Two pieces of legislation have been introduced, and been advanced by, the House Ways and Means Committee to ease the burden on employers and insurance carriers that need to submit information to the IRS and employees on health care coverage. The Employer Reporting Improvement Act (H.R. 3801) would change tax identification number (TIN) requirements, as well as set definite response times and limitations periods for IRS enforcement of ACA filing requirements. The Paperwork Burden Reduction Act (H.R. 3797) would extend the use of the alternative furnishing method to all Forms 1095-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, instead of just those that report only enrollment in Part III of the Form 1095-C or Forms 1095-B.

Background

IRC Section 4980H, which was added by the ACA, imposes excise taxes (commonly known as the employer mandate penalty) in certain situations on applicable large employers (ALEs) if any of their employees receive premium tax credits for the purchase of their own health care coverage from one of the health care marketplace exchanges.

ALEs must use Form 1094-C, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to report information required under IRC Sections 6055 and 6056 about the offer of employer-sponsored health care coverage and the employees' enrollment in that coverage. The IRS uses these forms to assess ESRPs.

For fully insured plans, insurance companies use Form 1095-B, Transmittal of Health Coverage Information Returns, to inform employees of their health care coverage. An alternative manner of furnishing, where the entities post on their website that the information may be sent out upon request, is permitted in most cases.

Employer Reporting Improvement Act

TIN reporting: The bill would amend IRC Section 6055(b)(1) to codify the ability of the reporting entity to substitute a covered individual's full name and date of birth for the individual's name and TIN if the TIN is missing. This would be effective for returns due after December 31, 2024.

Observation: This would merely add to the Code flexibility that already exists in regulations to report the date of birth in place of missing TINs. This section would only amend IRC Section 6055, which is the section dealing with reporting enrollment — i.e., Forms 1095-B, and Part III of Form 1095-C. No equivalent change is proposed for IRC Section 6056, which mandates the information for Parts I and II of Form 1095-C. Therefore, the requirement of having an accurate Social Security Number (SSN) to complete the Form 1095-C would not change (IRC Section 6056 just requires a TIN for each "full-time employee," but the final regulations require it to be the SSN).

Electronic statements: The bill would amend IRC Section 6056(c) to allow consent for electronic delivery of Forms 1095-B and 1095-C to be in place indefinitely, until revoked by the recipient. This would be effective for returns due after December 31, 2024.

Observation: As noted by the Joint Committee on Taxation report, this proposal generally would codify the existing regulations on electronic reporting under IRC Sections 6055 and 6056.

Timing of response: The bill would amend IRC Section 4980H(d) to give ALEs at least 90 days (instead of the current 30) to respond to a Letter 226-J (assessing an employer shared responsibility payment (ESRP)). This would be effective for assessments proposed in tax years beginning after the date of the bill's enactment.

Observation: This would provide a more reasonable period for an employer to respond to a Letter 226-J and eliminate the common practice of needing to ask the IRS for an extension to respond, which it typically grants.

Statute of limitations: The bill would amend IRC Section 6501 to establish a six-year limitations period for assessing ESRPs. The limitations period would begin to run on the due date for filing Forms 1094-C and 1095-C or the date the return is actually filed, if later. This would be effective for returns due after December 31, 2024.

Observation: The IRS's current position is that there is no statute of limitations under IRC Section 4980H. This would mean that the limitation period might still be unlimited if an ALE failed to file returns for a calendar year.

Paperwork Burden Reduction Act

The Paperwork Burden Reduction Act (H.R. 3797) would amend IRC Sections 6055(c) and 6056(c) by allowing the use of the alternative method of furnishing for Forms 1095-B and all Forms 1095-Cs. Currently, Forms 1095-B and only Forms 1095-C that just report enrollment in Part III (1G forms with enrollment) do not have to be furnished annually. This method excuses reporting entities from sending written notices so long as they post a notice prominently on their website notifying individuals that they may receive a copy of their form upon request. The form must be furnished by January 31 of the year following the calendar year for which the return was required to be made or 30 days after the request.

Observation: HR 3797 seems to codify the alternative method for furnishing Forms 1095-B and 1095-C forms coded as 1G that the IRS put in place after the federal individual mandate was set to $0 and also extend that relief to all Forms 1095-C. It seems to require these forms to be available by January 31. However, the due date for furnishing all ACA forms was permanently extended to March 2 (see Tax Alert 2022-1881). Therefore, employers that want to take advantage of this alternative but are not ready by January 31 might have to furnish the forms through the mail.

Implications

The proposed bills seek to reform aspects of IRS ACA reporting that some employers have indicated are unreasonable and unduly burden their ability to comply. It is unclear if and when the proposed legislation will be considered, though its bipartisan sponsorship suggests it could have legislative support.

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Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor