue and Taxation Code Section 61015.

Religious Exemptions

Individuals who are members of recognized religious sects that oppose insurance benefits can apply for a religious exemption. The religious sect must be recognized under Section 1402(g)(1) of the Internal Revenue Code, which applies to groups with established tenets against insurance, such as certain Amish or Mennonite communities.

Applicants must submit a request to Covered California with documentation confirming their membership in a qualifying religious sect. This may include a letter from a religious leader or official records demonstrating adherence to the sect’s beliefs. If approved, Covered California issues an ECN, which must be reported on Form 3853.

Without an ECN, the exemption cannot be claimed, and the individual may be subject to penalties. This exemption does not apply to those who opt out of insurance for personal or philosophical reasons. The state requires clear evidence that the individual’s religious beliefs explicitly prohibit participation in health coverage programs.

Other Categories

California also grants exemptions for incarceration, membership in a federally recognized Native American tribe, and short coverage gaps.

Individuals incarcerated for at least one day during the tax year are automatically exempt and do not need an ECN. They can indicate their status on Form 3853. Similarly, members of federally recognized tribes or those eligible for Indian Health Services are exempt and can claim this directly on their tax return without prior approval.

A short coverage gap exemption applies to individuals who went without health insurance for no more than three consecutive months. For example, if someone lost their job in June and obtained new coverage in September, they qualify. This exemption does not require an ECN and can be reported directly on Form 3853. If the gap exceeds three months, the individual may be subject to a prorated penalty based on the number of months without coverage.

Entering the Exemption on Form 3853

Exemptions are reported in Part III of Form 3853. Each exemption type corresponds to a unique code assigned by the California Franchise Tax Board (FTB). Selecting the correct code is essential to avoid processing delays or incorrect penalty assessments.

For exemptions requiring prior approval, the Exemption Certificate Number (ECN) issued by Covered California must be included. This number verifies that the exemption has been approved and is valid for the tax year. If an exemption is claimed without an ECN when one is required, the FTB may reject the exemption, leading to additional tax liability.

If multiple exemptions apply within a household, each individual must be listed separately on Form 3853. For example, if one spouse qualifies for an exemption due to incarceration while the other qualifies under a different category, both exemptions must be entered individually, along with any corresponding ECNs. This ensures the total household penalty is accurately calculated.

Supporting Documentation

Proper documentation is required when applying for an exemption. The California Franchise Tax Board (FTB) and Covered California require applicants to provide clear evidence supporting their exemption claim. Without sufficient documentation, applications may be denied, potentially resulting in penalties.

For financial hardship exemptions, applicants typically need to submit proof of income, such as W-2 forms, pay stubs, or bank statements, along with documentation of expenses that contributed to the hardship. For example, an individual who lost their job may need to provide a termination letter and proof of unemployment benefits. Court records, eviction notices, or utility shutoff warnings may also be required.

Applicants seeking exemptions based on membership in a qualifying religious sect or Native American tribe must submit official documentation verifying their status. This could include a letter from a religious leader confirming adherence to beliefs that prohibit insurance participation or a tribal enrollment card issued by a federally recognized tribe. These documents must be current and clearly establish the applicant’s eligibility.

Action Steps If the ECN Is Missing

Failing to obtain or enter an Exemption Certificate Number (ECN) when required can result in a miscalculated tax return or an unexpected penalty. If an individual believes they qualify for an exemption but do not have an ECN, they should first verify whether the exemption actually requires one. Some exemptions can be claimed directly on Form 3853 without prior approval.

If an ECN is required, the taxpayer must contact Covered California to check the status of their application or submit a new request. If tax filing deadlines are approaching and the ECN has not been received, taxpayers should consider filing for an extension to avoid late penalties while awaiting approval. However, an extension only postpones the filing deadline, not the payment of any potential tax liability.

If the exemption is denied, the individual may need to explore alternative options, such as applying for financial assistance through Covered California to obtain coverage for future years. Those who mistakenly file without an ECN when one is required may receive a notice from the FTB requesting additional documentation or payment of the assessed penalty. Responding promptly with supporting evidence or requesting an appeal can help resolve the issue before further enforcement actions are taken.