House Ways & Means Committee Issues Report on Tribal Employment, Jobs Protection Act

Targeted News Service

WASHINGTON, July 8 -- The House Ways and Means Committee issued a report (H.Rpt. 114-656) on legislation (H.R. 3080) to amend the Internal Revenue Code of 1986 to provide an exception to the employer health insurance mandate for Indian tribal governments and tribally owned businesses. The report was advanced by Rep. Kevin Brady, R-Texas, on July 5.

Excerpts of the report follow:

I. SUMMARY AND BACKGROUND

A. Purpose and Summary

The bill, H.R. 3080, as reported by the Committee on Ways and Means, provides an exception to the employer health insurance mandate for Indian tribal governments and tribally owned businesses.

B. Background and Need for Legislation

The President's health care law, the Affordable Care Act (ACA), imposes a new requirement on employers that employ more than fifty full-time equivalent workers (FTEs) to offer health coverage to their workers or pay one of two penalties beginning in 2014. Full-time workers for the purposes of this employer mandate are defined as those who work at least 30 hours per week.

H.R. 3080 exempts tribal organizations, governments, and majority-owned tribal corporations and partnerships from Obamacare's employer mandate. Historically, Indian Health Services provides health services to individuals, and as such, tribal members are exempted from the ACA's individual mandate. However, this exemption did not extend to tribes who act as employers. It is inconsistent to omit individuals from the individual mandate because they are covered by IHS, while at the same time requiring employers, employing the same individuals, to participate in the employer mandate or pay a penalty. Further, it is the position of the Committee that all large businesses--including those that are tribally-owned-- should have relief from the employer mandate. The current law requirement could be financially devastating to certain, tribally-owned large employers and only increase the unemployment rate for these tribes. For these reasons, tribally-owned businesses should be exempted from the employer mandate.

C. Legislative History

Background

H.R. 3080 was introduced on July 15, 2015, and was referred to the Committee on Ways and Means.

Committee action

The Committee on Ways and Means marked up H.R. 3080, the Tribal Employment and Jobs Protection Act, on June 15, 2016, and ordered the bill, as amended, favorably reported (with quorum being present).

Committee hearings

The policy issues surrounding employer mandate and their impact on access to health care have been discussed at four Ways and Means hearings during the 114th Congress:

Subcommittee on Health Hearing on The Individual and Employer Mandates in the President's Healthcare Law (April 14, 2015);

Full Committee Hearing on the Tax Treatment of Health Care (April 14, 2016);

Subcommittee on Tax Policy Member Day Hearing on Tax Legislation (May 12, 2016);

Subcommittee on Health Member Day Hearing on Tax-Related Proposals to Improve Health Care (May 17, 2016).

II. EXPLANATION OF THE BILL

A. Exception to Employer Health Insurance Mandate for Indian Tribal Governments and Tribally Owned Businesses (sec. 2 of the bill and sec. 4980H of the Code)

PRESENT LAW

Employer shared responsibility for health coverage

In general Under the Patient Protection and Affordable Care Act ("PPACA"),1 as amended by the Health Care and Education Reconciliation Act of 20102 (referred to collectively as the "Affordable Care Act" or "ACA"), an applicable large employer may be subject to a tax, called an "assessable payment," for a month if one or more of its full-time employees is certified to the employer as receiving for the month a premium assistance credit for health insurance purchased on an American Health Benefit Exchange or reduced cost-sharing for the employee's share of expenses covered by such health insurance.3 As discussed below, whether an applicable large employer owes an assessable payment and the amount of any assessable payment depend on whether the employer offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under a group health plan sponsored by the employer and, if it does, whether the coverage offered is affordable and provides minimum value.4

1Pub. L. No. 111-148.

2Pub. L. No. 111-152.

3Sec. 4980H. This is sometimes referred to as the employer shared responsibility requirement or employer mandate. An applicable large employer is also subject to annual reporting requirements under section 6056. Premium assistance credits for health insurance purchased on an American Health Benefit Exchange are provided under section 36B. Reduced cost-sharing for an individual's share of expenses covered by such health insurance is provided under section 1402 of PPACA.

4Under the ACA, these rules are effective for months beginning after December 31, 2013. However, in Notice 2013-45, 2013-31 I.R.B. 116, Part III, Q&A-2, the Internal Revenue Service ("IRS") announced that no assessable payments will be assessed for 2014. In addition, in 2014, the IRS announced that no assessable payments for 2015 will apply to applicable large employers that have fewer than 100 full-time employees and full-time equivalent employees and meet certain other requirements. Section XV.D.6 of the preamble to the final regulations, T.D. 9655, 79 Fed. Reg. 8544, 8574-8575, February 12, 2014.

Definitions of full-time employee and applicable large employer

For purposes of applying these rules, full-time employee means, with respect to any month, an employee who is employed on average at least 30 hours of service per week. Hours of service are to be determined under regulations, rules, and guidance prescribed by the Secretary of the Treasury ("Secretary"), in consultation with the Secretary of Labor, including rules for employees who are not compensated on an hourly basis.

Applicable large employer generally means, with respect to a calendar year, an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar year.5 Solely for purposes of determining whether an employer is an applicable large employer (that is, whether the employer has at least 50 full-time employees), besides the number of full-time employees, the employer must include the number of its full-time equivalent employees for a month, determined by dividing the aggregate number of hours of service for that month (up to a maximum of 120 for any employee) of employees who are not full-time employees for the month by 120. In addition, in determining whether an employer is an applicable large employer, members of the same controlled group, group under common control, and affiliated service group are treated as a single employer.6

5Additional rules apply, for example, in the case of an employer that was not in existence for the entire preceding calendar year.

6The rules for determining controlled group, group under common control, and affiliated service group under section 414(b), (c), (m) and (o) apply for this purpose. If the group is an applicable large employer under this test, each member of the group is an applicable large employer and subject to the employer shared responsibility requirement even if the member by itself would not be an applicable large employer. In addition, in determining assessable payments (as discussed herein), only one 30-employee reduction in full-time employees applies to the group and is allocated among the members ratably based on the number of full-time employees employed by each member.

Assessable payments

If an applicable large employer does not offer its full- time employees and their dependents minimum essential coverage under an employer-sponsored plan and at least one full-time employee is so certified to the employer, the employer may be subject to an assessable payment of $2,160 (for 2016)7 (divided by 12 and applied on a monthly basis) multiplied by the number of its full-time employees in excess of 30, regardless of the number of full-time employees so certified. For example, in 2016, Employer A fails to offer minimum essential coverage and has 100 full-time employees, 10 of whom receive premium assistance credits for the entire year. The employer's assessable payment is $2,160 for each employee over the 30-employee threshold, for a total of $151,200 ($2,160 multiplied by 70, that is, 100 minus 30).

7For calendar years after 2014, the dollar amounts (which were initially $2,000 and $3,000) are increased by the percentage (if any) by which the average per capita premium for health insurance coverage in the United States for the preceding calendar year (as estimated by the Secretary of HHS no later than October 1 of the preceding calendar year) exceeds the average per capita premium for 2013 (as determined by the Secretary of HHS), rounded down to the next lowest multiple of $10.

Generally an employee who is offered minimum essential coverage under an employer-sponsored plan is not eligible for a premium assistance credit or reduced cost-sharing unless the coverage is unaffordable or fails to provide minimum value.8 However, if an employer offers its full-time employees and their dependents minimum essential coverage under an employer- sponsored plan and at least one full-time employee is certified as receiving a premium assistance credit or reduced cost- sharing (because the coverage is unaffordable or fails to provide minimum value), the employer may be subject to an assessable payment of $3,240 (for 2016) (divided by 12 and applied on a monthly basis) multiplied by the number of such full-time employees. However, the assessable payment in this case is capped at the amount that would apply if the employer failed to offer its full-time employees and their dependents minimum essential coverage. For example, in 2016, Employer B offers minimum essential coverage and has 100 full-time employees, 20 of whom receive premium assistance credits for the entire year. The employer's assessable payment before consideration of the cap is $3,240 for each full-time employee receiving a credit, for a total of $64,800. The cap on the assessable payment is the amount that would have applied if the employer failed to offer coverage, or $151,200 ($2,160 multiplied by 70, that is, 100 minus 30). In this example, the cap therefore does not affect the amount of the assessable payment, which remains at $64,800.

8Under section 36B(c)(2)(C), coverage under an employer-sponsored plan is unaffordable if the employee's share of the premium for self- only coverage exceeds (for 2016) 9.66 percent of household income, and the coverage fails to provide minimum value if the plan's share of total allowed cost of provided benefits is less than 60 percent of such costs. Treas. Reg. sec. 1.36B-2(c)(3)(vi) provides guidance on the determination of whether coverage provides minimum value.

Individual requirement to maintain minimum essential coverage

Under the ACA, individuals must be covered by a health plan that provides at least minimum essential coverage or be subject to a tax for failure to maintain the coverage (commonly referred to as the "individual mandate").9 The tax is imposed for any month that an individual does not have minimum essential coverage unless the individual qualifies for an exemption for the month as described below. Members of Indian tribes are exempt from this requirement.10

9Sec. 5000A. Treas. Reg. secs. 1.5000A-1 through 1.5000A-5 provide guidance on this provision. 10For this purpose, the definition of Indian tribe in section 45A(c)(6) applies.

REASONS FOR CHANGE

The Committee believes that the employer shared responsibility requirement imposes an undue and unnecessary burden on tribal employers by requiring them to offer minimum essential coverage to their full-time employees, many of whom are tribal members. Tribal members are entitled to health care through the Indian Health Service and are exempt from the individual shared responsibility requirement, and thus do not need to be provided minimum essential coverage by a tribal employer.

EXPLANATION OF PROVISION

Under the provision, for purposes of the employer shared responsibility requirement, the definition of applicable large employer does not include any tribal employer. For this purpose, the

term tribal employer includes (1) any Indian tribal government11 or subdivision thereof, or any agency or instrumentality of either, or (2) any tribal organization.12 Tribal employer also includes any corporation if more than 50 percent (determined by vote and value) of the outstanding stock of such corporation is owned (directly or indirectly), and any partnership if more than 50 percent of the value of the capital and profits interests are owned (directly or indirectly), by any tribal entity described in (1) or (2) above.

11Indian tribal government is defined in section 7701(a)(40).

12Tribal organization for this purpose is defined in section 4(l) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b(l)).

EFFECTIVE DATE

The provision applies to months beginning after December 31, 2015.

III. VOTES OF THE COMMITTEE

In compliance with the Rules of the House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means during the markup consideration of H.R. 3080, the "Tribal Employment and Jobs Protection Act," on June 15, 2016.

The bill, H.R. 3080, was ordered favorably reported to the House of Representatives as amended by a roll call vote of 24 yeas to 13 nays (with a quorum being present). The vote was as follows:

To view the table, click this link: https://www.congress.gov/congressional-report/114th-congress/house-report/656/1.

IV. BUDGET EFFECTS OF THE BILL

A. Committee Estimate of Budgetary Effects

In compliance with clause 3(d) of rule XIII of the Rules of the House of Representatives, the following statement is made concerning the effects on the budget of the bill, H.R. 3080, as reported.

The bill, as reported, is estimated to have the following effect on Federal budget receipts for fiscal years 2017-2026:

Fiscal Years

[Millions of dollars]

To view the table, click this link: https://www.congress.gov/congressional-report/114th-congress/house-report/656/1.

Pursuant to clause 8 of rule XIII of the Rules of the House of Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the bill amending the Internal Revenue Code of 1986: The gross budgetary effect (before incorporating macroeconomic effects) in any fiscal year is less than 0.25 percent of the current projected gross domestic product of the United States for that fiscal year; therefore, the bill is not "major legislation" for purposes of requiring that the estimate include the budgetary effects of changes in economic output, employment, capital stock and other macroeconomic variables.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority

In compliance with clause 3(c)(2) of rule XIII of the Rules of the House of Representatives, the Committee states that the bill involves increased budget authority. The Committee further states that the revenue-reducing tax provisions involve increased tax expenditures. (See amounts in table in Part IV.A. above.)

C. Cost Estimate Prepared by the Congressional Budget Office

In compliance with clause 3(c)(3) of rule XIII of the Rules of the House of Representatives, requiring a cost estimate prepared by the CBO, the following statement by CBO is provided.

U.S. Congress,

Congressional Budget Office,

Washington, DC, June 30, 2016.

Hon. Kevin Brady,

Chairman, Committee on Ways and Means,

House of Representatives, Washington, DC.

Dear Mr. Chairman: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3080, the Tribal Employment and Jobs Protection Act.

If you wish further details on this estimate, we will be pleased to provide them. The CBO staff contact is Peter Huether.

Sincerely,

Keith Hall.

Enclosure.

H.R. 3080--Tribal Employment and Jobs Protection Act

H.R. 3080 would amend the Internal Revenue Code to exclude tribal employers from the requirements under current law that some large employers who do not offer health insurance coverage that meets certain standards must pay a penalty if they have any full-time employees who receive a subsidy through a health insurance marketplace. Tribal employers include Indian tribal governments and certain other tribal organizations, or certain corporations largely owned by such tribal entities.

The staff of the Joint Committee on Taxation (JCT) estimates that enacting H.R. 3080 would reduce revenues by $9 million over the 2016-2026 period and increase outlays by $110 million over the same period. As a result, H.R. 3080 would increase federal deficits by $119 million over the 2016-2026 period, JCT estimates. The change in revenues includes an increase of $44 million in off-budget revenues (from Social Security payroll taxes). As a result, on-budget deficits are expected to increase by $163 million over the 2016-2026 period. JCT also estimates that the bill would have a small effect on health insurance coverage, slightly lowering the number of individuals with employment-based coverage and increasing the number of uninsured individuals.

The Statutory Pay-As-You-Go Act of 2010 establishes budget- reporting and enforcement procedures for legislation affecting revenues or direct spending. The net changes in revenues and direct spending that are subject to those pay-as-you-go procedures are shown in the following table. Only on-budget changes to revenues and direct spending are subject to pay-as- you-go procedures.

CBO and JCT estimate that enacting the bill would not increase net direct spending or on-budget deficits by more than $5 billion in any of the four 10-year periods beginning in 2027.

JCT has determined that the bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.

The CBO staff contact for this estimate is Peter Huether. The estimate was approved by Mark Booth, Unit Chief, Revenue Estimating.

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 3080, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON JUNE 15, 2016

To view the table, click this link: https://www.congress.gov/congressional-report/114th-congress/house-report/656/1.

Source: Staff of the Joint Committee on Taxation.

A positive sign for outlays indicates an increase in outlays. A positive sign for revenues indicates an increase in revenues.

Note: Components may not sum to total because of rounding.

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

A. Committee Oversight Findings and Recommendations

With respect to clause 3(c)(1) of rule XIII of the Rules of the House of Representatives (relating to oversight findings), the Committee advises that it was as a result of the Committees review of the provisions of H.R. 3080 that the Committee concluded that it is appropriate to report the bill, as amended, favorably to the House of Representatives with the recommendation that the bill do pass.

B. Statement of General Performance Goals and Objectives

With respect to clause 3(c)(4) of rule XIII of the Rules of the House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required.

C. Information Relating to Unfunded Mandates

This information is provided in accordance with section 423 of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104- 4). The Committee has determined that the bill does not contain Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental mandate on State, local, or tribal governments.

D. Applicability of House Rule XXI 5(b)

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that "A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not be considered as passed or agreed to unless so determined by a vote of not less than three-fifths of the Members voting, a quorum being present." The Committee has carefully reviewed the bill, and states that the bill does not involve any Federal income tax rate increases within the meaning of the rule.

E. Tax Complexity Analysis

The following statement is made pursuant to clause 3(h)(1) of rule XIII of the Rules of the House of Representatives. Section 4022(b) of the Internal Revenue Service Restructuring and Reform Act of 1998 ("IRS Reform Act") requires the staff of the Joint Committee on Taxation (in consultation with the Internal Revenue Service and the Treasury Department) to provide a tax complexity analysis. The complexity analysis is required for all legislation reported by the Senate Committee on Finance, the House Committee on Ways and Means, or any committee of conference if the legislation includes a provision that directly or indirectly amends the Internal Revenue Code of 1986 and has widespread applicability to individuals or small businesses.

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House of Representatives, the staff of the Joint Committee on Taxation has determined that a complexity analysis is not required under section 4022(b) of the IRS Reform Act because the bill contains no provisions that amend the Internal Revenue Code of 1986 and that have "widespread applicability" to individuals or small businesses, within the meaning of the rule.

F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff Benefits

With respect to clause 9 of rule XXI of the Rules of the House of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not contain any congressional earmarks, limited tax benefits, or limited tariff benefits within the meaning of the rule.

G. Duplication of Federal Programs

In compliance with Sec. 3(g)(2) of H. Res. 5 (114th Congress), the Committee states that no provision of the bill establishes or reauthorizes: (1) a program of the Federal Government known to be duplicative of another Federal program, (2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111-139, or (3) a program related to a program identified in the most recent Catalog of Federal Domestic Assistance, published pursuant to the Federal Program Information Act (Public Law 95-220, as amended by Public Law 98-169).

H. Disclosure of Directed Rule Makings

In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), the following statement is made concerning directed rule makings: The Committee estimates that the bill requires no directed rule makings within the meaning of such section.

VI. CHANGES IN EXISTING LAW MADE BY THE BILL,

AS REPORTED

A. Text of Existing Law Amended or Repealed by the Bill, as Reported

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of the House of Representatives, the text of each section proposed to be amended or repealed by the bill, as reported, is shown below:

Changes in Existing Law Made by the Bill, as Reported

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of the House of Representatives, the text of each section proposed to be amended or repealed by the bill, as reported, is shown below:

VII. DISSENTING VIEWS

We object to H.R. 3080 because it increases the deficit and undermines the employer shared responsibility provisions of the Affordable Care Act (ACA). With this legislation, the Majority furthers their fiscal irresponsibility and misguided priorities.

The bill is the latest in a continued series of attacks by the Majority on the ACA. Under section 4980H of the Internal Revenue Code, the employer shared responsibility provision requires an employer with 50 or more full-time equivalents (FTEs) to offer affordable coverage of minimum value to full- time workers or pay a penalty. H.R. 3080 would amend the Internal Revenue Code to exempt tribal governments, tribally- owned businesses, and tribal organizations from the employer shared responsibility provisions of the ACA (often called the employer mandate). That means that even lucrative, for-profit entities will not be required to provide health care to their full-time workforce under this bill. This is a troubling proposal that actively undermines access to health coverage for middle class Americans.

The ACA exempts members of tribes--who are generally eligible for coverage through the Indian Health Service--from the individual mandate, and some suggest that this exemption should also apply to the employer mandate. However, this ignores the fact that many of the individuals employed by tribal entities are not actually members of a tribe. Because of this, they are not eligible for benefits through the Indian Health Service in the event that their employer doesn't cover them. During the mark-up, we asked JCT to provide an estimate of the number of workers employed by tribal governments, tribally-owned enterprises and tribal organizations. They have not yet provided this information; however, recent data suggest that about three-fourths of employees at tribally-owned casinos are not covered by IHS. Without the coverage provided through their employer, these individuals will be on their own to purchase insurance through the individual market.

We recognize that there is a balance that we need to strike. Tribal sovereignty is extremely important and we all respect the right of tribes to engage in self-government. But self-government isn't the issue here. By extending the scope of this exemption beyond tribes and tribal organizations, this bill creates an inappropriate carve-out for large, for-profit businesses. This reaches far beyond self-governance and into purely commercial activity.

About 5,600 employees would lose employer coverage as a result of this bill, and 2,000 of these individuals would ultimately become uninsured. This sets us on a slippery slope that will lead to more and more carve outs from the requirements of the law.

For these reasons we strongly object to H.R. 3080.

Sander M. Levin,

Ranking Member.

The full text of the report is found at: https://www.congress.gov/congressional-report/114th-congress/house-report/656/1.

Myron Struck, editor, Targeted News Service, Springfield, Va., 703/304-1897; [email protected]; http://www.targetednews.com

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