September 11, 2012
With the 2010 health care reform law a lingering cause of political skirmishing, a top Internal Revenue Service official Tuesday defended the agency’s staged rollout of the legislation’s tax components against Republican critics’ charges that the IRS is ill-equipped to handle the task without overburdening taxpayers and threatening privacy.
Steven T. Miller, the IRS deputy commissioner for services and enforcement, told a hearing of the House Ways and Means Oversight Subcommittee that the agency “would absolutely be ready” by the law’s deadline of 2014, “based on level of effort and the plan in place.”
The law’s 47 tax provisions include a requirement that the IRS report family incomes in a format that will allow the coming state exchanges to determine the size of a health premium tax credit available to taxpayers and businesses enrolling in the exchanges.
“The IRS has a successful history” in such endeavors, Miller added. He cited a “robust dialogue” with people the changes affect, such as tax preparers, software makers and businesses and pointed to dozens of new rules and notices intended to establish “simplified safe harbors.” Miller also noted 1,400 meetings with small business people that took place in the early months of implementation and talks to 10,000 return preparers at nationwide forums.
Republican critics of the law voiced skepticism. “More than creating new burdens on the Internal Revenue Service, 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,” said House subcommittee Chairman Charles Boustany Jr., R-La. He displayed two binders he said contained 17 new regulations and mentioned a figure of 80 million hours for “job creators and families” to comply with, based, he said, on IRS estimates approved by the Office of Information and Regulatory Affairs and the Office of Management and Budget.
“This is . . . not a hearing to beat up on the IRS -- an agency run by good men and women, dedicated public servants who have an incredibly difficult job,” Boustany added. “The agency did not write the health care law -- the previous Congress did.”
Miller replied that the focus is on administering the law and not on the agency’s economics. He also pushed back on the long-standing assertion by some that the IRS dramatically ramped up hiring -- taking on 16,000 more agents, according to one Republican report from 2009. “I don’t know where that number came from,” Miller said, clarifying that 670 IRS employees are assigned to the health care law in fiscal 2012, a figure set to rise to 859 in fiscal 2013.
Rep. Tom Reed, R-N.Y., expressed concern that the IRS has not projected staff numbers for fiscal 2014 and beyond. “You don’t have a fair indicator of employment burdens put on by this law,” he said.
Noting that the fiscal 2014 projection is being discussed “as we speak” by the Treasury Department and OMB, Miller replied, “we operate on an annual basis. If you give me a budget for multiple years, I might have some idea.”
Boustany repeated a Republican complaint that the IRS was interpreting the Affordable Care Act to allow federal subsidies of state insurance exchanges, when the language on that question is open to dispute. Miller said the position -- which involves reading the entire law rather than only one relevant section -- was arrived at following a “tripartite discussion” between the IRS administrators, the IRS Office of General Counsel and Treasury’s Office of Tax Policy. He agreed to Boustany’s request that he provide notes and meeting dates from those discussions.
Ranking member Rep. John Lewis, D-Ga., said he “is confident” the implementation will be carried out on schedule, but expressed concern about recent IRS budget cuts of $300 million. Lewis noted that $270 million of the IRS’ request of $360 million in health care law funding for fiscal 2013 is for information technology.
“The process for verifying individual insurance coverage is very similar” to verifications done in the past, Miller said, noting the law does not permit use of levies or criminal penalties or revenue agents for enforcement.
As for fears that privacy could be violated by sharing of financial information, Miller said, “we have a long history of sharing taxpayer information using fairly stringent restrictions with states and agencies. We have hundreds of agreements with various agencies. It doesn’t require a new effort to be sure safeguards are in place.”
Fred Goldberg Jr., a former IRS commissioner now in private law practice, warned that the health care law’s enlistment of the tax service to share taxpayer information with state exchanges would bring about a “costly burden and an administrative quagmire” that would increase incentives for noncompliance with tax law.
He said income verification and protection of privacy are “not the core competency of the exchanges” and urged Congress to move the entire function to the IRS, which “is efficient at administering the tax code,” he said, not altering human behavior.
Kathy Pickering, vice president for government relations at H&R Block, commended the IRS for the “undertaking,” but warned of “conflicting demands” between the agency’s emphasis on administering tax law and the Health and Human Services Department’s focus on “making sure that all have health insurance.” The result may be a surprise need for adjustments at tax time, she said.
Given the delays in some tax refunds this spring and the many other demands on the attention of the IRS, she said, the agency should make a special effort to give the tax preparer community and small businesses notice on new procedures by April 30, 2013, to provide sufficient time to mull decisions on whether to participate in the exchanges.
Scott Hodge, president of the nonpartisan research group Tax Foundation, was tougher on what he called a “superagency that has become an extension of the welfare state.” The IRS has “a dismal record in managing the plethora of tax credit programs it is already responsible for, so we should expect the ACA to lead to billions of dollars in fraud, abuse and erroneous payments,” he said. “The IRS “stumbled out of the gate in implementing some of the earliest -- and, perhaps simplest -- provisions of the ACA: the Small Business Health Care Tax Credit; the Indoor Tanning ExciseTax; and the expansion of the Adoption Credit.” Rather than giving the agency more money or staff, Hodge added, reform the U.S. Tax Code.
Seth Perreta, a law partner with Crowell and Moring LLP representing Fortune 500 corporations in the American Benefits Council, said the IRS for the most part had been responsive to his members during rule-making. “The IRS gave business a much needed reprieve and accommodated a variety of plans,” he said. But he urged it to continue to be receptive.
September 11, 2012