Tax Cuts & Jobs Act
Here are the benefit highlights from the Tax Cuts and Jobs Act.
Individual Mandate: The bill zeros out the penalty beginning in 2019 for individuals failing to maintain minimum essential coverage without an actual repeal of the Affordable Care Act (ACA) individual mandate. It is important to note that the individual mandate penalties remains in effect for 2017 and 2018. The IRS has indicated that individual tax returns filed electronically in 2018 will not be accepted unless the ACA’s health coverage requirements have been addressed; paper filings that do not address these requirements may be suspended until additional information is submitted, and refunds may be delayed.
Qualified Transportation Plans: The legislation eliminates the employer deduction for qualified transportation fringe benefits and, except as necessary for an employee’s safety, for transportation, payments, or reimbursements in connection with travel between an employee’s residence and place of employment. Similarly, exempt organizations will have to treat as unrelated business taxable income (UBTI) any amounts used to provide nondeductible qualified transportation fringe benefits or parking facilities used for qualified parking. The tax exclusion for qualified transportation fringe benefits is generally preserved for employees, but the exclusion for qualified bicycle commuting reimbursements is suspended and unavailable for tax years beginning after 2017 and before 2026.
Employer Tax Credit for Paid Family and Medical Leave: The legislation creates a new tax credit for eligible employers providing paid family and medical leave to their employees. To be eligible, employers must have a written program that pays at least 50% of wages to qualified employees for at least two weeks of annual paid family and medical leave. Eligible employers paying 50% of wages may claim a general business credit of 12.5% of wages paid for up to 12 weeks of family and medical leave a year. The credit increases to as much as 25% if the rate of payment exceeds 50%. The provision is generally effective for wages paid in taxable years beginning after December 31, 2017, and before January 1, 2020. Employers should be aware that leave provided as vacation, personal leave, or other medical or sick leave is not considered to be family and medical leave eligible for this credit, and that certain Family and Medical Leave Act (FMLA) protections apply.
What is not included: A further delay or permanent repeal of the health insurance tax (HIT) and Cadillac Tax were not addressed in tax reform. The Cadillac Tax will impose a 40% excise tax on health plans that exceed certain cost thresholds beginning in 2020, while the HIT was under a one-year moratorium and is set to take effect again in 2018, adding an additional $500 to average premiums per affected family every year.
The final version of the Act does not include some previously proposed benefit-related changes, including the termination of the $5000 DCAP exclusion and adoption tax credit, and elimination of the exclusions for educational assistance programs and qualified tuition reductions.
On December 22nd the IRS issued Notice 2018-06 which extends by 30 days the due date for providing forms 1095-B or 1095-C forms to employees. The new deadline is March 2, 2018. This extension is automatic so employers and providers do not have to request it.
The deadline for submitting the 1094-B and 1094-C forms to the IRS has not changed. Paper filers must submit by February 28, and electronic filers must submit by April 2.
The Notice also extends the good-faith transition relief to 2017 information reporting. This relief applies to incorrect and incomplete information reported on Form 1095-B or 1095-C, but not to a failure to provide or file the form by the deadline.
ACA Penalty Letters
Also on the topic of forms 1095-B and 1095-C are the Letter 226J that are being sent by the IRS. These letters contain the proposed penalty under the employer shared responsibility provision of Section 4980H of the Affordable Care Act (ACA).
The IRS issued Q&As 55 – 58 on November 2, 2017 which provides the information below.
Letter 226J will include:
- a brief explanation of section 4980H,
- an employer shared responsibility payment summary table itemizing the proposed payment by month and indicating for each month if the liability is under section 4980H(a) or section 4980H(b) or neither,
- an explanation of the employer shared responsibility payment summary table,
- an employer shared responsibility response form, Form 14764, “ESRP Response”,
- an employee PTC list, Form 14765, “Employee Premium Tax Credit (PTC) List” which lists, by month, the ALE’s assessable full-time employees (individuals who for at least one month in the year were full-time employees allowed a premium tax credit and for whom the ALE did not qualify for an affordability safe harbor or other relief (see instructions for Forms 1094-C and 1095-C, Line 16), and the indicator codes, if any, the ALE reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C,
- a description of the actions the ALE should take if it agrees or disagrees with the proposed employer shared responsibility payment in Letter 226J, and
- a description of the actions the IRS will take if the ALE does not respond timely to Letter 226J
The response to Letter 226J will be due by the response date shown on Letter 226J, which generally will be 30 days from the date of Letter 226J.
Letter 226J will contain the name and contact information of a specific IRS employee that the ALE should contact if the ALE has questions about the letter.
ALEs will have an opportunity to respond to Letter 226J before any employer shared responsibility liability is assessed and notice and demand for payment is made. Letter 226J will provide instructions for how the ALE should respond in writing, either agreeing with the proposed employer shared responsibility payment or disagreeing with part or all or the proposed amount.
If the ALE responds to Letter 226J, the IRS will acknowledge the ALE’s response to Letter 226J with an appropriate version of Letter 227 (a series of five different letters that, in general, acknowledge the ALE’s response to Letter 226J and describe further actions the ALE may need to take). If, after receipt of Letter 227, the ALE disagrees with the proposed or revised employer shared responsibility payment, the ALE may request a pre-assessment conference with the IRS Office of Appeals. The ALE should follow the instructions provided in Letter 227 and Publication 5, Your Appeal Rights and How To Prepare a Protest if You Don’t Agree, for requesting a conference with the IRS Office of Appeals. A conference should be requested in writing by the response date shown on Letter 227, which generally will be 30 days from the date of Letter 227.
If the ALE does not respond to either Letter 226J or Letter 227, the IRS will assess the amount of the proposed employer shared responsibility payment and issue a notice and demand for payment, Notice CP 220J.
It was the intent of the IRS to send out all letters for the 2015 filing by the end of 2017. If you have received one you should contact the vendor who prepared your filings. If you did your own filings please contact your Brown & Brown account team and they will refer you to a vendor who can assist in completing the process.
On December 7th the House voted 235-193 and the Senate voted 81-14 to approve a two-week continuing resolution through December 22 that also included a limited short-term patch for the Children’s Health Insurance Program (CHIP).
Subsequently, the House and Senate successfully avoided a government shutdown by passing a stopgap bill to keep the government funded until January 19, 2018. The bill included a short-term funding fix for CHIP by providing $2.85 billion aimed to keep the program running through March 31, 2018, but states are likely to run out of money before then. The House bill passed 231 to 188, on mostly partisan lines, and was approved in the Senate 66 to 32.
Both parties support CHIP, but they have been unable to agree on how to offset its cost. The House passed a five-year reauthorization earlier in 2017, but Democrats decried the legislation’s offsets. The Senate Finance Committee approved a bipartisan bill but never released how to pay for it. Now that lawmakers have returned to Washington a long-term CHIP reauthorization is one of the major issues they will face. On Tuesday Hillary Clinton called on Senate Republicans to bring a full extension of the Children’s Health Insurance Program to the floor for a vote.
We will keep an eye on negotiations and update everyone should an agreement be reached.
2018 IRS Guidelines