Source: https://www.acareview.com/
Timestamp: 2019-04-21 01:09:32+00:00

Document:
The IRS occasionally got something wrong, but employers usually got 2015 Letter 226J because the employers or their AIR Transmitters reported something incorrectly or incompletely on 2015 Form 1094-C and/or 2015 Form 1095-C. Lots of HR and payroll people did the best they could with few resources and little time to get it right.
Maybe because the IRS understands that, or because the IRS also is under-resourced and time-crunched, employers were granted reasonable extensions to submit their 2015 ESRP Responses. We’re aware of only one instance in which IRS denied a request for an extension of the 30-day deadline.
Employers have been getting IRS replies to their ESRP responses about two months after submission. Reasonable explanations of their reporting errors, submitted with corroborating evidence and appropriate corrections, have been accepted.
To what extent will IRS assess reporting penalties for Form 1095-C corrections first made in 2015 ESRP responses?
Will the 2016 process be automated (as previously announced) or will it be, like 2015, a manual, paper process? The 2016 Letter 226J looks to us just like the 2015 Letter 226J. So, for 2016, as for 2015, correcting Form 1095-C mistakes to avoid an improper ESRP assessment will be simple but correcting Form 1094-C mistakes probably won’t be.
If you were among those under-resourced, time-crunched HR and payroll people who made 2015 reporting errors, you should be troubleshooting 2016 filings now.
An employer reading IRS Letter 226J and accompanying Form 14765 (recently mailed to notify employers of proposed 2015 employer mandate tax assessments) may realize that a group health plan change is needed to reduce or eliminate an employer mandate tax exposure not previously recognized. The change may be so obviously beneficial to union-represented employees that the employer can’t imagine collateral demands being made as a price of union agreement. Imagine it. Plan on it.
Before making any material change to a group health plan, or to plan administration affecting union-represented employees, an employer covered by the National Labor Relations Act must give the union notice and an opportunity to bargain about the proposed change. That duty and opportunity is subject to some exceptions. Two are frequent troublemakers. An employer may think that a union has waived that right and given the employer liberty to make changes, but the National Labor Relations Board recognizes only waivers that are “clear and unmistakable,” such as specific, express terms of a current, written labor contract. And if the current contract lacks such a waiver, but includes a “zipper clause,” the union may have the right to postpone bargaining until the next contract opening, perhaps years in the future. If you want immediate discussions, there may be a price for the union’s waiver of the zipper clause.
If an employer makes material group health plan changes without respecting these and other applicable NLRB rules, the Board’s regional office may commence administrative litigation leading to a range of costly remedies. For example, the NLRB might require the employer to restore the prior plan terms and/or bear uninsured costs that were covered before the employer made the unlawful changes. You may have insurance for other employment claims, but unless you know that it covers NLRB matters, assume that it doesn’t, and add 100% of your defense expenses to the price you might pay for this mistake. Such litigation can take years and run up huge expenses even if no employee suffered any actual harm from the NLRA violation.
Entering a football stadium many years ago, your nimble correspondent encountered unarmed security contractors wearing uniforms featuring the company logo – a big, red bull’s-eye – on the front of the baseball cap and on the left breast pocket of the shirt. Similarly, IRS Form 14765 may invite some employers to target themselves for IRS information reporting penalties. Here’s how.
Starting in November 2017, IRS mailed Form 14765, “Employee Premium Tax Credit Listing,” along with Letter 226J and Form 14764 to notify employers of proposed employer mandate tax assessments for 2015. Letter 226J notifies an Applicable Large Employer (or Member) that the IRS intends to assess 2015 employer mandate taxes in stated amount, unless the employer responds by submitting with Form 14764 (hyperlink currently disabled) its valid objections. The employer typically must deliver this within thirty days of the mailing date shown on Letter 226J. Such taxes may be assessed under Code § 4980H only for months in which at least one ALE Member full-time employee received an ACA subsidy for insurance coverage purchased through an ACA exchange – Healthcare.gov, for example. Form 14765 lists those tax-triggering employees, along with relevant information that the employer reported about them when it filed its 2015 Forms 1095-C. The employer might conclude that Letter 226J was provoked by its erroneous reporting. For example, a “smaller large employer” of 50 to 100 FTEs may have failed to claim available 2015 transition relief. Form 14765 invites the recipient of Letter 226J to claim that relief by entering the correct codes in rows underneath the reported information shown.
However, Letter 226J also instructs such a recipient: “Do not file corrected Forms 1095-C with the IRS to report requested changes to the Employee PTC Listing ….” Standing alone, that can be understood in at least two materially different ways: (1) the information reporting penalty and ESRP assessment processes are independent, so filing corrected Forms 1095-C might help you avoid information reporting penalties but it won’t help you in the ESRP process; or (2) the IRS wants to have to analyze only one set of proposed corrections, so please don’t file a duplicate set; say what you want solely on Form 14765.
In many, perhaps most situations, confessing material reporting errors on Form 14765 may be an excellent idea, but there is some ciphering to be done first. Did the erroneous reporting expose the employer to penalties under Code § § 6721 and 6722? Those penalties may reach $500 per errant Form 1095-C and, though IRS announced a broad range of planned lenience for good faith mistakes in 2015 information reporting, it warned that known errors left uncorrected could lead to penalty assessments. So, what did you know about these errors and when did you know it? More to the point, how much § 4980H tax might you avoid by admitting to how much penalty exposure? And will the IRS recognize the 2015 reporting errors and impose penalties even if you don’t confess?
This is just one collateral exposure that could be created depending on what actions an employer takes based on receipt of Letter 226J. If you goofed 2015 information reporting because you failed to get well-informed advice, don’t repeat that error and put a target on your forehead.
On November 17, the IRS published the Form that Applicable Large Employers must use to respond to IRS letters regarding proposed assessment of 2015 employer mandate taxes. Form 14764 is a paper, mail-in “ESRP Response” that shows the receipt deadline at the top of the Form, along with a number to call to request an extension of that deadline. On page 1, the ALE’s authorized official either accepts IRS collection of the proposed assessment or disagrees (either partly or totally). On page 2, the ALE’s authorized representative may designate another person to provide further information to the IRS regarding the proposed assessment, but may not authorize full representation. That must be done separately. See Form 2848 and its Instructions. There is no space for the ALE to indicate the grounds for its disagreement, nor is there any instruction about the format of or due date for such a submission. Indeed, whether it may be submitted separately is not stated.
• Complete, sign, and date the enclosed Form 14764, ESRP Response, and send it to us so we receive it by the Response date on the first page of this letter.
• Include a signed statement explaining why you disagree with part or all of the proposed ESRP. You may include documentation supporting your statement.
• Make sure your statement describes changes, if any, you want to make to the information reported on your Form(s) 1094-C or Forms 1095-C. Do not file a corrected Form 1094-C with the IRS to report any changes you want to make to your Form 1094-C filed for the tax year shown on the first page of this letter.
• Include your revised Employee PTC Listing, if necessary, and any additional documentation supporting your changes with your Form 14764, ESRP Response, and signed statement.
• You did not report an affordability safe harbor or other relief from the ESRP on the employee’s Form 1095-C for one or more of the months the employee was allowed a PTC.
These employees are referred to as assessable full-time employees.
Each monthly box on the Employee PTC Listing has two rows. The first row reflects the codes, if any, that were entered on line 14 and line 16 of the employee’s Form 1095-C for each month. For each employee, if the month is not highlighted, the employee is an assessable full-time employee for that month.
If the month is highlighted, the employee is not an assessable full-time employee for that month.
Employees who are not considered assessable full-time employees for all twelve months of the year (either because the employee was not allowed a PTC for any month in the calendar year or a safe harbor or other provision providing relief was reported on Form 1095-C for each month the employee was allowed a PTC) are not included on the Employee PTC Listing.
• If the information reported on an assessable full-time employee’s Form 1095-C was inaccurate or incomplete, you may make changes to the Employee PTC Listing using the applicable indicator codes for lines 14 and 16 that are described in the Instructions for Forms 1094-C and 1095-C. Make any changes, for each employee, as necessary, by entering new codes on the 2nd row of each monthly box.
• When making changes, first enter the indicator code for line 14 and then enter the indicator code for line 16. Separate the two codes with a slash (e.g., 1H/2A).
• If the same indicator code applies for all 12 months of the calendar year, enter that code in the “All 12 Months” column, and do not make entries for any of the months.
• If you are providing additional information about the changes for an employee, enter a check in the column titled “Additional Information Attached.” Otherwise, leave this column blank. NOTE: If more than one indicator code could apply for a month, enter only one code for that month on the Employee PTC Listing. Note any additional indicator codes that could apply for the affected employee in your signed statement. Include the employee’s name, the applicable months and the additional indicator codes for each month. We will review what you submit and will contact you.
Please ensure the signed statement and all documents submitted include the tax year and your employer ID number in the top right corner.
If you don’t respond by the Response date on the first page of this letter, we will send you a Notice and Demand for the ESRP that we proposed and assessed. The ESRP will be subject to IRS lien and levy enforcement actions. Interest will accrue from the date of the Notice and Demand and continue until you pay the total ESRP balance due.
To this this, you and your representative may need prompt access to your 2015 Forms 1095-C and your enrollment information for that plan year. If that data is hosted by a vendor, verify that access soon, because, just maybe, you’ve got mail.
Readers will recall our surprise that so much of the rule-making under ACA § 1557 addressed transgender issues. We now have decisions from two federal district courts taking polar opposite positions on whether § 1557 prohibits such discrimination. Franciscan Alliance, Inc. v. Burwell, 227 F.Supp.3d 660 (N.D. Tex. 2016) said that it does not; Prescott v. Rady Children’s Hospital – San Diego, S.D. Cal. No. 16-cv-02408 (Doc. 22, Sept. 27, 2017) affirmed that it does. Both can’t be correct.
The California decision reasoned from the premise that Title VII of the 1964 Civil Rights Act prohibits transgender discrimination, citing decisions to that effect from the Sixth, Seventh, Ninth and Eleventh Circuit Courts of Appeal. Because other Circuits take the opposing view, the dispute may be resolved by the U.S. Supreme Court soon. Notably, the Department of Justice on October 4, 2017 switched sides in this fight, taking the view expressed by the Texas court.
That’s the title of a web page that employers may find helpful upon receipt of an IRS communication asserting liability for employer mandate taxes under Code § 4980H. It should have an official notice (“CP”) or letter (“LTR”) number on either the top or the bottom right-hand corner. Entering that number in the search bar on the web page should display more information about the reason for the communication and what IRS expects in response. There should also be a telephone number in the top right hand corner of the document that employers receive.
On the same web page, you’ll find a link to “Form 2848 Power of Attorney and Declaration of Representative.” If you want another person to represent you in connection with the notice or letter, both the taxpayer and the designated representative must complete and sign the Form. Page 1 of the Instructions for Form 2848 tells you where to mail or fax the Form.
Your designated representative need not be an attorney, if he or she is in another approved category and need not have an IRS CAF number, since a number will be issued upon receipt of the Form. If the representative already has a nine-digit CAF number, it should be on the Form submitted.
We suspect that the initial letter will be a semi-formal precursor to Notice CP220J, which tells an employer that the IRS has “charged you an employer responsibility payment (ESRP).” The return address on this Form is “Group 2219, 7300 Turfway Road Suite 410, Florence, KY 41042,” but no contact phone or fax number is listed. The explanatory CP220J web page is bare bones today. We hope the IRS soon will hang some meat on it.
The Notice image posted under “Publications and Notices” (bottom of this article) is a mess; just count the contradictions. And, we still don’t have the promised Internal Revenue Bulletin guidance about what, if anything, may precede issuance of Form CP220J.
Update: There was no related news in the September 11, 2017 Internal Revenue Bulletin.

References: § 4980
 § 6721
 § 4980
 § 1557
 § 1557
 v. 
 v. 
 § 4980