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amounts that are excepted from the
definition of wages in section 3401(a).

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Explanation of Provisions

26 CFR Part 31
[TD 9646]
RIN 1545–BL93

Authority for Voluntary Withholding on
Other Payments
Internal Revenue Service (IRS),
Treasury.
ACTION: Temporary regulations.
AGENCY:

This document contains
temporary regulations under the
Internal Revenue Code (Code) relating to
voluntary withholding agreements. The
regulations allow the Secretary to issue
guidance in the Internal Revenue
Bulletin to describe payments for which
the Secretary finds that income tax
withholding under a voluntary
withholding agreement would be
appropriate. The text of these temporary
regulations also serves as the text of the
proposed regulations set forth in the
notice of proposed rulemaking on this
subject in the Proposed Rules section in
this issue of the Federal Register. These
temporary regulations affect persons
making and persons receiving payments
for which the IRS issues subsequent
guidance authorizing the parties to enter
into voluntary withholding agreements.
DATES: Effective Date: These regulations
are effective on November 27, 2013.
Applicability date: For date of
applicability, see § 31.3402(p)–1T(d).
FOR FURTHER INFORMATION CONTACT:
Linda L. Conway-Hataloski at (202)
317–6798 (not a toll-free number).
SUPPLEMENTARY INFORMATION:

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SUMMARY:

Background
Section 3402(p) allows for voluntary
income tax withholding agreements.
Section 3402(p)(3) authorizes the
Secretary to provide regulations for
withholding from (A) remuneration for
services performed by an employee for
the employee’s employer which does
not constitute wages, and (B) from any
other payment with respect to which the
Secretary finds that withholding would
be appropriate, if the employer and
employee, or the person making and the
person receiving such other type of
payment, agree to such withholding.
Section 3402(p)(3) also authorizes the
Secretary to prescribe in regulations the
form and manner of such agreement.
Section 31.3402(p)–1 of the
Employment Tax Regulations describes
how an employer and an employee may
enter into an income tax withholding
agreement under section 3402(p) for

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These temporary regulations under
section 31.3402(p)–1T allow the
Secretary to describe other payments
subject to voluntary withholding
agreements in guidance to be published
in the Internal Revenue Bulletin (IRB).
The temporary regulations also provide
that the IRB guidance will set forth
requirements regarding the form and
duration of the voluntary withholding
agreement specific to the type of
payment from which withholding is
authorized.
Expanding the use of voluntary
withholding agreements to payments
designated by the Secretary as eligible
for voluntary withholding will permit
taxpayers to use the withholding regime
(rather than the estimated tax payment
process) to meet their tax payment
obligations on a timely basis, minimize
the risk of underpayment of taxes, and
achieve administrative simplification
for taxpayers and the IRS.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866, as
supplemented by Executive Order
13563. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations. For the applicability of the
Regulatory Flexibility Act (5 U.S.C.
chapter 6), refer to the cross-reference
notice of proposed rulemaking
published elsewhere in this Federal
Register. Pursuant to section 7805(f) of
the Code, these regulations have been
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on their
impact on small business.

Adoption of Amendments to the
Regulations
Accordingly, 26 CFR Part 31 is
amended as follows:
PART 31—EMPLOYMENT TAXES AND
COLLECTION OF INCOME TAX AT
SOURCE
Paragraph 1. The authority citation
for part 31 continues to read in part as
follows:

■

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

Par. 2. § 31.3402(p)–1T is added to
read as follows:

■

§ 31.3402(p)–1T Voluntary Withholding
Agreements (temporary).

(a)–(b) [Reserved] For further
guidance, see § 31.3402(p)–1(a) and (b).
(c) Other payments. The Secretary
may issue guidance by publication in
the Internal Revenue Bulletin (IRB)
(which will be available at
www.IRS.gov) describing other
payments for which withholding under
a voluntary withholding agreement
would be appropriate and authorizing
payors to agree to withhold income tax
on such payments if requested by the
payee. Requirements regarding the form
and duration of voluntary withholding
agreements authorized by this paragraph
(c) will be provided in the IRB guidance
issued regarding specific types of
payments.
(d) Effective/applicability date. (1)
This section applies on and after
November 27, 2013.
(2) The applicability of this section
expires on November 25, 2016.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: November 21, 2013.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2013–28526 Filed 11–27–13; 8:45 am]
BILLING CODE 4830–01–P

Drafting Information

DEPARTMENT OF THE TREASURY

The principal author of these
regulations is Linda L. ConwayHataloski, Office of Associate Chief
Counsel (Tax Exempt and Government
Entities). However, other personnel
from the IRS and Treasury Department
participated in their development.

Internal Revenue Service

List of Subjects in 26 CFR Part 31
Employment taxes, Income taxes,
Penalties, Pensions, Railroad retirement,
Reporting and recordkeeping
requirements, Social Security,
Unemployment compensation.

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26 CFR Parts 57 and 602
[TD 9643]
RIN 1545–BL20

Health Insurance Providers Fee
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:

This document contains final
regulations relating to the annual fee

SUMMARY:

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imposed on covered entities engaged in
the business of providing health
insurance for United States health risks.
This fee is imposed by section 9010 of
the Patient Protection and Affordable
Care Act, as amended. The regulations
affect persons engaged in the business of
providing health insurance for United
States health risks.
DATES: Effective date: These regulations
are effective on November 29, 2013.
Applicability date: For dates of
applicability see §§ 57.10 and 57.6302–
1.
FOR FURTHER INFORMATION CONTACT:
Charles J. Langley, Jr. at (202) 317–6855
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information
contained in these final regulations has
been reviewed and approved by the
Office of Management and Budget under
control number 1545–2249. The
collection of information in these final
regulations is in § 57.2(e)(2)(i). The
information is required to be
maintained, in the case of a controlled
group, by the designated entity and each
member of the controlled group. An
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless the
collection of information displays a
valid control number. Books or records
relating to a collection of information
must be retained as long as their
contents may become material in the
administration of any internal revenue
law. Generally, tax returns and tax
return information are confidential, as
required by section 6103.

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Background
This document adds the Health
Insurance Providers Fee Regulations to
the Code of Federal 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 did not amend the Internal
Revenue Code (Code) but contains
cross-references to specified Code
sections.
A notice of proposed rulemaking
(REG–118315–12, 78 FR 14034) was
published in the Federal Register on
March 4, 2013 (the proposed

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regulations). The Department of the
Treasury (Treasury Department) and the
IRS received over 80 written comments
from the public in response to the
proposed regulations. A public hearing
was held on June 21, 2013. After
considering the public written
comments and hearing testimony, the
proposed regulations are adopted as
final regulations by this Treasury
decision with certain changes as
described in this preamble.
Unless otherwise indicated, all other
references to subtitles, chapters,
subchapters, and sections in this
preamble are references to subtitles,
chapters, subchapters, and sections in
the Code and related regulations. All
references to ‘‘fee’’ in the final
regulations are references to the fee
imposed by section 9010.
Explanation of Provisions and
Summary of Comments
Covered Entities and Exclusions
In General
Section 9010(a) imposes an annual
fee, beginning in 2014, on each covered
entity engaged in the business of
providing health insurance. Section
9010(c) provides that a covered entity is
any entity that provides health
insurance for any United States health
risk during each year, subject to certain
exclusions. The proposed regulations
defined the term covered entity
generally to mean any entity with net
premiums written for United States
health risks during the fee year that is:
(1) a health insurance issuer within the
meaning of section 9832(b)(2); (2) a
health maintenance organization within
the meaning of section 9832(b)(3); (3) an
insurance company subject to tax under
part I or II of subchapter L, or that
would be subject to tax under part I or
II of subchapter L but for the entity
being exempt from tax under section
501(a); (4) an entity that provides health
insurance under Medicare Advantage,
Medicare Part D, or Medicaid; or (5) a
non-fully insured multiple employer
welfare arrangement (MEWA).
With respect to the first category of
covered entity, the proposed regulations
provided that a health insurance issuer
within the meaning of section 9832(b)(2)
means an insurance company, insurance
service, or insurance organization that is
required to be licensed to engage in the
business of insurance in a State and that
is subject to State law that regulates
insurance. A commenter suggested that
the final regulations eliminate any State
licensing requirement for a covered
entity because an entity may provide
health insurance for a United States
health risk and not be licensed. The

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final regulations do not adopt this
suggestion. The final regulations modify
this category of covered entity to more
closely align with section 9832(b)(2),
which provides that a health insurance
issuer must be licensed to engage in the
business of insurance in a State and not
merely required to be licensed as stated
in the proposed regulations. A health
insurance issuer within the meaning of
section 9832(b)(2) cannot lawfully
engage in the business of selling
insurance in a State unless it is licensed
to engage in the business of insurance
in that State.
Notwithstanding this licensing
limitation for the first category of
covered entity, the term covered entity
is not limited to an entity that is a health
insurance issuer within the meaning of
section 9832(b)(2). An insurance
company subject to tax under
subchapter L, an entity providing health
insurance under Medicare Advantage,
Medicare Part D, or Medicaid, or a
MEWA may also be a covered entity
under these regulations, whether or not
that entity is licensed to engage in the
business of insurance in a State.
Multiple Employer Welfare
Arrangements (MEWAs)
The proposed regulations provided
that the term covered entity includes a
MEWA within the meaning of section
3(40) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C.
chapter 18) (ERISA), to the extent that
the MEWA is not a fully-insured
MEWA, regardless of whether the
MEWA is subject to regulation under
State insurance law. In the case of a
fully-insured MEWA, the MEWA is not
a covered entity because, even though
the MEWA receives premiums, it
applies those premiums to pay an
insurance company to provide the
coverage it purchases. If the MEWA is
not fully insured, however, the MEWA
is a covered entity to the extent that it
uses the premiums it receives to provide
the health coverage rather than to pay
an insurance company to provide the
coverage.
Commenters suggested that a MEWA
not be treated as a covered entity,
stating that Federal and State law do not
support the interpretation that a MEWA
offers ‘‘insurance.’’ Commenters also
stated that an employer who
participates in a non-fully insured
MEWA should be treated the same as an
employer who offers a self-insured plan.
The final regulations do not adopt these
suggestions. By participating in a nonfully insured MEWA, a participating
employer generally is pooling its health
insurance risks, transferring those risks
to the MEWA, or both, similar to the

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way an employer pools and transfers
those risks by purchasing a group
insurance policy from an insurance
company. In a non-fully insured
MEWA, the responsibility for a claim
that a participant makes against it lies
with the MEWA, and possibly with all
of the contributing employers.
Therefore, a MEWA is different from a
self-insured plan in which
responsibility for a participant’s claim
lies solely with the claimant’s employer.
Moreover, section 514(b)(6) of ERISA
provides that a MEWA is subject to
State insurance law and regulation as an
insurance provider, unlike non-MEWA
ERISA-covered employee benefit plans
which are not subject to State insurance
law and regulation due to Federal
preemption. For example, a non-fully
insured multiemployer plan, defined
under section 3(37) of ERISA, generally
would not be subject to State insurance
law, whereas an ERISA-covered MEWA,
within the meaning of section 3(40) of
ERISA, that is not fully insured (as
defined in section 514(b)(6)(D) of
ERISA) generally would be subject to
State insurance law.
The Joint Committee on Taxation
General Explanation also indicates that
a MEWA is intended to be a covered
entity under section 9010: ‘‘A covered
entity does not include an organization
that qualifies as a VEBA [voluntary
employees’ beneficiary association]
under section 501(c)(9) that is
established by an entity other than the
employer (i.e., a union) for the purpose
of providing health care benefits. This
exclusion does not apply to multiemployer [sic] welfare arrangements
(‘MEWAs’).’’ See General Explanation of
Tax Legislation Enacted by the 111th
Congress, JCS–2–11 (March 2011) (JCT
General Explanation) at 330.
For these reasons, the Treasury
Department and the IRS have concluded
that a MEWA within the meaning of
section 3(40) of ERISA is an entity that
provides health insurance for purposes
of section 9010 to the extent that the
MEWA is not a fully-insured MEWA
and regardless of whether the MEWA is
subject to regulation under State
insurance law. In addition, such a
MEWA is not eligible for the exception
from the fee under section 9010(c)(2)(A)
for self-insured employers.
The proposed regulations excluded a
MEWA that is exempt from Department
of Labor (DOL) reporting requirements
under 29 CFR 2520.101–2(c)(2)(ii)(B).
This section of the DOL regulations
generally excludes a MEWA that
provides coverage to the employees of
two or more employers due to a change
in control of businesses (such as a
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purpose other than to avoid the
reporting requirements and does not
extend beyond a limited time. A
commenter suggested that the final
regulations also exclude a MEWA that is
exempt from reporting under 29 CFR
2520.101–2(c)(2)(ii)(A), which generally
applies to an entity that would not be
a MEWA but for the fact that it provides
coverage to two or more trades or
businesses that share a common control
interest of at least 25 percent (applying
principles similar to the principles of
section 414(c)) at any time during the
plan year. The commenter also
suggested that the final regulations
exclude a MEWA that is exempt from
reporting under 29 CFR 2520.101–
2(c)(2)(ii)(C), which generally applies to
an entity that would not be a MEWA but
for the fact that it provides coverage to
persons who are not employees or
former employees of the plan sponsor
(such as non-employee members of the
board of directors or independent
contractors), if coverage of such persons
does not exceed one percent of the total
number of employees or former
employees covered by the arrangement,
determined as of the last day of the year
to be reported, or determined as of the
60th day following the date the MEWA
began operating in a manner such that
a filing is required pursuant to 29 CFR
2520.101–2(e)(2) or (3).
The final regulations adopt these
suggestions and follow the DOL rules
excepting these entities from the DOL
reporting requirements under 29 CFR
2520.101–2 governing MEWAs. The
reasons supporting the DOL’s filing
exemption also justify exempting these
arrangements from section 9010 as more
akin to health coverage provided by a
self-insured employer. Similar to the
filing exemption for certain temporary
MEWAs, these two filing exemptions
are intended to address situations in
which the status as a MEWA derives not
from the design of the arrangement but
instead from the limited participation
by individuals who are not the
employees of a single employer or from
a desire to have a single plan for entities
sharing substantial common ownership
(though not sufficient to be treated as a
single employer under the controlled
group rules). Accordingly, a MEWA will
not be considered a covered entity if it
satisfies the requirements of 29 CFR
2520.101–2(c)(2)(ii)(A), (B), or (C) for
the plan year ending with or within the
section 9010 data year.
The proposed regulations provided
that, solely for purposes of section 9010,
an Entity Claiming Exception (ECE)1 is
1 An ECE is defined in 29 CFR 2520.101–2(b) as
an entity that claims it is not a MEWA on the basis

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subject to the same regime addressing
MEWAs. Commenters requested that an
ECE not categorically be treated as a
MEWA for purposes of section 9010.
Commenters pointed out that some
ECEs are multiemployer plans and
coverage during the period of their
status as an ECE would not be
consistent with this status. In addition,
as a practical matter, an entity’s status
as an ECE is only relevant for reporting
during a limited period of time. For
these reasons, the final regulations
adopt this suggestion so that whether an
entity is or is not an ECE is not relevant
to whether the entity is subject to
section 9010.
Voluntary Employees’ Beneficiary
Associations (VEBAs)
In accordance with section
9010(c)(2)(D), the proposed regulations
explicitly excluded any VEBA that is
established by an entity other than an
employer or employers for the purpose
of providing health care benefits.
Further, the preamble to the proposed
regulations stated that, if an employer
provides self-insured employee health
benefits through a VEBA, the VEBA is
not a covered entity because the
exclusion for employers with selfinsured arrangements under section
9010(c)(2)(A) applies. The preamble also
stated that, if a VEBA purchases health
insurance to cover the beneficiaries of
the VEBA, the VEBA is not a covered
entity because the issuer providing the
health insurance that the VEBA
purchases is the covered entity subject
to the fee rather than the VEBA. The
preamble stated that the Treasury
Department and the IRS were not aware
of any VEBAs that would be covered
entities under the proposed regulations
and invited comments on the types of
VEBAs, if any, that do not fall within
the exclusions and therefore would be
covered entities.
A commenter requested that the final
regulations clarify that a VEBA
established by a union qualifies for the
section 9010(c)(2)(D) exclusion.
Commenters also asked for clarification
that the section 9010(c)(2)(D) exclusion
applies to any VEBA established by a
joint board of trustees in the case of a
multiemployer plan within the meaning
of section 3(37) of ERISA. The final
that the entity is established or maintained
pursuant to one or more agreements that the
Secretary of Labor finds to be collective bargaining
agreements within the meaning of section
3(40)(A)(i) of ERISA and 29 CFR 2510.3–40. We also
note that ERISA section 501(b) imposes criminal
penalties on any person who is convicted of
violating the prohibition in ERISA section 519
against making false statements or representations
of fact in connection with the marketing or sale of
a MEWA.

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regulations adopt these suggestions with
respect to plans established by unions
and joint boards of trustees because the
union or joint board of trustees is an
entity other than the employer or
employers. Thus, in the case of a
multiemployer plan that maintains a
VEBA, neither the plan nor the VEBA is
a covered entity.
Commenters also requested that the
final regulations clarify the application
of the section 9010(c)(2)(D) exclusion to
a VEBA that is part of a single-employer
plan established pursuant to a collective
bargaining agreement and having a joint
board of trustees. As in the case of a
multiemployer plan, a VEBA that is, for
example, part of a single-employer plan
established by a joint board of trustees
pursuant to section 302(c)(5) of the
Labor Management Relations Act of
1947, is considered to be established by
an entity other than the employer or
employers and so is eligible for the
section 9010(c)(2)(D) exclusion.
The preamble to the proposed
regulations stated that, if a MEWA
provides health benefits through a
VEBA, the VEBA is not a covered entity.
A commenter asked whether the section
9010(c)(2)(D) exclusion applies to a nonfully insured MEWA that is also a
VEBA. The section 9010(c)(2)(D)
exclusion does not apply to an entity
that is both a non-fully insured MEWA
and a VEBA because, for section 9010
purposes, the entity has been
established by the employers whose
employees participate in the MEWA,
and the section 9010(c)(2)(D) exclusion
does not apply to an employerestablished VEBA. Additionally, the
entity does not qualify as a self-insured
arrangement that is eligible for the
exclusion for self-insured employers
under section 9010(c)(2)(A) because, as
previously described in the section of
this preamble titled ‘‘Multiple Employer
Welfare Arrangements (MEWAs),’’ a
non-fully insured MEWA is not a selfinsured employer. Accordingly, a
MEWA that is also a VEBA is a covered
entity.
Section 9010(c)(2)(C) Exclusion
In accordance with section
9010(c)(2)(C)(i)–(iii), the proposed
regulations excluded any entity (i) that
is incorporated as a nonprofit
corporation under State law; (ii) no part
of the net earnings of which inures to
the benefit of any private shareholder or
individual, no substantial part of the
activities of which is carrying on
propaganda, or otherwise attempting to,
influence legislation (except as provided
in section 501(h)), and that does not
participate in, or intervene in (including
the publishing or distributing of

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statements), any political campaign on
behalf of (or in opposition to) any
candidate for public office; and (iii) that
receives more than 80 percent of its
gross revenues from government
programs that target low-income,
elderly, or disabled populations under
titles XVIII, XIX, and XXI of the Social
Security Act (which include Medicare,
Medicaid, the Children’s Health
Insurance Plan (CHIP), and dual eligible
plans).
Commenters suggested that the final
regulations exclude a for-profit entity
that meets the section 9010(c)(2)(C)(ii)
and (iii) requirements. According to the
commenters, imposing the fee on these
for-profit entities will effectively reduce
benefits provided under Medicare and
Medicaid, require the entities to pass
the cost of the fee back to the
government, and competitively
disadvantage these entities in favor of
excluded nonprofit corporations.
Another commenter suggested that the
final regulations permit an entity that is
treated as a nonprofit entity under State
law to satisfy the section 9010(c)(2)(C)(i)
requirement even if it is not
incorporated as a nonprofit corporation.
Commenters also suggested that the
final regulations exclude an entity that
meets the section 9010(c)(2)(C)(i) and
(ii) requirements and that targets lowincome, elderly, or disabled populations
described in section 9010(c)(2)(C)(iii),
but whose income is not derived from
title XVIII, XIX, or XXI programs, but
rather from similar types of programs
that do not come under those titles. The
final regulations do not adopt these
suggested changes. The statutory
language sets forth specific
requirements for an entity to qualify for
the exception, including that the entity
be a nonprofit corporation and that the
entity receive the required portion of its
gross income from the enumerated
Federal government programs.
Commenters suggested that the final
regulations interpret the requirement set
forth in section 9010(c)(2)(C)(iii), that
the entity receive more than 80 percent
of its gross revenues from enumerated
Federal government programs to qualify
for that exception, to apply only to
revenues that relate to net premiums
written. Because gross revenues include
all revenues of the covered entity
without taking into account their
source, the final regulations do not
adopt this suggestion.
As explained in the preamble to the
proposed regulations, an entity is not
required to be exempt from tax under
section 501(a) to qualify for the section
9010(c)(2)(C) exclusion. However,
because the provisions of section
9010(c)(2)(C)(ii) relating to private

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inurement, lobbying, and political
campaign activity are the same as those
provisions applicable to organizations
described in section 501(c)(3), for
purposes of applying these
requirements, the proposed regulations
adopted the standards set forth under
section 501(c)(3) and the related
regulations. Commenters generally
agreed with this approach, which is
adopted in the final regulations.
One commenter suggested that the
final regulations incorporate a ‘‘safe
harbor’’ under which a transaction will
not violate the private inurement
prohibition under section
9010(c)(2)(C)(ii) if either the transaction
complies with applicable State
insurance laws governing the
reasonableness of transactions between
a health insurance provider and its
affiliates or the transaction is approved
in accordance with certain procedures
set forth in the regulations under section
4958 (relating to taxes on excess benefit
transactions). The final regulations do
not adopt this suggestion. The private
inurement prohibition under section
501(c)(3) contains no exception for
transactions that comply with State
insurance laws or other applicable State
or Federal laws. Similarly, while most
situations that constitute inurement will
also violate the general rules of section
4958, the two standards are not the
same. See § 1.501(c)(3)–1(f)(2) of the
Income Tax Regulations and § 53.4958–
8(a) of the Foundation and Similar
Excise Tax Regulations.
Agencies and Instrumentalities as
Governmental Entities
Section 9010(c)(2)(B) excludes any
governmental entity from the definition
of covered entity. In defining the term
governmental entity, the proposed
regulations did not include
instrumentalities. The preamble to the
proposed regulations requested
comments on the types of
instrumentalities, if any, that would be
considered covered entities under the
general definition of covered entity and
the extent to which those entities would
qualify for other exclusions consistent
with the statute.
Commenters suggested that the final
regulations define governmental entity
to include an instrumentality, citing
statutory language that excludes ‘‘any’’
governmental entity and arguing that, in
certain instances, an instrumentality
that provides health insurance performs
a governmental function and therefore
should be excluded. For those reasons,
the final regulations adopt this
suggestion and define governmental
entity to include any agency or
instrumentality of the United States, a

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State, a political subdivision of a State,
an Indian tribal government, or a
subdivision of an Indian tribal
government.
The final regulations also revise the
governmental entity definition to delete
the specific provision relating to any
public agency that is created by a State
or political subdivision thereof and
contracts with the State to administer
State Medicaid benefits through local
providers or health maintenance
organizations (HMOs). The Treasury
Department and the IRS intend that
such a public agency would qualify as
an agency or instrumentality of a State
or political subdivision thereof for
purposes of the governmental entity
definition. See JCT General Explanation
at 330.
Determinations of whether an entity is
an agency or instrumentality have
typically been analyzed on a facts and
circumstances basis. In determining
whether an entity is an agency or
instrumentality, courts have applied a
test similar to the six-factor test in
Revenue Ruling 57–128 (1957–1 CB
311), which generally provides guidance
on whether an entity is an
instrumentality for purposes of the
exemption from employment taxes
under sections 3121(b)(7) and
3306(c)(7). See, for example, Bernini v.
Federal Reserve Bank of St. Louis,
Eighth District, 420 F.Supp. 2d 1021
(E.D. Mo. 2005) and Rose v. Long Island
Railroad Pension Plan, 828 F.2d 910,
918 (2d Cir. 1987), cert. denied, 485 U.S.
936 (1988). For further background
information relating to agency or
instrumentality determinations, see the
‘‘Background’’ section of the preamble
in the section 414(d) draft general
regulations in the Appendix to the
ANPRM (REG–157714–06) relating to
governmental plan determinations, 76
FR 69172 (November 8, 2011).
Applying principles similar to those
described in Revenue Ruling 57–128, in
determining whether an entity is an
agency or instrumentality for purposes
of section 9010, factors taken into
consideration include whether the
entity is used for a governmental
purpose and performs a governmental
function. The Treasury Department and
the IRS question whether providing
health insurance on a commercial
market in direct competition with nongovernmental commercial entities is a
governmental function, absent
particular circumstances. Accordingly,
an entity may jeopardize its status as an
agency or instrumentality if it engages
in the business of providing insurance
on the commercial market on a
continuing and regular basis.

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Further, section 9010(i) authorizes the
IRS to prescribe such regulations as are
necessary or appropriate to prevent
avoidance of the purposes of section
9010, including inappropriate actions
taken to qualify as an excluded entity
under section 9010(c)(2). If the Treasury
Department and the IRS conclude that
agencies or instrumentalities have
entered the commercial market in
competition with commercial entities in
a manner that makes it inappropriate to
apply the governmental entity exclusion
under section 9010(c)(2)(B), the
Treasury Department and the IRS may
reconsider the exclusion of agencies and
instrumentalities and exercise the
authority under section 9010(i) to
address particular concerns in this area.
Educational Institutions
A commenter suggested that the final
regulations exclude educational
institutions from the definition of
covered entity. The final regulations do
not adopt this request. The statute does
not exclude educational institutions
from the definition of covered entity,
but as noted in the preamble to the
proposed regulations, other exceptions
may apply. For example, if an
educational institution uses the
premiums it receives from students to
purchase insurance from a separate,
unrelated issuer, the issuer, and not the
educational institution, will be the
covered entity for purposes of section
9010. If an educational institution
provides students with health coverage
through a self-insured arrangement, the
exclusion for self-insuring employers
does not apply because the institution is
not providing health coverage as an
employer. However, other exclusions
may apply. For example, the exclusion
for governmental entities applies if an
educational institution is a whollyowned instrumentality of a State. In
addition, although an educational
institution that is a covered entity must
report to the IRS its net premiums
written, it will not be subject to the fee
unless the institution (or its controlled
group that is treated as a single covered
entity) has net premiums written for
United States health risks of more than
$25 million pursuant to section
9010(b)(2)(A).
Other Entities
Commenters suggested that the final
regulations exclude certain section
501(c)(5) labor organizations that
provide health coverage under the
Federal Employees Health Benefit Plan
(FEHBP) on the basis that providing
health coverage is part of their exempt
function as a section 501(c)(5) entity.
The commenters asserted that, although

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a section 501(c)(5) entity is not
organized as a VEBA, it operates like a
VEBA because of the various FEHBP
rules (including, for example, on use of
reserves) and therefore should be treated
as a VEBA for section 9010 purposes.
The final regulations do not adopt this
suggestion. Congress identified specific
exclusions from section 9010 and there
is no statutory exclusion for section
501(c)(5) entities.
Another commenter suggested that
the final regulations exclude high risk
pools under section 1101 of the ACA,
which will expire on December 31,
2013. Section 9010(c)(1) defines a
covered entity to mean any entity that
provides health insurance for a United
States health risk in the year that the fee
is due. The first year the fee is due is
2014. Therefore, for the first fee year, an
entity is not a covered entity unless it
provides health insurance for United
States health risks in 2014. Because high
risk pools will expire on December 31,
2013, they will not provide health
insurance in 2014 and will not be
covered entities. In the event a high risk
pool provides health insurance for
United States health risks in 2014, it
will be a covered entity if it does not
meet one of the exclusions described in
section 9010(c)(2).
A commenter requested that the final
regulations provide an exclusion for an
entity that is selling or otherwise failing
to continue the majority of its health
insurance business by December 31,
2013, but is contractually required to
provide some residual health insurance.
The entity’s fee liability for 2014 based
on the 2013 data year will be
significantly larger than the total
amount of net premiums written that
the entity will collect in 2014. The final
regulations do not adopt this request
because it is inconsistent with the
statute, which bases the fee liability on
net premiums written during the data
year.
The proposed regulations defined the
term covered entity to include an HMO,
as defined in section 9832(b)(3). A
commenter requested that the final
regulations exclude an HMO that is a
tax-exempt organization described in
section 501(c)(3) or (4) on the basis that
Congress did not intend to subject a taxexempt HMO to the fee. The final
regulations do not adopt this suggestion.
Section 9010(c)(2) describes the entities
that are excluded from the definition of
covered entity. While section
9010(c)(2)(D) excludes certain types of
VEBAs described in section 501(c)(9),
there is no similar exclusion for an
entity that qualifies as a tax-exempt
organization under either section
501(c)(3) or (4). However, such a tax-

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exempt organization would be eligible
for the partial exclusion under section
9010(b)(2)(B).

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Disregarded Entities
Two commenters requested further
guidance on how to treat disregarded
entities for purposes of section 9010.
One commenter suggested that the final
regulations specifically state that the
general rules for disregarded entities
apply. A second commenter suggested
that, solely for section 9010 purposes, a
disregarded entity should always be
regarded as a corporation. The final
regulations do not adopt any special
entity classification rules. Thus, if a
covered entity is an eligible entity under
§ 301.7701–3(a) of the Procedure and
Administration Regulations, has a single
owner, and does not elect to be
classified as a corporation under
§ 301.7701–3(c), then the covered entity
is disregarded as an entity separate from
its owner and its activities are treated in
the same manner as a branch or division
of its owner pursuant to § 301.7701–
2(a). Additionally, although § 301.7701–
2(c)(2)(v) treats a disregarded entity as a
corporation for certain enumerated
excise taxes, the fee under section 9010
is not among the enumerated excise
taxes. However, an insurance company
is a corporation under § 301.7701–
2(b)(4) and cannot be disregarded as an
entity separate from its owner. See also
Rev. Rul. 83–132 (1983–2 CB 270).
Under sections 816(a) and 831(c), a
company is an insurance company if
more than half of its business during the
taxable year is the issuing of insurance
or annuity contracts or the reinsuring of
risks underwritten by insurance
companies. Therefore, if the covered
entity is an insurance company under
sections 816(a) and 831(c), then it is a
corporation and cannot be disregarded
as an entity separate from its owner.
Controlled Groups
In accordance with section 9010(c)(3),
the proposed regulations treated a
controlled group as a single covered
entity, and defined a controlled group as
a group of two or more persons,
including at least one person that is a
covered entity, that are treated as a
single employer under section 52(a),
52(b), 414(m), or 414(o).
Section 52(a) and (b) provide rules
that treat all organizations that are
members of a controlled group as a
single entity. Generally, section 52(a)
provides that the term controlled group
of corporations has the meaning given
to such term by section 1563(a), except
that ‘‘more than 50 percent’’ is
substituted for ‘‘at least 80 percent’’
each place it appears in section

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1563(a)(1) and the determination is
made without regard to section
1563(a)(4) (relating to special rules for
certain insurance companies) and
1563(e)(3)(C) (relating to attribution
rules for ownership interest held under
a trust described in section 401(a) that
is exempt from tax under section 501).
Section 52(b) provides similar rules for
determining whether trades or
businesses (whether or not
incorporated) are under common
control. Section 414(m) requires that all
members of an affiliated service group
be treated as a single organization, and
section 414(o) provides authority for
additional rules that may be necessary
to prevent the avoidance of certain
requirements related to employee
benefits.
A commenter suggested that the final
regulations clarify the circumstances
under which nonprofit organizations are
included in controlled groups under
section 9010(c)(3). The Treasury
Department and the IRS are considering
whether further guidance is needed
under section 52(a) or (b) to address
either organizations exempt from tax
under section 501(a) or nonprofit
organizations that, although not exempt
from tax under section 501(a), do not
have members or shareholders that are
entitled to receive distributions of the
organization’s income or assets
(including upon dissolution) or that
otherwise retain equity interests similar
to those generally held by owners of forprofit entities. Until further guidance is
issued, those two types of organizations
may either rely on a reasonable, goodfaith application of section 52(a) and (b)
(taking into account the reasons for
which the controlled group rules are
incorporated into section 9010) or apply
the rules set forth in § 1.414(c)–5(a)
through (d) (but substituting ‘‘more than
50 percent’’ in place of ‘‘at least 80
percent’’ each place it appears in
§ 1.414(c)–(5).
Health Insurance
In General
Section 9010 does not define health
insurance, providing in section
9010(h)(3) only that health insurance
does not include coverage only for
accident, or disability income
insurance, or any combination thereof
as described in section 9832(c)(1)(A);
coverage only for a specified disease or
illness and hospital indemnity or other
fixed indemnity insurance as described
in section 9832(c)(3); insurance for longterm care; or Medicare supplemental
health insurance (as defined in section
1882(g)(1) of the Social Security Act).
The proposed regulations generally

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defined the term health insurance,
subject to certain exclusions, by
reference to section 9832(b)(1)(A) to
mean benefits consisting of medical care
(provided directly, through insurance or
reimbursement, or otherwise) under any
hospital or medical service policy or
certificate, hospital or medical service
plan contract, or HMO contract offered
by a health insurance issuer. The final
regulations clarify that these benefits
constitute health insurance when they
are offered by any type of covered
entity, and not solely by a health
insurance issuer within the meaning of
section 9832(b)(2).
Stop-Loss Coverage
Several comments requested that the
final regulations clarify the treatment of
stop-loss coverage. Employers that selfinsure their employees’ health benefits
frequently purchase stop-loss coverage
to mitigate risk. The stop-loss provider
assumes the risk of claims above a
certain agreed-upon threshold known as
the attachment point. Some commenters
suggested including stop-loss coverage
in the definition of health insurance for
purposes of section 9010, whereas other
commenters suggested excluding it. The
DOL, the Department of Health and
Human Services (HHS), and the
Treasury Department are concerned that
more employers in small group markets
with healthier employees may pursue
self-insured arrangements with stop-loss
arrangements that have low attachment
points as a functionally equivalent
alternative to an insured group health
plan. As a result, the three agencies
issued a Request for Information (RFI)
regarding such practices, with a focus
on the prevalence and consequences of
stop-loss coverage at low attachment
points. See 77 FR 25788 (May 1, 2012).
Because the scope of stop-loss coverage
that may constitute health insurance, if
any, has not been determined, the final
regulations do not expressly include
stop-loss coverage in the definition of
health insurance. Accordingly, section
9010 will not apply to stop-loss
coverage until such time and only to the
extent that future guidance addresses
the issue of whether, and if so under
what circumstances, stop-loss coverage
constitutes health insurance.
Limited Scope Dental and Vision
Benefits
The proposed regulations defined
health insurance to include limited
scope dental and vision benefits under
section 9832(c)(2)(A). Commenters
suggested revising the definition of
health insurance to exclude limited
scope dental and vision benefits
(sometimes referred to as stand-alone

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dental and vision benefits).
Alternatively, commenters suggested
including only those dental and vision
policies that can be offered on an
Exchange, such as pediatric dental
plans. The final regulations do not
adopt these suggestions. The JCT
General Explanation indicates that
dental and vision benefits are intended
to be included as health insurance for
purposes of section 9010 and the
comments received do not compel a
different conclusion. See JCT General
Explanation at 331. Accordingly, the
final regulations retain the rule in the
proposed regulations and provide that
limited scope dental and vision benefits,
including arrangements that may be
sold on an Exchange (for example,
pediatric dental coverage), are health
insurance for purposes of section 9010.

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Coverage Funded by Targeted
Government Programs
Commenters suggested that the final
regulations exclude coverage funded by
government programs that target lowincome, elderly, or disabled populations
under titles XVIII, XIX, and XXI of the
Social Security Act (which include
Medicare, Medicaid, CHIP, and dual
eligible plans) from the definition of
health insurance or exclude revenues
received from these government
programs from net premiums written.
The final regulations do not adopt these
suggestions. A full exclusion for these
types of coverage or associated revenues
would not be consistent with section
9010. Section 9010(c)(2)(C) excludes a
limited subset of entities that provide
coverage funded by these governmental
programs, which indicates that entities
providing such coverage are otherwise
providing health insurance that is
subject to the fee. The JCT General
Explanation further indicates that
Medicare and Medicaid coverage is
health insurance that is subject to the
fee. Thus, an entity providing this type
of coverage is a covered entity unless it
qualifies for a statutory exclusion from
the definition of a covered entity, such
as the section 9010(c)(2)(C) exclusion.
See JCT General Explanation at 330 and
331.
Indemnity Reinsurance
The proposed regulations provided
that, solely for purposes of section 9010,
health insurance does not include
indemnity reinsurance, defined as an
agreement between two or more
insurance companies under which the
reinsuring company agrees to accept,
and to indemnify the issuing company
for, all or part of the risk of loss under
policies specified in the agreement and
the issuing company retains its liability

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to, and its contractual relationship with,
the individuals whose health risks are
insured under the policies specified in
the agreement. A commenter suggested
that the final regulations clarify that the
definition of indemnity reinsurance
extends to reinsurance obtained by
HMOs. The final regulations adopt this
suggestion and clarify that the issuer of
the policies specified in the indemnity
reinsurance agreement may be any
covered entity.
Commenters asked about the
treatment of a ‘‘carve-out’’ arrangement
or similar types of arrangement in
which one insurer accepts responsibility
for all or part of the health risk within
a defined category of medical benefits
that another insurer is obligated to
provide. For example, a full-service
insurer that includes dental benefits as
part of its health insurance plan may
contract with a dental insurer to provide
those benefits to plan members, but still
retain an exclusive contractual
relationship with plan members and
liability for benefits. The commenters
expressed concern that premiums
received by both the full-service insurer
and the secondary services insurer for
these benefits could be subject to the
fee. Although the final regulations do
not expressly address a carve-out
arrangement, the secondary services
insurer in such an arrangement is not
providing health insurance for purposes
of section 9010 to the extent the
arrangement meets the definition of
indemnity reinsurance.
Subcapitation
A commenter requested that the final
regulations clarify the treatment of a
subcapitation arrangement. Under a
typical subcapitation arrangement, a
Medicaid plan provider contracts with a
separate service provider to provide
certain services to the Medicaid plan
participants and share some of the
provider’s risk. A Medicaid plan
provider that enters into a subcapitation
arrangement remains fully liable on the
underlying plans, and any amounts paid
to compensate the service provider for
the subcapitation arrangement are not
considered premiums for State
regulatory purposes or reported as such.
Therefore, although the final regulations
do not directly address a subcapitation
arrangement, amounts paid to a service
provider under such an arrangement are
not included in net premiums written
for health insurance to the extent they
are not treated as premiums for State
regulatory and reporting purposes.
Employee Assistance Programs
Commenters requested that the final
regulations exclude benefits under an

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employee assistance program (EAP)
from the definition of health insurance,
including an EAP that is treated as
insurance in California or Nevada.
Generally, an EAP does not exhibit the
risk pooling and risk transferring
characteristics of insurance, but certain
States regulate benefits under an EAP as
insurance in some situations. The
Treasury Department, DOL, and HHS
currently are considering guidance that
would treat benefits under an EAP as an
excepted benefit under section 9832(c)
(as well as corresponding provisions of
ERISA and the Public Health Service
Act (42 U.S.C. chapter 6A) (PHSA)), and
provided in Q&A 9 of Notice 2013–54
(2013–40 IRB 287; September 30, 2013)
that until that separate rulemaking is
finalized in other guidance, and through
at least 2014, a taxpayer may treat an
EAP that does not provide significant
benefits in the nature of medical care or
treatment as constituting excepted
benefits. Whether and under what
conditions an EAP provides health
insurance coverage has been a
longstanding issue that this other
guidance is intended to address by
defining an EAP and setting forth the
conditions under which the benefits
under an EAP will be treated as
excepted benefits.
Because the extent to which benefits
under an EAP may constitute health
insurance has not been determined, the
final regulations do not expressly define
health insurance to include benefits
under an EAP. If an EAP provides
significant benefits in the nature of
medical care or treatment, those benefits
would meet the definition of health
insurance for section 9010 purposes.
Otherwise, benefits under an EAP will
not be treated as health insurance for
section 9010 purposes until such time
and only to the extent that the Treasury
Department, DOL and HHS determine
such benefits do not qualify as an
excepted benefit.
Commenters also requested that the
final regulations exclude coverage under
a disease management program or a
wellness program from the definition of
health insurance. The final regulations
do not specifically address the treatment
of a stand-alone wellness plan or
disease management program. These
programs generally do not exhibit the
risk shifting and risk distribution
characteristics of insurance.
Additionally, a program of this type
may be contained within an EAP that
satisfies the standard in Q&A 9 of Notice
2013–54 for being an excepted benefit
(taking into account the benefits
provided under the programs in
determining whether the EAP provides
substantial benefits in the nature of

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medical treatment). For these reasons,
the final regulations do not expressly
define health insurance to include
coverage under a disease management
program or wellness program. If these
programs provide significant benefits in
the nature of medical care or treatment,
those benefits would meet the definition
of health insurance for section 9010
purposes. Otherwise, coverage under
these programs will not be treated as
health insurance for section 9010
purposes until such time and only to the
extent that the three agencies determine
these benefits do not qualify as an
excepted benefit.

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Long-Term Care
The proposed regulations excluded
from the definition of health insurance
any benefits for long-term care, nursing
home care, home health care,
community-based care, or any
combination thereof, within the
meaning of section 9832(c)(2)(B), and
such other similar, limited benefits to
the extent such benefits are specified in
regulations under section 9832(c)(2)(C).
A commenter questioned whether this
exclusion applies to Medicaid managed
long-term care premiums, such as those
provided to covered entities that may
participate in State Medicaid managed
long-term care programs. To the extent
Medicaid plan providers can separately
identify premiums received for longterm care, these amounts are not for
health insurance and are not included
in net premiums written.
Medicare Advantage and Medicare Part
D Plans
Some employers or unions provide
Medicare Advantage or Medicare Part D
benefits in connection with an
Employer Group Waiver Plan (EGWP)
for employees and retirees who are
Medicare beneficiaries. According to
commenters, an employer or union can
provide these benefits on a self-insured
basis. Commenters requested that the
final regulations clarify whether a union
or employer that provides Medicare
Advantage and Medicare part D benefits
under an EGWP or similar arrangement
is a covered entity subject to section
9010 with respect to premiums received
for the coverage. No change was made
in the final regulations to specifically
address this issue. However, while the
benefits provided by these arrangements
may constitute health insurance within
the meaning of section 9010, an
employer or union that provides
benefits under an EGWP or similar
arrangement is not a covered entity to
the extent the arrangement is eligible for
the self-insuring employer exception
under section 9010(c)(2)(A).

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Medicare Cost Contract Plans
A commenter asked that the final
regulations clarify how section 9010
applies to the Medicare cost contract
portion of an entity’s business. A
Medicare cost contract plan is a type of
plan established by section 1876 of Title
XVIII of the Social Security Act. Cost
contract plans are paid based on the
reasonable costs incurred by delivering
Medicare-covered services to plan
members. Although the final regulations
do not specifically address the treatment
of a Medicare cost contract plan,
benefits under a Medicare cost contract
plan are health insurance for section
9010 purposes if they meet the general
definition of health insurance and do
not qualify for a specific exclusion.
Section 9010(b)(2)(B) Partial Exclusion
After applying section 9010(b)(2)(A)
to determine the amount of net
premiums written for health insurance
of United States health risks that are
taken into account, the proposed
regulations excluded under section
9010(b)(2)(B) 50 percent of the
remaining net premiums written for
health insurance of United States health
risks that are attributable to the
activities (other than activities of an
unrelated trade or business as defined in
section 513) of any covered entity
qualifying under section 501(c)(3), (4),
(26), or (29) and exempt from tax under
section 501(a). Commenters requested
that the final regulations apply this
exclusion to a for-profit hospital health
plan (HHP) that is owned and controlled
by an entity exempt from tax under
section 501(a) and further described in
section 501(c). According to the
commenters, an HHP functions like a
nonprofit entity because it reinvests
whatever profits it produces each year
in its parent owner’s charitable mission.
The final regulations do not adopt this
request. By statute, the partial exclusion
only applies to a covered entity that is
a section 501(c)(3), (4), (26), or (29)
entity, and even then only with respect
to premium revenue from its exempt
activities.
One commenter suggested that the
final regulations require any covered
entity claiming the partial exclusion to
submit an IRS determination letter
recognizing it as tax-exempt under
section 501(c)(3), (4), (26), or (29).
Another commenter objected to this
suggestion on the basis that the Code
does not require all tax-exempt entities
to apply to the IRS for recognition of
tax-exempt status. The final regulations
do not impose any additional
requirements on entities claiming the
partial exclusion. For purposes of

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section 9010, whether an entity qualifies
as exempt from Federal income tax
under section 501(a) as an organization
described in section 501(c)(3), (4), (26),
or (29) will be determined under the
Code provisions applicable to those
organizations. To provide greater
certainty, the final regulations provide
that an entity is eligible for the section
9010(b)(2)(B) partial exclusion if it
meets the requirements for that
exclusion as of December 31st of the
data year.
Reporting and Penalties
Section 9010(g)(1) requires each
covered entity to report to the IRS its net
premiums written for health insurance
for United States health risks during the
data year. The proposed regulations
required that this information be
reported on Form 8963, ‘‘Report of
Health Insurance Provider Information.’’
Commenters suggested that the final
regulations require an entity that
qualifies for an exclusion from the
definition of covered entity to report its
net premiums written to claim the
exclusion. The final regulations do not
adopt this suggestion. The required
reporting under section 9010(g)(1) only
applies to covered entities.
A commenter requested that each
covered entity be required to report
even if it receives no more than $25
million in net premiums written and
therefore is not liable for the fee. The
proposed regulations already imposed
this requirement in accordance with the
statute. The final regulations retain this
requirement.
Section 9010(g)(2) imposes a penalty
for failing to timely submit a report
containing the required information
unless the covered entity can show that
the failure is due to reasonable cause.
Section 9010(g)(3) imposes an accuracyrelated penalty for any understatement
of a covered entity’s net premiums
written. Commenters requested that the
final regulations provide a reasonable
cause exception for the accuracy-related
penalty similar to the reasonable cause
exception for the failure to report
penalty. Unlike section 9010(g)(2),
section 9010(g)(3) does not contain a
reasonable cause exception. Therefore,
the final regulations do not create a
reasonable cause exception for the
accuracy-related penalty. However, the
final regulations require a covered entity
to submit a corrected Form 8963 during
the error correction period if the entity
believes there are any errors in the
preliminary fee calculation. The
corrected Form 8963 will replace the
original Form 8963 for all purposes,
including for the purpose of
determining whether an accuracy-

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related penalty applies, except that a
covered entity remains subject to the
failure to report penalty if it fails to
timely submit the original Form 8963.
The proposed regulations clarified
that the failure to report penalty and the
accuracy-related penalty apply in
addition to the fee. The final regulations
retain this clarification and further
clarify that a covered entity may be
liable for both penalties.
A commenter suggested that the final
regulations create a safe harbor for the
failure to report penalty imposed by
section 9010(g)(2) and waive or reduce
the penalty for small businesses, or
exclude small businesses altogether
from the definition of covered entity so
that the penalty does not apply. The
final regulations do not adopt this
suggestion. The statute does not exclude
small businesses from either the
definition of covered entity or the
requirement to report. However, certain
statutory provisions will mitigate the
impact on small business. Although a
small business that is a covered entity
must report its net premiums written, it
will not be subject to the fee if its net
premiums written are $25 million or
less pursuant to section 9010(b)(2)(A).
Further, section 9010(g)(2) allows the
IRS to waive the failure to report
penalty if there is reasonable cause for
such failure. The IRS will determine
whether reasonable cause exists for a
covered entity’s failure to report based
on the facts and circumstances.
Commenters requested that the IRS
wait to assess the accuracy-related
penalty until the error correction
process is complete. Under section
9010(g)(3)(A), the amount of the
accuracy-related penalty is equal to the
excess of the amount of the covered
entity’s fee determined in the absence of
the understatement (that is, the correct
fee amount) over the amount of the fee
determined based on the
understatement (that is, the amount of
the fee based on understated reporting).
Because the fee is allocated among
covered entities based on each entity’s
net premiums written, the IRS must
determine the correct amount of net
premiums written for all covered
entities before it can determine the
correct fee amount for a covered entity.
Therefore, the IRS cannot compute and
assess any accuracy-related penalties
until the conclusion of the error
correction process when the IRS
computes the final bills. As stated
earlier in this preamble, if the covered
entity timely submits a corrected Form
8963 during the error correction period,
the corrected Form 8963 will replace the
original Form 8963 for the purpose of

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determining whether an accuracyrelated penalty applies.

liability, the final regulations do not
adopt this suggestion.

Fee Calculation and Error Correction
Process

Source of Data Used to Calculate the
Fee
The proposed regulations defined the
term net premiums written to mean
premiums written, including
reinsurance premiums written, reduced
by reinsurance ceded, and reduced by
ceding commissions and medical loss
ratio (MLR) rebates with respect to the
data year. The preamble to the proposed
regulations explained that, for covered
entities that file the Supplemental
Health Care Exhibit (SHCE) with the
National Association of Insurance
Commissioners (NAIC), net premiums
written for health insurance generally
will equal the amount reported on the
SHCE as direct premiums written minus
MLR rebates with respect to the data
year, subject to any applicable
exclusions under section 9010 such as
exclusions from the term health
insurance.
Commenters suggested that the final
regulations require a covered entity to
use the SHCE and any equivalent forms
as the basis for determining net
premiums written if it is required to file
the SHCE and any equivalent forms
pursuant to State reporting
requirements. The final regulations do
not adopt this suggestion because forms
can change. The instructions to Form
8963 provide additional information on
how to determine net premiums written
using the SHCE and any equivalent
forms as the source of data, and can be
updated to reflect changes in forms.

In General
The proposed regulations required
each covered entity to report annually
its net premiums written for health
insurance of United States health risks
during the data year to the IRS on Form
8963 by May 1st of the fee year. The
proposed regulations also required the
IRS to send each covered entity its final
fee calculation no later than August
31st, and required the covered entity to
pay the fee by September 30th by
electronic funds transfer. In addition,
the proposed regulations required the
IRS to send preliminary fee calculations
and give covered entities an opportunity
to submit error correction reports, with
the time and manner of error correction
reporting to be specified in other
guidance published in the Internal
Revenue Bulletin.
The final regulations adopt April 15th
as the date on which the Form 8963 is
due, rather than May 1st, to provide
additional time to prepare the
preliminary fee calculation for each
covered entity. Also, to ensure that any
errors are timely corrected, the final
regulations require a covered entity to
review its preliminary fee calculation
and, if it believes there are any errors,
to timely submit to the IRS a corrected
Form 8963 during the error correction
period. As stated earlier in this
preamble, the corrected Form 8963 will
replace the original Form 8963. In the
case of a controlled group, if the
preliminary fee calculation for the
controlled group contains one or more
errors, the corrected Form 8963 must
include all of the required information
for the entire controlled group,
including members that do not have
corrections. Further rules regarding the
manner for submitting Form 8963, the
time and manner for notifying covered
entities of their preliminary fee
calculation, and the time and manner
for submitting error correction reports
for the error correction process are
contained in other guidance in the
Internal Revenue Bulletin being
published concurrently with these final
regulations.
Commenters suggested that the final
regulations create a ‘‘true-up’’ process
by which the fee will be continually
adjusted from year to year. Because the
fee is an allocated fee, allowing a trueup process for one covered entity will
result in adjustments to the fee for all
covered entities. In the interest of
providing finality and certainty to fee

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Medical Loss Ratio (MLR) Rebates
The proposed regulations invited
comments on how to compute MLR
rebates with respect to the data year
using data reported on the SHCE.
Commenters suggested that MLR rebates
be computed on an accrual basis using
lines 5.3, 5.4, and 5.5 of the 2012 SHCE.
In response to this comment, the final
regulations clarify that MLR rebates are
computed on an accrual basis. The final
regulations do not designate specific
SHCE line numbers as the source of data
for computing MLR rebates because
forms can change. Instead, the
instructions to Form 8963 provide this
information.
Medicaid Bonuses
A commenter requested that the final
regulations address the treatment of
Medicaid bonuses in determining net
premiums written. According to the
commenter, Medicaid plans sometimes
receive bonuses for meeting plan goals.
In some cases, the bonuses are paid up
front and must be returned if the plan

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does not meet its goals, and in other
cases, bonuses are paid only after the
plan meets its goals. The final
regulations do not create a special rule
for the treatment of Medicaid bonuses.
The treatment of Medicaid bonuses in
determining net premiums written
depends on whether and when these
amounts are treated as premiums
written for State or other Federal
regulatory and reporting purposes.
Amounts Taken Into Account
In accordance with section
9010(b)(2)(A), the proposed regulations
provided that, for each covered entity
(or each controlled group treated as a
single covered entity), the IRS will not
take into account the first $25 million of
net premiums written. The IRS will take
into account 50 percent of the net
premiums written for amounts over $25
million and up to $50 million, and 100
percent of the net premiums written that
are over $50 million. Thus, for any
covered entity with net premiums
written of $50 million or more, the IRS
will not take into account the first $37.5
million of net premiums written.
Additionally, after this reduction, the
proposed regulations provided that, in
accordance with section 9010(b)(2)(B), if
the covered entity (or any member of the
controlled group treated as a single
covered entity) is exempt from tax
under section 501(a) and is described in
section 501(c)(3), (4), (26), or (29), the
IRS will take into account only 50
percent of the remaining net premiums
written of that entity (or member) that
are attributable to its exempt activities.
A commenter asked how the fee will
be calculated for a controlled group that
is treated as a single covered entity
when some but not all of the group’s
members qualify for the 50-percent
exclusion under section 9010(b)(2)(B).
The final regulations clarify that, in this
circumstance, the section 9010(b)(2)(A)
exclusion applies first to each member
of the controlled group on a pro rata
basis, and then the section 9010(b)(2)(B)
exclusion applies only to eligible
members of the group.
For example, if a controlled group
consists of one member with $100
million in net premiums written and a
second member with $50 million in net
premiums written, two-thirds of the
group’s total $37.5 million reduction
under section 9010(b)(2)(A), or $25
million, applies to the first member, and
the remaining one-third, or $12.5
million, applies to the second member.
Therefore, after this initial reduction,
the first member has $75 million of net
premiums written ($100 million minus
$25 million), and the second member
has $37.5 million of net premiums

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written ($50 million minus $12.5
million). If the second member is
eligible for the 50-percent exclusion
under section 9010(b)(2)(B), the 50percent exclusion applies to this
member’s remaining net premiums
written, resulting in $18.75 million (50
percent of $37.5 million) being taken
into account. Thus, total net premiums
written taken into account for this
controlled group are $93.75 million
($150 million minus $37.5 million
minus $18.75 million).
Designated Entities
The proposed regulations required
each controlled group to have a
designated entity, defined as a person
within the controlled group that is
designated to act on behalf of the
controlled group with regard to the fee.
The proposed regulations further
provided that if the controlled group,
without regard to foreign corporations
included under section 9010(c)(3)(B), is
also an affiliated group that files a
consolidated return for Federal income
tax purposes, the designated entity is
the common parent of the affiliated
group identified on the tax return filed
for the data year. If the controlled group
is not a part of an affiliated group that
files a consolidated return, the proposed
regulations allowed the controlled
group to select its designated entity but
did not require it to do so. The proposed
regulations also required each member
of a controlled group to maintain a
record of its consent to the designated
entity selection and required the
designated entity to maintain a record of
all member consents. Under the
proposed regulations, if the controlled
group did not select a person as its
designated entity, the IRS would select
a person as a designated entity for the
controlled group and advise the
designated entity accordingly.
The final regulations modify the
proposed regulations, which provided
that the common parent of a
consolidated group was the designated
entity in all cases. To better coordinate
with the consolidated return
regulations, the final regulations
provide that the designated entity of a
controlled group, without regard to
foreign corporations included under
section 9010(c)(3)(B), that is a
consolidated group (within the meaning
of § 1.1502–1(h)) is the agent for the
group (within the meaning of § 1.1502–
77). In the case of a controlled group
that is not a part of an affiliated group
that files a consolidated return, the
Treasury Department and the IRS
believe that the controlled group
members are in the best position to
determine which of its members should

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be the designated entity. To promote
greater certainty and ease of
administration in the fee reporting and
determination process, the final
regulations thus require, rather than
permit, a controlled group that is not
also a consolidated group to select its
designated entity. The final regulations
further provide that the IRS will select
a member of the controlled group to be
the designated entity for the controlled
group if a controlled group fails to do
so, but the controlled group may be
liable for penalties for failure to meet its
filing requirements. In the event the
controlled group fails to select a
designated entity and the IRS selects a
designated entity for the controlled
group, the final regulations deem all
members of the controlled group that
provide health insurance for a United
States health risk to have consented to
the IRS’s selection of the designated
entity.
Disclosure
Section 9010(g)(4) provides that
section 6103 (relating to the
confidentiality and disclosure of returns
and return information) does not apply
to any information reported by the
covered entities under section 9010(g).
The preamble to the proposed
regulations stated that the Treasury
Department and the IRS are considering
making available to the public the
information reported on Form 8963,
including the identity of the covered
entity and the amount of its net
premiums written, at the time the notice
of preliminary fee calculation is sent,
and invited comments on which
reported information the IRS should
make publicly available. Numerous
commenters requested that the IRS
make all information reported on Form
8963 available to the public, and several
commenters requested that this
information be reported on the IRS Web
site no later than 15 days after the
reporting deadline to promote
transparency and assist health insurers
in determining whether an error
correction request is necessary. One
commenter requested that consumers
have access to the information that
shows how much each covered entity
will pay. In response to comments, the
final regulations provide that the
information reported on each Form 8963
will be open for public inspection or
available upon request. The Treasury
Department and the IRS expect that, at
a time to be determined, certain
information will be made available on
www.irs.gov, including the identity of
each reporting entity and the amount of
its reported net premiums written.

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Expatriate Policies
In accordance with section 9010(d),
the proposed regulations defined the
term United States health risk to mean
the health risk of any individual who is
(1) a United States citizen, (2) a resident
of the United States (within the meaning
of section 7701(b)(1)(A)), or (3) located
in the United States, with respect to the
period such individual is so located.
The preamble to the proposed
regulations requested comments on how
the final regulations should apply to
expatriate policies. The medical loss
ratio final rule issued by HHS (MLR
final rule) defines expatriate policies as
predominantly group health insurance
policies that provide coverage to
employees, substantially all of whom
are: (1) Working outside their country of
citizenship; (2) working outside their
country of citizenship and outside the
employer’s country of domicile; or (3)
non-U.S. citizens working in their home
country. 45 CFR 158.120(d)(4). The
NAIC tracks the definition in the MLR
final rule for purposes of State reporting
requirements.
The proposed regulations did not
provide specific rules for expatriate
policies. However, the definitions of
covered entity and health insurance in
the proposed regulations only extended
to entities and policies that are subject
to State or Federal regulation.
Commenters expressed the concern that
the proposed regulations provided an
unfair advantage to foreign health
insurers. Not all foreign insurers issuing
expatriate policies on United States
health risks are subject to State
regulation or to Federal regulation
under ERISA. As a result, commenters
asserted that a foreign insurance
company that is not a covered entity
will be able to charge less than a U.S.
insurance company for nearly identical
expatriate policies. Commenters
suggested that the final regulations
exclude expatriate policies (or defer
their inclusion until more facts can be
gathered). Alternatively, commenters
suggested broadening the definition of
covered entity to include a foreign
insurer regardless of whether it is
subject to State or Federal regulation.
The final regulations do not adopt
these suggestions. Section 9010 defines
a United States health risk to include
the health risk of a U.S. citizen or a
resident alien. An insurer that issues a
policy to a U.S. citizen or resident living
abroad is still providing coverage for a
United States health risk, despite the
fact that the individual may not be
currently residing in the United States.
Thus, excluding expatriate policies is

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inconsistent with the language of
section 9010(d).
Alternatively, broadening the
definition of covered entity to include a
foreign insurer that does not do business
in the United States is not in the interest
of sound tax administration. Legal and
practical restrictions significantly limit
the ability of the IRS to compel an entity
that does not do business in the United
States to file a report and pay a tax or
fee. Further, the Treasury Department
and the IRS expect that, in the
overwhelming majority of cases, foreign
insurers that do not do business in the
United States will not have more than
$25 million in net premiums written for
United States health risks and thus will
not be subject to liability for the fee.
Therefore, the final regulations do not
expand the definition of covered entity
to include a foreign insurer that does
not do business in the United States.
The proposed regulations created a
presumption under which the entire
amount reported on the SHCE filed with
the NAIC pursuant to State reporting
requirements will be considered to be
for United States health risks unless the
covered entity can demonstrate
otherwise. Commenters expressed
concern that the data necessary to
affirmatively establish that an
individual is not a United States health
risk will be difficult for covered entities
to obtain because they will need to
know the location of each insured
individual at all times and that
individual’s nationality. Moreover,
commenters contended that such
information may not be clear or accurate
because location or nationality can vary
among multiple members of the same
family (some of whom may hold dual
citizenship), and that covered entities
may simply be unable to obtain such
information because of the constant
mobility of those covered. Commenters
suggested allowing a covered entity to
determine expatriate net premiums
written for United States health risks by
multiplying its total expatriate net
premiums written by the ratio of claims
paid in the United States to claims paid
worldwide. The final regulations do not
adopt this suggestion. A ratio based on
claims paid in the United States would
not accurately represent the relative
proportion of United States health risks
because a United States health risk
includes the health risks of U.S. citizens
who are living abroad. The Treasury
Department and the IRS also considered
alternative methods for a covered entity
to account for its expatriate policies, but
were unable to identify any that would
be verifiable and administrable.
Therefore, the final regulations retain
the presumption in the proposed

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regulations and allow a covered entity
to demonstrate that certain net
premiums written are not for a United
States health risk.
United States Possessions
Commenters suggested that the fee
should not apply to health insurance
providers in Puerto Rico and Guam. The
final regulations do not adopt this
suggestion. Section 9010(h)(2)
specifically states that the term United
States includes the U.S. possessions.
Section 9010(c)(1) defines a covered
entity as any entity that provides health
insurance for any United States health
risk, and under section 9010(d)(3), a
United States health risk includes
coverage of the health risk of any
individual located in the U.S.
possessions. To aid in determining
whether an entity qualifies as a covered
entity, the proposed regulations
incorporated the definition of health
insurance issuer under section
9832(b)(2) as one category of covered
entity. The only definition of health
insurance issuer in the Code is the
definition of health insurance issuer in
section 9832(b)(2), and the language of
this provision is substantially similar to
the only definition of health insurance
issuer referenced in the ACA.2 Section
9832(b)(2) defines a health insurance
issuer as an insurance company,
insurance service, or insurance
organization that is licensed to engage
in the business of insurance in a State
and that is subject to State laws that
regulate insurance within the meaning
of section 514(b)(2) of ERISA. Under
section 514(b)(2) of ERISA, State law
that regulates insurance generally means
any State regulation. Section 3(10) of
ERISA defines State for purposes of
ERISA to include the U.S. possessions.
Accordingly, the references to State and
State law in section 9832(b)(2)
encompass the 50 States, the District of
Columbia, and the U.S. possessions.
Taxability and Other Treatment of the
Fee
Section 9010(f)(2) treats the fee as a
tax described in section 275(a)(6)
(relating to taxes for which no
deduction is allowed). Before issuing
the proposed regulations, the Treasury
Department and the IRS received
comments stating that covered entities
may attempt to pass on the cost of the
fee to policyholders, either by a
corresponding increase in premiums or
by separately charging policyholders for
2 See ACA section 1301(b)(2), referencing section
2791(b) of the PHSA (42 U.S.C. 300gg–91). The
definition of health insurance issuer in section
2791(b) of the PHSA is substantially similar to the
definition in section 9832(b)(2) of the Code.

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71487

a portion of the fee. The preamble to the
proposed regulations stated that, under
section 61(a), gross income means all
income from whatever source derived
unless a provision of the Code or other
law specifically excludes the payment
from gross income. Therefore, a covered
entity’s gross income includes amounts
received from policyholders to offset the
cost of the fee, whether or not separately
stated on any bill. The preamble
requested comments on whether the text
of the regulations should be revised to
clarify that recovered fee amounts are
included in a covered entity’s gross
income. Numerous commenters
disagreed with the preamble statement
and requested that the final regulations
permit covered entities to exclude from
income any amounts collected from
policyholders to offset the cost of the
fee. One commenter alternatively
suggested that the payment of income
taxes on the fee should count towards
the payment of the fee itself. The final
regulations do not adopt these
suggestions. The Treasury Department
and the IRS will issue separate guidance
to clarify that covered entities must
include in income under section 61(a)
any amounts they collect from
policyholders to offset the cost of the
fee.
Commenters suggested that the final
regulations prohibit a covered entity
from collecting amounts to offset the
cost of the fee when they collect
premiums from excluded entities such
as governmental entities and VEBAs.
The final regulations do not adopt this
suggestion. The health insurance
provider, and not the payor of
premiums, is liable for the fee.
Therefore, any exclusions apply at the
health insurance provider level.
A commenter asked if a covered entity
must disclose to its policyholders the
extent to which the cost of the fee is
included in a policyholder’s premium.
Because the health insurance provider,
and not the policyholder, is liable for
the fee, the final regulations do not
require a covered entity to disclose to its
policyholders any amounts included in
premiums to offset the cost of the fee,
although nothing in the final regulations
prohibits a covered entity from
disclosing these amounts. However, a
covered entity may be subject to State or
other Federal rules, if any, regarding
disclosures of these amounts.

The IRS notice cited in this preamble is
available at www.irs.gov.

PART 57—HEALTH INSURANCE
PROVIDERS FEE

Special Analyses

Sec.
57.1
57.2
57.3

Availability of IRS Documents
The IRS revenue rulings cited in this
preamble are published in the Internal
Revenue Cumulative Bulletin and are
available from the superintendent of
Documents, United States Government
Printing Office, Washington, DC 20402.

Adoption of Amendments to the
Regulations

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It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866, as
supplemented by Executive Order
13563. Therefore, a regulatory
assessment is not required. This
regulation merely implements the fee
imposed by section 9010 and does not
impose the fee itself. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these
regulations. It is hereby certified that the
collection of information in these
regulations will not have a significant
economic impact on a substantial
number of small entities. This
certification is based on the fact that the
only collection burden imposed by
these regulations is the requirement to
maintain a record of consent to the
selection of a designated entity, and this
collection burden applies only to
designated entities of controlled groups,
which tend to be large corporations, and
their members. Therefore, a Regulatory
Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. Pursuant to
section 7805(f), the notice of proposed
rulemaking was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business, and no
comments were received.
Drafting Information
The principal author of these
regulations is Charles J. Langley, Jr.,
Office of the Associate Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from the
Treasury Department and the IRS
participated in their development.
List of Subjects
26 CFR Part 57
Health insurance, Reporting and
recordkeeping requirements.
26 CFR 602
Reporting and recordkeeping
requirements.

Accordingly, 26 CFR chapter 1 is
amended as follows:
Paragraph 1. Part 57 is added to read
as follows:

■

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Overview.
Explanation of terms.
Reporting requirements and associated
penalties.
57.4 Fee calculation.
57.5 Notice of preliminary fee calculation.
57.6 Error correction process.
57.7 Notification and fee payment.
57.8 Tax treatment of fee.
57.9 Refund claims.
57.10 Effective/applicability date.
57.6302–1 Method of paying the health
insurance providers fee.
Authority: 26 U.S.C. 7805; sec. 9010, Pub.
L. 111–148 (124 Stat. 119 (2010)).
Section 57.3 also issued under 26 U.S.C.
6071(a)
Section 57.7 also issued under 26 U.S.C.
6302(a).
Section 57.6302–1 also issued under 26
U.S.C. 6302(a).
§ 57.1

Overview.

(a) The regulations in this part are
designated ‘‘Health Insurance Providers
Fee Regulations.’’
(b) The regulations in this part
provide guidance on the annual fee
imposed on covered entities engaged in
the business of providing health
insurance by 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 to section 9010 in this part 57
are references to section 9010 of the
ACA. Unless otherwise indicated, all
other references to subtitles, chapters,
subchapters, and sections are references
to subtitles, chapters, subchapters and
sections in the Internal Revenue Code
and the related regulations.
(c) Section 9010(e)(1) sets an
applicable fee amount for each year,
beginning with 2014, that will be
apportioned among covered entities
with aggregate net premiums written
over $25 million for health insurance for
United States health risks. Generally,
each covered entity is liable for a fee in
each fee year that is based on its net
premiums written during the data year
in an amount determined by the Internal
Revenue Service (IRS) under the rules of
this part.
§ 57.2

Explanation of terms.

(a) In general. This section explains
the terms used in this part 57 for
purposes of the fee.

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(b) Covered entity—(1) In general.
Except as provided in paragraph (b)(2)
of this section, the term covered entity
means any entity with net premiums
written for health insurance for United
States health risks in the fee year if the
entity is—
(i) A health insurance issuer within
the meaning of section 9832(b)(2),
defined in section 9832(b)(2) as an
insurance company, insurance service,
or insurance organization that is
licensed to engage in the business of
insurance in a State and that is subject
to State law that regulates insurance
(within the meaning of section 514(b)(2)
of the Employee Retirement Income
Security Act of 1974 (ERISA));
(ii) A health maintenance
organization within the meaning of
section 9832(b)(3), defined in section
9832(b)(3) as—
(A) A Federally qualified health
maintenance organization (as defined in
section 1301(a) of the Public Health
Service Act);
(B) An organization recognized under
State law as a health maintenance
organization; or
(C) A similar organization regulated
under State law for solvency in the same
manner and to the same extent as such
a health maintenance organization;
(iii) An insurance company subject to
tax under part I or II of subchapter L, or
that would be subject to tax under part
I or II of subchapter L but for the entity
being exempt from tax under section
501(a);
(iv) An entity that provides health
insurance under Medicare Advantage,
Medicare Part D, or Medicaid; or
(v) A multiple employer welfare
arrangement (MEWA), within the
meaning of section 3(40) of ERISA, to
the extent not fully insured, provided
that for this purpose a covered entity
does not include a MEWA that with
respect to the plan year ending with or
within the section 9010 data year
satisfies the requirements to be exempt
from reporting under 29 CFR 2520.101–
2(c)(2)(ii)(A), (B), or (C).
(2) Exclusions—(i) Self-insured
employer. The term covered entity does
not include any entity (including a
voluntary employees’ beneficiary
association under section 501(c)(9)
(VEBA)) that is part of a self-insured
employer plan to the extent that such
entity self-insures its employees’ health
risks. The term self-insured employer
means an employer that sponsors a selfinsured medical reimbursement plan
within the meaning of § 1.105–
11(b)(1)(i) of this chapter. Self-insured
medical reimbursement plans include
plans that do not involve shifting risk to
an unrelated third party as described in

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§ 1.105–11(b)(1)(ii) of this chapter. A
self-insured medical reimbursement
plan may use an insurance company or
other third party to provide
administrative or bookkeeping
functions. For purposes of this section,
the term self-insured employer does not
include a MEWA.
(ii) Governmental entity. The term
covered entity does not include any
governmental entity. For this purpose,
the term governmental entity means—
(A) The government of the United
States;
(B) Any State or a political
subdivision thereof (as defined for
purposes of section 103) including, for
example, a State health department or a
State insurance commission;
(C) Any Indian tribal government (as
defined in section 7701(a)(40)) or a
subdivision thereof (determined in
accordance with section 7871(d)); or
(D) Any agency or instrumentality of
any of the foregoing.
(iii) Certain nonprofit corporations.
The term covered entity does not
include any entity—
(A) That is incorporated as a nonprofit
corporation under a State law;
(B) No part of the net earnings of
which inures to the benefit of any
private shareholder or individual
(within the meaning of §§ 1.501(a)–1(c)
and 1.501(c)(3)–1(c)(2) of this chapter);
(C) No substantial part of the activities
of which is carrying on propaganda, or
otherwise attempting, to influence
legislation (within the meaning of
§ 1.501(c)(3)–1(c)(3)(ii) of this chapter)
(or which is described in section
501(h)(3) and is not denied exemption
under section 501(a) by reason of
section 501(h));
(D) That does not participate in, or
intervene in (including the publishing
or distributing of statements), any
political campaign on behalf of (or in
opposition to) any candidate for public
office (within the meaning of
§ 1.501(c)(3)–1(c)(3)(iii) of this chapter);
and
(E) More than 80 percent of the gross
revenues of which is received from
government programs that target lowincome, elderly, or disabled populations
under titles XVIII, XIX, and XXI of the
Social Security Act.
(iv) Certain voluntary employees’
beneficiary associations (VEBAs). The
term covered entity does not include
any entity that is described in section
501(c)(9) that is established by an entity
(other than by an employer or
employers) for purposes of providing
health care benefits. This exclusion
applies to a VEBA that is established by
a union or established pursuant to a
collective bargaining agreement and

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having a joint board of trustees (such as
in the case of a multiemployer plan
within the meaning of section 3(37) of
ERISA or a single-employer plan
described in section 302(c)(5) of the
Labor Management Relations Act, 29
U.S.C. 186(c)(5)). This exclusion does
not apply to a MEWA.
(3) State. Solely for purposes of
paragraph (b) of this section, the term
State means any of the 50 States, the
District of Columbia, or any of the
possessions of the United States,
including American Samoa, Guam, the
Northern Mariana Islands, Puerto Rico,
and the Virgin Islands.
(c) Controlled groups—(1) In general.
The term controlled group means a
group of two or more persons, including
at least one person that is a covered
entity, that is treated as a single
employer under section 52(a), 52(b),
414(m), or 414(o).
(2) Treatment of controlled group. A
controlled group (as defined in
paragraph (c)(1) of this section) is
treated as a single covered entity for
purposes of the fee.
(3) Special rules. For purposes of
paragraph (c)(1) of this section (related
to controlled groups)—
(i) A foreign entity subject to tax
under section 881 is included within a
controlled group under section 52(a) or
(b); and
(ii) A person is treated as being a
member of the controlled group if it is
a member of the group at the end of the
day on December 31st of the data year.
(d) Data year. The term data year
means the calendar year immediately
before the fee year. Thus, for example,
2013 is the data year for fee year 2014.
(e) Designated entity—(1) In general.
The term designated entity means the
person within a controlled group that is
designated to act on behalf of the
controlled group regarding the fee with
respect to—
(i) Filing Form 8963, ‘‘Report of
Health Insurance Provider Information’’;
(ii) Receiving IRS communications
about the fee for the group;
(iii) Filing a corrected Form 8963 for
the group, if applicable, as described in
§ 57.6; and
(iv) Paying the fee for the group to the
government.
(2) Selection of designated entity—(i)
In general. Except as provided in
paragraph (e)(2)(ii) of this section, each
controlled group must select a
designated entity by having that entity
file the Form 8963 in accordance with
the form instructions. The designated
entity must state under penalties of
perjury that all persons that provide
health insurance for United States
health risks that are members of the

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Federal Register / Vol. 78, No. 230 / Friday, November 29, 2013 / Rules and Regulations
group have consented to the selection of
the designated entity. Each member of a
controlled group must maintain a record
of its consent to the controlled group’s
selection of the designated entity. The
designated entity must maintain a
record of all member consents.
(ii) Requirement for consolidated
groups; common parent. If a controlled
group, without regard to foreign
corporations included under section
9010(c)(3)(B), is also an affiliated group
the common parent of which files a
consolidated return for Federal income
tax purposes, the designated entity is
the agent for the group (within the
meaning of § 1.1502–77 of this chapter)
for the data year.
(iii) Failure to select a designated
entity. Excepted as provided in
paragraph (e)(2)(ii) of this section, if a
controlled group fails to select a
designated entity as provided in
paragraph (e)(2)(i) of this section, then
the IRS will select a member of the
controlled group to be the designated
entity. If the IRS selects the designated
entity, then all members of the
controlled group that provide health
insurance for a United States health risk
will be deemed to have consented to the
IRS’s selection of the designated entity.
(f) Fee. The term fee means the fee
imposed by section 9010 on each
covered entity engaged in the business
of providing health insurance.
(g) Fee year. The term fee year means
the calendar year in which the fee must
be paid to the government. The first fee
year is 2014.
(h) Health insurance—(1) In general.
Except as provided in paragraph (h)(2)
of this section, the term health
insurance generally has the same
meaning as the term health insurance
coverage in section 9832(b)(1)(A),
defined to mean benefits consisting of
medical care (provided directly, through
insurance or reimbursement, or
otherwise) under any hospital or
medical service policy or certificate,
hospital or medical service plan
contract, or health maintenance
organization contract, when these
benefits are offered by an entity that is
one of the types of entities described in
paragraph (b)(1)(i) through (b)(1)(v) of
this section. The term health insurance
includes limited scope dental and
vision benefits under section
9832(c)(2)(A) and retiree-only health
insurance.
(2) Exclusions. The term health
insurance does not include—
(i) Coverage only for accident, or
disability income insurance, or any
combination thereof, within the
meaning of section 9832(c)(1)(A);

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(ii) Coverage issued as a supplement
to liability insurance within the
meaning of section 9832(c)(1)(B);
(iii) Liability insurance, including
general liability insurance and
automobile liability insurance, within
the meaning of section 9832(c)(1)(C);
(iv) Workers’ compensation or similar
insurance within the meaning of section
9832(c)(1)(D);
(v) Automobile medical payment
insurance within the meaning of section
9832(c)(1)(E);
(vi) Credit-only insurance within the
meaning of section 9832(c)(1)(F);
(vii) Coverage for on-site medical
clinics within the meaning of section
9832(c)(1)(G);
(viii) Other insurance coverage that is
similar to the insurance coverage in
paragraph (h)(2)(i) through (vii) of this
section under which benefits for
medical care are secondary or incidental
to other insurance benefits, within the
meaning of section 9832(c)(1)(H), to the
extent such insurance coverage is
specified in regulations under section
9832(c)(1)(H);
(ix) Benefits for long-term care,
nursing home care, home health care,
community-based care, or any
combination thereof, within the
meaning of section 9832(c)(2)(B), and
such other similar, limited benefits to
the extent such benefits are specified in
regulations under section 9832(c)(2)(C);
(x) Coverage only for a specified
disease or illness within the meaning of
section 9832(c)(3)(A);
(xi) Hospital indemnity or other fixed
indemnity insurance within the
meaning of section 9832(c)(3)(B);
(xii) Medicare supplemental health
insurance (as defined under section
1882(g)(1) of the Social Security Act),
coverage supplemental to the coverage
provided under chapter 55 of title 10,
United States Code, and similar
supplemental coverage provided to
coverage under a group health plan,
within the meaning of section
9832(c)(4);
(xiii) Coverage under an employee
assistance plan, a disease management
plan, or a wellness plan, if the benefits
provided under the plan constitute
excepted benefits under section
9832(c)(2) (or do not otherwise provide
benefits consisting of health insurance
under paragraph (h)(1) of this section);
(xiv) Student administrative health
fee arrangements, as defined in
paragraph (h)(3);
(xv) Travel insurance, as defined in
paragraph (h)(4) of this section; or
(xvi) Indemnity reinsurance, as
defined in paragraph (h)(5)(i) of this
section.

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71489

(3) Student administrative health fee
arrangement. For purposes of paragraph
(h)(2)(xiv) of this section, the term
student administrative health fee
arrangement means an arrangement
under which an educational institution,
other than through an insured
arrangement, charges student
administrative health fees to students on
a periodic basis to help cover the cost
of student health clinic operations and
care delivery (regardless of whether the
student uses the clinic and regardless of
whether the student purchases any
available student health insurance
coverage).
(4) Travel insurance. For purposes of
paragraph (h)(2)(xv) of this section, the
term travel insurance means insurance
coverage for personal risks incident to
planned travel, which may include, but
is not limited to, interruption or
cancellation of trip or event, loss of
baggage or personal effects, damages to
accommodations or rental vehicles, and
sickness, accident, disability, or death
occurring during travel, provided that
the health benefits are not offered on a
stand-alone basis and are incidental to
other coverage. For this purpose, the
term travel insurance does not include
major medical plans that provide
comprehensive medical protection for
travelers with trips lasting 6 months or
longer, including, for example, those
working overseas as an expatriate or
military personnel being deployed.
(5) Reinsurance—(i) Indemnity
reinsurance. For purposes of paragraphs
(h)(2)(xvi) and (k) of this section, the
term indemnity reinsurance means an
agreement between one or more
reinsuring companies and a covered
entity under which—
(A) The reinsuring company agrees to
accept, and to indemnify the issuing
company for, all or part of the risk of
loss under policies specified in the
agreement; and
(B) The covered entity retains its
liability to, and its contractual
relationship with, the individuals
whose health risks are insured under
the policies specified in the agreement.
(ii) Assumption reinsurance. For
purposes of paragraph (k) of this
section, the term assumption
reinsurance means reinsurance for
which there is a novation and the
reinsurer takes over the entire risk of
loss pursuant to a new contract.
(i) Located in the United States. The
term located in the United States means
present in the United States (within the
meaning of paragraph (m) of this
section) under section 7701(b)(7) (for
presence in the 50 States and the
District of Columbia) or § 1.937–

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1(c)(3)(i) of this chapter (for presence in
a possession of the United States).
(j) NAIC. The term NAIC means the
National Association of Insurance
Commissioners.
(k) Net premiums written—The term
net premiums written means premiums
written, including reinsurance
premiums written, reduced by
reinsurance ceded, and reduced by
ceding commissions and medical loss
ratio (MLR) rebates with respect to the
data year. For this purpose, MLR rebates
are computed on an accrual basis in
determining net premiums written.
Because indemnity reinsurance within
the meaning of paragraph (h)(5)(i) of this
section is not health insurance under
paragraph (h)(1) of this section, the term
net premiums written does not include
premiums written for indemnity
reinsurance and is not reduced by
indemnity reinsurance ceded. However,
in the case of assumption reinsurance
within the meaning of paragraph
(h)(5)(ii) of this section, the term net
premiums written does include
premiums written for assumption
reinsurance and is reduced by
assumption reinsurance premiums
ceded.
(l) SHCE. The term SHCE means the
Supplemental Health Care Exhibit. The
SHCE is a form published by the NAIC
that most covered entities are required
to file annually under State law.
(m) United States. For purposes of
paragraph (i) of this section, the term
United States means the 50 States, the
District of Columbia, and any
possession of the United States,
including American Samoa, Guam, the
Northern Mariana Islands, Puerto Rico,
and the Virgin Islands.
(n) United States health risk. The term
United States health risk means the
health risk of any individual who is—
(1) A United States citizen;
(2) A resident of the United States
(within the meaning of section
7701(b)(1)(A)); or
(3) Located in the United States
(within the meaning of paragraph (i) of
this section) during the period such
individual is so located.

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§ 57.3 Reporting requirements and
associated penalties.

(a) Reporting requirement—(1) In
general. Annually, each covered entity,
including each controlled group that is
treated as a single covered entity, must
report its net premiums written for
health insurance of United States health
risks during the data year to the IRS by
April 15th of the fee year on Form 8963,
‘‘Report of Health Insurance Provider
Information,’’ in accordance with the
instructions for the form. A covered

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entity that has net premiums written
during the data year is subject to this
reporting requirement even if it does not
have any amount taken into account as
described in § 57.4(a)(4). If an entity is
not in the business of providing health
insurance for any United States health
risk in the fee year, it is not a covered
entity and does not have to report.
(2) Manner of reporting. 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.
(3) Disclosure of reported information.
Pursuant to section 9010(g)(4), the
information reported on each original
and corrected Form 8963 will be open
for public inspection or available upon
request.
(b) Penalties—(1) Failure to report—(i)
In general. A covered entity that fails to
timely submit a report containing the
information required by paragraph (a) of
this section is liable for a failure to
report penalty in the amount described
in paragraph (b)(1)(ii) of this section in
addition to its fee liability and any other
applicable penalty, unless the failure is
due to reasonable cause as defined in
paragraph (b)(1)(iii) of this section.
(ii) Amount. The amount of the failure
to report penalty described in paragraph
(b)(1)(i) of this section is—
(A) $10,000, plus
(B) The lesser of—
(1) An amount equal to $1,000
multiplied by the number of days
during which such failure continues; or
(2) The amount of the covered entity’s
fee for which the report was required.
(iii) Reasonable cause. The failure to
report penalty described in paragraph
(b)(1)(i) of this section is waived if the
failure is due to reasonable cause. A
failure is due to reasonable cause if the
covered entity exercised ordinary
business care and prudence and was
nevertheless unable to submit the report
within the prescribed time. In
determining whether the covered entity
was unable to submit the report timely
despite the exercise of ordinary business
care and prudence, the IRS will
consider all the facts and circumstances
surrounding the failure to submit the
report.
(iv) Treatment of penalty. The failure
to report penalty described in this
paragraph (b)(1)—
(A) Is treated as a penalty under
subtitle F;
(B) Must be paid on notice and
demand by the IRS and in the same
manner as a tax under the Internal
Revenue Code; and

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(C) Is a penalty for which only civil
actions for refund under procedures of
subtitle F apply.
(2) Accuracy-related penalty—(i) In
general. A covered entity that
understates its net premiums written for
health insurance of United States health
risks in the report required under
paragraph (a)(1) of this section is liable
for an accuracy-related penalty in the
amount described in paragraph (b)(2)(ii)
of this section, in addition to its fee
liability and any other applicable
penalty.
(ii) Amount. The amount of the
accuracy-related penalty described in
paragraph (b)(2)(i) of this section is the
excess of—
(A) The amount of the covered
entity’s fee for the fee year that the IRS
determines should have been paid in
the absence of any understatement; over
(B) The amount of the covered entity’s
fee for the fee year that the IRS
determined based on the
understatement.
(iii) Understatement. An
understatement of a covered entity’s net
premiums written for health insurance
of United States health risks is the
difference between the amount of net
premiums written that the covered
entity reported and the amount of net
premiums written that the IRS
determines the covered entity should
have reported.
(iv) Treatment of penalty. The
accuracy-related penalty is subject to
the provisions of subtitle F that apply to
assessable penalties imposed under
chapter 68.
(3) Controlled groups. Each member of
a controlled group that is required to
provide information to the controlled
group’s designated entity for purposes
of the report required to be submitted by
the designated entity on behalf of the
controlled group is jointly and severally
liable for any penalties described in this
paragraph (b) for any reporting failures
by the designated entity.
§ 57.4

Fee calculation.

(a) Fee components—(1) In general.
For every fee year, the IRS will calculate
a covered entity’s allocated fee as
described in this section.
(2) Calculation of net premiums
written. Each covered entity’s allocated
fee for any fee year is equal to an
amount that bears the same ratio to the
applicable amount as the covered
entity’s net premiums written for health
insurance of United States health risks
during the data year taken into account
bears to the aggregate net premiums
written for health insurance of United
States health risks of all covered entities
during the data year taken into account.

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71491

(3) Applicable amount. The
applicable amounts for fee years are—
Fee year
2014
2015
2016
2017
2018
2019

....................................
....................................
....................................
....................................
....................................
and thereafter ............

Applicable amount
$8,000,000,000
$11,300,000,000
$11,300,000,000
$13,900,000,000
$14,300,000,000
The applicable amount in the preceding fee year increased by the rate of premium growth (within the meaning of
section 36B(b)(3)(A)(ii)).

(4) Net premiums written taken into
account—(i) In general. A covered

entity’s net premiums written for health
insurance of United States health risks

during any data year are taken into
account as follows:
Percentage of net premiums
written taken into account is:

Covered entity’s net premiums written during the data year that are:

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Not more than $25,000,000 .......................................................................................................................................
More than $25,000,000 but not more than $50,000,000 ..........................................................................................
More than $50,000,000 .............................................................................................................................................

(ii) Controlled groups. In the case of
a controlled group, paragraph (a)(4)(i) of
this section applies to all net premiums
written for health insurance of United
States health risks during the data year,
in the aggregate, of the entire controlled
group, except that any net premiums
written by any member of the controlled
group that is a nonprofit corporation
meeting the requirements of
§ 57.2(b)(2)(iii) or a voluntary
employees’ beneficiary association
meeting the requirements of
§ 57.2(b)(2)(iv) are not taken into
account.
(iii) Partial exclusion for certain
exempt activities. After the application
of paragraph (a)(4)(i) of this section, if
the covered entity (or any member of a
controlled group treated as a single
covered entity) is exempt from Federal
income tax under section 501(a) and is
described in section 501(c)(3), (4), (26),
or (29) as of December 31st of the data
year, then only 50 percent of its
remaining net premiums written for
health insurance of United States health
risks that are attributable to its exempt
activities (and not to activities of an
unrelated trade or business as defined in
section 513) during the data year are
taken into account. If an entity to which
this partial exclusion applies is a
member of a controlled group, then the
partial exclusion applies to that entity
after first applying paragraph (a)(4)(i) on
a pro rata basis to all members of the
controlled group.
(b) Determination of net premiums
written—(1) In general. The IRS will
determine net premiums written for
health insurance of United States health
risks for each covered entity based on
the Form 8963, ‘‘Report of Health

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Insurance Provider Information,’’
submitted by each covered entity,
together with any other source of
information available to the IRS. Other
sources of information that the IRS may
use to determine net premiums written
for each covered entity include the
SHCE, which supplements the annual
statement filed with the NAIC pursuant
to State law, the annual statement itself
or the Accident and Health Policy
Experience filed with the NAIC, the
MLR Annual Reporting Form filed with
the Center for Medicare & Medicaid
Services’ Center for Consumer
Information and Insurance Oversight of
the U.S. Department of Health and
Human Services, or any similar
statements filed with the NAIC, with
any State government, or with the
Federal government pursuant to
applicable State or Federal
requirements.
(2) Presumption for United States
health risks. For any covered entity that
files the SHCE with the NAIC, the entire
amount reported on the SHCE as direct
premiums written will be considered to
be for health insurance of United States
health risks as described in § 57.2(n)
(subject to any applicable exclusions for
amounts that are not health insurance as
described in § 57.2(h)(2)) unless the
covered entity can demonstrate
otherwise.
(c) Determination of amounts taken
into account. (1) For each fee year and
for each covered entity, the IRS will
calculate the net premiums written for
health insurance of United States health
risks taken into account during the data
year. The resulting number is the
numerator of the fraction described in
paragraph (d)(1) of this section.

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0
50
100

(2) For each fee year, the IRS will
calculate the aggregate net premiums
written for health insurance of United
States health risks taken into account for
all covered entities during the data year.
The resulting number is the
denominator of the fraction described in
paragraph (d)(2) of this section.
(d) Allocated fee calculated. For each
covered entity for each fee year, the IRS
will calculate the covered entity’s
allocated fee by multiplying the
applicable amount from paragraph (a)(3)
of this section by a fraction—
(1) The numerator of which is the
covered entity’s net premiums written
for health insurance of United States
health risks during the data year taken
into account (described in paragraph
(c)(1) of this section); and
(2) The denominator of which is the
aggregate net premiums written for
health insurance of United States health
risks for all covered entities during the
data year taken into account (described
in paragraph (c)(2) of this section).
§ 57.5 Notice of preliminary fee
calculation.

(a) Content of notice. Each fee year,
the IRS will make a preliminary
calculation of the fee for each covered
entity as described in § 57.4. The IRS
will notify each covered entity of its
preliminary fee calculation for that fee
year. The notification to a covered entity
of its preliminary fee calculation will
include—
(1) The covered entity’s allocated fee;
(2) The covered entity’s net premiums
written for health insurance of United
States health risks;
(3) The covered entity’s net premiums
written for health insurance of United

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States health risks taken into account
after the application of § 57.4(a)(4);
(4) The aggregate net premiums
written for health insurance of United
States health risks taken into account for
all covered entities; and
(5) Instructions for how to submit a
corrected Form 8963, ‘‘Report of Health
Insurance Provider Information,’’ to
correct any errors through the error
correction process.
(b) Timing of notice. The IRS will
specify in other guidance published in
the Internal Revenue Bulletin the date
by which it will send each covered
entity a notice of its preliminary fee
calculation.

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§ 57.6

Error correction process.

(a) In general. Upon receipt of its
preliminary fee calculation, each
covered entity must review this
calculation during the error correction
period. If the covered entity identifies
one or more errors in its preliminary fee
calculation, the covered entity must
timely submit to the IRS a corrected
Form 8963, ‘‘Report of Health Insurance
Provider Information,’’ during the error
correction period. The corrected Form
8963 will replace the original Form
8963 for all purposes, including for the
purpose of determining whether an
accuracy-related penalty applies, except
that a covered entity remains subject to
the failure to report penalty if it fails to
timely submit the original Form 8963. In
the case of a controlled group, if the
preliminary fee calculation for the
controlled group contains one or more
errors, the corrected Form 8963 must
include all of the required information
for the entire controlled group,
including members that do not have
corrections.
(b) Time and manner. The IRS will
specify in other guidance published in
the Internal Revenue Bulletin the time
and manner by which a covered entity
must submit a corrected Form 8963. The
IRS will provide its final determination
regarding the covered entity’s
submission no later than the time the
IRS provides a covered entity with a
final fee calculation.
(c) Finality. Covered entities must
assert any basis for contesting their
preliminary fee calculation during the
error correction period. In the interest of
providing finality to the fee calculation
process, the IRS will not accept a
corrected Form 8963 after the end of the
error correction period or alter final fee
calculations on the basis of information
provided after the end of the error
correction period.

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§ 57.7

Notification and fee payment.

(a) Content of notice. Each fee year,
the IRS will make a final calculation of
the fee for each covered entity as
described in § 57.4. The IRS will base its
final fee calculation on each covered
entity’s original or corrected Form 8963,
‘‘Report of Health Insurance Provider
Information,’’ as adjusted by other
sources of information described in
§ 57.4(b)(1). The notification to a
covered entity of its final fee calculation
will include—
(1) The covered entity’s allocated fee;
(2) The covered entity’s net premiums
written for health insurance of United
States health risks;
(3) The covered entity’s net premiums
written for health insurance of United
States health risks taken into account
after the application of § 57.4(a)(4);
(4) The aggregate net premiums
written for health insurance of United
States health risks taken into account for
all covered entities; and
(5) The final determination on the
covered entity’s corrected Form 8963,
‘‘Report of Health Insurance Provider
Information,’’ if any.
(b) Timing of notice. The IRS will
send each covered entity a notice of its
final fee calculation by August 31st of
the fee year.
(c) Differences in preliminary fee
calculation and final calculation. A
covered entity’s final fee calculation
may differ from the covered entity’s
preliminary fee calculation because of
changes made pursuant to the error
correction process described in § 57.6 or
because the IRS discovered additional
information relevant to the fee
calculation through other information
sources as described in § 57.4(b)(1).
Even if a covered entity did not file a
corrected Form 8963 described in § 57.6,
a covered entity’s final fee may differ
from a covered entity’s preliminary fee
because of information discovered about
that covered entity through other
information sources. In addition, a
change in aggregate net premiums
written for health insurance of United
States health risks can affect every
covered entity’s fee because each
covered entity’s fee is equal to a fraction
of the aggregate fee collected from all
covered entities.
(d) Payment of final fee. Each covered
entity must pay its final fee by
September 30th of the fee year. For a
controlled group, the payment must be
made using the designated entity’s
Employer Identification Number as
reported on Form 8963. The fee must be
paid by electronic funds transfer as
required by § 57.6302–1. There is no tax
return to be filed with the payment of
the fee.

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(e) Controlled groups. In the case of a
controlled group that is liable for the
fee, all members of the controlled group
are jointly and severally liable for the
fee. Accordingly, if a controlled group’s
fee is not paid, the IRS may separately
assess each member of the controlled
group for the full amount of the
controlled group’s fee.
§ 57.8

Tax treatment of fee.

(a) Treatment as an excise tax. The fee
is treated as an excise tax for purposes
of subtitle F (sections 6001–7874). Thus,
references in subtitle F to ‘‘taxes
imposed by this title,’’ ‘‘internal revenue
tax,’’ and similar references, are also
references to the fee. For example, the
fee is assessed (section 6201), collected
(sections 6301, 6321, and 6331),
enforced (section 7602), and subject to
examination and summons (section
7602) in the same manner as taxes
imposed by the Code.
(b) Deficiency procedures. The
deficiency procedures of sections 6211–
6216 do not apply to the fee.
(c) Limitation on assessment. The IRS
must assess the amount of the fee for
any fee year within three years of
September 30th of that fee year.
(d) Application of section 275. The fee
is treated as a tax described in section
275(a)(6) (relating to taxes for which no
deduction is allowed).
§ 57.9

Refund claims.

Any claim for a refund of the fee must
be made by the entity that paid the fee
to the government and must be made on
Form 843, ‘‘Claim for Refund and
Request for Abatement,’’ in accordance
with the instructions for that form.
§ 57.10

Effective/applicability date.

Sections 57.1 through 57.9 apply to
any fee that is due on or after September
30, 2014.
§ 57.6302–1 Method of paying the health
insurance providers fee.

(a) Fee to be paid by electronic funds
transfer. Under the authority of section
6302(a), the fee imposed on covered
entities engaged in the business of
providing health insurance for United
States health risks under section 9010
and § 57.4 must be paid by electronic
funds transfer as defined in § 31.6302–
1(h)(4)(i) of this chapter, as if the fee
were a depository tax. For the time for
paying the fee, see § 57.7.
(b) Effective/Applicability date. This
section applies with respect to any fee
that is due on or after September 30,
2014.

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Federal Register / Vol. 78, No. 230 / Friday, November 29, 2013 / Rules and Regulations
into, transiting through, or anchoring
within this zone unless authorized by
the Captain of the Port, or his
designated representative.
■ Par. 2. The authority citation for part
DATES: This rule is effective from 5 p.m.
602 continues to read as follows:
to 9 p.m. on December 6th, December
Authority: 26 U.S.C. 7805.
7th, and December 14th, 2013.
ADDRESSES: Documents mentioned in
■ Par. 3. In § 602.101, paragraph (b) is
this preamble are part of docket [USCG–
amended by adding the following entry
2013–0917]. To view documents
in numerical order to the table to read
mentioned in this preamble as being
as follows:
available in the docket, go to http://
§ 602.101 OMB Control numbers.
www.regulations.gov, type the docket
*
*
*
*
*
number in the ‘‘SEARCH’’ box and click
(b) * * *
‘‘SEARCH.’’ Click on Open Docket
Folder on the line associated with this
CFR Part or section where
Current OMB
rulemaking. You may also visit the
identified and described
control No.
Docket Management Facility in Room
W12–140 on the ground floor of the
Department of Transportation West
*
*
*
*
57.2(e)(2)(i) ...........................
1545–2249 Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m.
*
*
*
*
and 5 p.m., Monday through Friday,
except Federal holidays.
John Dalrymple,
FOR FURTHER INFORMATION CONTACT: If
you have questions on this rule, call or
Deputy Commissioner for Services and
Enforcement.
email Petty Officer Bryan Gollogly,
Waterways Management, U.S. Coast
Approved: November 13, 2013.
Guard Sector San Diego; telephone (619)
Mark J. Mazur,
278–7656, email d11marineeventssd@
Assistant Secretary of the Treasury (Tax
uscg.mil. If you have questions on
Policy).
viewing or submitting material to the
[FR Doc. 2013–28412 Filed 11–26–13; 4:15 pm]
docket, call Barbara Hairston, Program
BILLING CODE 4830–01–P
Manager, Docket Operations, telephone
(202) 366–9826.
SUPPLEMENTARY INFORMATION:
DEPARTMENT OF HOMELAND
SECURITY
Table of Acronyms
PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT

[Docket No. USCG–2013–0917]

BNM Broadcast Notices to Mariners
COTP Captain of the Port
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of Proposed Rulemaking

RIN 1625–AA00

A. Regulatory History and Information

Coast Guard
33 CFR Part 100

Special Local Regulation; Lake Havasu
City Christmas Boat Parade of Lights;
Colorado River; Lake Havasu, AZ
Coast Guard, DHS.
Temporary final rule.

AGENCY:
ACTION:

The Coast Guard is
temporarily modifying the dates for the
special local regulation in support of the
Lake Havasu City Christmas Boat Parade
of Lights on the Colorado River. This
modification is necessary to reflect the
actual dates of the event for this year
which are December 6th and December
7th, 2013. Additionally, this temporary
final rule adds a third evening,
December 14th, 2013. This rule is
necessary to provide for the safety of the
participants, crew, spectators,
participating vessels, and other vessels
and users of the waterway. Persons and
vessels are prohibited from entering

sroberts on DSK5SPTVN1PROD with RULES

SUMMARY:

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The Coast Guard is issuing this
temporary final rule without prior
notice and opportunity to comment
pursuant to authority under section 4(a)
of the Administrative Procedure Act
(APA) (5 U.S.C. 553(b)). This provision
authorizes an agency to issue a rule
without prior notice and opportunity to
comment when the agency for good
cause finds that those procedures are
‘‘impracticable, unnecessary, or contrary
to the public interest.’’ Under 5 U.S.C.
553(b)(B), the Coast Guard finds that
good cause exists for not publishing a
notice of proposed rulemaking (NPRM)
with respect to this rule because
logistical details pertaining to this year’s
dates were not known by the Coast
Guard in time to publish an NPRM and
wait for the comment period to run.
Immediate action is needed to ensure
the special local regulations listed in 33
CFR 100.1102 (table 1, item 10) will be

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71493

in effect on the actual dates of the event,
which are December 6th, December 7th,
and December 14th, 2013.
Under 5 U.S.C. 553(d)(3), for the same
reasons mentioned above, the Coast
Guard finds that good cause exists for
making this rule effective less than 30
days after publication in the Federal
Register. Any delay in the effective date
of this rule would be contrary to the
public interest, because immediate
action is necessary to protect the parade
vessels from the dangers associated with
non participant vessels transiting the
event area.
B. Basis and Purpose
The legal basis and authorities for this
rulemaking establishing a special local
regulation are found in 33 U.S.C. 1233,
which authorize the Coast Guard to
establish and define special local
regulations.
This temporary final rule and notice
of enforcement will protect the
participating vessels over the three
evenings in December in a marine event
sponsored by the London Bridge Yacht
Club.
The annual Lake Havasu City
Christmas Boat Parade of Lights will
involve fifty vessels in Lake Havasu, AZ
transiting Thompson Bay, proceeding
through Bridgewater Channel, circling
in front of Windsor Beach and returning
through Bridgewater Channel. The
regulated zone will encompass the
navigable waters in the northern portion
of Thompson Bay, the Bridgewater
Channel, and waters off Windsor Beach.
Vessel participants will be traveling in
a parade line that will affect normal
traffic patterns. In addition, event
participants will be utilizing additional
holiday lighting that will obscure or
confuse required normal Navigation
Lights and increase the dangers
associated with non participating
vessels transiting the area.
This temporary special local
regulation is necessary to prevent
vessels from transiting the area and to
protect the participating vessels and
passengers from potential damage and
injury.
C. Discussion of the Final Rule
The Coast Guard is changing the dates
of the special local regulation currently
listed in 33 CFR 100.1102 (table 1, item
10). This change differs from the
existing regulation by specifying that
the event will be held on December 6,
December 7 and December 14, 2013,
instead of the first weekend in
December. The special local regulations
for the Lake Havasu City Christmas Boat
Parade of Lights will be enforced from
5 p.m. to 9 p.m. on Friday, December 6,

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