Information Reporting of Health Insurance Coverage and Other Issues
Notice of proposed rulemaking.
CFR Part: "26 CFR Parts 1 and 301"
RIN Number: "RIN 1545-BQ11"
Citation: "86 FR 68939"
Document Number: "REG-109128-21"
Page Number: "68939"
"Proposed Rules"
Agency: "
SUMMARY: This document contains proposed regulations providing that "minimum essential coverage," as that term is used in health insurance-related tax laws, does not include Medicaid coverage that is limited to COVID-19 testing and diagnostic services provided under the Families First Coronavirus Response Act. The proposed regulations also would provide an automatic extension of time for providers of minimum essential coverage (including health insurance issuers, self-insured employers, and government agencies) to furnish individual statements regarding such coverage and would provide an alternative method for furnishing individual statements when the shared responsibility payment amount is zero. Additionally, the proposed regulations would provide an automatic extension of time for "applicable large employers" (generally employers with 50 or more full-time or full-time equivalent employees) to furnish statements relating to health insurance that the employer offers to its full-time employees. The proposed regulations would affect some taxpayers who claim the premium tax credit; health insurance issuers, self-insured employers, government agencies, and other persons that provide minimum essential coverage to individuals; and applicable large employers.
DATES: Written or electronic comments and requests for a public hearing must be received by
ADDRESSES: Commenters are strongly encouraged to submit public comments electronically. Submit electronic submissions via the Federal eRulemaking Portal at www.regulations.gov (indicate
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, call
SUPPLEMENTARY INFORMATION:
Background This document contains proposed amendments to 26 CFR parts 1 (Income Tax Regulations) and 301 (Procedure and Administration Regulations) under sections 5000A, 6055, and 6056 of the Internal Revenue Code (Code).
1. Minimum Essential Coverage Under Section 5000A
Beginning in 2014, under the Patient Protection and Affordable Care Act, Public Law 111-148, 124 Stat. 119 (2010), and the Health Care and Education Reconciliation Act of 2010, Public Law 111-152, 124 Stat. 1029 (2010) (collectively, the Affordable Care Act or ACA), eligible individuals who purchase coverage under a qualified health plan through a Health Insurance Exchange (Exchange) established under section 1311 of the ACA may claim a premium tax credit under section 36B of the Code. Section 36B and
Section 5000A was added to the Code by section 1501 of the ACA. Section 5000A(f)(1) defines "minimum essential coverage" to include various types of health plans and programs, including, for example, specified government-sponsored programs such as the Medicare program under Part A of title XVIII of the Social Security Act; the Medicaid program under Title XIX of the Social Security Act; the
Section 5000A requires that individuals have minimum essential coverage for each month in the taxable year, qualify for an exemption from the minimum essential coverage requirement, or make an individual shared responsibility payment upon filing a federal income tax return. Section 11081 of Public Law 115-97, 131 Stat. 2054, 2092 (2017), commonly referred to as the Tax Cuts and Jobs Act (TCJA), reduces the individual shared responsibility payment amount to zero for months beginning after
2. Information Reporting Under Sections 6055 and 6056
Section 6055 of the Code provides that all persons who provide minimum essential coverage to an individual must report certain information to the
Section 6056 of the Code requires an applicable large employer (ALE), as defined in section 4980H(c) of the Code, that is required to meet the requirements of section 4908H to file annually information returns and furnish written statements in relation to the health insurance, if any, that the employer offers to its full-time employees. These information returns and written statements are needed in order to administer the employer shared responsibility provisions of section 4980H.
Under section 6056(a), (c)(2), and
In addition, an ALE member that offers coverage through a self-insured health plan must complete the reporting required under section 6055, specifically the information regarding each individual enrolled in the self-insured health plan, using Form 1095-C, Part III, rather than Form 1095-
The current regulations under sections 6055 and 6056 allow the
3. Information Reporting Penalties Under Sections 6721 and 6722
Section 6721 imposes a penalty for failing to timely file an information return or for filing an incorrect or incomplete information return. Section 6722 imposes a penalty for failing to timely furnish an information statement or furnishing an incorrect or incomplete information statement. The section 6721 and 6722 penalties are imposed with regard to information returns and statements listed in section 6724(d), which include those required by sections 6055 and 6056. Section 6724 provides that no penalty will be imposed under section 6721 or 6722 with respect to any failure if it is shown that the failure is due to reasonable cause and not to willful neglect.
The preambles to the section 6055 and 6056 regulations provided that the
Explanation of Provisions
1. Medicaid Coverage of COVID-19 Testing and Diagnostic Services Under Section 5000A
Notice 2020-66, 2020-40 I.R.B. 785 (
Notice 2020-66 further indicates that the
Notice 2020-66 provides that taxpayers, including ALEs, may continue to rely on the guidance described in Notice 2020-66 if no proposed regulations or other guidance are released within 18 months after
2. Time and Manner for Furnishing Statements Under Sections 6055 and 6056
Through a series of notices, the
In addition to extending the due dates for furnishing statements, Notices 2018-94 and 2019-63 stated that, as a result of the TCJA's reduction of the shared responsibility payment amount under section 5000A(c) to zero for months beginning after
Notice 2020-76, 2020-47 I.R.B. 1058 (
Commenters noted that the process by which reporting entities compile accurate health coverage offer and enrollment information is complex and often takes more time than the current
Commenters also pointed out that the
Some of the commenters indicated that, if a more permanent automatic extension of the
a. Extension of Deadline for Furnishing Statements Under Section 6055
To reduce administrative burdens for reporting entities and the
Under these proposed regulations,
b. Alternative Manner of Furnishing Statements Under Section 6055
Notice 2020-76 indicates that, because the TCJA reduced the individual shared responsibility payment amount to zero for 2020, responsible individuals do not need the information on Form 1095-B to prepare and file their individual returns. Nonetheless, reporting entities required to furnish Forms 1095-B must expend resources to do so. In light of those factors, the
Because of the combined reporting by ALE members under sections 6055 and 6056 on Form 1095-C for full-time employees of ALE members enrolled in self-insured health plans, the 2020 section 6055 furnishing relief was not extended to the requirement to furnish Forms 1095-C to full-time employees. The 2020 section 6055 furnishing relief, however, applied to penalty assessments related to the requirement to furnish Form 1095-C to a part-time employee enrolled in an ALE member's self-insured plan for any month in 2020, subject to the two requirements of the 2020 section 6055 furnishing relief. Finally, the 2020 section 6055 furnishing relief did not extend to the assessment of penalties relating to failures to file the 2020 Forms 1094-B or 1095-B or the Forms 1094-C or 1095-C, as applicable, with the
In response to Notice 2020-76, a number of health plan providers, governmental agencies, and associations requested that the 2020 section 6055 furnishing relief be made permanent or extended at least for the time periods when the individual shared responsibility payment amount is zero. These commenters echoed the considerations identified in Notice 2020-76 supporting the 2020 section 6055 furnishing relief. Namely, commenters pointed to the high costs associated with producing and mailing Forms 1095-B although individuals have no need for the information on the Form 1095-B to correctly compute federal tax liability and timely file returns. Commenters cited additional production and/or mailing costs ranging from a half million to more than
In light of the public comments received,
One commenter requested that, if the 2020 section 6055 furnishing relief is extended, a self-insured ALE member should continue to be permitted to use the relief for employees who are enrolled in the ALE's self-insured plan and who are not full-time employees of the ALE. The commenter also requested that the proposed regulations allow a self-insured ALE member to use the 2020 section 6055 furnishing relief for non-employees, such as former employees of the ALE, who are enrolled in the self-insured plan. The proposed regulations adopt both requests in the rules for the alternative method of furnishing. However, consistent with the guidance in Notice 2020-76, the proposed regulations do not allow ALE members to use the alternative method of furnishing for full-time employees who are enrolled in the self-insured plan.
The proposed regulations also address a suggestion of a commenter to Notice 2020-76 who requested that future guidance specify the time period a reporting entity is required to retain the notice on its website and also explain how prominent the notice must be. The provisions of proposed
One commenter requested that the 2020 section 6055 furnishing relief be modified to allow a reporting entity to satisfy the furnishing requirement under
The requirement in these proposed regulations that a reporting entity include its email address, mailing address, and telephone number on a website notice informing individuals of the ability to request a Form 1095-B is consistent with other information reporting provisions. See, for example,
If, in the future, the shared responsibility payment amount under section 5000A(b) is not zero, the
c. Extension of Deadline for Furnishing Statements Under Section 6056
For the reasons discussed in section 2 of the Explanation of Provisions, the
Under these proposed regulations,
3. Elimination of Transitional Good Faith Relief
As noted in the Background section of this preamble, the preambles to the regulations under sections 6055 and 6056 provided that the
This good faith relief was intended to be transitional to accommodate public concerns with implementing the then newly enacted reporting requirements under the ACA. These reporting requirements have now been in place for six years, and transitional relief is no longer appropriate. Some commenters requested that the relief be extended due to continued difficulty in understanding the reporting requirements, periodic changes to the ACA, and the uncertainty related to the COVID-19 pandemic. Although the
4. Renewed Comment Request on the Section 6055 2016 Proposed Regulations
In Notice 2015-68, the
On
Statement of Availability of
Proposed Applicability Date
The regulations under
Special Analyses
I. Regulatory Planning and Review--Economic Analysis
These proposed regulations are not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (
II. Paperwork Reduction Act
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by OMB.
There is no collection of information contained in these proposed regulations. The collections of information contained in [Sec.]
The Paperwork Reduction Act (44 U.S.C. 3501-3520) relates to information collection requests by any government agency. A collection of information generally means the "obtaining, causing to be obtained, soliciting, or requiring the disclosure to third parties or the public, of facts or opinions by or for an agency, regardless of form or format, calling for either (1) answers to identical questions posted to, or identical reporting or recordkeeping requirements imposed on ten or more persons, other than agencies, instrumentalities, or employees of
These proposed regulations do not require a reporting entity to provide any information to the Federal government, to maintain specific records, or to disclose any additional information that the reporting entity did not already have a requirement to disclose.
III. Initial Regulatory Flexibility Analysis
When an agency issues a proposed rulemaking, the Regulatory Flexibility Act (5 U.S.C. chapter 6) (Act) requires the agency to "prepare and make available for public comment an initial regulatory flexibility analysis" that "describe[s] the impact of the proposed rule on small entities." 5 U.S.C. 603(a). The term "small entities" is defined in 5 U.S.C. 601 to mean "small business," "small organization," and "small governmental jurisdiction," which are also defined in 5 U.S.C. 601. Small business size standards define whether a business is "small" and have been established for types of economic activities, or industry, generally under the North American Industry Classification System (NAICS). See Title 13, Part 121 of the Code of Federal Regulations (titled "Small Business Size Regulations"). The size standards look at various factors, including annual receipts, number of employees, and amount of assets, to determine whether the business is small. See Title 13, Part 121.201 of the Code of Federal Regulations for the Small Business Size Standards by NAICS Industry.
Section 605 of the Act provides an exception to the requirement to prepare an initial regulatory flexibility analysis if the agency certifies that the proposed rulemaking will not have a significant economic impact on a substantial number of small entities.
Description of the reasons why the agency action is being considered.
The proposed regulations under
The proposed regulations under
Statement of the objectives of, and the legal basis for, the proposed rule.
The principal objectives of the proposed regulations are to provide taxpayers with definitive guidance of what constitutes, or does not constitute, minimum essential coverage, to provide reporting entities with a sufficient amount of time to complete and furnish accurate statements to responsible individuals and full-time employees, and to offer reporting entities under section 6055 a minimally burdensome option by which to furnish the required statement. The legal basis for defining minimum essential coverage is section 5000A(f)(1)(E), which provides the Secretary of the
Description and estimate (where feasible) of the number of small entities subject to the proposed rule.
The proposed regulations apply to health insurance issuers, self-insured employers, government agencies, and other providers of minimum essential coverage required to furnish individual statements regarding such coverage under section 6055 and ALE members that are required to furnish information relating to health insurance that the ALE offers to its full-time employees under section 6056. An estimate of the number of small entities subject to the proposed regulations is not feasible because a correlation between small taxpayers and this type of reporting cannot be made. The proposed regulations affect all industries. Taxpayers using any NAICS code could be subject to the proposed regulations.
Description of the projected reporting, recordkeeping, and related requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirements and the type of professional skills necessary for preparation of the report or record.
As discussed in the Paperwork Reduction Act section above, these proposed regulations do not impose any reporting, recordkeeping, or similar requirements on any small entities.
Identification, to the extent practicable, of all relevant Federal rules that may duplicate, overlap, or conflict with the proposed rule.
The proposed regulations do not duplicate, overlap, or conflict with any Federal statutes or other rules.
Description of any significant alternatives to the proposed rule that accomplish the stated objectives of applicable statutes and minimize any significant economic impact on small entities.
Accordingly, the
Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel of the
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a state, local, or tribal government, in the aggregate, or by the private sector, of
V.Executive Order 13132: Federalism
Executive Order 13132 (entitled "Federalism") prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on state and local governments, and is not required by statute, or preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This proposed rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.
Comments and Requests for Public Hearing
Before these proposed regulations or the 2016 proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the
A public hearing will be scheduled if requested in writing by any person who timely submits written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the
Drafting Information
The principal author of these proposed regulations is
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations Accordingly,
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in part as follows:
Authority:26 U.S.C. 7805 * * *
Par. 2. Section 1.5000A-2 is amended by:
1. Revising paragraph (b)(2)(vii) and (viii);
2. Adding paragraph (b)(2)(ix).
The revisions and addition read as follows:
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(b) * * *
(2) * * *
(vii) Coverage under section 1079(a), 1086(c)(1), or 1086(d)(1) of title 10, U.S.C., that is solely limited to space available care in a facility of the uniformed services for individuals excluded from TRICARE coverage for care from private sector providers;
(viii) Coverage under section 1074a and 1074b of title 10, U.S.C., for an injury, illness, or disease incurred or aggravated in the line of duty for individuals who are not on active duty; and
(ix) Medicaid coverage limited to COVID-19 testing and diagnostic services provided under section 6004(a)(3) of the Families First Coronavirus Response Act, Pub. L. 116-127, 134 Stat. 178 (
Par. 3. Section 1.5000A-5 is amended by revising paragraph (c) to read as follows:
*****
(c) Applicability date. Except as otherwise provided in this paragraph (c), this section and
Par. 4. Section 1.6055-1 is amended by:
1. Revising the first sentence of paragraph (g)(1);
2. Revising paragraph (g)(4)(i) and (ii);
3. Revising paragraph (j).
The revisions read as follows:
*****
(g) * * * Except as otherwise provided in paragraph (g)(4)(ii)(B) of this section, every person required to file a return under this section must furnish to the responsible individual identified on the return a written statement. * * *
*****
(4) * * * (i) Time for furnishing--Except as otherwise provided in this paragraph (g)(4)(i), a reporting entity must furnish the statements required under paragraph (g)(1) of this section on or before
(ii) Manner of furnishing--(A) In general. Except as otherwise provided in paragraph (g)(4)(ii)(B) of this section, if mailed, the statement must be sent to the responsible individual's last known permanent address or, if no permanent address is known, to the individual's temporary address. For purposes of this paragraph (g)(4)(ii)(A), a reporting entity's first class mailing to the last known permanent address, or if no permanent address is known, the temporary address, discharges the requirement to furnish the statement. A reporting entity may furnish the statement electronically if the requirements of
(B) Alternative manner of furnishing. A reporting entity shall be treated as furnishing the statement in a timely manner under this paragraph (g)(4) if the shared responsibility payment amount under section 5000A(c) for the calendar year in which the minimum essential coverage is provided is zero and the reporting entity satisfies the requirements in this paragraph (g)(4)(ii)(B). If the reporting entity is an applicable large employer member that sponsors a self-insured group health plan and makes a return in accordance with paragraph (f)(2)(i) of this section related to that plan, the applicable large employer member may use the alternative manner of furnishing described in this paragraph (g)(4)(ii)(B) for statements to non-full-time employees and non-employees who are enrolled in the applicable large employer's self-insured group health plan. A reporting entity may use the alternative manner of furnishing described in this paragraph (g)(4)(ii)(B) only if the reporting entity:
(1) Provides clear and conspicuous notice, in a location on its website that is reasonably accessible to all responsible individuals, stating that responsible individuals may receive a copy of their statement upon request. The notice must include an email address, a physical address to which a request for a statement may be sent, and a telephone number that responsible individuals may use to contact the reporting entity with any questions. A notice posted on a reporting entity's website will satisfy the requirements of this paragraph (g)(4)(ii)(B)(1) if it is written in plain, non-technical terms and with letters of a font size large enough, including any visual clues or graphical figures, to call to a viewer's attention that the information pertains to tax statements reporting that individuals had health coverage. For example, a reporting entity's website provides a clear and conspicuous notice if it includes a statement on the main page--or a link on the main page, reading "Tax Information", to a secondary page that includes a statement--in capital letters, "IMPORTANT HEALTH COVERAGE TAX DOCUMENTS"; explains how responsible individuals may request a copy of Form 1095-B, Health Coverage, (or, for an applicable large employer member that sponsors a self-insured group health plan and makes a return in accordance with paragraph (f)(2)(i) of this section, explains how non-full-time employees and non-employees who are enrolled in the plan may request a copy of Form 1095-C, Employer-Provided Health Insurance Offer and Coverage); and includes the reporting entity's email address, mailing address, and telephone number;
(2) Retains the notice in the same location on its website through
(3) Furnishes the statement to a requesting responsible individual within 30 days of the date the request is received. To satisfy the requirement of this paragraph (g)(4)(ii)(B)(3), a reporting entity may furnish the statement electronically pursuant to
*****
(j) Applicability date. Except as otherwise provided in this paragraph (j), this section applies for calendar years beginning after
PART 301--PROCEDURE AND ADMINISTRATION
Par. 5. The authority citation for part 301 continues to read in part as follows:
Authority:26 U.S.C. 7805 * * *
*****
Par. 6. Section 301.6056-1 is amended by revising paragraphs (g)(1) and (m) to read as follows:
*****
(g) * * * (1) Time for furnishing--Except as otherwise provided in this paragraph (g)(1), each statement required by this section for a calendar year must be furnished to a full-time employee on or before
*****
(m) Applicability date. Except as otherwise provided in this paragraph (m), this section applies for calendar years beginning after
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2021-25785 Filed 12-3-21;
BILLING CODE 4830-01-P
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