IRS puts new regulations and ACA coverage requirement on hold

The Internal Revenue Service is temporarily putting the brakes on issuing new rules while evaluating the impact of executive orders from President Trump, and scaling back enforcement of the individual mandate under the Affordable Care Act.

IRS associate chief counsel Robert Wellen told attendees at a Practising Law Institute conference this week that the agency would not be issuing any new revenue rulings or revenue procedures, at least until incoming Treasury Secretary Steven Mnuchin sets up his tax team, according to Tax Notes. Trump’s executive order required two regulations to be identified for elimination whenever any new regulation is proposed. Federal agencies are still assessing how to deal with the new requirement.

Wellen said the IRS would continue to issue routine updates such as for interest rates and mileage deduction allowances, but for the foreseeable future the IRS won’t submit any new regulations to the Federal Register or the Internal Revenue Bulletin. “Discussions continue,” he said, according to Tax Notes. “Read your newspaper. I don’t know how this is going to come out.”

Andrew Harrer/Bloomberg

The IRS plans to still issue private letter rulings and chief counsel advice memorandums, however.

The IRS press office did not provide any immediate comment. The press office, however, did provide a link to information posted Wednesday on the IRS website explaining how it will deal with the processing of tax returns as the new administration plans to repeal the Affordable Care Act. The IRS said it is currently reviewing another Trump executive order, signed on the day of his inauguration, requiring federal agencies to exercise their discretion and authority to reduce potential economic burden. The IRS is trying to determine the implications for the individual shared responsibility provision, also known as the individual mandate. It recommended taxpayers should continue to file their tax returns as they normally would. The individual shared responsibility provision requires most taxpayers and their families to have some form of health coverage or qualify for a special health coverage exemption. Tax forms include a check box where taxpayers indicate whether they have “full-year coverage.”

For this tax season, the IRS had originally made changes in its processing systems so it would automatically reject any tax returns if the taxpayer didn’t provide information on health coverage. However, as a result of Trump’s executive order directing federal agencies to exercise their authority and discretion to reduce potential burdens, the IRS has once again changed the programming on its systems so it will process tax returns, even if they don’t indicate the taxpayer has health coverage.

“Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn’t indicate their coverage status,” said the IRS.

The IRS cautioned, however, that the legislative provisions of the ACA remain in force until they are changed by Congress, and taxpayers are still required to follow the law and pay whatever they owe. The IRS will continue to process the returns as it did in previous tax seasons.

“Processing silent returns means that taxpayer returns are not systemically rejected by the IRS at the time of filing, allowing the returns to be processed and minimizing burden on taxpayers, including those expecting a refund,” said the IRS. “When the IRS has questions about a tax return, taxpayers may receive follow-up questions and correspondence at a future date, after the filing process is completed. This is similar to how we handled this in previous years, and this reflects the normal IRS post-filing compliance procedures that we follow.”