IRS Issues Proposed Rules on Employer Tax Under Affordable Health Care Act

In January, the U.S. Treasury Department and the Internal Revenue Service published proposed rules and new questions and answers providing guidance with respect to the employer “shared responsibility” excise tax under section 4980H of the Internal Revenue Code, which was added by the Patient Protection and Affordable Care Act and is effective beginning in 2014. 78 Fed. Reg. 217 (January 2, 2013).

The proposed rules are broad in scope and contain several new rules and clarifications. For example, the proposed rules:
  • Expand upon earlier IRS safe harbor guidance for determining whether an employee is full-time and for determining whether coverage is affordable.
  • Clarify that an employer will not be subject to tax for failure to offer coverage to spouses.
  • Clarify that an employer that offers coverage to all but 5% of its full-time employees (or, if greater, five full-time employees) and their dependents will be considered to have offered coverage to “substantially all” full-time employees.
  • Clarify that each single employer within a controlled group of employers will be separately liable for the tax.
  • Provide that employers will be notified that an employee has received a premium tax credit or a cost-sharing reduction for coverage on an Exchange and will have an opportunity to respond before the IRS issues a notice and demand for payment.
Interested parties do have an opportunity to submit comments on the proposed rules no later than March 18, 2013. A public hearing will follow and is scheduled for April 23, 2013.

Hedley Lawson, Contributing Editor
Managing Partner
Aligned Growth Partners, LLC