[Federal Register Volume 77, Number 83 (Monday, April 30, 2012)]
[Proposed Rules]
[Pages 25378-25381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-10440]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[REG-119632-11]
RIN 1545-BK87
Regulations Pertaining to the Disclosure of Return Information To
Carry Out Eligibility Requirements for Health Insurance Affordability
Programs
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
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SUMMARY: This document contains proposed regulations relating to the
disclosure of return information under section 6103(l)(21) of the
Internal Revenue Code, as enacted by the Patient Protection and
Affordable Care Act and the Health Care and Education Reconciliation
Act of 2010. The regulations define certain terms and prescribe certain
items of return information in addition to those items prescribed by
statute that will be disclosed, upon written request, under section
6103(l)(21) of the Internal Revenue Code.
DATES: Written (including electronic) comments must be received by July
30, 2012. Outlines of topics to be discussed at the public hearing
scheduled for Friday, August 31, 2012, must be received by July 30,
2012.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-119632-11), Room
5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
119632-11), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at www.regulations.gov (IRS REG-119632-11). The
public hearing will be held in the IRS Auditorium, Internal Revenue
Building, 1111 Constitution Avenue NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Steven Karon, (202) 622-4570; concerning the submission of comments,
the public hearing, and to be placed on the building access list to
attend the public hearing, Olumafunmilayo Taylor, (202) 622-7180 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
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), Affordable
Insurance Exchanges (Exchanges) will provide competitive marketplaces
for individuals and small employers to directly compare available
private health insurance options (qualified health plans, or QHPs) on
the basis of price, quality, and other factors, and to purchase such
coverage. A Federally-facilitated Exchange will operate on behalf of
States electing not to pursue a State-based Exchange. In general, a QHP
is a health plan offered by a health insurance issuer that meets
minimum standards in the law and set by an Exchange.
[[Page 25379]]
Qualified individuals and small employers will be able to purchase
private health insurance through Exchanges. Certain individuals who
choose to obtain coverage through an Exchange will be eligible to
qualify for a new premium tax credit and/or cost-sharing reductions
established to help make the purchase of insurance more affordable.
Section 1401 of the Affordable Care Act amended the Internal
Revenue Code to add section 36B, providing for the premium tax credit
to help eligible individuals and families afford health insurance
coverage. Section 1402 of the Affordable Care Act provides reduced
cost-sharing for certain individuals enrolled in qualified health plans
through the Exchange, decreasing the individual's out-of-pocket limits,
deductibles, co-insurance, and co-payments in certain situations.
Section 1411(a) of the Affordable Care Act directs the Secretary of
the Department of Health and Human Services (HHS) to establish a
program under which Exchanges will determine whether individuals are
eligible to enroll in QHPs through the Exchange, and whether they are
eligible for advance payments of the premium tax credit and cost-
sharing reductions. Section 1412 of the Affordable Care Act directs the
Secretary of HHS to establish a program for determining eligibility for
advance payments of the premium tax credit and cost-sharing reductions
that may be paid directly to an insurance company on behalf of a
taxpayer. Eligibility for advance payments, like eligibility for the
premium tax credit itself, is based in part on the household income of
the individual who will claim the credit. Household income is defined
in section 36B(d)(2) as the total of the modified adjusted gross
incomes (MAGI) of the taxpayer claiming the premium tax credit and
those other individuals for whom the taxpayer was allowed a deduction
under section 151 and who were required to file a tax return.
Section 1413(a) of the Affordable Care Act directs the Secretary of
HHS to establish a system under which an individual may submit a
single, streamlined application to apply for specified insurance
affordability programs (that is, the premium tax credit under section
36B, cost-sharing reductions under section 1402 of the Affordable Care
Act, Medicaid, the Children's Health Insurance Program (CHIP), and a
State's basic health program, if applicable, under section 1331 of the
Affordable Care Act). The system must be compatible with the processes
set up to determine eligibility for advance payments of the premium tax
credit and cost-sharing reductions. Where an individual seeking
eligibility for any of these insurance affordability programs is found
to be eligible for Medicaid or CHIP, the individual is enrolled in that
program. If an individual is not eligible for one of these programs,
the Exchange will make the determination (or provide for HHS to make
the determination) as to the individual's eligibility for advance
payments of the premium tax credit under section 36B and for cost-
sharing reductions, and the amount of any advance payments. Under
section 1412(c)(2) of the Affordable Care Act, advance payments are
made monthly (or on another periodic basis as HHS may provide) directly
to the issuer of the qualified health plan in which the individual
enrolls.
Section 1411(b)(3) of the Affordable Care Act requires that
individuals seeking an eligibility determination for advance payments
of the premium tax credit or for cost-sharing reductions provide the
Exchange with information regarding their household income and family
size to demonstrate that they meet the income-based eligibility
requirements. However, section 1411(c)(4)(B) of the Affordable Care Act
grants the Secretary of HHS authority to modify the methods used for
the verification of information if the Secretary of HHS determines
those modifications would reduce the administrative costs and burdens
on individuals seeking coverage through an Exchange. The section
explicitly gives the Secretary of HHS authority to change the manner in
which Exchanges determine eligibility for advance payments of the
premium tax credit or for cost-sharing reductions, so long as any
applicable requirements under section 6103 of the Internal Revenue Code
with respect to the confidentiality, disclosure, maintenance and use of
return information would still be met. Section 1411(g) of the
Affordable Care Act further provides that individuals will be required
to provide only the minimum amount of information needed to
authenticate an individual's identity and to determine the individual's
eligibility for, and amount of, advance payments of the premium tax
credit or cost-sharing reductions.
In proposing regulations in the Federal Register on August 17,
2011, the Secretary of HHS concluded that a less burdensome and more
reasonable eligibility process would not require an individual to
provide an Exchange with specific income-related information, such as
the individual's MAGI (76 FR 51202 at 51214). Accordingly, the
Secretary of HHS promulgated final regulations published in the Federal
Register on March 27, 2012 (77 FR 18310), limiting the information an
individual needs to provide to an Exchange for purposes of income
verification and allowing the Exchange to solicit information from the
IRS through HHS with respect to the individual and his family members
whose names and social security numbers, or adoption taxpayer
identification numbers, are provided. The regulations also provide
guidance on the eligibility determination process for enrollment in a
QHP, advance payments of the premium tax credit and cost-sharing
reductions, and other insurance affordability programs. Additionally,
the Secretary of HHS promulgated final regulations published in the
Federal Register on March 23, 2012 (77 FR 17144) that provide revised
eligibility rules for Medicaid. The Treasury Department and the IRS
proposed regulations in the Federal Register on August 17, 2011 (76 FR
51202) to implement the new premium tax credit.
Section 6103(l)(21) permits the disclosure of return information to
assist Exchanges in performing certain functions set forth in section
1311 of the Affordable Care Act for which income verification is
required (including determinations of eligibility for the insurance
affordability programs described in the Affordable Care Act), as well
as to assist State agencies administering a State Medicaid program
under title XIX of the Social Security Act, CHIP under title XXI of the
Social Security Act, or a basic health program under section 1331 of
the Affordable Care Act (if applicable). Section 6103(l)(21) identifies
specific items of return information that will be disclosed and permits
the disclosure of such other items prescribed by regulation that might
indicate whether an individual is eligible for the premium tax credit
under section 36B or cost-sharing reductions under section 1402, and
the amount thereof. After an individual submits an application for
financial assistance in obtaining health coverage provided pursuant to
Title I, subtitle E, of the Affordable Care Act (``the application'')
to an Exchange or State agency, the IRS will disclose the available
items of return information described under section 6103(l)(21)(A) to
HHS. Pursuant to section 6103(l)(21)(B), HHS will then disclose the
information to the Exchange or State agency that is processing the
application.
As a condition for receiving return information under section
[[Page 25380]]
6103(l)(21)(A) and (B), each receiving entity (that is, HHS, the
Exchanges, and State agencies that administer Medicaid, CHIP, or basic
health plans, and their respective contractors) is required to adhere
to the safeguards established under section 6103(p)(4). Final HHS
regulations published in the Federal Register on March 27, 2012 (77 FR
at 18446, 18450) state that to be certified by HHS an Exchange must
demonstrate readiness to meet the section 6103 confidentiality
requirements with respect to the items of return information the
Exchange will receive. As described in section 6103(l)(21)(C), each
receiving entity may then use the return information received under
sections 6103(l)(21)(A) and (B) only for the purposes of, and to the
extent necessary in, establishing eligibility for participation in the
Exchange, verifying the appropriate amount of any advance payments of
the premium tax credit or cost-sharing reductions, and determining
eligibility for participation in a State Medicaid program, CHIP, or
basic health program under section 1331 of the Affordable Care Act.
Under section 6103(l)(21)(A), the IRS will disclose to HHS
(including its contractor(s)) certain items of return information, as
enumerated in the statute or by regulation, for any relevant taxpayer.
For purposes of these regulations, a relevant taxpayer is defined to be
any individual listed, by name and social security number or adoption
taxpayer identification number (``taxpayer identity information''), on
the application whose income may bear upon a determination of the
eligibility of an individual for an insurance affordability program.
For each relevant taxpayer, section 6103(l)(21) explicitly authorizes
the disclosure of the following items of return information from the
reference tax year: Taxpayer identity information, filing status, the
number of individuals for which a deduction under section 151 was
allowed (``family size''), MAGI, and the taxable year to which any such
information relates or, alternatively, that such information is not
available. The ``reference tax year'' is the first calendar year or,
where no return information is available in that year the second
calendar year, prior to the submission of the application. MAGI is
defined under section 36B as the taxpayer's adjusted gross income
defined under section 62, increased by three components: (1) Any amount
excluded from gross income under section 911, (2) any amount of
interest received or accrued by the taxpayer during the taxable year
that is exempt from tax, and (3) the amount of social security benefits
of the taxpayer excluded from gross income under section 86 for the tax
year.
In some situations, the IRS will be unable to calculate MAGI. While
uncommon, for certain relevant taxpayers who receive nontaxable social
security benefits, the IRS may not have complete information from which
to determine the amount of those benefits. If the IRS has information
indicating that a relevant taxpayer received nontaxable social security
benefits, but is unable to determine the amount of those benefits, the
IRS will provide the aggregate amount of the other components used to
calculate the relevant taxpayer's MAGI, as well as information
indicating that the amount of nontaxable social security benefits must
still be taken into account to determine MAGI. Similarly, where MAGI is
not available, the IRS will disclose the adjusted gross income, as well
as information indicating that the other components of MAGI must still
be taken into account to determine MAGI. Because the Affordable Care
Act and HHS's final regulations (77 FR at 18456-18458) require that
Exchanges use alternative means to verify income where information is
not available from the IRS, these explanatory items may assist an
Exchange in determining an individual's eligibility for, and amount of,
any advance payment of the premium tax credit or cost-sharing
reductions.
The proposed regulations further provide that, in certain
instances, where some or all of the items of return information
prescribed by statute or regulation is unavailable, the IRS will
provide information indicating why the particular item of return
information is not available. Where an individual jointly filed with a
spouse who is not a relevant taxpayer (that is, that spouse is not
included on the application), the IRS will not disclose MAGI from the
joint return because it cannot be appropriately allocated between the
two spouses. Instead, the IRS will disclose that a joint return had
been filed. This additional information may help individuals correct
any errors or understand why they need to pursue alternative routes to
verify their income. This information, therefore, also can assist
Exchanges in determining whether an individual is eligible for advance
payments of the premium tax credit or cost-sharing reductions.
Additionally, the IRS may have information in its records
indicating that a relevant taxpayer had been a victim of identity theft
or that a relevant taxpayer has been reported as deceased. The proposed
regulations provide that the IRS will disclose that, although a return
for that taxpayer is on file, the information described under section
6103(l)(21) is not being provided because IRS records suggest that the
Exchange should take additional steps to authenticate the identities of
the relevant taxpayers and may need to use alternate means for income
verification.
Where an individual who is listed as a dependent on the application
(for the tax year in which the premium tax credit will be claimed)
filed a return in the reference tax year but did not have a tax filing
requirement for that year (based upon the return filed), the IRS will
provide information indicating the dependent listed did not have a
filing requirement because the information is relevant to the
Exchange's computation of household income.
The final regulations issued by HHS provide that advance payments
of the premium tax credit will not be permitted where the relevant
taxpayer has received advance payments in the reference tax year and
failed to file a return reconciling the advance payments with the
actual premium tax credit. (77 FR at 18453). Therefore, these proposed
regulations provide that the IRS will disclose to HHS that a relevant
taxpayer who received an advance payment of a premium tax credit in the
reference tax year did not file a return reconciling the advance
payments with any premium tax credit available.
Special Analyses
It has been determined that this Notice of Proposed Rule Making is
not a significant regulatory action as defined in Executive Order
12866, as supplemented by Executive Order 13563. Therefore, a
regulatory assessment is not required. It has also been determined
that, because the regulations proposed do not impose a collection of
information on small entities, the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to section 7805(f) of the Code,
this notice of proposed rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on its impact on small business.
Comments and Public Hearing
The Treasury Department and the IRS request comments on all aspects
of the proposed rules. A public hearing has been scheduled for August
31, 2012, at 10:00 a.m., in the IRS Auditorium, Internal Revenue
Building, 1111 Constitution Avenue NW., Washington, DC. Due to building
security procedures, visitors must enter at the Constitution Avenue
entrance. In
[[Page 25381]]
addition, all visitors must present photo identification to enter the
building. Because of access restrictions, visitors will not be admitted
beyond the immediate entrance area more than 30 minutes before the
hearing starts. For information about having your name placed on the
building access list to attend the hearing, see the FOR FURTHER
INFORMATION CONTACT section of this preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments at the hearing must submit written or
electronic comments and an outline of the topics to be discussed and
the time to be devoted to each topic (a signed original and eight (8)
copies) by July 30, 2012. A period of 10 minutes will be allotted to
each person for making comments. An agenda showing the scheduling of
the speakers will be prepared after the deadline for receiving outlines
has passed. Copies of the agenda will be available free of charge at
the hearing.
Drafting Information
The principal author of the regulations is Steven L. Karon of the
Office of the Associate Chief Counsel, Procedure and Administration.
List of Subjects in 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, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
Paragraph 1. The authority citation for part 301 is amended by
adding the entry for Sec. 301.6103(l)(21) to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6103(l)(21)-(1) also issued under 26 U.S.C.
6103(l)(21) and 6103(q).
Par. 2. Add Sec. 301.6103(l)(21)-1 to read as follows:
Sec. 301.6103(l)(21)-1 Disclosure of return information to the
Department of Health and Human Services to carry out eligibility
requirements for health insurance affordability programs.
(a) General rule. Pursuant to the provisions of section
6103(l)(21)(A) of the Internal Revenue Code, officers and employees of
the Internal Revenue Service will disclose, upon written request, for
each relevant taxpayer on a single application those items of return
information that are described under section 6103(l)(21)(A) and
paragraphs (a)(1) through (6) of this section, for the reference tax
year, as applicable, to officers, employees and contractors of the
Department of Health and Human Services, solely for purposes of, and to
the extent necessary in, establishing an individual's eligibility for
participation in an Exchange established under the Patient Protection
and Affordable Care Act, including eligibility for, and determining the
appropriate amount of, any premium tax credit under section 36B or
cost-sharing reduction under section 1402 of the Patient Protection and
Affordable Care Act, or determining eligibility for the State programs
described in section 6103(l)(21)(A).
(1) With respect to each relevant taxpayer for the reference tax
year where the amount of social security benefits not included in gross
income under section 86 of the Internal Revenue Code of that relevant
taxpayer is unavailable:
(i) The aggregate amount of the following items of return
information--
(A) Adjusted gross income, as defined by section 62 of the Internal
Revenue Code;
(B) Any amount excluded from gross income under section 911 of the
Internal Revenue Code; and
(C) Any amount of interest received or accrued by the taxpayer
during the taxable year which is exempt from tax.
(ii) Information indicating that the amount of social security
benefits not included in gross income under section 86 of the Internal
Revenue Code is unavailable.
(2) Adjusted gross income, as defined by section 62 of the Internal
Revenue Code, of a relevant taxpayer for the reference tax year, in
circumstances where the modified adjusted gross income (MAGI), as
defined by section 36B(d)(2)(B) of the Internal Revenue Code, of that
relevant taxpayer is unavailable, as well as information indicating
that the components of MAGI other than adjusted gross income must be
taken into account to determine MAGI;
(3) Information indicating that certain return information of a
relevant taxpayer is unavailable for the reference tax year because the
relevant taxpayer jointly filed a U.S. Individual Income Tax Return for
that year with a spouse who is not a relevant taxpayer listed on the
same application;
(4) Information indicating that, although a return for an
individual identified on the application as a relevant taxpayer for the
reference tax year is available, return information is not being
provided because of possible authentication issues with respect to the
identity of the relevant taxpayer;
(5) Information indicating that a relevant taxpayer who is
identified as a dependent for the tax year in which the premium tax
credit under section 36B of the Internal Revenue Code would be claimed,
did not have a filing requirement for the reference tax year based upon
the U.S. Individual Income Tax Return the relevant taxpayer filed for
the reference tax year; and
(6) Information indicating that a relevant taxpayer who received
advance payments of the premium tax credit in the reference tax year
did not file a tax return for the reference tax year reconciling the
advance payments of the premium tax credit with any premium tax credit
under section 36B of the Internal Revenue Code available for that year.
(b) Relevant taxpayer defined. For purposes of paragraph (a) of
this section, a relevant taxpayer is defined to be any individual
listed, by name and social security number or adoption taxpayer
identification number, on an application submitted pursuant to Title I,
Subtitle E, of the Patient Protection and Affordable Care Act, whose
income may bear upon a determination of any advance payment of any
premium tax credit under section 36B of the Internal Revenue Code,
cost-sharing reduction under section 1402 of the Patient Protection and
Affordable Care Act, or eligibility for any program described in
section 6103(l)(21)(A) of the Internal Revenue Code.
(c) Reference tax year defined. For purposes of section
6103(l)(21)(A) of the Internal Revenue Code and this section, the
reference tax year is the first calendar year or, where no return
information is available in that year, the second calendar year, prior
to the submission of an application pursuant to Title I, Subtitle E, of
the Patient Protection and Affordable Care Act.
(d) Effective/applicability date. This section applies to
disclosures to the Department of Health and Human Services on or after
these proposed regulations are published as final regulations in the
Federal Register.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2012-10440 Filed 4-27-12; 8:45 am]
BILLING CODE 4830-01-P