Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10333 

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 

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 §§ 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 


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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 

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 

■ 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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Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10335 

(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: 

§ 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). 

(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 

AGENCY: Department of the Army, DoD. 

ACTION: Direct final rule. 

SUMMARY: 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 http://www.whitehouse.gov/ 

sites/default/files/other/2011-regulatory

-action-plans/department

ofdefenseregulatory

reformplanaugust2011a.pdf. 

DATES: The rule will be effective on May 

7, 2015 unless comments are received 

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: http://

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 http://

www.regulations.gov as they are 

received without change, including any 

personal identifiers or contact 

information. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Tracy Rogers, Chief, FOIA/PA, 

telephone: 703–428–6513. 

SUPPLEMENTARY INFORMATION: 

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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