Health Insurance Providers Fee, 10333-10335 [2015-03944]
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Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations
Dated: February 20, 2015.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2015–03934 Filed 2–25–15; 8:45 am]
BILLING CODE 4164–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 57
[TD 9711]
RIN 1545–BM52
Health Insurance Providers Fee
Internal Revenue Service (IRS),
Treasury.
ACTION: Final and temporary
regulations.
AGENCY:
This document contains
temporary regulations that provide rules
for the definition of a covered entity for
purposes of the fee imposed by section
9010 of the Patient Protection and
Affordable Care Act, as amended. The
temporary regulations are necessary to
clarify certain terms in section 9010.
The temporary regulations affect
persons engaged in the business of
providing health insurance for United
States health risks. The text of the
temporary regulations also serves as the
text of the proposed regulations (REG–
143416–14) published in the Proposed
Rules section in this issue of the Federal
Register.
DATES: Effective Date: These regulations
are effective on February 26, 2015.
Applicability Date: For dates of
applicability, see §§ 57.10 and 57.10T.
FOR FURTHER INFORMATION CONTACT:
Rachel S. Smith, (202) 317–6855 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
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Background
Section 9010 of the Patient Protection
and Affordable Care Act (PPACA),
Public Law 111–148 (124 Stat. 119
(2010)), as amended by section 10905 of
PPACA, and as further amended by
section 1406 of the Health Care and
Education Reconciliation Act of 2010,
Public Law 111–152 (124 Stat. 1029
(2010)) (collectively, the Affordable Care
Act or ACA) imposes an annual fee on
covered entities that provide health
insurance for United States health risks.
All references in this preamble to
section 9010 are references to the ACA.
Section 9010 did not amend the Internal
Revenue Code (Code) but contains
cross-references to specified Code
sections. Unless otherwise indicated, all
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other references to subtitles, chapters,
subchapters, and sections in this
preamble are references to subtitles,
chapters, subchapters, and sections in
the Code and related regulations. All
references to ‘‘fee’’ in this preamble are
references to the fee imposed by section
9010.
On November 27, 2013, the Treasury
Department and the IRS issued the
Health Insurance Providers Fee
regulations as final regulations (TD
9643). On August 12, 2014, the Treasury
Department and the IRS issued Notice
2014–47, 2014–35 IRB 522, to provide
further guidance for the 2014 fee year on
the definition of a covered entity. The
temporary regulations provide further
guidance on the definition of a covered
entity for the 2015 fee year and
subsequent fee years.
General Overview
Section 9010(a) imposes an annual fee
on each covered entity engaged in the
business of providing health insurance.
The fee is due by the annual date
specified by the Secretary, but in no
event later than September 30th of each
calendar year in which a fee must be
paid (fee year).
Section 9010(b) requires the Secretary
to determine the annual fee for each
covered entity based on the ratio of the
covered entity’s net premiums written
for health insurance for any United
States health risk that are taken into
account for the calendar year
immediately before the fee year (data
year) to the aggregate net premiums
written for health insurance of United
States health risks of all covered entities
that are taken into account during the
data year. In calculating the fee, the
Secretary must determine each covered
entity’s net premiums written for United
States health risks based on reports
submitted to the Secretary by the
covered entity and through the use of
any other source of information
available to the Secretary.
Section 9010(c)(1) defines a covered
entity as any entity that provides health
insurance for any United States health
risk during each fee year. Section
9010(c)(2) excludes the following
entities from being covered entities: (A)
Any employer to the extent that the
employer self-insures its employees’
health risks; (B) any governmental
entity; (C) any entity (i) that is
incorporated as a nonprofit corporation
under a State law, (ii) no part of the net
earnings of which inures to the benefit
of any private shareholder or individual,
no substantial part of the activities of
which is carrying on propaganda, or
otherwise attempting, to influence
legislation (except as otherwise
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10333
provided in section 501(h)), and which
does not participate in, or intervene in,
any political campaign on behalf of (or
in opposition to) any candidate for
public office, and (iii) more than 80
percent of the gross revenues of which
is received from government programs
that target low income, elderly, or
disabled populations under titles XVIII,
XIX, and XXI of the Social Security Act;
and (D) any entity that is described in
section 501(c)(9) (a voluntary
employees’ beneficiary association
(VEBA)) and is established by an entity
(other than by an employer or
employers) for purposes of providing
health care benefits.
Section 9010(c)(3)(A) provides a
controlled group rule under which all
persons treated as a single employer
under section 52(a) or (b) or section
414(m) or (o) are treated as a single
covered entity. Section 9010(c)(4)
provides that, if more than one person
is liable to pay the fee on a single
covered entity by reason of the
application of the controlled group rule,
then all such persons are jointly and
severally liable for payment of the fee.
Section 57.2(c)(1) of the Health
Insurance Providers Fee regulations
defines the term controlled group to
mean a group of two or more persons,
including at least one person that is a
covered entity, that is treated as a single
employer under section 52(a), 52(b),
414(m), or 414(o). Section 57.2(c)(3)(ii)
further provides that a person is treated
as being a member of the controlled
group if it is a member of the group at
the end of the day on December 31st of
the data year.
Explanation of Provisions
Following the publication of the final
regulations in TD 9643, the Treasury
Department and the IRS received
questions about how to apply the
exclusions under section 9010(c)(2) to
the general definition of a covered
entity. The Treasury Department and
the IRS also received questions about
whether covered entities must report
information on net premiums written
for certain members of a controlled
group. Notice 2014–47 was
subsequently issued to resolve those
questions for the 2014 fee year. The
temporary regulations adopt the general
approach of Notice 2014–47 to resolve
those questions for the 2015 fee year
and each subsequent fee year.
Application of Exclusions Under
Section 9010(c)(2)
Notice 2014–47 provided that, for the
2014 fee year, the Treasury Department
and the IRS would not treat any entity
as a covered entity if it would be
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10334
Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations
excluded from the definition of a
covered entity because it qualified for
one of the exclusions under section
9010(c)(2) either for the entire 2013 data
year or for the entire 2014 fee year,
which began on January 1, 2014. As
described later in this preamble, the
controlled group rules under section
9010(c)(3)(A) and § 57.2(c)(1) do not
apply for the limited purpose of
determining whether an entity qualifies
for an exclusion under section
9010(c)(2). Notice 2014–47 further
provided that the entity should not
report its net premiums written for the
2013 data year because the Treasury
Department and the IRS would not treat
such an entity as a covered entity.
The temporary regulations amend the
rules in the existing Health Insurance
Providers Fee regulations to incorporate
the general approach in Notice 2014–47.
Specifically, the temporary regulations
provide that, for the 2015 fee year and
each subsequent fee year, an entity
qualifies for an exclusion under section
9010(c)(2) if it qualifies for an exclusion
either for the entire data year ending on
the prior December 31st or for the entire
fee year beginning on January 1st. An
entity that qualifies for an exclusion
under this rule is not a covered entity
for that fee year and must not report its
net premiums written.
The temporary regulations also
impose two additional requirements.
First, the temporary regulations
generally impose a consistency
requirement that binds an entity to its
original selection of either the data year
or the fee year (its test year) to
determine whether it qualifies for an
exclusion under section 9010(c)(2) for
the 2015 fee year and each subsequent
fee year. For example, if an entity
selects the 2014 data year as its test year
for the 2015 fee year, it must use the
data year as its test year for the 2016 fee
year and each subsequent fee year.
Second, the temporary regulations
impose a special rule for an entity that
uses the fee year as its test year. A
special rule is important in this context
because the fee is due by September
30th of the fee year, and it may not be
clear until the end of the fee year
whether an entity will in fact qualify for
an exclusion. If an entity using the fee
year as its test year does not report its
net premiums written because it expects
to qualify for an exclusion under section
9010(c)(2), but the entity ultimately
does not qualify for an exclusion, the
temporary regulations require the entity
to use the data year as its test year in
all subsequent fee years. In this
circumstance, the entity will necessarily
be a covered entity that is required to
report its net premiums written for the
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immediately following fee year. In
addition, an entity that does not timely
file a report in a fee year, and that is a
covered entity for that fee year because
it does not qualify for an exclusion, may
be subject to penalties, including the
failure to report penalty under section
9010(g)(2).
For example, assume that for the 2015
fee year an entity used the fee year as
its test year and reasonably expected to
qualify for the section 9010(c)(2)(C)
exclusion for that fee year. As a result,
the entity did not report its net
premiums written and it was not treated
as a covered entity for purposes of the
2015 fee calculation. Further assume
that as of December 31, 2015, the entity
did not satisfy the 80 percent minimum
gross revenues requirement of section
9010(c)(2)(C)(iii) and therefore did not
qualify for this or any other exclusion
under section 9010(c)(2) for the 2015 fee
year. Under the temporary regulations,
this entity must use the data year for
each subsequent fee year to determine
whether it qualifies for an exclusion
under section 9010(c)(2). Thus, for the
2016 fee year, because this entity must
determine its eligibility for an exclusion
based on the 2015 data year, it would
not be eligible for an exclusion under
section 9010(c)(2) for the 2016 fee year
and must submit a report in that year.
This entity must also use the data year
as its test year for the 2017 fee year and
each subsequent fee year.
The Treasury Department and the IRS
request comments regarding whether
there are any circumstances in which an
entity should be permitted by the IRS to
change its test year, and if so, what
conditions and limitations should apply
to any such change.
Reporting for Controlled Group
Members
Notice 2014–47 provided that a
controlled group must report net
premiums written only for each person
who is a controlled group member at the
end of the day on December 31st of the
data year and who would qualify as a
covered entity in the fee year if it were
a single-person covered entity (that is,
not a member of a controlled group).
The temporary regulations incorporate
this rule for the 2015 fee year and each
subsequent fee year. Therefore, a
controlled group must not report net
premiums written for any controlled
group member who would fail to be a
covered entity in the fee year if it were
not a member of a controlled group.
Although that person’s net premiums
written are not taken into account, it
remains a member of the controlled
group and is jointly and severally liable
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for the fee amount allocated to the
controlled group.
Special Analyses
It has been determined that this
Treasury decision 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 section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations, and because these
regulations 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, these
temporary regulations have been
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small businesses.
Drafting Information
The principal author of these
regulations is Rachel S. Smith, IRS
Office of the Associate Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from the
Treasury Department and the IRS
participated in their development.
List of Subjects in 26 CFR Part 57
Health Insurance, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 57 is
amended as follows:
PART 57—HEALTH INSURANCE
PROVIDERS FEE
Paragraph 1. The authority citation
for part 57 continues to read in part as
follows:
■
Authority: 26 U.S.C. 7805; sec. 9010,
Public Law 111–148 (124 Stat. 119 (2010)).
*
*
*
*
*
Par. 2. Section 57.2 is amended by:
1. Redesignating paragraph (b)(3) as
paragraph (b)(4).
■ 2. Adding paragraph (b)(3).
■ 3. Revising paragraph (c)(3)(ii).
The addition and revision read as
follows:
■
■
§ 57.2
Explanation of terms.
*
*
*
*
*
(b) * * *
(3) [Reserved]. For further guidance,
see § 57.2T(b)(3).
*
*
*
*
*
(c) * * *
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(3) * * *
(ii) [Reserved]. For further guidance
see § 57.2T(c)(3)(ii).
*
*
*
*
*
■ Par. 3. Section 57.2T is added to read
as follows:
§ 57.2T
Explanation of terms (temporary).
(a) through (b)(2) [Reserved]. For
further guidance, see § 57.2(a) through
(b)(2).
(3) Application of exclusions—(i) Test
year. An entity qualifies for an
exclusion described in § 57.2(b)(2)(i)
through (iv) if it so qualifies in its test
year. The term test year means either the
entire data year or the entire fee year.
(ii) Consistency rule. For purposes of
paragraph (b)(3)(i) of this section, an
entity must use the same test year as it
used in its first fee year beginning after
December 31, 2014, and in each
subsequent fee year. Thus, for example,
if an entity used the 2014 data year as
its test year for the 2015 fee year, that
entity must use the data year as its test
year for each subsequent fee year.
(iii) Special rule for fee year as test
year. For purposes of paragraph (b)(3) of
this section, any entity that uses the fee
year as its test year but ultimately does
not qualify for an exclusion described in
§ 57.2(b)(2)(i) through (iv) for that entire
fee year must use the data year as its test
year for each subsequent fee year.
(b)(4) through (c)(3)(i) [Reserved]. For
further guidance, see § 57.2(b)(4)
through (c)(3)(i).
(ii) A person is treated as being a
member of the controlled group if it is
a member of the group at the end of the
day on December 31st of the data year.
However, a person’s net premiums
written are included in net premiums
written for the controlled group only if
the person would qualify as a covered
entity in the fee year if the person were
not a member of the controlled group.
(d) through (n) [Reserved]. For further
guidance, see § 52.7(d) through (n).
■ Par. 4. Section 57.10 is revised to read
as follows:
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§ 57.10
Effective/applicability date.
(a) In general. Except as provided in
paragraph (b), §§ 57.1 through 57.9
apply to any fee that is due on or after
September 30, 2014.
(b) [Reserved]. For further guidance,
see § 57.10T(b).
■ Par. 5. Section 57.10T is added to read
as follows:
§ 57.10T Effective/applicability date
(temporary).
(a) [Reserved]. For further guidance,
see § 57.10(a).
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(b) Paragraphs (b)(3) and (c)(3)(ii) of
§ 57.2T. Paragraphs (b)(3) and (c)(3)(ii)
of § 57.2T apply on February 26, 2015.
(c) Expiration date. Paragraphs (b)(3)
and (c)(3)(ii) of § 57.2T expire on
February 23, 2018.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: February 19, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2015–03944 Filed 2–23–15; 4:15 pm]
BILLING CODE 4830–01–P
DEPARTMENT OF DEFENSE
Department of the Army
32 CFR Part 505
[USA–2014–0006]
RIN 0702–AA65
Army Privacy Program
Department of the Army, DoD.
Direct final rule.
10335
that would result in a contrary
determination. Comments will be
accepted on or before April 27, 2015.
ADDRESSES: You may submit comments,
identified by docket number and/or
Regulatory Information Number (RIN)
and title, by any of the following
methods:
• Federal Rulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: Federal Docket Management
System Office, 4800 Mark Center Drive,
East Tower, Suite 02G09, Alexandria,
VA 22350–3100.
Instructions: All submissions received
must include the agency name and
docket number or RIN for this Federal
Register document. The general policy
for comments and other submissions
from members of the public is to make
these submissions available for public
viewing on the Internet at https://
www.regulations.gov as they are
received without change, including any
personal identifiers or contact
information.
AGENCY:
FOR FURTHER INFORMATION CONTACT:
ACTION:
Tracy Rogers, Chief, FOIA/PA,
telephone: 703–428–6513.
SUPPLEMENTARY INFORMATION:
The Department of the Army
is amending the Army Privacy Program
Regulation. Specifically, Army is
reinstating exemptions that were
mistakenly deleted when the Army’s
Privacy Program Regulation was last
revised. These rules provide policies
and procedures for the Army’s
implementation of the Privacy Act of
1974, as amended.
This direct final rule makes changes
to the Department of the Army’s Privacy
Program rules. These changes will allow
the Department to exempt records from
certain portions of the Privacy Act. This
will improve the efficiency and
effectiveness of DoD’s program by
preserving the exempt status of the
records when the purposes underlying
the exemption are valid and necessary
to protect the contents of the records.
This rule is being published as a
direct final rule as the Department of
Defense does not expect to receive any
adverse comments, and so a proposed
rule is unnecessary.
The revisions to these rules are part
of DoD’s retrospective plan under
Executive Order 13563 completed in
August 2011. DoD’s full plan can be
accessed at https://www.whitehouse.gov/
sites/default/files/other/2011-regulatory
-action-plans/department
ofdefenseregulatory
reformplanaugust2011a.pdf.
SUMMARY:
The rule will be effective on May
7, 2015 unless comments are received
DATES:
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Ms.
Direct Final Rule and Significant
Adverse Comments
DoD has determined this rulemaking
meets the criteria for a direct final rule
because it involves changes dealing
with DoD’s management of its Privacy
Programs. DoD expects no opposition to
the changes and no significant adverse
comments. However, if DoD receives a
significant adverse comment, the
Department will withdraw this direct
final rule by publishing a notice in the
Federal Register. A significant adverse
comment is one that explains: (1) Why
the direct final rule is inappropriate,
including challenges to the rule’s
underlying premise or approach; or (2)
why the direct final rule will be
ineffective or unacceptable without a
change. In determining whether a
comment necessitates withdrawal of
this direct final rule, DoD will consider
whether it warrants a substantive
response in a notice and comment
process.
Executive Summary
I. Purpose of This Regulatory Action
a. These rules provide policies and
procedures for Army’s implementation
of the Privacy Act of 1974, as amended.
b. Authority: Privacy Act of 1974,
Public Law 93–579, Stat. 1896 (5 U.S.C.
552a).
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Agencies
[Federal Register Volume 80, Number 38 (Thursday, February 26, 2015)]
[Rules and Regulations]
[Pages 10333-10335]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-03944]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 57
[TD 9711]
RIN 1545-BM52
Health Insurance Providers Fee
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains temporary regulations that provide
rules for the definition of a covered entity for purposes of the fee
imposed by section 9010 of the Patient Protection and Affordable Care
Act, as amended. The temporary regulations are necessary to clarify
certain terms in section 9010. The temporary regulations affect persons
engaged in the business of providing health insurance for United States
health risks. The text of the temporary regulations also serves as the
text of the proposed regulations (REG-143416-14) published in the
Proposed Rules section in this issue of the Federal Register.
DATES: Effective Date: These regulations are effective on February 26,
2015.
Applicability Date: For dates of applicability, see Sec. Sec.
57.10 and 57.10T.
FOR FURTHER INFORMATION CONTACT: Rachel S. Smith, (202) 317-6855 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 9010 of the Patient Protection and Affordable Care Act
(PPACA), Public Law 111-148 (124 Stat. 119 (2010)), as amended by
section 10905 of PPACA, and as further amended by section 1406 of the
Health Care and Education Reconciliation Act of 2010, Public Law 111-
152 (124 Stat. 1029 (2010)) (collectively, the Affordable Care Act or
ACA) imposes an annual fee on covered entities that provide health
insurance for United States health risks. All references in this
preamble to section 9010 are references to the ACA. Section 9010 did
not amend the Internal Revenue Code (Code) but contains cross-
references to specified Code sections. Unless otherwise indicated, all
other references to subtitles, chapters, subchapters, and sections in
this preamble are references to subtitles, chapters, subchapters, and
sections in the Code and related regulations. All references to ``fee''
in this preamble are references to the fee imposed by section 9010.
On November 27, 2013, the Treasury Department and the IRS issued
the Health Insurance Providers Fee regulations as final regulations (TD
9643). On August 12, 2014, the Treasury Department and the IRS issued
Notice 2014-47, 2014-35 IRB 522, to provide further guidance for the
2014 fee year on the definition of a covered entity. The temporary
regulations provide further guidance on the definition of a covered
entity for the 2015 fee year and subsequent fee years.
General Overview
Section 9010(a) imposes an annual fee on each covered entity
engaged in the business of providing health insurance. The fee is due
by the annual date specified by the Secretary, but in no event later
than September 30th of each calendar year in which a fee must be paid
(fee year).
Section 9010(b) requires the Secretary to determine the annual fee
for each covered entity based on the ratio of the covered entity's net
premiums written for health insurance for any United States health risk
that are taken into account for the calendar year immediately before
the fee year (data year) to the aggregate net premiums written for
health insurance of United States health risks of all covered entities
that are taken into account during the data year. In calculating the
fee, the Secretary must determine each covered entity's net premiums
written for United States health risks based on reports submitted to
the Secretary by the covered entity and through the use of any other
source of information available to the Secretary.
Section 9010(c)(1) defines a covered entity as any entity that
provides health insurance for any United States health risk during each
fee year. Section 9010(c)(2) excludes the following entities from being
covered entities: (A) Any employer to the extent that the employer
self-insures its employees' health risks; (B) any governmental entity;
(C) any entity (i) that is incorporated as a nonprofit corporation
under a State law, (ii) no part of the net earnings of which inures to
the benefit of any private shareholder or individual, no substantial
part of the activities of which is carrying on propaganda, or otherwise
attempting, to influence legislation (except as otherwise provided in
section 501(h)), and which does not participate in, or intervene in,
any political campaign on behalf of (or in opposition to) any candidate
for public office, and (iii) more than 80 percent of the gross revenues
of which is received from government programs that target low income,
elderly, or disabled populations under titles XVIII, XIX, and XXI of
the Social Security Act; and (D) any entity that is described in
section 501(c)(9) (a voluntary employees' beneficiary association
(VEBA)) and is established by an entity (other than by an employer or
employers) for purposes of providing health care benefits.
Section 9010(c)(3)(A) provides a controlled group rule under which
all persons treated as a single employer under section 52(a) or (b) or
section 414(m) or (o) are treated as a single covered entity. Section
9010(c)(4) provides that, if more than one person is liable to pay the
fee on a single covered entity by reason of the application of the
controlled group rule, then all such persons are jointly and severally
liable for payment of the fee.
Section 57.2(c)(1) of the Health Insurance Providers Fee
regulations defines the term controlled group to mean a group of two or
more persons, including at least one person that is a covered entity,
that is treated as a single employer under section 52(a), 52(b),
414(m), or 414(o). Section 57.2(c)(3)(ii) further provides that a
person is treated as being a member of the controlled group if it is a
member of the group at the end of the day on December 31st of the data
year.
Explanation of Provisions
Following the publication of the final regulations in TD 9643, the
Treasury Department and the IRS received questions about how to apply
the exclusions under section 9010(c)(2) to the general definition of a
covered entity. The Treasury Department and the IRS also received
questions about whether covered entities must report information on net
premiums written for certain members of a controlled group. Notice
2014-47 was subsequently issued to resolve those questions for the 2014
fee year. The temporary regulations adopt the general approach of
Notice 2014-47 to resolve those questions for the 2015 fee year and
each subsequent fee year.
Application of Exclusions Under Section 9010(c)(2)
Notice 2014-47 provided that, for the 2014 fee year, the Treasury
Department and the IRS would not treat any entity as a covered entity
if it would be
[[Page 10334]]
excluded from the definition of a covered entity because it qualified
for one of the exclusions under section 9010(c)(2) either for the
entire 2013 data year or for the entire 2014 fee year, which began on
January 1, 2014. As described later in this preamble, the controlled
group rules under section 9010(c)(3)(A) and Sec. 57.2(c)(1) do not
apply for the limited purpose of determining whether an entity
qualifies for an exclusion under section 9010(c)(2). Notice 2014-47
further provided that the entity should not report its net premiums
written for the 2013 data year because the Treasury Department and the
IRS would not treat such an entity as a covered entity.
The temporary regulations amend the rules in the existing Health
Insurance Providers Fee regulations to incorporate the general approach
in Notice 2014-47. Specifically, the temporary regulations provide
that, for the 2015 fee year and each subsequent fee year, an entity
qualifies for an exclusion under section 9010(c)(2) if it qualifies for
an exclusion either for the entire data year ending on the prior
December 31st or for the entire fee year beginning on January 1st. An
entity that qualifies for an exclusion under this rule is not a covered
entity for that fee year and must not report its net premiums written.
The temporary regulations also impose two additional requirements.
First, the temporary regulations generally impose a consistency
requirement that binds an entity to its original selection of either
the data year or the fee year (its test year) to determine whether it
qualifies for an exclusion under section 9010(c)(2) for the 2015 fee
year and each subsequent fee year. For example, if an entity selects
the 2014 data year as its test year for the 2015 fee year, it must use
the data year as its test year for the 2016 fee year and each
subsequent fee year.
Second, the temporary regulations impose a special rule for an
entity that uses the fee year as its test year. A special rule is
important in this context because the fee is due by September 30th of
the fee year, and it may not be clear until the end of the fee year
whether an entity will in fact qualify for an exclusion. If an entity
using the fee year as its test year does not report its net premiums
written because it expects to qualify for an exclusion under section
9010(c)(2), but the entity ultimately does not qualify for an
exclusion, the temporary regulations require the entity to use the data
year as its test year in all subsequent fee years. In this
circumstance, the entity will necessarily be a covered entity that is
required to report its net premiums written for the immediately
following fee year. In addition, an entity that does not timely file a
report in a fee year, and that is a covered entity for that fee year
because it does not qualify for an exclusion, may be subject to
penalties, including the failure to report penalty under section
9010(g)(2).
For example, assume that for the 2015 fee year an entity used the
fee year as its test year and reasonably expected to qualify for the
section 9010(c)(2)(C) exclusion for that fee year. As a result, the
entity did not report its net premiums written and it was not treated
as a covered entity for purposes of the 2015 fee calculation. Further
assume that as of December 31, 2015, the entity did not satisfy the 80
percent minimum gross revenues requirement of section
9010(c)(2)(C)(iii) and therefore did not qualify for this or any other
exclusion under section 9010(c)(2) for the 2015 fee year. Under the
temporary regulations, this entity must use the data year for each
subsequent fee year to determine whether it qualifies for an exclusion
under section 9010(c)(2). Thus, for the 2016 fee year, because this
entity must determine its eligibility for an exclusion based on the
2015 data year, it would not be eligible for an exclusion under section
9010(c)(2) for the 2016 fee year and must submit a report in that year.
This entity must also use the data year as its test year for the 2017
fee year and each subsequent fee year.
The Treasury Department and the IRS request comments regarding
whether there are any circumstances in which an entity should be
permitted by the IRS to change its test year, and if so, what
conditions and limitations should apply to any such change.
Reporting for Controlled Group Members
Notice 2014-47 provided that a controlled group must report net
premiums written only for each person who is a controlled group member
at the end of the day on December 31st of the data year and who would
qualify as a covered entity in the fee year if it were a single-person
covered entity (that is, not a member of a controlled group). The
temporary regulations incorporate this rule for the 2015 fee year and
each subsequent fee year. Therefore, a controlled group must not report
net premiums written for any controlled group member who would fail to
be a covered entity in the fee year if it were not a member of a
controlled group. Although that person's net premiums written are not
taken into account, it remains a member of the controlled group and is
jointly and severally liable for the fee amount allocated to the
controlled group.
Special Analyses
It has been determined that this Treasury decision 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 section
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and because these regulations 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, these temporary regulations have been
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small businesses.
Drafting Information
The principal author of these regulations is Rachel S. Smith, IRS
Office of the Associate Chief Counsel (Passthroughs and Special
Industries). However, other personnel from the Treasury Department and
the IRS participated in their development.
List of Subjects in 26 CFR Part 57
Health Insurance, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 57 is amended as follows:
PART 57--HEALTH INSURANCE PROVIDERS FEE
0
Paragraph 1. The authority citation for part 57 continues to read in
part as follows:
Authority: 26 U.S.C. 7805; sec. 9010, Public Law 111-148 (124
Stat. 119 (2010)).
* * * * *
0
Par. 2. Section 57.2 is amended by:
0
1. Redesignating paragraph (b)(3) as paragraph (b)(4).
0
2. Adding paragraph (b)(3).
0
3. Revising paragraph (c)(3)(ii).
The addition and revision read as follows:
Sec. 57.2 Explanation of terms.
* * * * *
(b) * * *
(3) [Reserved]. For further guidance, see Sec. 57.2T(b)(3).
* * * * *
(c) * * *
[[Page 10335]]
(3) * * *
(ii) [Reserved]. For further guidance see Sec. 57.2T(c)(3)(ii).
* * * * *
0
Par. 3. Section 57.2T is added to read as follows:
Sec. 57.2T Explanation of terms (temporary).
(a) through (b)(2) [Reserved]. For further guidance, see Sec.
57.2(a) through (b)(2).
(3) Application of exclusions--(i) Test year. An entity qualifies
for an exclusion described in Sec. 57.2(b)(2)(i) through (iv) if it so
qualifies in its test year. The term test year means either the entire
data year or the entire fee year.
(ii) Consistency rule. For purposes of paragraph (b)(3)(i) of this
section, an entity must use the same test year as it used in its first
fee year beginning after December 31, 2014, and in each subsequent fee
year. Thus, for example, if an entity used the 2014 data year as its
test year for the 2015 fee year, that entity must use the data year as
its test year for each subsequent fee year.
(iii) Special rule for fee year as test year. For purposes of
paragraph (b)(3) of this section, any entity that uses the fee year as
its test year but ultimately does not qualify for an exclusion
described in Sec. 57.2(b)(2)(i) through (iv) for that entire fee year
must use the data year as its test year for each subsequent fee year.
(b)(4) through (c)(3)(i) [Reserved]. For further guidance, see
Sec. 57.2(b)(4) through (c)(3)(i).
(ii) A person is treated as being a member of the controlled group
if it is a member of the group at the end of the day on December 31st
of the data year. However, a person's net premiums written are included
in net premiums written for the controlled group only if the person
would qualify as a covered entity in the fee year if the person were
not a member of the controlled group.
(d) through (n) [Reserved]. For further guidance, see Sec. 52.7(d)
through (n).
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Par. 4. Section 57.10 is revised to read as follows:
Sec. 57.10 Effective/applicability date.
(a) In general. Except as provided in paragraph (b), Sec. Sec.
57.1 through 57.9 apply to any fee that is due on or after September
30, 2014.
(b) [Reserved]. For further guidance, see Sec. 57.10T(b).
0
Par. 5. Section 57.10T is added to read as follows:
Sec. 57.10T Effective/applicability date (temporary).
(a) [Reserved]. For further guidance, see Sec. 57.10(a).
(b) Paragraphs (b)(3) and (c)(3)(ii) of Sec. 57.2T. Paragraphs
(b)(3) and (c)(3)(ii) of Sec. 57.2T apply on February 26, 2015.
(c) Expiration date. Paragraphs (b)(3) and (c)(3)(ii) of Sec.
57.2T expire on February 23, 2018.
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
Approved: February 19, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2015-03944 Filed 2-23-15; 4:15 pm]
BILLING CODE 4830-01-P