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Companies May Beat Employer Mandate Fine, On A Technicality http://ift.tt/2EXRXAi Employers are starting to get the bill due from the Internal Revenue Service for failing to adhere to the Affordable Care Act's employer mandate. Naturally, their impulse is to sue. From Politico:
And the law's complexity may give them opening. The Affordable Care Act, you'll recall, requires companies with at least 50 full-time employees to either offer health insurance to their employees — "play" — or pay a fine. But under the law, the IRS can only assess a penalty only if it "has been certified to the employer" that at least one employee has taken subsidized coverage on a government-run health insurance exchange. I'm using the passive voice here because just who in the government is supposed to make this certification is at the heart of the unhappy companies' claim. Bianchi argues that the law requires the health insurance exchange, not the IRS, to make the certification. Yet in 2015, the year the government began enforcing the employer mandate, neither the federal government nor most of the states operating their own exchanges managed to alert employers. In late 2015, the Department of Health and Human Services, which manages the federal marketplace, announced that it would begin sending notices to "certain" employers in 2016, and "expand to more employers in later years." It's not clear to what extent it has followed through on that promise. In the meantime, the agency said, "the IRS will independently determine any liability for the employer shared responsibility payment without regard to whether the Marketplace issued a notice." In late 2017, the IRS began sending employers a letter that claimed to certify that the company owed a penalty for 2015. In claiming the IRS is acting illegally here, Bianchi has locked onto an inconsistency, if not a contradiction, between two different parts of the Affordable Care Act. In effect, he is playing them off against each other. Where the employer mandate section of the law talks about certification, it refers to a different section of the law that governs how exchanges determine whether someone is eligible for a subsidy. That section makes no reference to certification at all, saying instead only that "the Exchange shall notify the employer" when a worker has enrolled in a health plan with a subsidy. But those subsidies are often a credit that the person claims when filing an income tax return — and only the IRS would have that information, not HHS. A former government lawyer involved in the discussion at the time, now in private practice, recently wrote to colleagues that the agencies determined that the IRS could not share that information with HHS, and so HHS would "delegate" its obligation to contact the employer to the IRS. (I was provided with the lawyer's analysis on the condition that I identify neither the attorney nor the firm.) A court case will probably turn on whether HHS in fact has the authority for that hand-off, which the agency wrote into its regulations, Bianchi and three other lawyers said. It's not clear that Bianchi could show that his clients were actually harmed when they heard from the IRS rather than from the exchange — though the IRS letters came two years too late to do anything about employees taking subsidies, the law doesn't specify when the notice must be sent, so an exchange could have been just as tardy. (Bianchi told me that while it seems to him that one purpose for certification "would be to alert an employer — in real time — that they have some exposure," he also allowed that "there is nothing in the legislative history that I can point to in support of this position.") But it's also not clear that he needs to prove harm, either. "One might think that the certification to the employer would be irrelevant if the outcome would not have changed," said Spencer Walter, a lawyer specializing in employee benefits at Ivins, Phillips & Barker, a Washington tax firm. "But when it comes to IRS penalties and taxes, procedure is key, so the burden should be on the IRS to demonstrate that the required certification was provided." Business via Forbes - Entrepreneurs http://ift.tt/dTEDZf February 23, 2018 at 08:56AM
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