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The District of Columbia's Office of Tax and Revenue (OTR) has issued new guidance on employer reporting requirements in light of the District's adoption of the health insurance mandate, effective for calendar year 2019.

Background

Because of Congress's recent elimination of the financial penalty imposed by the Affordable Care Act's (ACA) shared responsibility provision (individual mandate), several states have adopted their own requirements. Using the ACA as a roadmap, Washington, D.C. is the latest territory to leverage federal Forms 1094-C and 1095-C to administer an individual mandate, which takes effect this year. To date, New Jersey, Vermont, California and Rhode Island have passed some form of an individual mandate. In all instances, the states have looked to the ACA as a template as they implement policies that mirror or broaden the federal reporting requirements that were in place before the passage of the Tax Cut and Jobs Act of 2017 (the TCJA). The TCJA set the individual mandate penalty to $0 starting with the 2019 calendar year, effectively repealing the federal penalty.

Summary of reporting requirements for employers

On August 9, 2019, the OTR released Notice 2019-04 providing guidance for employers, employment-based plan sponsors, and persons, including governmental agencies, that provide minimum essential coverage to an individual during the year. Employers and plan sponsors with "at least fifty full-time employees, including at least one employee who was a District resident" are required to submit information returns and file statements about the minimum essential coverage provided. While this requirement mirrors the ACA's individual mandate, the District expands the reporting requirement to any person who "provided minimum essential coverage to a District resident" during the year.

For purposes of the reporting requirement, a District resident is an employee whose wages were withheld and paid to the District or who has a residence or mailing address in the District, at any time during the year. The OTR has not altered the federal definition of minimum essential coverage, which includes, among other plan types, COBRA, retiree, and government-sponsored coverage.

The Notice confirms the District's intent to rely on federal Forms 1094-C and 1095-C with no District modifications. All information returns must be filed electronically by uploading files through the OTR's secure portal, MyTax.DC.gov, using .txt format (.zip files will be accepted). Paper filings will not be accepted. Third-party service providers should be aware that, unlike the IRS's ACA Information Return (AIR) System, OTR's portal will not generate an acknowledgement. There is a process in place, however, for third-party bulk filers to send test files with live data.

The deadline for uploading information returns for tax year ending December 31, 2019 is June 30, 2020. For all subsequent tax years, the deadline is 30 days after the IRS deadline for transmitting Forms 1095-C, including any extensions granted by the IRS. No files will be accepted after December 31 of the filing year.

The notice can be found at here.

Implications

Employers of District residents should begin preparing for the upcoming filing requirements by identifying the required population to be reported and working with their ACA reporting providers to ensure preparations are in place for the 2019 electronic filing requirements. Employers who are District taxpayers or third-party bulk filers without a MyTax.DC.gov login must sign up to access the portal before files can be uploaded.

EY will continue to monitor the OTR's website for additional guidance, if any.

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