[Federal Register Volume 78, Number 157 (Wednesday, August 14, 2013)]
[Rules and Regulations]
[Pages 49367-49370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-19728]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9628]
RIN 1545-BK87


Regulations Pertaining to the Disclosure of Return Information To 
Carry Out Eligibility Requirements for Health Insurance Affordability 
Programs

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the 
disclosure of return information under section 6103(l)(21) of the 
Internal Revenue Code, as enacted by the Patient Protection and 
Affordable Care Act and the Health Care and Education Reconciliation 
Act of 2010. The regulations define certain terms and prescribe certain 
items of return information in addition to those items prescribed by 
statute that will be disclosed, upon written request, under section 
6103(l)(21).

DATES: Effective date: These regulations are effective on August 14, 
2013.
    Applicability date: For date of applicability, see Sec.  
301.6103(l)(21)-1(d).

FOR FURTHER INFORMATION CONTACT: Steven Karon, (202) 622-4570; (not a 
toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    Section 6103(l)(21) of the Internal Revenue Code (the Code) permits 
the disclosure of return information to assist Exchanges in performing 
certain functions set forth in the Patient Protection and Affordable 
Care Act, Public Law 111-148 (124 Stat. 119 (2010)) (the Affordable 
Care Act) for which income verification is required (including 
determinations of eligibility for the insurance affordability programs 
described in the Affordable Care Act), as well as to assist State 
agencies administering a State Medicaid program under title XIX of the 
Social Security Act, a State's children's health insurance program 
under title XXI of the Social Security Act (CHIP), or a basic health 
program (BHP) under section 1331 of the Affordable Care Act (if 
applicable). Section 6103(l)(21) identifies specific items of return 
information that will be disclosed. For taxpayers whose income is 
relevant in determining eligibility for an insurance affordability 
program, Medicaid, CHIP, or BHP, section 6103(l)(21) explicitly 
authorizes the disclosure of the following items of return information: 
Taxpayer identity information, filing status, the number of individuals 
for whom a deduction is allowed under section 151 of the Code, the 
taxpayer's modified adjusted gross income as defined under section 36B 
of the Code (MAGI), and the taxable year to which any such information 
relates or, alternatively, that such information is not available. 
Section 6103(l)(21) also authorizes the disclosure of such other 
information prescribed by regulation that might indicate whether an 
individual is eligible for the premium tax credit under section 36B of 
the Code, or cost-sharing reductions under section 1402 of the 
Affordable Care Act, and the amount thereof.
    The Treasury Department and the IRS published a notice of proposed 
rulemaking (REG-119632-11) in the Federal Register, 77 FR 25378, on 
April 30, 2012, proposing additional items to be disclosed pursuant to 
section 6103(l)(21). A public hearing was scheduled for August 31, 
2012. The IRS did not receive any requests to testify at the public 
hearing, and the public hearing was cancelled. Five written comments 
responding to the proposed regulations were received. All comments were 
considered and are available for public inspection at

[[Page 49368]]

http://www.regulations.gov or upon request. Additionally, the IRS 
received information from the Department of Health and Human Services 
(HHS) that pertains to the disclosure of items pursuant to section 
6103(l)(21). After consideration of the written comments and the 
information provided to the IRS by HHS, the proposed regulations under 
section 6103(l)(21) are adopted as revised by this final regulation. 
The public comments, the information HHS provided to the IRS, and the 
revisions are discussed in the following section.

Summary of Comments and Explanation of Provisions

    The IRS received five written comments in response to the proposed 
regulations. Two commentators expressed support for the proposed 
regulations and had no suggested changes. A third commentator provided 
a comment, discussed in this section, concerning the items disclosed 
under section 6103(l)(21) and the proposed regulations. The remaining 
commentators made comments, also discussed in this section, pertaining 
to section 6103 generally, but did not make comments specific to the 
proposed regulations under section 6103(l)(21) and the additional items 
to be disclosed under that section.
    A commentator stated that the premium tax credit under section 36B 
applies to low income filers. The commentator stated that, when a 
filer's income exceeds the maximum income allowable for the credit, the 
IRS should only disclose that the individual's income is above the 
maximum allowable amount, and not provide the return information as 
described by section 6103(l)(21) or the proposed regulations. As noted 
in the preamble to the proposed regulations, the Affordable Care Act 
and HHS's final regulations (77 FR at 18456-18458) require that 
Exchanges use alternative means to verify income where information is 
not available from, or verified by, the IRS. Providing the specific 
delineated items described by section 6103(l)(21) and these 
regulations, as opposed to simply stating that an applicant's income is 
above the threshold for a premium tax credit, will inform an Exchange 
of the degree to which alternative verification may be needed. 
Therefore, disclosing these items to an Exchange will assist the 
Exchange in determining an individual's eligibility for, and the amount 
of, any advance payment of the premium tax credit or cost-sharing 
reductions. Accordingly, after careful consideration of the comment, 
the regulations remain unchanged.
    The commentator additionally noted that taxpayers should be able to 
request that the IRS tell them if anyone requested information about 
their return using this regulation. No changes were made to these 
regulations as a result of this comment. Section 6103(l)(21) and these 
regulations concern the disclosure of items of return information to 
HHS, Exchanges, and certain State agencies, and not the disclosure of 
whether anyone requested a taxpayer's return information under section 
6103 in general. Section 6103(p)(3) describes certain requirements with 
respect to the maintenance of a system of records or accountings of all 
requests for inspection or disclosure of return or return information 
under section 6103 generally.
    The commentator also stated that the regulation should contain a 
penalty for individuals that fraudulently request information. The 
commentator further suggested that the regulation should contain a 
penalty for HHS, Exchanges, and any other organizations that do not 
comply with the data protection requirements. No changes were made in 
response to these comments. Section 6103(l)(21) does not permit the 
Treasury Department or the IRS to establish penalties under these 
regulations. The Treasury Department and the IRS note, however, that 
section 1411(h)(1)(B) of the Affordable Care Act states that any person 
who knowingly and willfully provides false or fraudulent information 
shall be subject to a penalty of not more than $250,000 in addition to 
any other penalties prescribed by law. Additionally, penalties may be 
imposed under sections 7213, 7213A, and 7431 of the Code for 
unauthorized disclosures of return information obtained under section 
6103(l)(21).
    One commentator expressed concerns about taxpayer privacy and 
wanted assurances that HHS and other agencies receiving return 
information are required to adopt the safeguarding requirements of 
section 6103. By operation of law, the safeguards established by 
section 6103(p)(4) apply to those entities described in section 
6103(l)(21), namely HHS, the Exchanges established under the Affordable 
Care Act, and the State agencies administering a State program 
described under section 6103(l)(21), as well as their contractors. No 
regulatory changes are needed to have section 6103(p)(4) apply to those 
entities. The commentator also noted that section 1411(g)(2)(b) of the 
Affordable Care Act imposes penalties on HHS employees and contractors 
who improperly use or disclose tax return information, and suggested 
that the regulations should clarify that this penalty may be imposed in 
addition to the penalty imposed under section 7213 of the Code when 
there are certain unauthorized disclosures of return information. The 
commentator is correct that both statutory provisions provide for civil 
or criminal penalties for the improper use or disclosure of tax return 
information. Because those provisions govern the imposition of those 
penalties, no changes are needed with respect to these regulations.
    Finally, another commentator remarked about the timing and 
characteristics of particular communications made from Exchanges to an 
applicant, stating that notices should be sent throughout the 
application process. The commentator stated the notices should be in 
language appropriate for all populations, suggesting that existing 
guidance from the Department of Justice (DOJ) and HHS on providing 
appropriate documents to limited English proficiency populations may be 
helpful. These comments regarding the timing and characteristics of 
such communications are outside the scope of section 6103(l)(21) and 
these regulations.
    After the Treasury Department and the IRS published the proposed 
regulations, HHS informed the IRS that it may be receiving certain 
items of information from the Social Security Administration (SSA). One 
of the items that HHS expects to receive from SSA is the total amount 
of the social security benefits for each individual whose income is 
relevant to the determination of eligibility for health insurance 
affordability programs described in the Affordable Care Act. If the IRS 
also provides HHS with the amount of social security benefits included 
in gross income under section 86, an Exchange or State agency will be 
generally able to determine the amount of social security benefits not 
included in gross income under section 86. This amount is one of the 
components of an individual's MAGI. Eligibility for the premium tax 
credit, and advance payments of the credit, is based on the household 
income of the applicant, which is the sum of the MAGI of those 
individuals who comprise the household. As a result, providing the 
amount of social security benefits included in gross income under 
section 86, along with other items contained in these regulations, will 
help an Exchange determine whether a taxpayer is eligible for the 
premium tax credit under section 36B or cost-sharing reductions under 
section 1402 of the Affordable Care Act, and the amount of the credit 
or

[[Page 49369]]

reductions. Section 301.6103(l)(21)-1(a) of these final regulations, 
therefore, includes the amount of social security benefits included in 
gross income under section 86 as an item that will be disclosed to HHS 
pursuant to section 6103(l)(21).
    In the proposed regulations, a relevant taxpayer, for whom return 
information would be disclosed under section 6103(l)(21), was defined 
as any individual listed by name and social security number or adoption 
taxpayer identification number (ATIN) on an application submitted 
pursuant to Title I, Subtitle E, of the Affordable Care Act whose 
income may bear upon a determination of eligibility for a health 
insurance affordability program. Subsequent to the publication of the 
proposed regulations, the IRS recognized that requests relating to 
ATINs would not be received because individuals' identification numbers 
will first be verified against SSA records. Under section 1411(c) of 
the Affordable Care Act, HHS is to provide the name, date of birth, and 
social security number of each individual on the application to the SSA 
for a determination that the information provided is consistent with 
the information in SSA records. HHS will only request return 
information for those individuals whose numbers are verified. Since the 
SSA has no records of ATINs, these numbers will not be verified and HHS 
will not request return information for individuals using adoption 
taxpayer identification numbers. While the income of an individual with 
an ATIN may be relevant for determining household income and, 
therefore, eligibility for a health insurance affordability program, an 
Exchange or State agency will use alternate verification procedures as 
provided under regulations prescribed by HHS, including procedures 
under part 155.320 of chapter 45 of the Code of Federal Regulations, 
instead of getting return information under section 6103(l)(21). 
Accordingly, Sec.  301.6103(l)(21)-1(b) of these final regulations 
removes the reference to ATINs.

Special Analyses

    It has been determined that these final regulations are not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563. Therefore, a regulatory 
assessment is not required. It has also been determined that, because 
the regulations proposed do not impose a collection of information on 
small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) 
does not apply. Pursuant to section 7805(f) of the Code, the notice of 
proposed rulemaking was submitted to the Chief Counsel for Advocacy of 
the Small Business Administration for comment on its impact on small 
business, and no comments were received from that office.

Drafting Information

    The principal author of the regulations is Steven L. Karon of the 
Office of the Associate Chief Counsel, Procedure and Administration.

List of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1. The authority citation for part 301 is amended by adding 
the entry for Sec.  301.6103(l)(21) to read in part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Section 301.6103(l)(21)-(1) also issued under 26 U.S.C. 
6103(l)(21) and 6103(q). * * *


0
Par. 2. Add Sec.  301.6103(l)(21)-1 to read as follows:


Sec.  301.6103(l)(21)-1  Disclosure of return information to the 
Department of Health and Human Services to carry out eligibility 
requirements for health insurance affordability programs.

    (a) General rule. Pursuant to the provisions of section 
6103(l)(21)(A) of the Internal Revenue Code, officers and employees of 
the Internal Revenue Service will disclose, upon written request, for 
each relevant taxpayer on a single application those items of return 
information that are described under section 6103(l)(21)(A) and 
paragraphs (a)(1) through (7) of this section, for the reference tax 
year, as applicable, to officers, employees, and contractors of the 
Department of Health and Human Services. Such information shall be 
provided solely for purposes of, and to the extent necessary in, 
establishing an individual's eligibility for participation in an 
Exchange established under the Patient Protection and Affordable Care 
Act, verifying the appropriate amount of any premium tax credit under 
section 36B or cost-sharing reduction under section 1402 of the Patient 
Protection and Affordable Care Act, or determining eligibility for the 
State programs described in section 6103(l)(21)(A).
    (1) With respect to each relevant taxpayer for the reference tax 
year where the amount of social security benefits not included in gross 
income under section 86 of the Internal Revenue Code of that relevant 
taxpayer is unavailable:
    (i) The aggregate amount of the following items of return 
information--
    (A) Adjusted gross income, as defined by section 62 of the Internal 
Revenue Code;
    (B) Any amount excluded from gross income under section 911 of the 
Internal Revenue Code; and
    (C) Any amount of interest received or accrued by the taxpayer 
during the taxable year that is exempt from tax.
    (ii) Information indicating that the amount of social security 
benefits not included in gross income under section 86 of the Internal 
Revenue Code is unavailable.
    (2) Adjusted gross income, as defined by section 62 of the Internal 
Revenue Code, of a relevant taxpayer for the reference tax year, in 
circumstances where the modified adjusted gross income (MAGI), as 
defined by section 36B(d)(2)(B) of the Internal Revenue Code, of that 
relevant taxpayer is unavailable, as well as information indicating 
that the components of MAGI other than adjusted gross income must be 
taken into account to determine MAGI;
    (3) The amount of social security benefits of the relevant taxpayer 
that is included in gross income under section 86 of the Internal 
Revenue Code for the reference tax year;
    (4) Information indicating that certain return information of a 
relevant taxpayer is unavailable for the reference tax year because the 
relevant taxpayer jointly filed a U.S. Individual Income Tax Return for 
that year with a spouse who is not a relevant taxpayer listed on the 
same application;
    (5) Information indicating that, although a return for an 
individual identified on the application as a relevant taxpayer for the 
reference tax year is available, return information is not being 
provided because of possible authentication issues with respect to the 
identity of the relevant taxpayer;
    (6) Information indicating that a relevant taxpayer who is 
identified as a dependent for the tax year in which the premium tax 
credit under section 36B of the Internal Revenue Code would be claimed, 
did not have a filing requirement for the reference tax year based upon 
the U.S. Individual Income Tax Return the relevant taxpayer filed for 
the reference tax year; and

[[Page 49370]]

    (7) Information indicating that a relevant taxpayer who received 
advance payments of the premium tax credit in the reference tax year 
did not file a tax return for the reference tax year reconciling the 
advance payments of the premium tax credit with any premium tax credit 
under section 36B of the Internal Revenue Code available for that year.
    (b) Relevant taxpayer defined. For purposes of paragraph (a) of 
this section, a relevant taxpayer is defined to be any individual 
listed, by name and social security number, on an application submitted 
pursuant to Title I, Subtitle E, of the Patient Protection and 
Affordable Care Act, whose income may bear upon a determination of any 
advance payment of any premium tax credit under section 36B of the 
Internal Revenue Code, cost-sharing reduction under section 1402 of the 
Patient Protection and Affordable Care Act, or eligibility for any 
program described in section 6103(l)(21)(A) of the Internal Revenue 
Code.
    (c) Reference tax year defined. For purposes of section 
6103(l)(21)(A) of the Internal Revenue Code and this section, the 
reference tax year is the first calendar year or, where no return 
information is available in that year, the second calendar year, prior 
to the submission of an application pursuant to Title I, Subtitle E, of 
the Patient Protection and Affordable Care Act.
    (d) Effective/applicability date. This section applies to 
disclosures to the Department of Health and Human Services on or after 
August 14, 2013.

Beth Tucker,
Acting Deputy Commissioner for Services and Enforcement.
    Approved: July 10, 2013.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2013-19728 Filed 8-13-13; 8:45 am]
BILLING CODE 4830-01-P