[Federal Register Volume 81, Number 237 (Friday, December 9, 2016)]
[Proposed Rules]
[Pages 89020-89022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29489]



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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 57

[REG-123829-16]
RIN 1545-BN57


Electronic Filing of the Report of Health Insurance Provider 
Information

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes to amend the Health Insurance Providers 
Fee regulations to require certain covered entities engaged in the 
business of providing health insurance for United States health risks 
to electronically file Form 8963, ``Report of Health Insurance Provider 
Information.'' These proposed regulations affect those entities.

DATES: Written or electronic comments and requests for a public hearing 
must be received by March 9, 2017.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-123829-16), Room 
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
123829-16), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at http://www.regulations.gov (indicate IRS REG-
123829-16).

FOR FURTHER INFORMATION CONTACT:  Concerning the proposed regulations, 
David Bergman, (202) 317-6844; concerning submissions of comments or to 
request a public hearing, Regina Johnson, (202) 317-6901 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION: 

Background

    This document proposes to amend the Health Insurance Providers Fee 
Regulations (26 CFR part 57) under section 9010 of the Patient 
Protection and Affordable Care Act (PPACA), Public Law 111-148 (124 
Stat. 119 (2010)), as amended by section 10905 of PPACA, and as further 
amended by section 1406 of the Health Care and Education Reconciliation 
Act of 2010, Public Law 111-152 (124 Stat. 1029 (2010)) (collectively, 
the Affordable Care Act or ACA). All references in this preamble to 
section 9010 are references to the ACA.
    Section 9010(a) imposes an annual fee on each covered entity 
engaged in the business of providing health insurance. A covered 
entity, defined under section 9010(c), is any entity that provides 
health insurance for any United States health risk during each year, 
subject to certain exclusions. The total aggregate amount of the fee 
for all covered entities is determined by statute and is called the 
applicable amount. See section 9010(e). Each covered entity's annual 
fee is equal to an amount that bears the same ratio to the applicable 
amount as the covered entity's portion of net premiums written with 
respect to health insurance for United States health risks that are 
taken into account compared to the aggregate amount of net premiums 
written for all covered entities that are taken into account. Section 
9010(b)(2) clarifies which net premiums are taken into account for 
purposes of calculating the fee. A covered entity (including a 
controlled group) with no more than $25 million in net premiums written 
does not have any premiums taken into account and is not liable for a 
fee.
    Section 9010(b)(3) requires the Secretary to calculate the amount 
of each covered entity's fee on a calendar year basis. To facilitate 
these calculations, section 9010(g)(1) requires that each covered 
entity must report to the Secretary the covered entity's net premiums 
written for health insurance for any United States health risk for the 
preceding calendar year by the date prescribed by the Secretary. 
Section 9010(g)(1) also provides the Secretary with authority to 
prescribe the manner in which a covered entity reports its net premiums 
written. The reporting requirement applies regardless of whether a 
covered entity will be liable for a fee. Section 9010(g)(2) imposes a 
penalty on a covered entity for any failure to report the required 
information by the date prescribed by the Secretary (determined with 
regard to any extension of time for filing), unless such failure is due 
to reasonable cause. Section 9010(g)(3) imposes an accuracy-related 
penalty for understating the covered entity's net premiums written for 
health insurance for any United States health risk for any calendar 
year.
    Section 57.3 of the Health Insurance Providers Fee regulations 
implements section 9010(g) and provides the rules for covered entities 
to report net premiums written for health insurance of United States 
health risks to the IRS. Under that section, information is reported to 
the IRS on Form 8963, ``Report of Health Insurance Provider 
Information,'' which must be filed in accordance with the form 
instructions by April 15 of the year following the calendar year for 
which data is being reported. That section further provides that rules 
for the manner of reporting may be provided in guidance in the Internal 
Revenue Bulletin. The IRS uses the information reported on Form 8963 as 
part of the determination of each covered entity's annual fee under 
section 9010. Neither the statute nor the regulations currently specify 
whether Form 8963 must be submitted electronically or on paper. Covered 
entities currently have the option of filing the form in either manner.
    Section 57.5 requires the IRS to send each covered entity notice of 
a preliminary fee calculation for that fee year (the calendar year in 
which the fee must be paid, beginning with 2014), and provides the 
content of that notice. Section 57.5 further provides that the timing 
of the notice will be provided in guidance published in the Internal 
Revenue Bulletin. Notice 2013-76 (2013-51 IRB 769) provides that the 
IRS will mail each covered entity its notice of preliminary fee 
calculation by June 15 of each fee year. Section 57.6 requires that a 
covered entity correct any errors identified after receiving the 
preliminary fee calculation by filing a corrected Form 8963. Notice 
2013-76 provides that a corrected Form 8963 must be filed by July 15 of 
the fee year. The corrected Form 8963 replaces the original Form 8963 
for all purposes, including the determination of whether an accuracy-
related penalty applies. The covered entity remains liable for any 
failure to report penalty if it failed to timely submit the original 
Form 8963. As with the original report, the corrected Form 8963 may 
currently be submitted either electronically on paper.
    Under Sec.  57.7(b), the IRS must send each covered entity its 
final fee calculation no later than August 31. The IRS validates the 
data on Form 8963 in performing the final calculation, and, pursuant to 
section 9010(b)(3), the IRS is authorized to use any other source of 
information to determine each covered entity's net premiums written for 
health insurance of United States health risks. The covered entity must 
pay the fee by September 30 of the fee year, as provided by section 
9010(a)(2). The fee must be paid by electronic funds transfer. See 
Sec. Sec.  57.7(d); 57.6302-1.
    The Consolidated Appropriations Act of 2016 imposes a moratorium on 
the fee for the 2017 calendar year. Public Law 114-113, section 201. 
Thus, covered entities are not required to pay the fee or file Form 
8963 for the 2017 fee year.

Explanation of Provisions

    The IRS has now had three years of experience administering the 
Health

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Insurance Providers Fee. Based on this experience, the IRS concludes 
that the fee could be more efficiently administered if certain covered 
entities were required to file Forms 8963 and corrected Forms 8963 
electronically.
    The calculation of the fee is complex, and the statute requires 
that it be paid by the covered entity by September 30. The calculation 
of any one covered entity's fee depends upon the data reported on Form 
8963 by all covered entities--an adjustment to one covered entity's fee 
affects other covered entities' fees. Covered entities need time after 
the end of the year to compile the information that needs to be 
reported. Accordingly, there is a short window of time for (1) the IRS 
to compile and analyze the reported information and send out 
preliminary letters, (2) covered entities to respond with any 
corrections, (3) the IRS to compile and analyze the amended reporting 
and issue final fee letters, and (4) covered entities to pay the fee.
    Paper reporting slows this process because paper forms take time to 
travel through the mail. Additionally, once the paper Form 8963 (or 
corrected Form 8963) reaches IRS personnel, the information on the 
paper form must be transcribed into IRS computers to calculate the fee. 
Transcription of paper forms is costly and time-consuming. And, because 
of the nature of the fee, no entity's proposed or final assessment can 
be determined until all the reporting of all payers has been taken into 
account.
    The IRS uses electronic filing in several other contexts to 
streamline the collection of large volumes of paper forms and to 
efficiently use the information provided. Electronic filing of Forms 
8963 and corrected Forms 8963 would benefit the administration of the 
fee by significantly reducing delays and the resources needed to 
calculate the preliminary and final fee amounts. Electronic filing will 
also benefit fee payers by facilitating the process for computing the 
fee for all covered entities.
    Accordingly, pursuant to section 9010(g)(1), which provides 
authority to prescribe the manner for reporting, the proposed 
regulations amend Sec.  57.3(a)(2) to provide that a covered entity 
(including a controlled group) reporting more than $25 million in net 
premiums written on a Form 8963 or corrected Form 8963 must 
electronically file these forms after December 31, 2017. Forms 8963 
reporting $25 million or less in net premiums written are not required 
to be electronically filed. This is because a covered entity (including 
a controlled group) reporting no more than $25 million in net premiums 
written is not liable for a fee and therefore the time constraints 
applicable to computation of the fee are not applicable with respect to 
these entities. See Sec.  57.4(a)(4). The proposed regulation also 
provides that if a Form 8963 or corrected Form 8963 is required to be 
filed electronically, any subsequently filed Form 8963 filed for the 
same fee year must also be filed electronically, even if such 
subsequently filed Form 8963 reports $25 million or less in net 
premiums written. In addition, the proposed regulation provides that 
failure to electronically file will be treated as a failure to file for 
purposes of Sec.  57.3(b).

Proposed Effective/Applicability Date

    These amendments are proposed to apply to any covered entity 
reporting more than $25 million in net premiums written on any Form 
8963 filed after December 31, 2017.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It is hereby certified that the electronic filing 
requirement would not have a significant economic impact on a 
substantial number of small entities pursuant to the Regulatory 
Flexibility Act (5 U.S.C. chapter 6). This certification is based on 
the fact that the rule is expected to affect primarily larger entities 
because the electronic filing requirement is not met unless the filer 
must report more than $25 million in net premiums. Accordingly, a 
regulatory flexibility analysis is not required.
    Pursuant to section 7805(f) of the Internal Revenue Code, this 
notice of proposed rulemaking has been submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on the 
impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written or electronic comments that 
are submitted timely to the IRS as prescribed in this preamble under 
the ADDRESSES heading. The Treasury Department and the IRS request 
comments on all aspects of the proposed rules. All comments will be 
available for public inspection and copying at www.regulations.gov or 
upon request. A public hearing will be scheduled if requested in 
writing by any person that timely submits written comments. If a public 
hearing is scheduled, notice of the date, time, and place for the 
public hearing will be published in the Federal Register.

Drafting Information

    The principal author of the proposed regulations is David Bergman 
of the Office of the Associate Chief Counsel (Procedure and 
Administration).

List of Subjects in 26 CFR Part 57

    Health Insurance, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 57 is proposed to be amended to read as 
follows:

PART 57--HEALTH INSURANCE PROVIDERS FEE

    Paragraph 1. The authority citation for 26 CFR part 57 continues to 
read in part as follows:

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

    Par. 2. Section 57.3 is amended by revising paragraph (a)(2) to 
read as follows:


Sec.  57.3  Reporting requirements and associated penalties.

* * * * *
    (a) * * *

    (2) Manner of reporting--(i) In general. The IRS may provide rules 
in guidance published in the Internal Revenue Bulletin for the manner 
of reporting by a covered entity under this section, including rules 
for reporting by a designated entity on behalf of a controlled group 
that is treated as a single covered entity.
    (ii) Electronic filing required. Any Form 8963 (including corrected 
forms) filed pursuant to paragraph (a)(1) of this section reporting 
more than $25 million in net premiums written must be filed 
electronically in accordance with the instructions to the form. If a 
Form 8963 or corrected Form 8963 is required to be filed electronically 
under this paragraph (a)(2)(ii), any subsequently filed Form 8963 filed 
for the same fee year must also be filed electronically. For purposes 
of paragraph (b) of this section, any Form 8963 required to be filed 
electronically under this section will not be considered filed unless 
it is filed electronically.
* * * * *
    Par. 3. Section 57.10 is amended by revising paragraph (a) and 
adding paragraph (c) to read as follows:

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Sec.  57.10  Effective/applicability date.

    (a) Except as provided paragraphs (b) and (c) of this section, 
Sec. Sec.  57.1 through 57.9 apply to any fee that is due on or after 
September 30, 2014.
* * * * *
    (c) Section 57.3(a)(2)(ii) applies to Forms 8963, including 
corrected Forms 8963, filed after December 31, 2017.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2016-29489 Filed 12-8-16; 8:45 am]
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