On April 7, 2017, the Treasury Inspector General for Tax
Administration (TIGTA) published a report on the "Assessment
of Efforts to Implement the Employer Shared Responsibility
Provision." This report1 provides clues to the
Affordable Care Act (ACA) enforcement initiatives with regard to
the employer mandate.
The report stressed that the IRS' systems to enforce the
employer mandate portion of the Affordable Care Act have been
delayed – not cancelled -- and could be up and running as
early as May 2017.
The report follows TIGTA's audit of the Internal Revenue
Service's processes for enforcing the ACA's tax penalties
on large employers who failed to offer affordable, minimum value
coverage to their full-time employees. TIGTA concluded that the
IRS' enforcement of the employer mandate has been delayed by
multiple issues associated with processing the data reported by
employers on the annual Form 1095-C.
In particular, the audit revealed that the IRS was slow to
process the paper returns, which, in turn, delayed the testing
modules for the enforcement systems. According to TIGTA, nearly a
third of the 4.8 million paper Forms 1095-C had not been processed
as of October 28, 2016. Other factors contributing to the delays
included delays during the 1040 filing season and problems
identifying valid errors in the ACA reports.
Importantly for large employers, the report also sheds light on
the IRS' process for enforcing the employer mandate
"The IRS is developing new systems that will use
employer-reported information returns as well as other tax data to
identify employers that are not compliant with the Employer Shared
Responsibility Provision and may be subject to the Employer Shared
Responsibility Payment. For example, the IRS is developing the ACA
Compliance Validation (ACV) system, which will be used to identify
potentially noncompliant Applicable Large Employers and calculate
the proposed Employer Shared Responsibility Payments. ...
However, the implementation of the ACV system has been
delayed to May 2017."
The report does not state whether implementation of the ACV
system in May will result in immediate enforcement activity.
However, at the very least, this report suggests that employer
mandate enforcement has not been shelved or postponed
The report also provides a rough outline of the IRS'
proposed process for notifying employers who may owe an employer
"[T]he IRS's compliance plans include the development
of a process to contact the Applicable Large Employer about the
potential assessment. The contact information will include
identifying the employee(s) who have received [subsidized
Marketplace coverage] and provide the employer an opportunity to
respond to the notice of potential assessment. If the IRS
determines that an employer is liable for an Employer Shared
Responsibility Payment, the IRS will send the employer a notice and
demand for payment."
According to the Joint Committee on Taxation's estimate,
revenue from the employer mandate could reach $167 billion for the
years between 2016 through 2025.
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