[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
               INTERNAL REVENUE SERVICE'S IMPLEMENTATION 
                  AND ADMINISTRATION OF THE DEMOCRATS' 
                            HEALTH CARE LAW 

=======================================================================

                                HEARING

                               before the

                       SUBCOMMITTEE ON OVERSIGHT

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 11, 2012

                               __________

                          Serial No. 112-OS16

                               __________

         Printed for the use of the Committee on Ways and Means


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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               SHELLEY BERKLEY, Nevada
LYNN JENKINS, Kansas                 JOSEPH CROWLEY, New York
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                       SUBCOMMITTEE ON OVERSIGHT

             CHARLES W. BOUSTANY, JR., Louisiana, Chairman

DIANE BLACK, Tennessee               JOHN LEWIS, Georgia
AARON SCHOCK, Illinois               XAVIER BECERRA, California
LYNN JENKINS, Kansas                 RON KIND, Wisconsin
KENNY MARCHANT, Texas                JIM MCDERMOTT, Washington
TOM REED, New York
ERIK PAULSEN, Minnesota



                            C O N T E N T S

                               __________

                                                                   Page

Advisory of September 11, 2012 announcing the hearing............     2

                               WITNESSES

PANEL 1:

Steven T. Miller, Deputy Commissioner for Services and 
  Enforcement, Internal Revenue Service, Testimony...............     6

PANEL 2:

Mr. Fred Goldberg, Jr., Partner; Skadden, Arps, Slate, Meagher & 
  Flom LLP, Testimony............................................    26
Ms. Kathy Pickering, Executive Director, The Tax Institute at H&R 
  Block; Vice President, Government Relations, Testimony.........    35
Mr. Scott A. Hodge, President; The Tax Foundation, Testimony.....    44
Mr. Seth T. Perreta, Partner, Crowell and Moring LLP, Testimony..    52

                       SUBMISSIONS FOR THE RECORD

Timothy Stoltzfus Jost...........................................    77
William G. Schiffbauer...........................................    86


  INTERNAL REVENUE SERVICE'S IMPLEMENTATION AND ADMINISTRATION OF THE 
                       DEMOCRATS' HEALTH CARE LAW

                              ----------                              


                      TUESDAY, SEPTEMBER 11, 2012

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                 Subcommittee on Oversight,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 9:46 a.m. in 
room 1100, Longworth House Office Building, the Honorable 
Charles Boustany (Chairman of the Subcommittee) presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

     Boustany Announces Hearing on the Internal Revenue Service's 
  Implementation and Administration of the Democrats' Health Care Law

Tuesday, September 04, 2012
*UPDATE: NEW TIME*
ALL OTHER DETAILS OF THE HEARING REMAIN THE SAME.

    Congressman Charles W. Boustany, Jr., MD, (R-LA), Chairman of the 
Subcommittee on Oversight of the Committee on Ways and Means, today 
announced the Subcommittee will hold a hearing on the Internal Revenue 
Service's (``IRS'') implementation and administration of the Patient 
Protection and Affordable Care Act and Health Care and Education 
Reconciliation Act of 2010 (``Democrats' health care law''). The 
hearing will take place on Tuesday, September 11, 2012, in room 1100 of 
the Longworth House Office Building, beginning at 9:45 A.M.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Subcommittee and 
for inclusion in the printed record of the hearing. A list of invited 
witnesses will follow.
      

BACKGROUND:

      
    Enacted in large part on March 23, 2010, the Democrats' health care 
law contains 47 tax or tax-related provisions, some of which are 
already in effect and others that will become effective over the next 
18 months. These provisions include, the individual mandate and 
employer mandate taxes, restrictions on the use of Flexible Spending 
Arrangements and Health Savings Accounts, a new 3.8 percent tax on 
investment income, newly mandated information reporting on health 
insurance coverage, new taxes on medical devices, a new Medicare 
payroll tax, the health insurance premium subsidy, and new requirements 
for tax-exempt hospitals and group health insurance plans.
      
    The IRS is charged with implementing and administering these new 
provisions on top of its existing duties under the Internal Revenue 
Code, which include collecting $2.4 trillion in taxes, processing 145 
million individual tax returns, issuing $345 billion in tax refunds, 
and administering numerous non-revenue provisions such as the Earned 
Income Tax Credit and various green energy subsidies.
      
    Along with its review of the IRS's new duties, the Subcommittee 
will consider: (1) how the IRS's new duties under the health care law 
will affect both taxpayers and the IRS's core revenue-collection 
function; (2) the IRS's progress in implementing various provisions of 
the health care law, both those that are already in effect and those 
that are not yet in place; and (3) how the agency will coordinate with 
other Federal departments, state governments, and stakeholders to 
implement the new tax provisions.
      
    In announcing the hearing, Chairman Boustany said, ``In recent 
years, the Subcommittee has held hearings on the IRS's budget, its 
administration of our complex and convoluted Tax Code, and an estimated 
$100 billion in taxpayer dollars that have been lost to fraud, waste, 
and abuse over the past decade. Under President Obama's health care 
law, the IRS is now charged with administering much of the health care 
law. It is imperative that we take a close look at these new duties and 
consider the impact they will have on the agency and the taxpayers it 
serves.''

FOCUS OF THE HEARING:

      
    The hearing will focus on the IRS's implementation of various tax 
provisions enacted in the Democrats' health care law and consider how 
the agency's implementation of the law will affect taxpayers and its 
core revenue-collection mission.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Tuesday, September 25, 2012. Finally, 
please note that due to the change in House mail policy, the U.S. 
Capitol Police will refuse sealed-package deliveries to all House 
Office Buildings. For questions, or if you encounter technical 
problems, please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman BOUSTANY. This hearing will now come to order. 
Good morning and welcome to today's hearing on the Internal 
Revenue's implementation and administration of the President's 
health care law.
    Before we begin this morning, it is appropriate to recall 
that 11 years ago, almost to the hour, our Nation was savagely 
attacked. After these 11 years, each of us can certainly recall 
exactly what we were doing at that time.
    The horror of the day should give us the resolve to 
continue doing our business and demonstrate that we will not be 
intimidated or deterred.
    More than a decade has passed but the attacks of the day 
still outrage, the tragedies still overwhelm, and the acts of 
heroism still inspire us.
    We still mourn those lost on that day and all those who 
have given their lives since in the defense of liberty. We are 
thankful for those who continue to stand and volunteer to serve 
our country both at home and abroad.
    We will take a recess from this Subcommittee's proceedings 
at 10:45, so that those who wish to join the 9/11 remembrance 
in the Capitol can do so, and then we will promptly reconvene 
at 11:30 to resume the hearing.
    We are going to watch the clock pretty closely and we will 
stop at around 10:45.
    The Internal Revenue Service has enormous responsibility. 
It is tasked with administering our very convoluted tax system 
and a Tax Code that has changed nearly 5,000 times in the past 
10 years alone.
    The agency is charged with collecting roughly $2.5 
trillion, distributing hundreds of billions of dollars in tax 
credits, and enforcing 4,000 pages of tax laws, and 80,000 
pages of tax regulations.
    The agency's core revenue collection function has 
increasingly been crowded by its responsibility to administer 
many social programs.
    Through the years, Congress has sought to advance a 
multitude of non-revenue objectives through the Tax Code, 
energy policy, housing policy, and of course, health care 
policy.
    Making the IRS both revenue collector and administrator of 
these activities has diverted the IRS' resources from its 
central mission and can diminish taxpayer service.
    In 2010, Congress passed President Obama's health care law, 
expanding nearly 1,000 pages and passed ``so you can find out 
what is in it,'' in the famous words of then-Speaker Nancy 
Pelosi.
    The health care law contained 47 tax provisions and charged 
the IRS with vast new responsibilities.
    These included the implementation and administration of the 
largest entitlement created in more than a generation, new 
penalty taxes on individuals and employers who fail to provide 
or buy government approved health insurance, the need to 
quickly create vast new information technology systems, and the 
list goes on and on.
    The President's health care law has put the Federal 
Government in charge of approving health insurance plans, 
subsidizing them, punishing those who do not buy government 
approved plans, and many other aspects of our health care 
system.
    The Internal Revenue Service has been saddled with the 
responsibility of carrying out many of these new Federal 
activities.
    More than creating new burdens on the IRS, the President's 
health care law has led to new tax rules and regulations that 
will pose significant challenges to both individuals and job 
creators.
    The Administration's own documents state that the 
compliance burden of the new rules it has thus far written 
pursuant to the President's health care law will add nearly 80 
million man hours each to individuals and job creators. This is 
just the 17 regulations that have been issued so far. There are 
more to come.
    Eighty million hours that will not be spent creating new 
wealth, providing health care, or doing anything productive.
    Eighty million hours simply complying with new rules from 
Washington.
    This is the burden from just the IRS' new rules, the 17 new 
rules that have been promulgated. When you add the new 
regulations from HHS, the Department of Labor, and other 
agencies, the burden on our sluggish economy goes still higher.
    As a former surgeon and owner of a small medical practice 
in Louisiana, I certainly know how taxes, rules and regulations 
from Washington can impede not only a small business but also 
patient care.
    I am especially interested in hearing from the IRS and our 
witnesses today about how the new law will operate in the real 
world, in real time.
    The object of this hearing is to assess the IRS' efforts to 
administer the law, including its efforts on the Service's core 
mission, and how decisions made now to implement it will affect 
both the agency and taxpayers as the provisions continue to 
come into effect.
    Ladies and gentlemen, this is also not a hearing to beat up 
the IRS, an agency run by good men and good women. I want to 
emphasize that. Dedicated public servants who have an 
incredibly difficult job.
    The agency did not write the health care law. The previous 
Congress did. It passed the law. Now we are finding out what is 
in it and what it means for the country and for the Internal 
Revenue Service and for taxpayers.
    I look forward to the testimony and questioning of our 
witnesses. Now, I am pleased to yield to the distinguished 
Ranking Member from Georgia, Mr. Lewis.
    Mr. LEWIS. Thank you, Mr. Chairman. First of all, I want to 
thank you for pausing to observe what happened to our country 
11 years ago today. It is my hope and prayer that Americans all 
over will pause and observe what happened.
    Mr. Chairman, I want to thank you for holding this hearing 
on the Affordable Care Act. We are always pleased to discuss 
our landmark health reform law which will expand health 
coverage to over 30 million Americans.
    Because of the Affordable Care Act, children today cannot 
be denied insurance benefits due to preexisting conditions, and 
young adults can stay on their parents' insurance until age 26.
    Seniors are already saving hundreds of dollars on their 
prescription drugs and receiving free preventive services.
    This morning, the Department of Health and Human Services 
announced that the Affordable Care Act has saved people with 
private insurance over $2 billion.
    We must ensure that the Internal Revenue Service continues 
to move with all deliberate speed to deliver hundreds of 
billions of dollars of Federal tax credits to American families 
and small businesses, which will make health insurance 
affordable.
    I am confident that the tax provisions of the Affordable 
Care Act will be carried out on schedule.
    Today, I look forward to learning where we are in the 
process, the problems we have seen, and the issues that remain.
    I want to thank all of the witnesses for their 
recommendations to address these issues. I also look forward to 
hearing from the agency about the resources it needs to fulfill 
its duties under the health reform law.
    I continue to have serious concerns about the effect of 
recent budget cuts on taxpayers, tax collection, and agency 
operations.
    This year, the agency's budget was cut by over $300 
million. This cut harmed taxpayers and tax administration. For 
fiscal year 2013, the IRS requested a budget increase of $360 
million for administration of the health reform law. Almost 75 
percent of this money will be spent on technology needed to 
deliver hundreds of billions of dollars in tax credits.
    I look forward to hearing more about the IRS budget request 
and how the amount requested will help the agency complete its 
work on the health care law while protecting Federal tax 
dollars.
    Thank you very much, Mr. Chairman.
    Chairman BOUSTANY. Thank you, Ranking Member Lewis. Next, 
it is my pleasure to welcome two panels of witnesses before us 
today.
    Today's witnesses have extensive experience with the IRS 
and tax compliance, and I am delighted to have all with us.
    Our first panel will consist of Deputy Commissioner Steven 
T. Miller. I want to welcome him again before our Subcommittee. 
We appreciate you being willing to come before us today.
    Steven T. Miller, Deputy Commissioner for Services and 
Enforcement at the Internal Revenue Service.
    Deputy Commissioner Miller, the Committee has received your 
written testimony, and it will be made part of the formal 
hearing record. You will have 5 minutes for your oral remarks 
as is customary. You are recognized for 5 minutes, sir.

STATEMENT OF STEVEN T. MILLER, DEPUTY COMMISSIONER FOR SERVICES 
           AND ENFORCEMENT, INTERNAL REVENUE SERVICE

    Mr. MILLER. Thanks so much, Mr. Chairman. Chairman 
Boustany, Ranking Member Lewis, Members of the Subcommittee, 
thanks for the opportunity to update you on the IRS' staged 
implementation of the tax law portion of the Affordable Care 
Act.
    As I begin, let me say that there is no doubt that 
implementation of the ACA has required and will continue to 
require a concentrated effort on our part.
    However, the IRS has a successful history of such efforts. 
In this case, the IRS is taking full advantage of the fact that 
the major exchange related provisions, with respect to those, 
we will have time to plan our implementation and communicate 
with taxpayers.
    The IRS began both short term implementation and long term 
planning immediately upon passage of ACA. Our efforts focused 
on two things. First, to quickly implement tax law changes that 
were retroactively or immediately effective.
    Examples in this first category include the small business 
health care tax credit, the expansion of the adoption credit, 
and specific industry provisions such as those that focused on 
qualified therapeutic projects and the indoor tanning industry.
    In terms of those provisions that had future effective 
dates, we moved quickly to put a structure and process in place 
to plan and implement these provisions.
    Because many ACA tax provisions are substantial and require 
long term planning, the IRS established enterprise-wide 
governance and planning processes, both in its business 
operations and its information technology divisions. This is a 
significant undertaking and a lot of work still lies ahead. 
However, by involving top leadership and using established best 
practices, we have made important progress.
    We have prioritized our work based on the particular 
effective date of a provision and/or the need for the 
Government or taxpayers to build the systems necessary to 
support the new law.
    This approach is taken whether we are talking about our IT 
work or how we prioritize our guidance to the community.
    The IRS' most substantial implementation efforts relate to 
our work with the exchanges and the premium tax credit. In this 
area, we are working on the secure delivery of information to 
HHS as well as other work that will ensure that advanced 
premium tax credits are available beginning in 2014.
    The Department of Health and Human Services is the lead 
agency defining the structure and operations of the exchanges 
with Treasury and the IRS defining some of the associated 
rules.
    As part of our efforts, we are working to provide clear and 
flexible guidance to the community, and we have done this after 
engaging in a robust dialogue with those impacted.
    For example, we have worked closely with large employers to 
get them key pieces of guidance and time to set up their 
systems and procedures, including a number of simplifying safe 
harbors to assist in measurement and compliance.
    In terms of guidance on ACA more generally, we have to date 
issued a variety of regulations, more than 40 notices, as well 
as a variety of revenue rulings, procedures, announcements, and 
frequently asked questions.
    While there is much yet to be done, we have already 
accomplished a great deal.
    In addition to building necessary systems and issuing 
guidance, we are working on how taxpayers will interact with 
the IRS as they file their returns. This involves both service 
and compliance.
    We do have some time as most of these interactions begin 
during the 2015 tax filing season. Still, we are already 
engaged in discussions with tax return preparers and software 
developers so the taxpayers have what they need at the time 
they file their 2014 tax return.
    Let me speak to one area in particular, as there have been 
numerous questions about how the IRS will verify individual 
coverage.
    The IRS process for verifying coverage will be very similar 
to the one we have used for years to verify wages and 
withholding. The IRS will match what is reported on the tax 
return with the information reported by insurers.
    We will follow up with taxpayers who appear to have over 
paid, under paid, and/or were not eligible for an exemption.
    This will take the form of written correspondence. Revenue 
agents will not be doing this work. As required by the statute, 
we will not use levies, liens, or criminal prosecutions if 
taxpayers have unpaid amounts related to the individual 
coverage provision.
    Thank you for the opportunity to testify on our planning 
and implementation efforts related to ACA's tax provisions. It 
is a large undertaking but over the last several years, there 
have been thousands of tax law changes, some larger than 
others, and the IRS has implemented them all.
    Our work to date on ACA is going well. We have the 
processes and structure in place to succeed.
    I would be happy to answer any questions.
    [The prepared statement of Mr. Miller follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 

    Chairman BOUSTANY. Thank you, Mr. Miller. We have a lot of 
uncertainty out there today amongst the business community and 
families with regard to what is going to happen with taxes. Of 
course, we know about all the expiring tax provisions that are 
coming at the end of the year unless Congress duly acts.
    I would like to point out that the House has acted in July 
to avert rates from going up. I hope that the other body across 
the Capitol will move forward and do so hastily to eliminate 
this uncertainty that is ongoing.
    With that having been said, clearly we know there is a lot 
of uncertainty related to ACA, the implementation, the tax 
implications.
    I know the IRS has begun issuing regulations in accordance 
with the President's health law with many more coming. In fact, 
I have these two binders right here. These are the regulations, 
revenue proceedings, revenue rulings, and Treasury decisions to 
date, encompassing some 17 new regulations the IRS has 
published so far, that will require nearly 80 million hours of 
compliance work by taxpayers annually. Eighty million hours so 
far.
    This is according to the IRS and the Office of Management 
and Budget materials published in the Federal Register.
    This includes over 25 million hours for information 
reporting by tax exempt organizations, over 40 million hours 
for small businesses, and almost three million hours for the 
self employed.
    This additional 80 million hours is based only on what 
regulations have been published already, not on those coming. 
That is my understanding.
    Mr. Miller, can you give us an estimate of the regulatory 
burden expected once the President's law is fully implemented?
    Mr. MILLER. First, I guess, Mr. Chairman, I do not know the 
80 million figure, so I am not prepared to speak to whether 
that is correct or not. I am assuming it is correct, but I do 
not have that figure.
    Chairman BOUSTANY. This is from IRS and OMB.
    Mr. MILLER. I do not have a sense at this point for a total 
number of hours. Until we do the regulations and complete that 
work, that really is not possible.
    Chairman BOUSTANY. I understand. Given what we have so far, 
is it possible to estimate the economic cost to our economy on 
this? Are you aware of any estimates of the economic burden 
this will impose on American taxpayers?
    Mr. MILLER. Sir, you are talking to the Administrator, Mr. 
Chairman. I would not be able to speak to the economics of the 
situation, only to our working through the provisions and 
getting the guidance out to folks that need to comply.
    Chairman BOUSTANY. This will certainly be a question we 
will need to further investigate with Treasury and others.
    The President's law creates new insurance subsidies and 
employer mandate taxes, which are tied to the subsidies. Under 
the language of Section 1401 of that law, the subsidies are 
only available to individuals enrolled through an exchange 
established by the state. That is the statute.
    Yet, in August last year, the IRS proposed a rule that ran 
counter or seemingly ran counter to the plain language of the 
statute, providing for subsidies in states regardless of 
whether that state chose to create an exchange or not.
    This gives rise to employer mandate taxes that are not 
provided for by the statute and some have alleged it was done 
at the urging of political appointees at the Treasury 
Department and the White House.
    I know your position as Administrator is well taken, and I 
understand that. Can you publicly state whether the IRS had 
received any communication from political appointees at 
Treasury or anyone at the White House urging this reading of 
the statute?
    Mr. MILLER. Let me start with how our regulatory process 
works, which is a tripartite discussion between the Department 
of Treasury, Office of Tax Policy, our Office of Chief Counsel, 
our lawyers, and the Internal Revenue Service itself, Doug 
Shulman and myself.
    The jurisdictions, the Office of Tax Policy, really plays 
lead on policy matters. We take a look and see, as the IRS, is 
the proposed rule ``administratable,'' can we do it. We all 
have a part in talking to stakeholders about the rule.
    Our Chief Counsel's Office really speaks to what are the 
permissible reading's of a particular statutory provision.
    In this case, we probably did have discussions with the 
Administration, and that is not a surprise because where there 
is a multi-agency regulation, generally that will happen. Who 
in particular was briefed, I do not know.
    What I can say and what I want you to take away from this, 
Mr. Chairman, is the decision as to whether our reading of 
Federal versus just state was correct was made by our Counsel's 
Office at the IRS. We believe it is the correct legal 
interpretation.
    Chairman BOUSTANY. This was not solely an IRS determination 
but it was done with legal counsel at IRS in combination with 
those at Treasury and the White House?
    Mr. MILLER. You are putting the White House in there, and I 
do not know they were involved. The decision on whether the 
regulation contained a provision--to step around that a little 
bit, our position, and it is the IRS' position, is that you 
cannot read that statutory provision alone. You need to look at 
not only the text but the context, the purpose, and the 
structure of the statute.
    Our reading that a Federal exchange can provide a subsidy 
is a preferred reading, and it is the finding of the Chief 
Counsel's Office at the IRS.
    Chairman BOUSTANY. Okay. What we would like as a 
subcommittee are the dates and participants at all meetings, 
notes from those meetings. Certainly documents relating to that 
determination that the insurance premium subsidies apply to the 
Federal exchanges, Federally created exchanges.
    This is clearly something we dispute because the reading in 
the statute seems very clear. As you cite other aspects of the 
law, we would like to know what other aspects in the law were 
used in that determination by legal counsel and all outside 
input, including if indeed there was input from White House 
political advisors, but certainly I know Treasury was involved 
in this because it is a policy matter.
    Mr. MILLER. Right.
    Chairman BOUSTANY. If you could provide that to us as 
promptly as possible, we would certainly appreciate it.
    Mr. MILLER. We will be glad to respond.
    Chairman BOUSTANY. Thank you. With that, I will be happy to 
yield to my friend, the Ranking Member, for questions.
    Mr. LEWIS. Thank you very much, Mr. Chairman. Mr. Miller, 
at this moment today, do you expect IRS to be ready for the 
health care law by 2014?
    Mr. MILLER. Absolutely, Mr. Lewis.
    Mr. LEWIS. You do not have any reservation, you are ready?
    Mr. MILLER. We are ready. We will be ready. Based on what I 
know, based on our level of effort to date, based on the 
planning and structures we have put in place, we will be ready 
on the exchange related provisions and other provisions of the 
ACA.
    Mr. LEWIS. Will the administration of the health care law 
harm the IRS' core revenue collection mission?
    Mr. MILLER. I do not believe so. I will step back from that 
question, Mr. Lewis. I do not recognize core versus non-core in 
terms of the IRS' work. This is what we do. Congress passes a 
statute, whether it is a charitable deduction or whether it is 
a home mortgage deduction, some of those things have varied 
purposes, but they are in the Tax Code.
    We consider the ACA to be our core work. It is part of our 
core work.
    Mr. LEWIS. Mr. Commissioner, has the IRS been listening to 
and working with outside stakeholders to provide guidance that 
is responsive to their needs?
    Mr. MILLER. We have. In fact, I would note for the 
Chairman, in that big book, a whole bunch of that book are 
requests for comments and suggested safe harbors, and all the 
types of things we ought to be doing to engage the business 
community and others before we put out final rules.
    Mr. LEWIS. As part of carrying out the health reform law, 
does the IRS plan to conduct education, maybe workshops, 
activities, outreach to taxpayers, employers and tax 
professionals? What has the IRS done so far?
    Mr. MILLER. Again, here we are guided in our approach by 
the effective date of the provision. For example, the early 
provisions, we did something in excess of 1,500 meetings with 
small business over the tax credit for small business. We have 
done a couple of hundred meetings with folks in the tanning 
industry.
    We have tried to engage those folks. As we move into 2013, 
we will obviously start working on what is going to happen with 
the health care credits later in that year.
    This past year, we engaged more than 10,000 return 
preparers at our various tax forums around the country to try 
to educate them on what is here today and what is coming in the 
next year.
    We have a very active outreach program.
    Mr. LEWIS. Mr. Miller, for the year 2013, the IRS requested 
about $270 million for technology and operational support to 
deliver new tax credits.
    I want you to explain to Members of the Committee why 
additional money is needed for the IRS' computer system and how 
the computer system will be used to deliver the tax credits.
    Mr. MILLER. IT builds are considerable. The first that is 
necessary is we are obligated under the statute to provide some 
taxpayer information, to provide income and family size, so 
that the exchanges can do their work as people come in to sign 
up and get the right amount of advance premium.
    That work continues. We are working incredibly well with 
HHS and CMS to make sure that happens. That will be in place 
for the open season, which begins in late 2013. That is the 
first build.
    We also have a build where we will have to receive the 
information returns from various parties to ensure that the 
correct amounts are being paid out and verify that. That work 
becomes very important as we have the filing season for 2014.
    We have a whole array of work with respect to the exchange 
related provisions, and then there are some other provisions as 
well that require IT work.
    We do have significant building to do in the IT arena.
    Mr. LEWIS. Thank you very much, Mr. Miller. I yield back, 
Mr. Chairman.
    Chairman BOUSTANY. Ms. Jenkins, you are recognized for five 
minutes.
    Ms. JENKINS. Thank you, Mr. Chairman. Thank you for holding 
this hearing, and thank you, Commissioner Miller, for being 
here.
    Commissioner Shulman has said the President's health care 
law, and I quote ``Fragmentation of operational workload 
increases the difficulty of execution and will require an 
extraordinary amount of coordination with other players in the 
health care system.''
    For example, HHS will have to reach out to IRS to verify 
income and family size. Homeland Security might have to verify 
immigration status. The Social Security Administration might 
have to verify citizenship.
    All of this is occurring while a trillion in subsidies will 
be flying out the door.
    Are you aware of any previous law that has ever required 
the IRS to interact so extensively with other governmental 
agencies, and what sort of stress will this extension 
interaction place on the IRS' core function?
    Mr. MILLER. We share taxpayer information under very 
stringent restrictions with an awful lot of folks, with the 
state tax authorities, the state Medicaid authorities, with 
Social Security. We have a long history of doing it. It does 
not stress us.
    It does require us to work very hard to ensure that the 
safeguards are in place, that that taxpayer information is 
protected.
    Ms. JENKINS. No extra heavy lift on your part to 
coordinate?
    Mr. MILLER. As I mentioned, the IT work itself is a decent 
lift for us. We are working on that and we will succeed on it, 
but it is a decent lift.
    Ms. JENKINS. Okay. The insurance premium subsidy will be 
based on a new definition of IRS household income, which is 
affected by the make up of families' income, their personal 
finances and other personal matters.
    Under the President's health care law, individuals are 
responsible for informing governmental officials at the 
insurance exchange if they have changes to their household 
income during the year. This would be the adjusted size of 
their subsidy; is that correct?
    Mr. MILLER. I am less familiar with that piece of that 
because that is not really the IRS piece.
    It is true that when you come in the door to sign up for 
coverage and for an advance premium, there will be a discussion 
of what is your tax situation, what is the appropriate amount 
of the premium.
    As things change during the year, I believe there is an 
obligation to come back and talk to the exchange about whether 
that impacts the amount of the premium.
    Ms. JENKINS. If I lose a current job or get demoted, lose 
pay or get a raise, any change in all of that, as you 
understand, I would need to inform a governmental official at 
the exchange?
    Mr. MILLER. I do not know. I am quite sure it is not any 
change, Congresswoman. I cannot speak to that because that is 
an HHS sort of job to define that.
    Ms. JENKINS. Is there somebody that could get us that 
information?
    Mr. MILLER. I would think HHS would be the place to go for 
that.
    Ms. JENKINS. Okay. Thank you. I yield back.
    Chairman BOUSTANY. Mr. Kind.
    Mr. KIND. Thank you, Mr. Chairman. Thank you, Mr. Miller, 
for your testimony here today and the service that the IRS 
provides our Nation overall.
    I guess, Mr. Chairman, the big news this week for the 
Affordable Care Act that was revealed was Mitt Romney's embrace 
of some of the provisions that are part of the Affordable Care 
Act.
    To tell you the truth, it is not too surprising. For anyone 
who has read the actual legislation and understands what is in 
it and the provisions contained there, there has been wide 
embrace on both sides of the aisle on a variety of provisions.
    I think Mitt Romney in the light of honesty and full 
disclosure admits himself there is a lot in the Affordable Care 
Act that he can work with, that he would like to preserve if he 
was elected President.
    I thought that was a very revealing comment, but also not 
surprising given that he is the one that implemented his own 
health care reform, much of which was adopted with the 
Affordable Care Act here in Congress.
    Whether it is preexisting conditions, young adults staying 
on their parents' plans, I think the Governor has acknowledged 
there is a lot of good aspects of the Affordable Care Act that 
should be preserved and should be protected. I thought that was 
a very revealing and helpful comment.
    I agree with Mr. Lewis. I think it is helpful for us to 
have from time to time oversight in hearings to see about the 
implementation of the Affordable Care Act, especially the IRS' 
role in all of this.
    I think we have heard Mr. Miller testifying in regard to 
some of the resources that IRS is requesting and what that 
money is going to be used for.
    My sense is, and correct me if I am wrong, that the vast 
amount of the resources will be used as far as outreach and 
education and also some of the infrastructure needs that the 
IRS has in implementing the Affordable Care Act; is that right?
    Mr. MILLER. That is correct. The biggest amount of the $360 
million asked for in 2013 is actually for the IT build that we 
have talked about. A very small amount of it is enforcement or 
service, much of the balance is infrastructure to set up the 
processes to succeed.
    Mr. KIND. Mr. Lewis also asked you to respond to the 
outreach that is currently being conducted to the variety of 
stakeholders out there, whether it is businesses, individuals, 
tax preparers, things of that nature.
    How would you describe that relationship and that 
communication with a lot of the requests for information coming 
into the IRS today?
    Mr. MILLER. I think it has been robust. I think the second 
panel will be a perfect panel to talk to about that issue. I 
think overall, we have gotten a great response. Obviously, 
there is a great deal of interest, and most things, I think, 
people can live with and some things, they are continuing to 
talk to us about, which is the nature of a decent discussion, I 
believe.
    Mr. KIND. Will the IRS be involved at all in the 
enforcement of the Affordable Care Act, the requirement for 
health insurance for individuals?
    Mr. MILLER. We will. That is a tax provision.
    Mr. KIND. To what extent will you be involved with that? 
Will this be conducting audits of individuals or businesses or 
what?
    Mr. MILLER. I think, if I understand the question, Mr. 
Kind, and I alluded to this in my oral, with respect to the 
individual coverage provision, the IRS will, I believe--we have 
talked about this--there will not be revenue agents involved in 
this. These will not be audits. This will be a matching 
process. It will be something similar to what we see when we 
get in bank information with interest on it.
    There will be a match to see whether there has been 
insurance. There will be correspondence with the individual, if 
it looks like they are not entitled to an exemption, and they 
will have the ability to converse with us about whether or not 
there should be a payment or not.
    To the extent there is a payment, the statute is very clear 
in what we can and cannot do. We cannot do liens. We cannot do 
levies. We cannot do seizures. We cannot do criminal 
prosecutions.
    The vast majority of people in this category, they will pay 
the money they owe. That is the way the American system works. 
More than 70 percent of the money that we collect from the 
balance of dues is collected not through drastic collection 
action, but when we correspond with someone, when we give 
notice or other correspondence.
    I have no doubt that most people will comply with the 
payment. Those that do not, we have a limited amount that we 
will be able to do with respect to them, and we have talked 
about that at the end of the day, it might be an offset of----
    Mr. KIND. Some opponents in the past of the Affordable Care 
Act claim the IRS is going to have to staff up to the tune of 
16,000 enforcement agents. Is there any basis for that number?
    Mr. MILLER. There is no basis for that number.
    Mr. KIND. Thank you, Mr. Miller. Thank you, Mr. Chairman.
    Chairman BOUSTANY. Thank you, Mr. Kind. Before we go to Mr. 
Marchant, just a quick follow up. I know you mentioned a 
significant amount of money requested for IT implementation. I 
just want to remind you that Mr. Lewis and I sent a letter not 
long ago. We are still waiting on a response.
    It is about the IRS and what is going on with the money and 
the allocation for IT.
    Mr. MILLER. We will get you that letter this week.
    Chairman BOUSTANY. I appreciate it. Thank you. Mr. 
Marchant?
    Mr. MARCHANT. Thank you, Mr. Chairman. Mr. Miller, I would 
like to explore the new concept to the IRS of the household 
income. Since it is a brand new concept, is it a legal concept 
to the IRS at this point?
    Mr. MILLER. It is in the statute itself. It is defined in 
the statute. It is a statutory provision.
    Mr. MARCHANT. Has the IRS made preliminary findings on what 
constitutes a household?
    Mr. MILLER. I think we have. I think the statute sets it 
out. The statute basically says modified or adjusted gross 
income, which basically is off your tax return. The only twist 
to that is you have to add in for your family size, where you 
are taking a dependent, and that dependent is filing a tax 
return, that dependent's income has to be added in as well. 
That is the only real difference. There are very few people in 
that category, Congressman.
    Mr. MARCHANT. Is it the IRS that will be the final person 
who decides what constitutes that household unit or will it be 
the exchanges?
    Mr. MILLER. I believe, if I am understanding the question, 
that the IRS will be providing the exchange with information on 
any dependents that are filing a tax return in that unit.
    Mr. MARCHANT. If you have two people unmarried living under 
the same roof, each having a child, will that constitute a 
household, and which of the tax returns will be the main tax 
return that will constitute--that will apply to the exchange?
    Mr. MILLER. I will come back in writing if they tell me I 
am wrong, Congressman, but it is going to depend on who is 
taking whom as a dependent. The household is that individual 
who has some people being taken--who is taking some people as a 
dependent on their return.
    I do not know in a given situation whether the two 
unmarried folks have a dependency relationship in that respect 
or not or whether the children do or not. It really is going to 
depend--the definition of ``household income'' is your modified 
adjusted gross income subject to some foreign provisions in tax 
exempt interest, and the income from those who you have taken 
on your return as a dependent provided that dependent has filed 
a tax return.
    Mr. MARCHANT. If you had two adults living in the same 
household that filed separate tax returns, would a married 
couple filing separate tax returns be constituted as a 
household?
    Mr. MILLER. Well, I will answer the question in a different 
way, which is if you are married under ACA, to get the premium 
tax credit, you must file married, filing jointly. That is an 
eligibility requirement for the credit.
    Mr. MARCHANT. The physical living together has no part of 
the definition of ``household.'' It is defined by virtue of the 
IRS Code, purely?
    Mr. MILLER. The physical proximity might have an impact on 
the dependency claim on the tax return. Again, it ties off to 
whether you are a dependent on that person's return.
    Mr. MARCHANT. For the first time ever, it will be the IRS' 
job to compile this and go through a separate step and define 
``household income?''
    Mr. MILLER. The only separate step, Congressman, is 
including the income from a dependent who is filing a tax 
return. To be quite frank, you should have a general feel for 
what that income is if you are taking that person as a 
dependent because that is part of the test of taking that 
person as a dependent.
    Much of that if not all of that discussion should be 
occurring already.
    Mr. MARCHANT. Heretofore, all of this information has been 
passed to the states and HHS basically on an individual basis, 
an individual tax return basis.
    Mr. MILLER. Rather than as a household. I do not know the 
answer to that one, Congressman. I apologize.
    Mr. MARCHANT. Will the states get more information about 
households and IRS returns and will there be more people at the 
state level able to view more information about a person's IRS 
income and IRS status than ever before?
    Mr. MILLER. To the extent that the exchanges are using this 
for eligibility purposes, then those are new purposes, and 
probably new people that are taking a look at that data.
    Mr. MARCHANT. Thank you.
    Chairman BOUSTANY. Mr. Reed.
    Mr. REED. Thank you, Mr. Chairman. Thank you, Mr. Miller, 
for being here today.
    I just want to follow up quickly before I get to another 
point on Mr. Kind's comment. When he asked you about the 16,000 
new employees for the IRS, you quickly and confidently said 
there was no basis for that number.
    It is clear to me that you have taken a look at that 
situation in depth to be able to make such a quick response and 
confident response.
    What I am going to ask you, Mr. Miller, is in 2012, I 
believe there were 1,278 additional employees to implement the 
Affordable Care Act that were requested and put forth in the 
IRS. In 2013, 859 new employees.
    Do you agree with those numbers of employees that were 
increased in the staffing for IRS to implement the Affordable 
Care Act?
    Mr. MILLER. No. It is a mis-reading. The total number of 
people working on ACA in 2012, and I will be wrong on the 
specific number, but something like 670.
    Mr. REED. 670 for 2012. For 2013, how many new employees 
will be doing that work, or is it just 670 is all you are going 
to need?
    Mr. MILLER. It is the 670 plus the increment to get to the 
859 you were talking about. 859 is the total number of folks.
    Mr. REED. 670 in 2012 and the difference between 859 and 
670 would be the increase for 2013.
    Mr. MILLER. Right.
    Mr. REED. From 2012 to 2013, the testimony is 859 new 
employees?
    Mr. MILLER. No, sir.
    Mr. REED. I am confused. Please correct me.
    Mr. MILLER. Again, the total number of employees will be 
859 employees in 2013. They are not additive. We already have 
670, whatever the math is. I cannot do the math off the top of 
my head.
    Mr. REED. The total for the 2 years, 2012 and 2013, is 859? 
Is that what you are saying?
    Mr. MILLER. No, I do not think I am saying that. I am 
saying in 2012, we had 670 people work on it. In 2013, our 
intention is to have 859 work on it. They are separate numbers.
    Mr. REED. Let's go forward, 2014, the bulk of the law goes 
into further implementation, how many additional employees do 
you feel are going to be either hired or allocated to implement 
the Affordable Care Act thereafter?
    Mr. MILLER. That number we are working on as we speak. We 
have a draft 2014 budget that is floating up into a discussion 
with Department of Treasury, OMB, and that will be part of the 
administration's budget.
    Mr. REED. Okay. You are working on an estimate, you are 
working on a proposal. What does that estimate show you right 
now at this point in time?
    Mr. MILLER. I do not have that number for you because 
again, it is an estimate and it has not been approved.
    Mr. REED. You are working on it, I would hope.
    Mr. MILLER. Yes, we are working on the 2014 budget, which 
is due in January.
    Mr. REED. The employment needs for the IRS in 2015 and 
beyond, I hope you are doing some projections as to what you 
are going to need in order to implement the law.
    Mr. MILLER. That becomes more difficult because again we 
operate on an annual basis. We are working on 2014 and we will 
see what we have in 2014, and that will inform along with where 
we are on various other business processes, what we desire in 
2015. We do not have details.
    Mr. REED. That concerns me, Mr. Miller. You are the agency 
that has been responsible or charged with responsibility for 
implementing this law. What you are telling me is you really do 
not have a clear indication as to what employment burdens are 
going to be put on the IRS as a result of this law. That is 
very concerning to me.
    Would you agree that is concerning to a Member of an 
oversight Committee on your agency, that the agency should have 
some type of projection as to what those employment burdens are 
going to be and the costs associated?
    Mr. MILLER. Mr. Reed, I understand your point, and if you 
were to give me a budget for multiple years, I might have a 
better sense of what I could do or not.
    The budgetary process is an annual process. It is difficult 
for me given the scenario of budgets to have a precise number 
for you at this point for 2015. We are working on 2014, sir.
    Mr. REED. How about anything past 2015? Nothing?
    Mr. MILLER. We will be in steady state in 2016, sir.
    Mr. REED. I have a few more minutes, I hope. I want to talk 
about the premium tax credits real quick. My understanding is 
the advance payment for that goes to the insurer.
    Mr. MILLER. The insurance company.
    Mr. REED. The insurance company, not the insured, but the 
insurer, which is the insurance company.
    Mr. MILLER. Correct.
    Mr. REED. If there is an over credit, and I know I am short 
on time, do you go back to the insurance carrier to get that 
over payment or do you go to the individual taxpayer?
    Mr. MILLER. I would be glad to answer it. I am not sure I 
understand the question, sir. I apologize.
    Mr. REED. Okay. I am out of time. I do want to follow up on 
that. I am concerned that the money goes to the carrier and yet 
the taxpayer ultimately, if it is an over payment situation, 
the money never gets from the carrier back to the individual. 
It comes from the IRS which then comes from the taxpayers.
    Mr. MILLER. There will be a reconciliation process on both 
ends.
    Mr. REED. I will submit written questions on that. I 
appreciate your input, Mr. Miller. I really do. Thank you. I 
yield back.
    Chairman BOUSTANY. Thank you, Mr. Reed. If you could 
respond to that final piece in writing.
    Mr. MILLER. We will do that.
    Chairman BOUSTANY. Thanks, Mr. Miller.
    Mr. Paulsen.
    Mr. PAULSEN. Thank you, Mr. Chairman, for conducting the 
hearing. Mr. Miller, last week we heard from the IRS about 
plans to publish revisions to Form 637 very soon. 637, that is 
the application for registration dealing with excise taxes in 
particular.
    In reviewing this form, I am looking at the form, I know 
there are a lot of items that are listed that are subject to 
the excise tax. Items like gas guzzler automobiles, sports 
fishing equipment, fishing tackle boxes, bows, quivers, 
broadheads, points, arrow shafts, also alcohol, tobacco and 
gasoline are subject to an excise tax.
    The public policy rationale in the past for excise tax has 
historically been to deter certain activities. As you know, the 
medical device tax, which is a part of the new health care law, 
is an excise tax. In my mind, the last thing we want to do is 
deter creation or innovation of these life saving, life 
improving drugs.
    Do you believe as a matter of public policy it is 
appropriate to apply an excise tax to medical devices in a 
similar category as these other items?
    Mr. MILLER. Congressman, I only administer it. I cannot 
really speak to whether it is appropriate policy in terms of 
use or not.
    Mr. PAULSEN. Do you think the line item we might see on a 
Form 637 is going to also include gas guzzling automobiles and 
life saving medical devices? Will there be a line item that 
will identify it for medical device companies in that manner?
    Mr. MILLER. I do not know specifically. We are working 
hard. We have proposed regulations out on the medical device 
tax. We are working with the industry to make sure we try not 
to burden them and get them to know the rules and comply going 
forward.
    I am not sure on the form itself. I am not familiar with 
it.
    Mr. PAULSEN. According to the new law, the companies will 
have to begin paying this tax on January 1, which is just a few 
months from now. Am I correct in my understanding that no final 
rule has been released by the IRS yet on this?
    Mr. MILLER. Right. That is close, sir.
    Mr. PAULSEN. Without clarity of the rules, you said you 
were working with the industry, but I know they are expressing 
concern about having to comply with the new law, certainly. You 
say you are working with them?
    Mr. MILLER. We are.
    Mr. PAULSEN. There are about 7,000 of these companies 
across the country. They do a lot of medical devices. It could 
be diagnostic equipment. Many of these companies are not 
profitable. They are still going to be required to pay the tax. 
This fact does not take into account the administrative burdens 
of the tax that will come through the new IRS form, for 
instance.
    Has the IRS done a Paperwork Reduction Act analysis to 
measure the administrative burdens of the device tax on 
companies?
    Mr. MILLER. I do not know the answer to that. I can get 
back to you on that, sir.
    Mr. PAULSEN. That would be good to know. I am just curious.
    Mr. MILLER. If I could say one thing. The burden that has 
been placed on--it is a statutory provision. We did not create 
this out of whole cloth, sir.
    Mr. PAULSEN. I know there is going to be additional 
paperwork, costs for companies to comply with the tax. It is 
also my understanding that the excise tax payments are 
traditionally collected semi-monthly or every 2 weeks.
    Do you think that model would fit for many of these 
companies which have the experience essentially of making 
estimated income tax deposits on a quarterly basis, but they do 
not have any experience in the Federal excise tax component, 
and I do not think they have systems in place for calculations.
    Is there consideration being taken into account for that?
    Mr. MILLER. I do not know the answer to that question 
either, sir. Again, we are working with them. The proposed 
regulations are out. The number of issues, Congressman, are not 
a myriad. There are a few issues that remain unclear and we are 
working with them on. A lot of this has been put out and 
discussed.
    Mr. PAULSEN. Okay. Mr. Chairman, I just raise some of these 
issues because I think we are clearly going in a precarious 
situation or dangerous situation for a lot of these companies 
that provide a lot of jobs, it is domestic manufacturing, and 
we have analyzed a little bit of what the effects of the tax 
would be.
    We have tried to stop it. We have repealed it in the House 
in a very strong bipartisan vote.
    Now that we are moving forward on January 1 and these 
companies are laying off employees already, I want to make sure 
we are also taking into account the paperwork connections and 
the IRS following up on the Paperwork Reduction Act analysis 
and process as well.
    I yield back.
    Chairman BOUSTANY. I thank the gentleman. I think the 
gentleman is correct in that we have a lot of uncertainty in 
the policy of the law but also concerns about the 
implementation, too, and the timing.
    This is creating uncertainty for business, and it is 
certainly not helping our economy.
    Ms. Black, you are recognized for 5 minutes.
    Mrs. BLACK. Thank you, Mr. Chairman. Mr. Miller, I want to 
go to the privacy issue. As we know, there are few things more 
sacrosanct to people than having their tax information known 
broadly and widely to other folks.
    An entire section of the Tax Code, Section 6103, as you 
well know, is devoted to limited instances in which this 
information can be shared, but in the wrong hands, taxpayer 
information can be used to steal tens of thousands of dollars 
from the Treasury. We have already seen instances of that. We 
have had hearings here related to that matter.
    It contains information of a personal nature, about 
personal finances, and family information.
    Underneath of the President's health care law, the IRS will 
be sharing this information, this taxpayer information, more 
broadly with many more parties than you ever have before.
    While the IRS already shares some of this data with places 
like child support, we have heard about that in testimony, 
Medicaid and some other revenue collection situations, this new 
sharing is going to be much broader, especially since the 
exchange employees will be taking place.
    How do you plan to make sure this information is fully 
protected?
    Mr. MILLER. Congresswoman, this is what we do. We do this 
quite a bit already. We have hundreds of agreements with 
various governmental agencies.
    The process is quite restrictive actually, and I think if 
you would talk to other agencies, they would tell you how 
restrictive we are in terms of making sure that the information 
that is sent needs to go--once it arrives, it is stored 
properly, it is subject to appropriate controls in terms of who 
has access to it, and is subject to either destruction or 
return to the IRS when it is no longer needed.
    These are rules, and I can outline these in writing, these 
are safeguard rules, that we have an entire part of the IRS 
working with folks on.
    We will come to an agreement with a particular government 
entity or the exchange as to what is the expectation of what 
will happen with that data. We will then go on-site and inspect 
to ensure that document is correct.
    We have quite detailed rules in the area because we take it 
incredibly seriously.
    Mrs. BLACK. You already have memorandum's of understanding 
with agencies and exchanges?
    Mr. MILLER. Not exchanges at this point, I do not believe.
    Mrs. BLACK. Not exchanges. You say you already have rules 
in place?
    Mr. MILLER. We have rules in place generally, 
Congresswoman, for this sort of situation.
    Mrs. BLACK. Okay. Can you provide us with what you are 
doing with those agencies as that comes along? I think that 
will be important for this Committee, considering the fact, as 
I say, we have already had hearings about how taxpayer 
information is used by people to fraudulently get their return, 
get money back that does not belong to them.
    I think it would be important for this Committee, this 
oversight Committee, to know that we are protecting even more 
information with even more people that are going to have access 
to this.
    My next question is what will be the repercussions against 
exchange employees or contractors that mis-use taxpayer 
information? Do you already have something in place?
    Mr. MILLER. I will come back to you on that, but I believe 
they are subject to the same restrictions as I am in terms of 
being subject to criminal prosecution and other penalties for 
disclosing that information.
    Mrs. BLACK. I would appreciate you keeping this Committee 
in touch with what you are doing so we can be sure that 
absolutely is happening considering all the things that are 
happening with people's information right now.
    Thank you. I yield back the balance of my time.
    Chairman BOUSTANY. Thank you. Mr. Miller, I think that 
concludes our questioning. We appreciate you being here today 
and providing this information.
    Of course, there is more work to be done as we look at the 
implementation of this. We look forward to hearing from you in 
the future. We appreciate your testimony and your forthright 
answers.
    Mr. MILLER. Thank you.
    Chairman BOUSTANY. We are going to ask the next panel to 
come forward, and we will start taking testimony. We will 
recess, as I mentioned earlier, to attend the commemoration, 
and then we will resume at 11:30.
    We will ask the next panel to come up and we will try to 
get through some of the testimony.
    I want to thank our next panel of witnesses for being with 
us today. We have four experts on this subject.
    First, we will hear from the Honorable Fred Goldberg, a 
partner of SkaddenArps, a law firm here in Washington, DC. Mr. 
Goldberg is a former IRS Commissioner, former Assistant 
Secretary of Treasury for Tax Policy.
    Next, we will welcome Kathy Pickering. Ms. Pickering is 
Executive Director of The Tax Institute and Vice President of 
governmental Relations at H&R Block.
    Third on the panel is Scott Hodge. Mr. Hodge is President 
of The Tax Foundation here in Washington.
    Finally, we will hear from Mr. Seth Perretta, a partner of 
the law firm Crowell and Moring.
    We want to thank you all for being with us today. The 
Committee has received your written testimony and it will be 
made part of the formal hearing record. Each of you will be 
recognized for 5 minutes for your oral remarks.
    Mr. Goldberg, we will start with you for 5 minutes. We will 
try to get through two statements. We will recess and come back 
promptly at 11:30.
    Mr. Goldberg, you may proceed.

STATEMENT OF FRED GOLDBERG, JR., PARTNER; SKADDEN, ARPS, SLATE, 
                         MEAGHER & FLOM

    Mr. GOLDBERG. Mr. Chairman, Ranking Member Lewis, Members 
of the Committee, it is an honor to appear before you today to 
discuss the impact of certain revenue provisions of the 
Affordable Care Act on taxpayers and the IRS.
    I am appearing today solely in my individual capacity.
    Many years ago, I had the pleasure of appearing before this 
Committee during my time as IRS Chief Counsel, as IRS 
Commissioner, and as Assistant Secretary for Tax Policy.
    Your Committee has a long bipartisan history of concern for 
effective tax administration and your efforts have served the 
American people well.
    Before starting, I would like to make a preliminary 
observation. The administrative, behavioral and tax compliance 
issues you are considering are inherent in any policy that 
provides phased out tax credits to subsidize the purchase of 
health insurance, including, for example, the Ryan-Wyden 
proposal. They are not unique to the Affordable Care Act.
    Much of my written statement explains in some detail why my 
experience as IRS Commissioner convinces me that the revenue 
provisions of the Act in their current form will become a 
burdensome, costly, and frustrating quagmire for millions of 
Americans, and will cause significant non-compliance with our 
tax laws.
    My oral statement does not address portions of my written 
statement dealing with adverse impact of the Act's financial 
incentives on employers and individuals, but I will be happy to 
answer any questions.
    What I want to emphasize today is my experience as IRS 
Commissioner also convinces me that these failings are 
unnecessary and are easily minimized.
    Chief Justice Roberts and four of his colleagues have 
decided that the revenue provisions of the Act are all about 
the government's taxing power.
    I believe they got it right and the best way to avoid 
administrative, behavioral and tax compliance melt down is to 
embrace this reality.
    First, now that we know the revenue provisions are all 
about the government's taxing authority, there is no longer any 
reason whatsoever why each of 51 different exchanges should 
have responsibility for determining the proper amount of health 
insurance tax credits on behalf of millions of individuals and 
families.
    The exchanges will be starting from scratch with 
information that is 2 years out of date because personal and 
financial circumstances change. Change is the one constant in 
our real lives. The exchange's credit calculations will be too 
high or too low most of the time. Now, in hopes of getting it 
less wrong, each exchange will need to obtain sensitive 
personal and financial information from millions of individuals 
and families and it will need to do so throughout the year 
because life's changes do not follow the bookkeeper's calendar. 
These efforts will require direct interaction with millions of 
individuals and families in ways that meet their reasonable 
expectations and allow them to make timely decisions.
    Decades of IRS experience make clear that as citizens, we 
want our questions answered and our issues resolved promptly, 
properly, and in ways we understand. We are sharing intimate 
details of our personal and financial lives and expect that our 
information will remain confidential, and because the stakes 
are so significant, our health and hard-earned money, we have 
high expectations and little tolerance for mess ups.
    These responsibilities are not going to be core competency 
of the exchanges. There is no reason they should be and there 
is no chance the exchanges will get it anywhere near right. 
They are facing more than enough challenges without functioning 
as some weird hybrid of tax advisor and tax enforcer. Let folks 
figure out their expected credits with support from a long-
established network of public and private intermediaries and 
let them make appropriate representations to their exchanges. 
They have been doing this kind of thing for decades in their 
dealings with the IRS. Taking the exchanges out of the picture 
will make things far less intrusive, burdensome, and costly and 
will save the exchanges a fortune.
    Second, from the standpoint of tax compliance, the current 
sanctions for overstating the amount of health insurance tax 
credit, coupled with limits on IRS enforcement activities, 
effectively guarantee that there will be widespread 
noncompliance. To avoid these compliance issues, treat these 
taxes like all other taxes.
    Thank you very much.
    [The prepared statement of Mr. Goldberg follows:]

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    Chairman BOUSTANY. Thank you, Mr. Goldberg.
    Ms. Pickering, you're recognized for 5 minutes.

   STATEMENT OF KATHY PICKERING, EXECUTIVE DIRECTOR, THE TAX 
  INSTITUTE AT H&R BLOCK; VICE PRESIDENT, GOVERNMENT RELATIONS

    Ms. PICKERING. Good morning, Chairman Boustany, Ranking 
Member Lewis, and distinguished Members of the Oversight 
Subcommittee. Thank you for the opportunity to share H&R 
Block's views on the IRS' implementation of the Patient 
Protection and Affordable Care Act.
    H&R Block is the country's leading provider of tax 
preparation services. In each of your districts, we have on 
average 37 offices, 12 franchisees, and 323 preparers. We are 
one of the largest employers of military spouses in the nation 
and we work alongside the IRS to help taxpayers annually file 
about 25 million returns.
    Clearly, the implantation of ACA is a significant 
undertaking and we commend the IRS for the progress it has 
made; however, it will face numerous challenges and conflicting 
demands for resources.
    First, the IRS and HHS have two very different missions and 
focuses with respect to the ACA. HHS will focus on ensuring 
that everyone has healthcare coverage. The focus of the IRS 
will be on enforcing tax law, reconciling advanced payments of 
the premium tax credit, and collecting revenues from the 
various tax provisions of the ACA.
    For example, HHS has stated that an individual can enroll 
in an exchange, but using documentation from other sources to 
substantiate income levels; however, the IRS will require 
individuals to file a tax return to reconcile advanced payments 
of the premium tax credit. As a result, individuals may receive 
an unpleasant surprise when they find out that they have a tax 
liability because they improperly estimated their income. We 
recommend the IRS and HHS develop consistent processes for 
income verification and eligibility. Requiring individuals to 
provide tax return information is the most reliable, consistent 
way to provide this verification.
    The second area I wish to highlight is the need for 
finalizing regulations and educating the greater tax community. 
There are many key provisions that still need to be finalized 
in order to implement by January 1, 2014. As a franchisor, H&R 
Block is concerned about the impact and timing of new 
regulations on small businessowners. For example, small 
businessowners will need at least 4 months to plan and to 
determine if they will participate in a small business health 
options program where enrollment begins in October 2013. We 
recommend that, given the time required to publish regulations, 
the IRS should ensure all ACA regulations are proposed by April 
30, 2013.
    To be successful, the IRS and HHS must also provide 
individuals with timely education and guidance. This may be one 
of the most challenging tasks the IRS will face in 2013. We 
recommend the IRS leverage the tax preparation community 
through the Return Preparer Initiative to amplify taxpayer 
outreach and education efforts. To do so, the IRS and its 
testing vendor need to ensure they have sufficient testing 
capacity across the country to meet the December 2013 deadline; 
however, the IRS has ongoing operational challenges which will 
be magnified by the difficulties of implementing of ACA. 
Therefore, a third and final area of importance is ensuring 
readiness for the 2013 tax season.
    In the 2012 tax season, millions in refunds were delayed in 
the early season due to fraud system programming errors and 
transmission problems with the Modernized e-File System, 
coupled with a decrease in IRS toll-free phone services in 
2012. Taxpayers dealt with increased hold times and a decreased 
level of service. The IRS must complete the full transition to 
the Modernized e-File System, continue to improve fraud 
controls, respond to late tax legislation, and successfully 
implement the Return Preparer Initiative, all while handling 
the effects of a late start to the e-filing system currently 
set for January 22nd. This means that many early season, low-
income filers will not receive their much needed refunds until 
well into February.
    We recommend that the IRS begin accepting and processing e-
filed returns no later than January 15, 2013. Additionally, the 
IRS should maintain legacy as a contingency and provide the 
framework they intend to use to determine if it will be 
deployed. More importantly, the IRS should promptly notify the 
tax preparation community and taxpayers of problems with 
processing returns.
    In conclusion, the IRS and HHS together have a daunting 
task ahead and the IRS should use the upcoming tax season to 
improve several key areas of tax administration in order to be 
better positioned to fully implement ACA. H&R Block looks 
forward to continue to working with the IRS in these and many 
other areas.
    Chairman Boustany, thank you once again for organizing 
today's hearing and for the opportunity to testify.
    [The prepared statement of Ms. Pickering follows:]

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    Chairman BOUSTANY. Thank you, Ms. Pickering.
    We are now--the Committee is now going to recess for the 
commemoration of 9/11. I appreciate the panel's patience with 
us. We will promptly reconvene at around--right about 11:30 at 
the conclusion of that commemoration and we will proceed from 
there.
    So we thank you. Committee stands in recess.
    [Recess.]
    Chairman BOUSTANY. We would like to reconvene the hearing. 
I would ask the panelists to please take their seats.
    The Subcommittee thanks you all for your patience with this 
delay we have had and--but, anyway, we will continue onward.
    And Mr. Hodge, you are recognized for 5 minutes for your 
oral statement.

   STATEMENT OF SCOTT A. HODGE, PRESIDENT; THE TAX FOUNDATION

    Mr. HODGE. Thank you, Mr. Chairman and Mr. Lewis and 
Members of the Committee. I really do appreciate the 
opportunity to talk about this important topic.
    I am sure you all agree that the ideal tax system should do 
only one thing and that is raise a sufficient amount of 
revenues to fund the government activities with the least 
amount of harm to the economy, but by all accounts, the U.S. 
Tax Code is far from that ideal. Our current tax system is a 
byzantine monstrosity that spans 70,000 pages, costs taxpayers 
more than $160 billion a year to comply with, and now dictates 
virtually every aspect of our lives, and even before the ACA 
grafted more than 40 new provisions to the Tax Code, the 
relentless growth of credits and deductions over the past 20 
years has made the IRS a super agency, engaged in policies as 
unrelated as delivering welfare benefits to subsidizing energy-
efficient refrigerators.
    Although the IRS's annual budget may be relatively small, 
it is essentially controlling vastly more budgetary resources 
than any cabinet level agency. The more than 170 different tax 
expenditure programs in the Tax Code have a total budgetary 
cost of over $1 trillion and these myriad tax provisions were 
enacted to achieve all manner of social and economic 
objectives, but the most troubling development in recent years 
is that the expanded use of these tax credits to deliver social 
policy has knocked millions of people off the tax rolls and 
turned the IRS into an extension of the welfare state, a role 
that it has not managed very well, and today there are a record 
number of Americans, 56 million in all, 41 percent of all 
filers now pay no individual income taxes because of the 
generous credits and deductions, and worse yet, the IRS now 
gives out more than $100 billion in refundable credits to 
people who have no income tax liability.
    In 2010, the budgetary costs of both refundable and 
nonrefundable tax credits exceeded $224 billion, and to put 
this in perspective, if tax credits were combined into a single 
program, they would be the fourth largest domestic program 
behind Social Security, Medicare, and Medicaid, and the ACA's 
generous tax credits and cost sharing programs will no doubt 
increase the number of non-payers and increase the IRS's role 
as a deliverer of social benefits and the IRS has a dismal 
record of managing these tax credit programs. So we should 
expect the ACA to lead to billions of dollars in fraud, abuse, 
and erroneous payments.
    The Treasury's own IG for tax administration has testified 
here that refundable credits are a magnet for unscrupulous 
individuals who file erroneous claims for these credits and the 
IRS' failure to rein in the sizable amount of fraud and 
improper payments in programs such as the EITC and the Hope 
Credit should give us great concern about the ability of the 
IRS to skillfully manage the ACA, and the IRS stumbled out of 
the gate in implementing some of the earliest and perhaps the 
simplest provisions of the ACA, such as the Small Business 
Healthcare Credit and the indoor tanning tax.
    Many businessowners said that the benefits of the Small 
Business Health Insurance Credit was not worth the effort and 
you can't blame them considering that calculating the credit 
takes multiple steps and seven different worksheets, and the 
IRS also had difficulty simply identifying the number of 
businesses who are supposed to pay the tanning excise tax.
    In many areas, the ACA makes the IRS an extension of the 
Department of Health and Human Services. The Premium Assistance 
Credit is a case in point where HHS has the authority to make 
the rules while the IRS and Treasury are responsible for doing 
the paperwork, policing the system, cutting the checks, and 
fixing any problems that may arise.
    Now, imagine if the Supplemental Nutrition Assistance 
Program were run in the same fashion where eligibility for SNAP 
benefits was determined by USDA, but the IRS was responsible 
for verifying the incomes of recipients and either giving a 
food tax credit directly to taxpayers or sending checks to 
grocery stores on their behalf. Does anyone think that that 
would make for an efficient and user-friendly system?
    The added compliance costs of the ACA will fall 
disproportionately on small businesses and the poor. Already 
about 73 percent of those people claiming their income tax 
credit pay a professional preparer to complete their tax return 
and no doubt that number will arise because of the ACA. The 
irony is that many taxpayers, low-income taxpayers, will have 
to ask themselves how much they can afford to pay a 
professional tax preparer in order to claim a tax credit that 
is intended to pay for health insurance that they currently 
cannot afford.
    In conclusion, Mr. Chairman, it is hard to believe that 
anything can make the Tax Code look simple and understandable, 
but the Affordable Care Act does just that. The solution is not 
to give the IRS more money, resources or staff. The solution is 
to reform the Tax Code and eliminate the most burdensome and 
distortionary tax preferences and return the IRS to its core 
mission of simply collecting the necessary revenues to fund 
government programs.
    Thank you very much for this opportunity. I welcome any 
questions that you may have.
    [The prepared statement of Mr. Hodge follows:]

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    Chairman BOUSTANY. Thank you, Mr. Hodge.
    Mr. Perretta, you may proceed with 5 minutes.

   STATEMENT OF SETH PERRETTA, PARTNER; CROWELL & MORING, LLP

    Mr. PERRETTA. Thank you, Mr. Chairman and Members of the 
Subcommittee. I am Seth Perretta, a partner at Crowell and 
Moring, where I lead the firm's employee benefits practice. I 
am here today on behalf of the American Benefits Council for 
whom I serve as outside health tax counsel.
    The Council's Members are principally major national 
employers, as well as health insurers and employee benefit 
advisors. Collectively, the Council's Members either sponsor 
directly or provide services to health and retirement plans 
covering more than 100 million Americans.
    I would like to briefly address three points today. The 
first concerns the job that the Treasury Department and the IRS 
have done in helping employers and others comply with the 
Affordable Care Act, the second is to refer to a few examples 
of how the agencies have resolved the challenges faced by 
employer sponsors of health plans, and the third is to mention 
some of the important decisions yet to be made.
    First, whether one believes the Affordable Care Act 
represents good policy or bad policy, everyone ought to agree 
on two points. Namely, the Act is a large and complex statute 
involving many new responsibilities for employers and other 
stakeholders, and given that reality, the Treasury Department 
and IRS have overall done a very commendable job helping 
employers and others understand and comply with the law's 
requirements.
    As referenced in my written testimony, the Council and the 
employer community as a whole have not always agreed with the 
interpretations that the agencies have made regarding certain 
provisions of the Act. For example, the agencies' 
interpretation of what constitutes a grandfathered plan is an 
example, but it has been our experience that the agencies have 
generally sought to give employers flexibility in implementing 
the law and I can say without reservation that the agencies 
have been very accessible during this process to us, not only 
welcoming input from us, but also actively seeking out our 
views on how to make the law more administratable.
    Since March of 2010, the American Benefits Council has 
hosted 14 webinars for our members on different aspects of the 
Affordable Care Act. Collectively, thousands of employee 
benefits professionals nationwide have participated. IRS or 
Treasury officials have directly presented at a great many of 
these programs and have been a very valuable technical resource 
for all of them.
    In the same vein, I just completed my term as chairman of 
the Employee Benefits Committee of the DC Bar where we hosted 
seven programs ourselves related to the ACA for the benefit of 
legal practitioners across the city. Again, the agencies' 
officials actively participated in these programs upon request.
    These sessions and other formal and informal communications 
have allowed the regulators to answer numerous questions from 
employers as well as benefit practitioners. Of equal 
importance, the agencies have used these opportunities to 
better understand the design and operation of employer 
sponsored health plans so they could address the true diversity 
of plan offerings that exist and develop rules regarding 
implementation.
    Second, time does not permit a lengthy discussion of 
specific regulatory projects, but my written testimony 
addresses some in greater detail, and of course I will be 
pleased to answer any questions you may have about them.
    The first concerns the requirement for employers to include 
the value of employer healthcare on an employee's form W-2 
starting for the 2011 tax year. Employers had many questions 
and concerns about this new requirement, including whether 
particular coverage was to be included on the form, and if so, 
how do actually value that coverage. In answering these 
questions, the IRS incorporated many employer suggestions and 
in fact gave employers a much needed one-year reprieve in 
complying with the new requirement.
    Another example concern to the law is the so called pay-or-
play provision and the challenge of defining what constitutes 
full-time employment and whether coverage is deemed affordable. 
This is relevant both from employer penalties as well as for 
purposes of the premium tax credit. The IRS has crafted safe 
harbors that will make these determinations simpler for plan 
sponsors.
    A third example relates to the way in which IRS allows 
employers to treat multiple plan offerings for purposes of 
determining their financial obligation to pay one of the new 
fees prescribed by the law. I believe one of you mentioned the 
medical device tax. Well, this is--there is another fee called 
the PCORI fee and the IRS issues favorable guidance from the 
employer perspective that makes it easier to comply.
    Again, with respect to all three examples, it goes without 
saying that many companies may not like the underlying 
requirements, but IRS action has made compliance with these 
provisions more straightforward and flexible to accommodate a 
variety of plan structures.
    The third and final point I want to emphasize concerns the 
future. In the coming months, employers will need clear and 
easy to follow guidance in order to fulfill a number of 
reporting and disclosure obligations, including just 6 months 
from now a March 2013 notice related to state insurance 
exchanges. The IRS also needs to more fully explain how 
employers are to determine whether the plans they offer provide 
minimum value for purposes of the Act's pay-or-play provision. 
And likewise, employers who sponsor wellness programs to 
improve the health of their employees and control healthcare 
costs need to know how wellness incentives will be taken into 
account for determining whether an employer-sponsored plan is 
deemed affordable.
    With respect to these and other regulatory projects yet to 
be developed, we urge the IRS to continue to be receptive to 
input from employers in the same fashion that it has sought to 
do so from day one of the Act.
    Thank you for allowing me to testify this morning. I would 
be pleased to answer any questions.
    [The prepared statement of Mr. Perretta follows:]

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    Chairman BOUSTANY. Thank you, Mr. Perretta. We will begin 
questioning.
    Our tax laws provide financial and behavioral incentives to 
actors across our entire economy, some intended, others not.
    Mr. Goldberg, in your experience both as a government 
official in multiple capacities and a tax practitioner, I think 
you probably have a deeper understanding than most of us about 
how that all plays out. Can you describe in greater detail some 
of the unintended consequences the new law might provide?
    For example, might it provide incentives for employers to 
dump low-income employees into an insurance exchange or shift 
workers to part-time employment?
    On the individual's side, does it incentive healthy 
individuals to forgo buying health insurance until they are 
sick or injured?
    Could you comment on some of the unintended consequences 
that might ensure?
    Mr. GOLDBERG. Sure, Mr. Chairman.
    My experience tells me that the American people are 
extraordinarily responsive to incentives created by the Tax 
Code. They are aided in this process by a massive 
infrastructure of advisors. For the most part, I think this is 
healthy. This is part of who we are.
    The way the Affordable Care Act is currently structured, I 
believe that employers will have significant incentives to 
discontinue group coverage and split their savings with 
employees. I believe that is going to happen. I believe that 
the current tax penalty structure for failure to purchase 
insurance on an exchange clearly provides a young, healthy 
individual to not purchase the policy until he or she is in 
need of insurance. So this is going to happen and it is going 
to happen for sure.
    You can change it. You have decades of collective 
experience in structuring incentives. If you structure the 
incentives properly, you will change the behavior.
    Chairman BOUSTANY. Others want to comment on this, on 
unintended consequences?
    Mr. HODGE. Yes, Mr. Chairman.
    If you are looking to reduce the cost of healthcare, this 
is not the way to do it, and for instance, two taxes in 
particular, one is the medical device tax, which the ultimate 
payer of that tax will be insurance companies of the first 
order, ultimately consumers, but that will cascade down to 
consumers eventually. In addition to that, there is the fee 
that is being placed on insurance companies. That will also 
cascade down to the payers, the companies, businesses, and 
individuals.
    Chairman BOUSTANY. In higher premiums then?
    Mr. HODGE. In higher premiums. So these will actually jack 
up the cost of premiums in insurance. So if the intended goal 
is to reduce that, this is going to have a contrary effect.
    Chairman BOUSTANY. Thank you.
    Others want to comment on this?
    Mr. Hodge, you made a comment in your statement and it is 
also in your written statement about the tax credits that we 
have thrown throughout our entire Tax Code and the sheer 
complexity of this and you made a statement and I want to make 
sure I have this correct. It constitutes the--it would 
constitute the fourth largest social welfare program.
    Mr. HODGE. That's correct, Mr. Chairman.
    If you add up to the total cost in both the refundable and 
nonrefundable costs of all of the tax credits that are 
currently administered, it would be the fourth largest domestic 
program in the budget. They currently total $224 billion and 
that would make them fourth only to Social Security, Medicare, 
and Medicaid.
    Chairman BOUSTANY. And so now we are going in a direction--
with ACA we are going in a direction of more complexity in the 
Tax Code rather than the stated goals of trying to get to a 
simplified Tax Code with lower rates?
    Mr. HODGE. Well, we have certainly turned the IRS now into 
a full-blown governmental agency managing vast numbers of 
programs in a way that it was simply not intended to do.
    Chairman BOUSTANY. Thank you.
    And I would like to hear from the panel on how the new 
responsibilities from the healthcare law might affect the tax 
gap. I think when I read through testimony, this was raised, 
and Mr. Goldberg, I know you mentioned a threat of an increased 
tax gap in your written testimony. Could you expand on that?
    Mr. GOLDBERG. Yes, Mr. Chairman.
    Again, I have a simple story. This is a tax. Treat it like 
a tax. The current penalties for noncompliance, and I am 
talking principally about on the credit side, there is no 
interest, there are no penalties. The IRS is not going to 
engage in its customary enforcement efforts. This is an ugly 
story. It is not happy, but it is true, and if you give--if you 
simply let the IRS do its job the way it does elsewhere, you 
will mitigate significantly these compliance problems.
    It is not a perfect marriage, but it has been around a long 
time and despite what others say, I believe the IRS and 
taxpayers pretty much have worked it out pretty well and if you 
are going to go down this road, let taxpayers do their job, let 
the IRS do its job, and I believe it will significantly 
minimize noncompliance, but as currently structured, it is 
going to be a mess.
    Chairman BOUSTANY. So we will see a widening of the tax 
gap?
    Mr. GOLDBERG. Yes, sir.
    Chairman BOUSTANY. And the revenue generated from these 
taxes in ACA are basically a significant part of the funding of 
the new program, the coverage expansion; is that correct?
    So we are going to see a widening tax gap, but also 
significant underfunding of the proposed program; is that a 
fair statement?
    Mr. GOLDBERG. I believe it is, Mr. Chairman. I think your 
Committee historically has done an admirable job bipartisan 
supporting adequate funding for the IRS. They are charged with 
immense responsibility and they should be funded properly to 
discharge it.
    Chairman BOUSTANY. Thank you.
    Others want to comment on the tax gap issue? No.
    Thank you. That's all I have.
    Mr. Lewis?
    Mr. LEWIS. Thank you, Mr. Chairman.
    I want to thank each one of you for being here today, 
taking the time and being so patient.
    Mr. Perretta has reached out to the IRS on issues related 
to health reform, to the health reform law, and what have been 
your experience in term of the IRS responding?
    Mr. PERRETTA. I speak with folks at the IRS and Treasury on 
issues both on behalf of the American Benefits Council and on 
behalf of my issuer and employer clients on a very frequent 
basis. I would say I speak with them probably on a biweekly or 
certainly once a month on issues of emerging importance in 
terms of figuring out how to comply with these rules and I can 
say that the response has always been fantastic.
    The IRS and Treasury, I really think, in many respects as a 
Federal agency are a model for making themselves available to 
help comply with their rules. They always make themselves 
available to provide both explanations on an informal basis to 
individual practitioners, but also to larger groups.
    As I mentioned, as chairman of the DC Bar Employee Benefits 
Committee, we hosted several programs and several--seven or 
eight programs since 2010 on the ACA and you call around town 
and you try to get people from the agencies to come speak to 
practitioners who are trying to understand these rules and help 
employers understand these rules, and I can say without a 
doubt, the IRS and Treasury have always been the most 
responsive of the agencies I have dealt with in making 
available people to help have those conversations.
    Mr. LEWIS. What type of help/assistance do employers need 
from the IRS that hasn't been issued yet?
    Mr. PERRETTA. There are sort of, I think, three really, 
really big issues. One is minimum value in order to determine 
whether or not an employer is providing coverage that will 
qualify as minimum essential coverage under the pay-or-play, so 
essentially how an employer decides whether or not they are 
complying with the obligation to provide qualifying coverage. 
The coverage must provide minimum value, and right now, we have 
a proposed sort of concept as to how minimum value will be 
determined, which we are very thankful for and very happy with, 
but I think further contours on that rule would be helpful so 
employers can understand their obligation.
    Wellness incentives, employers are using wellness programs 
to a greater extent to help both reduce the healthcare trends 
and also to make sure their employees are healthy and wellness 
incentives were codified--sorry, were addressed in regulation 
by HIPAA almost 20 years ago and it was codified by Congress in 
the ACA, and employers just want to make sure that as we move 
forward with wellness programs, that they are supported as a 
way for employers to continue to encourage their employees to 
become healthier.
    I think those would be two of the more significant.
    Mr. LEWIS. Thank you very much.
    Mr. Hodge, I am somewhat curious and maybe I just want to 
know. You seem to be saying by the IRS helping to carry out the 
mandate of the Affordable Care Act, that it is helping to 
expand the welfare state and I want to be sure that we are 
reading from the same page.
    Could you just tell me what is the welfare state?
    Mr. HODGE. I would include all of the means-tested type 
safety net programs in addition to all--many entitlement 
programs that are generally administered through HHS and so 
forth, and the IRS has now become an integral part of many of 
those welfare type programs, broadly stated, and so, yes, it is 
an integral part of the welfare state in providing basic 
assistance to people through things like the Earned Income Tax 
Credit and other sorts of refundable credits.
    Mr. LEWIS. And do you think that is a good thing or----
    Mr. HODGE. I think it is a very bad thing actually. I do 
not think it is a role for the IRS to play in that. I think for 
the IRS to be handing out now over $100 billion worth of 
refundable credits is a very bad trend.
    Mr. LEWIS. Well, who should play that role? What agency of 
the government should play that role? It is a necessary role 
for someone to play. Who should play that role?
    Mr. HODGE. Well, it is already being played in other areas 
of the government. For instance, HHS is providing that role 
through its assistance programs and now we have it duplicated 
through the Tax Code and I think that we ought to have agencies 
that specialize in it keep to their core missions.
    Mr. LEWIS. Would other Members of the panel like to 
respond?
    Mr. Goldberg.
    Mr. GOLDBERG. Mr. Lewis, I--my first presidential 
appointment was from Ronald Reagan. My second presidential 
appointment and third were from the first President George 
Bush. Each of those presidents supported increases in the 
Earned Income Tax Credit. The intellectual birth of the Earned 
Income Tax Credit is Milton Friedman.
    The IRS is the most efficient delivery of these kinds of 
incentives in the world. It doesn't regulate. It doesn't 
dictate behavior. It simply administers a pricing system. One 
would think that conservatives are particularly enamored, as am 
I, of pricing systems. The code is about our values. It is 
about homeownership. It is about education. It is about thrift. 
It is about education. It is about health. And abstract notions 
to get rid of all of that, I believe, are stillborn.
    So I think the IRS is doing a terrific job. It is a job 
that was charged with by each of my bosses, President Reagan 
and President Bush, and I think they do it very well.
    Thank you very much.
    Mr. LEWIS. Thank you, Mr. Goldberg.
    Madam Chair, I yield back.
    Mrs. BLACK. Thank you, Mr. Lewis.
    And now, Ms. Jenkins, you are recognized for 5 minutes.
    Ms. JENKINS. Thank you, Madam Chair. Thank you all for 
being here.
    Ms. Pickering, in your testimony you noted that the vastly 
different missions of the Department of Health and Human 
Services and the Internal Revenue Service has the potential to 
create taxpayer confusion and unexpected debt, tax debts, as a 
result of overpayments of subsidies. For example, according to 
HHS regs, a taxpayer does not have to file a tax return to 
substantiate their income level; however, the IRS will require 
a tax return to reconcile the advanced premium tax credit.
    Can you just elaborate on the consequences of having two 
different standards and what recommendations would you have to 
ensure that taxpayers do not receive an unpleasant surprise 
because they improperly estimated their income?
    Ms. PICKERING. Thanks for that question.
    We certainly, on the frontline as we are serving our 
clients, see from a very real and practical experience the 
challenges that individuals have in navigating the complex tax 
laws. What we are particularly concerned about with regards to, 
you know, the HHS having much looser documentation requirements 
for establishing income and eligibility, the HHS in their 
mission is motivated and incented to help everyone gain health 
coverage and the IRS is incented to collect taxes and reconcile 
that premium, and so for that, we are afraid that with 
different standards and different confusing information, and 
certainly as this is a new regulation being rolled out, we will 
see that there are many taxpayers that have not recently or 
ever been required to file their taxes will now have to enter 
into the tax system to file their taxes to reconcile that 
premium and that is going to cause some frustration, some 
surprises, and put people into a situation where they have a 
tax liability through no fault of their own, certainly not 
through, you know, bad intentions. They just didn't understand 
the regulations, estimated things incorrectly, and now find 
themselves owing money.
    Ms. JENKINS. Okay. Thank you. That helps.
    From my understanding, current law requires that if a 
taxpayer's circumstances change during the year, whether it is 
due to good news, like a new job or a raise, or because they 
lost their job, the taxpayer's responsible for updating their 
information with the exchange, potentially resulting in a large 
overpayment or underpayment if not timely reported. The 
taxpayer advocate has warned taxpayers who do not update their 
household information during the year may find that they owe a 
significant amount of money at the end of the year, money they 
likely do not have.
    Maybe, Mr. Goldberg, each of you could comment and describe 
how this requirement to provide notice and the IRS 
reconciliation process works from this perspective of just 
everyday taxpayers.
    Mr. GOLDBERG. Sure, Ms. Jenkins.
    Let me comment very briefly on your prior question.
    Ms. JENKINS. Sure.
    Mr. GOLDBERG. I believe that the issue of forcing people to 
file tax returns may be less than is generally estimated. 
Because of the way the Affordable Care Act is structured, I 
believe virtually all of--a very, very large percentage of 
those folks will receive health coverage through Medicaid 
rather than on the exchanges. There will be some exceptions and 
it is going to be a problem.
    Stepping back, I think that we have decided to run this 
through the exchanges. I believe, frankly, that was a political 
decision because people didn't want to call it a tax. That 
creates a wholly unnecessary intermediary dealing with all of 
the information you are talking about. They don't know how to 
do it. Mrs. Black, as you alluded to, it raises serious 
confidentiality and privacy--and it is just not necessary. The 
H&R Blocks of the world, the advisors of the world, the 
churches, the nonexempt or tax-exempt organizations, the IRS, I 
believe will do a credible job of educating employees and 
purchasers on the exchanges generally how the rules work.
    If you simply let the family go in and say, ``Gee, I got a 
raise, I want to change my premium,'' which families are 
perfectly capable of doing, it will work fine. If you say, 
``You have to fill out three forms and talk with four different 
government employees, getting passed from phone to phone before 
you can make the change,'' they are just not going to do it.
    So my recommendation is you trust the individuals and 
families to make that decision working with advisors, working 
with providers, and you will significantly reduce that problem 
and I believe the IRS, properly instructed by this Committee, 
will be reasonable in dealing with the transition, but as it is 
structured, it is just a bureaucratic mess.
    Ms. JENKINS. Okay. Fair enough.
    Madam Chair, I yield back.
    Mrs. BLACK. Thank you, Ms. Jenkins.
    And Mr. Becerra, you are recognized for 5 minutes.
    Mr. BECERRA. Thank you, Madam Chair, and thank you all for 
your testimony. By the way, thanks for being patient with us as 
we went out to commemorate 9/11.
    You know, I would agree with anyone who is willing to say 
that any time you do something big, especially in a big place 
like America, it is going to take a little time to adjust.
    And, Mr. Goldberg, can I just say to you thank you for your 
constructive comments. We could be critical or critique, but at 
the same time, what we are hoping to do is have a functional 
government, and I appreciate where you point out where IRS can 
do better and where it is doing the best it can and I agree 
with you. There aren't too many governments in the world that 
can say they have as efficient a system as we do. We still have 
to figure out how we collect on that tax gap that we got, but I 
got to believe that men and women who work in the IRS, who 
oftentimes get a lot of heartburn for what they do, are trying 
to do the best job they can, especially the folks that are out 
there trying to do the enforcement, you know, trying to find 
the folks who are trying to evade paying their fair share of 
taxes.
    So I am going to be the last one that is going to sound 
like Scrooge and say that as we try to expand healthcare to 33 
million Americans who had a heck of a time trying to afford it, 
that we should try to go backward because the reality is it is 
not just about trying to help 33 million Americans and their 
families to get health insurance, quality, affordable health 
insurance for the first time. Actually, a lot more is at stake. 
There are over 100 million Americans who, beginning 2014, will 
never have to worry about a preexisting condition again. They 
all have the security of knowing that they are going to keep 
their insurance, and as we try to administer this program, 
whether through the IRS or HHS, who cares, we are trying to do 
something to help folks.
    At the end of the day, as Mr. Goldberg, I think you said, 
it is trying to make sure that government works for people, 
whether it is the IRS or any other agency, and my sense is that 
if we all work together, we can make this happen.
    Mr. Hodge, I am concerned when I hear people say that the 
IRS is taking on way too many things. It should go back to 
its--I think you said something to the effect of it should go 
back to its core responsibilities. I don't disagree with that 
except that the IRS helps people save money. Should the IRS 
stop providing assistance through these provisions that help 
people save money by encouraging them to do so and getting a 
tax break by doing so? Should the IRS not do that?
    Mr. HODGE. There are certain elements of the Tax Code that 
should be in place. We should not be taxing savings. So I don't 
consider that a ``tax break.'' It should----
    Mr. BECERRA. But we do tax it. We do tax benefits/gains 
that are made, people's income, and what we do is we give 
people a chance to not have all their income taxed if they save 
some of it.
    So should we not provide folks with that type of a tax 
credit or a tax deduction through the code?
    Mr. HODGE. We have gone way beyond that into----
    Mr. BECERRA. No, I know we have. I agree with that, but----
    Mr. HODGE.--now giving credits for replacing the windows of 
their home and buying an electric car and putting their kids in 
daycare and so forth, and so----
    Mr. BECERRA. Right. So should we return to, as you say, the 
core mission of simply collecting the necessary amount of tax 
revenues the government?
    Mr. HODGE. That is right.
    Mr. BECERRA. Okay. So then we shouldn't provide--encourage 
people, through a tax credit or a tax deduction, encourage them 
to save more money? We shouldn't encourage them through the 
homeowner's mortgage interest deduction, an incentive to 
purchase a home. We shouldn't provide them with a tax credit to 
save money to prepare to send their kids to college.
    Those are not core missions of the IRS, and from what I 
gather from your testimony, we are simply pure and have the IRS 
collect the revenues that the government needs. There are a 
whole bunch of Americans who would have a tougher time buying a 
home, saving for their kids' college education or even saving 
for their own retirement, and I understand what you are saying. 
The further away you get from your core responsibility, the 
more chance that there is mischief or a mistake, but I got to 
believe that only Scrooge would say don't try to package that 
present for that little child on Christmas Day.
    There are things that we try to do to make life better. 
Don't always get them right, but, as I think Mr. Goldberg was 
just saying, if we try to focus on doing it right, then there 
is a good chance that we are going to be helping a lot of 
Americans and in a bill that has become law, historic 
legislation, that now will extend protections against 
discrimination on preexisting condition in healthcare to 150 
million Americans or so, to extend coverage to 33 million 
American families now. I hope that what we do is just work 
together, figure out how we can help the IRS make sure it 
doesn't make mistakes and does it right so that when Christmas 
comes, everyone gets what they deserve.
    With that, Madam Chair, I will yield back the balance of my 
time.
    Mrs. BLACK. Thank you, Mr. Becerra.
    And Mr. Marchant, you are recognized for 5 minutes.
    Mr. MARCHANT. Thank you, Madam Chair.
    When I held my town hall meetings this last break, Bedford, 
Texas comes to mind, the crowds pretty consistently stood and 
delivered one message. Please simplify the Tax Code. Please 
make it to where the IRS does not have as much involvement in 
our lives. Pretty simple message from my constituents.
    When I got the briefing paper for this hearing today, which 
was a very good briefing paper, I was taken aback by the exact 
opposite. When the Affordable Healthcare Act comes into effect, 
the IRS is going to be even more involved in our lives. The IRS 
is going to be a bigger part of everybody's tax return, and in 
fact, in my opinion, people that have been doing their own 
taxes may now have to consult with someone and pay someone to 
help, and in my mind, we are going exactly the opposite 
direction.
    Yes, 33 million people theoretically will become--have 
access to healthcare, but 300 million people are possibly 
impacted by the process that we have put in place to bring 
about that change.
    Mr. Hodge, Deputy Commissioner Miller suggested that the 
process of taxpayers updating government officials about the 
details, the intimate details, of their personal and family 
lives had really nothing to do with the IRS. It was just going 
to be a simple calculation, a simple you fill out your return 
and based on what you put on the return, that was going to be 
the extent of the IRS's involvement. Do you have anything to 
say about that?
    Mr. HODGE. Well, it looks very clear, as I understand the 
legislation, and especially from what Mr. Goldberg and Ms. 
Pickering has said, the IRS will be immediately and very--and 
intimately involved in that, and if I read the briefing from 
the Joint Committee on Taxation summary of the ACA, it says 
very clearly that any adjustment to tax resulting from the 
difference between the advanced premium assistance and the 
allowable refundable tax credit would be assessed as an 
additional tax or a reduction in tax on the tax return. In many 
aspects, this will be like the Alternative Minimum Tax where it 
is sort of an accidental thing that people fall into when they 
actually fill out their tax return. It is very difficult for 
them to adjust their withholding in such a manner as to 
anticipate this situation. So they are going to be caught in 
this bureaucratic quagmire between HHS and the exchanges, which 
could make a mistake, and their own changes and their own 
situation, and then the IRS that has to rectify these.
    It is--I feel sorry for folks that are going to get caught 
up in this and they will end up on April 15th realizing a tax 
burden that they may not have seen coming and that is pretty 
frightening.
    Mr. MARCHANT. Mr. Goldberg, do you see--you made the 
comment earlier that business and individuals are very 
responsive to the Tax Code and they will sit down, they will 
figure it out. Do you see the opportunities for additional tax 
avoidance in the way these forms are filled out or do you see 
people's behavior being altered? Do you see them sitting down 
with their accountant saying, ``Okay, we may have filed this 
way before, but because of the new rules, we are going to 
decide to file this way?'' And, in fact, the Alternative 
Minimum Tax is an excellent example from my district because 
that's the number one thing in the Tax Code that catches my 
constituents.
    Will it alter the behavior of taxpayers?
    Mr. GOLDBERG. Yes, sir, I believe that it is a certainty. 
For example, if you have a young kid off on his or her own who 
is healthy, someone, I guarantee you, will tell her, ``You can 
either pay $400 to the IRS or you can pay $3,000 to the 
exchange or you can wait and when you get sick, you can buy an 
insurance policy because there is no preexisting conditions. So 
you can save 2,600 bucks a year till you get sick.'' That is 
going to happen for sure.
    So, yes, of course, and I think that is just human nature. 
That is--I mean you see nothing but human nature if you are 
running the IRS, better and worse.
    The important point I think that Congress needs to keep in 
mind is if you say you want to maintain private markets for 
health insurance and if you say I want to subsidize the cost of 
insurance for those who have difficulty paying, you have just 
said I want some form of phased-out credit. That is what you 
have just said, otherwise you can give everybody $25,000 and 
tell everybody to go buy insurance and tax it at the back end. 
That would actually work, but otherwise, you are stuck with 
this question.
    I personally think the structure of the Ryan proposal, 
setting aside the numbers, in many ways is a terrific 
structure. It was first supported by President Clinton, but it 
has the same question. How are you going to get progressive, 
subsidized subsidies from the government to buy health 
insurance? See, you got the same question any way you go. You 
got the same issues, and I believe the choice is very simple. 
For all of its problems, you either let the IRS administer 
those kinds of progressive credits or you get somebody else to 
do it, and I think it is a more prudent choice to let the IRS 
do it, but you can't avoid the choice. You go to single-payer, 
you avoid the choice, but otherwise, I think you are stuck with 
it.
    You are absolutely right about the behavior. The Tax Code 
today is grotesque. It is repulsive. It is so unneedlessly 
complex (sic). In terms of issues, your colleague across the 
capitol, Senator Coburn, is a profile in courage for calling 
out some of the needless subsidies provided by the Tax Code. 
You guys could do a terrific job to strip it down. Healthcare, 
progressive subsidies, phased-out credit, you are stuck where 
you are, whether it is Congressman Ryan or whether it is the 
Affordable Care Act. That's what I----
    Mrs. BLACK. And thank you, Mr. Goldberg. The time is 
expired. Thank you, Mr. Marchant.
    And I think, barring anyone else walking in the door, it 
looks like we are at the end, and I just want to go back to a 
question that I asked to the previous panel, Mr. Miller, 
related to the amount of information that is going to be in so 
many different places having to do with the taxpayer's personal 
information so much more than we have ever known before and 
that is a real concern for me.
    I mean obviously right now the IRS does share some of this 
data with Child Support, some with Medicaid, and maybe some 
other cases of revenue collection, but now we are going to see 
it much broader. We are going to see it where the exchange 
employees with vast amounts of information that they haven't 
previously been privy to, and I want to know from your 
perspective, each of you, if you have the same concern that I 
have, especially given the fact, as I said in the previous 
panel, that what we have seen in this Committee, as we have had 
the IRS hearings, that we know that there is fraud out there. 
There are people who have gotten refunds that didn't belong to 
them, and are--do you have a concern about where we are going 
with this?
    Mr. Goldberg, I want to start out with you and if we can 
just go down the panel, that would be great.
    Mr. GOLDBERG. Yes, I share the concern. It is one of the 
greatest concerns about the Affordable Care Act. The easiest 
solution is to take the exchanges out of that business.
    Mrs. BLACK. Thank you.
    Ms. PICKERING. Yes, I share that concern as well. We know 
that the IRS works very hard to protect taxpayer information. 
In working with HHS and the exchanges now, there is going to be 
a broader exchange of information, and while I believe everyone 
works to the--you know, to the best of their ability with the 
best intentions, there is just so much more opportunity and the 
fraudsters and the criminals are getting so much more clever in 
their ability to propagate these fraud schemes. So I think 
there is exposure and vulnerability.
    Mrs. BLACK. Thank you.
    Mr. Hodge.
    Mr. HODGE. Yeah, I too share that and I am sure every 
taxpayer fears their information getting out. They do so when 
they fill out a credit card application, a health plan. 
Everything is now accessible to these hackers and I would think 
everyone would worry that the more you disseminate this kind of 
information, personal information, the more vulnerable it is to 
that kind of mischief.
    Mr. PERRETTA. Thank you. I certainly support the comments 
of my fellow panelists here.
    I can't help but say a couple things from the perspective 
of the Council, which is employers are obviously very focused 
on employee privacy and, you know, one of the issues that 
employers were concerned about was the issue of having to 
figure out whether their health coverage was affordable because 
that is relevant to figuring out whether the employer has to 
pay a penalty, and most employers don't know what their 
employees' household income is and most employees don't want to 
tell their employers what the household income is, and 
thankfully the IRS listened to the Council and the employer 
community and they came up with the Safe Harbor Rule, which 
lets employers base affordability on the employee's W-2 wage, 
which is something that the employer will know, and so it does 
go a little bit to your point, Chairwoman, about the issue of 
privacy.
    Another issue I do want to touch on while I have your 
attention is the issue of notice and disclosure and this goes a 
little bit to the issue of flowing of information from parties, 
and I think employers, both small and large, are obviously 
concerned about the burdens that are going to fall upon them in 
terms of having to transmit, collect, store information as part 
of their obligations under the ACA and I think as the IRS moves 
forward, they have been very thoughtful in reaching out to us 
to understand sort of what our concerns are, but that is 
obviously an area where working closely with the employer 
community would be helpful since the employers will bear a 
significant piece of that burden in making sure that 
information flows in the right way.
    Mrs. BLACK. Thank you.
    Ms. Pickering, I have one additional question, one final 
question for you, and this goes back to the comment that you 
made both here and also in your written testimony about the 
concerns as preparers and getting your--the folks that work for 
you educated on what they are going to have to be doing as far 
as the rules go and I would like for you just to expound a 
little bit about how if we don't get those final rules in a 
timely manner, how this is really going to affect those who 
will be preparing those taxes for folks/the clients that you 
will be seeing?
    Ms. PICKERING. We have got a number of factors going on 
there. The Registered Tax Return Preparer Initiative is a very 
important initiative for getting all professional tax preparers 
registered with the IRS and up to--you know, up to standard 
competency levels. This is something that we have always 
supported. We think it is important for the professionalism of 
the industry, and in there, there is a continuing education 
requirement as well which says that preparers need to stay 
current on tax law.
    Now, as the ACA is rolling out as well, our clients will be 
coming to us looking forward to some additional understanding 
at least a minimum what are the tax implications to them with 
regards to the healthcare implementation and it is very 
important to have timely regulations so that all of that can be 
incorporated into the training plans and getting people 
prepared.
    So the timing of these things is critical and it is, you 
know, certainly a daunting task, but one that we look forward 
to partnering with the IRS on.
    Mrs. BLACK. Well, thank you.
    Mr. PERRETTA. Could I just add a follow-up comment?
    Mrs. BLACK. Yes.
    Mr. PERRETTA. Just to the idea that--going on that point, 
employers are often pricing their health insurance coverage 12 
to 14 months in advance.
    Mrs. BLACK. That is right.
    Mr. PERRETTA. And so when you think about having coverage 
in effect for 2014, many employers are beginning to fashion 
that coverage and make decisions about what that is going to 
look like, what their subsidies are going to be, and obviously 
playing on that point about the timely information, really the 
sooner the regulations can come out, obviously with opportunity 
for notice and comment, the better.
    Mrs. BLACK. Absolutely, and I know I am also hearing this 
from the insurance industry as well. Everybody's waiting for 
those final rules and regulations, almost that they need them 
yesterday in order to be able to give advice to their clients 
or those that are buying the product.
    Once again, I want to say thank you to the panel for your 
patience today and thank you for all of the good information 
that you provided to us.
    This hearing is completed.
    [Whereupon, at 12:20 p.m., the Subcommittee was adjourned.]
    [Submissions for the Record follow:]

                                 

                         Timothy Stoltzfus Jost

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                        William G. Schiffbauer 

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