Attribute self-employed health premiums to farm and partnership businesses

[MaxGhenis]

Draft. Depends on PolicyEngine/policyengine-us#10120 (open draft, stacked on PolicyEngine/policyengine-us#10109). Hold the merge until #10120 merges. Microcosm pins PolicyEngine-US 2.2.1, which caps the deduction at Schedule C income, so the federal effect also needs the engine pin to move past #10120.

Problem

The other_health_insurance_premiums stage's attribution operation (#451 item 2) sets is_self_employed and copies the reported non-Part-B premium onto health_insurance_premiums only for people with strictly positive Schedule C income. The law allows more:

• 26 U.S.C. 162(l)(2)(A) limits the deduction to earned income "derived by the taxpayer from the trade or business with respect to which the plan providing the medical care coverage is established".
• Form 7206 instructions (2023), p. 1 list who qualifies: a net profit on Schedule C or Schedule F, a partner with net earnings on Schedule K-1 box 14 code A, the Schedule SE optional methods, and wages of a more-than-2% S corporation shareholder.
• Let farm, partnership and S corporation plans set the self-employed health insurance limit policyengine-us#10120 computes the Form 7206 limit for each business (Schedule C = total_self_employment_income, Schedule F = farm_operations_income, partnership = partnership_self_employment_net_earnings) and, with no named plan business, takes the largest.

On the certified default (populace_us_2024, sha 6496cc43…), 2.01M people with nonzero farm income and 2.06M with nonzero partnership earnings are not flagged self-employed, so #10120 cannot reach them.

Change

A person is self-employed for this stage when any one plan business has strictly positive net earnings, each on its own:

Business	Columns	Rule
Schedule C	self_employment_income_before_lsr + sstb_self_employment_income_before_lsr	sum > 0 (one business, as in #10120)
Schedule F	farm_operations_income	> 0
Partnership (K-1 box 14 code A)	partnership_self_employment_net_earnings	> 0

• A loss in one business never cancels another's profit, because one plan sits under one business.
• The Medicare-proxy exclusion (age 65+ or any SSDI) and the measured-ESI exclusion are unchanged and apply to the new paths.
• The manifest parameter self_employment_income_sources (list) becomes plan_business_income_sources (keyed by business). source_stages.json, the regenerated sources.yaml and the sources schema move with it.
• The signal gate recomputes the same rule from shipped columns and reports positive_plan_business_rows per business.
• Not covered: the Schedule SE optional methods and S corporation shareholders, which no measured input carries (#10120's s_corp_shareholder_medicare_wages has no data).

Invariants

These hold for every input and are tested with Hypothesis in tests/engine_free/us/test_us_se_health_attribution_properties.py (150 examples each):

1. Reference. Premium and flag equal an independent row-wise reference written in plain Python; the order of businesses does not matter; the source frame is not mutated.
2. No invented mass. Each attributed premium is 0 or exactly the reported premium, the total never exceeds the reported total, and a positive premium implies the flag.
3. Differential against the old rule. Restricted to Schedule C, the operation equals the pre-change formula exactly. The widened rule only adds people: everyone the old rule attributed keeps the same premium and flag, every added person has a profitable farm or partnership, and people without one are unchanged.
4. Losses never cancel. Replacing any unprofitable business with any other non-positive amount (for Schedule C, any other split netting to a loss or zero) leaves the output unchanged.
5. Differential against the gate. The signal gate's own recomputation of the identity finds no divergence on the operation's output, and its per-business counts match.

Tests

• test_us_other_health_insurance.py: farm-only and partnership-only carriers; a Schedule C loss beside a farm profit and a farm loss beside partnership earnings; both exclusions on the new paths; missing and nonfinite farm and partnership sources fail closed; the retired Schedule C-only parameter and a narrowed mapping are refused; a farm person and a partner carry positive premiums through the stage and the gate; the gate fails when a farm person's flag or premium is tampered with or a source column is missing.
• Local runs at 5ae529281 (macOS, Python 3.14, pytest -n 4): 234 passed across the stage tests, the properties, and the spec-engine loader, field-usage, inventory, schema, bundle and coverage-tool files (exit 0). tools/spec_engine_coverage.py --check exit 0 (42,186/42,186 fields, 41/41 inventory checks). tools/generate_us_bundle_from_constants.py --check exit 0. tools/ci_test_plan.py verify exit 0.

Measurement

Stored data, no engine (data_only.py on the certified default; weighted people):

	Schedule C-only rule	Widened rule	Change
is_self_employed	36.75M	39.27M	+2.52M
People with an attributed premium	3.744M	3.880M	+0.136M
Attributed premiums	$18.35B	$19.73B	+$1.38B
Tax units with an attributed premium	3.69M	3.82M	+0.14M

• The Schedule C-only rule reproduces the shipped health_insurance_premiums and is_self_employed columns exactly, so the candidate differs from the certified file only by this change.
• Of the 2.52M newly flagged people, 0.98M qualify through a farm only, 1.51M through a partnership only, and 0.02M through both; 0.07M have a Schedule C loss.
• Few of them gain a premium: 38.9% are in the Medicare proxy, a further 39.0% have measured ESI, and 51.2% report any premium.
• Medicare-proxy share by profitable business: Schedule C 19.1%, farm 13.2%, partnership 43.5%.
• 0.110M of the 0.136M added carriers are PUF-support people, whose reported premium is the joint QRF's prediction. Its predictors include Schedule C income but neither farm nor partnership earnings.

Engine runs: pending. Real microsimulations on the certified default and the widened candidate, under PolicyEngine-US 2.2.1 and the #10120 head (47bba5e893, 2.38.24), are queued under the shared heavy lock. They report the deduction (returns and amount) against SOI Pub 1304 Table 1.4 (TY2023: 3,595,764 returns / $31.23B, PolicyEngine/chronicle#105), federal and state income tax, and the release gate's neutralization probe. The probe's reason text in the coverage manifest is rewritten when they land.

What changes before #10120. Under 2.2.1 the federal deduction is min(max(total_self_employment_income, 0), premiums), so a farm-only or partnership-only person's deduction stays $0. Five state and local formulas read the bare premium input (MO qualified-premium subtraction, MI household resources, OH medical expenses, Orange County general relief, MO child-care subsidy), so the added $1.38B of premiums moves those today. is_self_employed has one reader in both engine versions: the defined_for gate of self_employed_health_insurance_premiums.

Identities re-pinned

The stage module is a seed-protocol kernel module and source_stages.json is digested into the spec bundle, so these moved and were recomputed: the frozen source-stage hash, US spec_sha256, seed protocol, seed map, source manifest, resource semantics, full checkpoint, the pointer inventory and field counts (+2 authored fields), the minimal-loader golden, and docs/evidence/spec-engine/us-f0-coverage.json.

Review

Round 1 (independent Opus 5.5 lane, subfleet run --task review --tier hard; the Codex lanes were closed): APPROVE, no blocking defects. It confirmed the gate matches #10120's limit, that no later stage rewrites the farm or partnership columns before the export gate, and that no registry declares this stage's reads. Acted on:

• the schema now requires unique, non-empty column names;
• the loss property covers Schedule C and the integration test carries positive farm and partnership premiums;
• the notes state the live state and local effect, the PUF-support imputation caveat, and that treating Schedule C as one business follows #10120's modelling choice.

Its guess that the Medicare proxy bites hardest on farmers did not hold in the data (13.2% for farm, 43.5% for partnership). A second round runs on the final head.

Follow-ups (filed as separate tasks)

• The raw-PUF fallback for partnership_self_employment_net_earnings in puf_support.py adds two loss fields, unlike the archived derivation. The certified build reads the processed PUF column, not that fallback.
• The Form 7206 instructions let voluntarily paid Medicare premiums figure the deduction; the Medicare proxy withholds them. This predates the PR and needs a methodology decision.

No dataset release: Microcosm data releases are Max's call.

axiom: n/a: microdata attribution change; the engine-side provision is PolicyEngine/policyengine-us#10120, whose Axiom line is TheAxiomFoundation/rulespec-us#1676 queued

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