IRS, under political fire, must help overhaul U.S. healthcare

WASHINGTON Sat Jun 8, 2013 1:14am IST

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WASHINGTON (Reuters) - The U.S. Internal Revenue Service, under political fire and distracted by leadership changes, faces a big job and tight deadlines in months ahead as one of the main federal agencies implementing President Barack Obama's new healthcare law.

More than 40 tax code changes were part of 2010's Affordable Care Act (ACA), the president's signature domestic policy achievement. Some changes are already in place, but several take effect in January 2014 and the IRS is still figuring them out.

The task grew more complicated in the past month as the IRS also faced sharp criticism over agents targeting conservative political groups for scrutiny; revelations of costly conferences; and turmoil among senior personnel.

On May 15, Obama fired acting Commissioner Steve Miller after Cincinnati IRS agents applied extra scrutiny to tax-exempt status applications from groups with words such as 'Tea Party' in their names. Miller was replaced by White House budget official, Danny Werfel.

On Wednesday the IRS suspended Fred Schindler, director of oversight for implementation of the Affordable Care Act. Congressional sources said Schindler faces allegations that he accepted free gifts and food at a costly 2010 IRS conference in California.

On Thursday, J. Russell George, the U.S. Treasury Department's Inspector General for Tax Administration, whose office has played a central role in bringing allegations against the IRS, warned at a hearing of what lies ahead for the agency.

"The IRS is about to engage in one of the most comprehensive and unprecedented aspects of its activities in terms of implementing the Affordable Care Act," he said.

SEVERAL BIG JOBS

Under the health care law, the IRS is charged with collecting tax penalties from employers who fail to provide insurance coverage and individuals who fail to get coverage.

Some businesses trying to implement the healthcare law are worried that the upheaval at the agency, said Seth Perretta, a partner at law firm Crowell & Moring LLP. "You can't help but be nervous because so much has to get done before 2014," he said.

The IRS must also finish writing certain legal definitions such as what "minimum value" means for employers' health plans.

Some worker advocacy groups are concerned the IRS might rule for a minimum value that is too low, leaving workers unable to waive a bare-bone employer health plan for a federal tax credit to buy insurance on a new state exchange. Stakeholders have until July 2 to send comments to the IRS.

The IRS is also finalizing rules for "minimum essential coverage." Most Americans will face a tax penalty to IRS for failing to obtain health insurance that meets the minimum essential definition.

The IRS is also expected to issue guidance soon on new forms employers and employees must fill out for healthcare purposes.

Werfel on Thursday at a hearing sought to reassure lawmakers on the IRS's ability to meet its healthcare challenges. "We're on a path to hit the rest of our key milestones," he said.

(Editing by Kevin Drawbaugh and David Gregorio)

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