One controversial section of the Affordable Health Care for America Act bill could subject individuals who “go bare” to tax filing penalties.
Republicans are trying to focus attention on that conclusion, which is based on their interpretation of Section 501 of H.R. 3962, the AHCAA bill.
The section apparently could subject some individuals who failed to own acceptable health coverage, and who also failed to pay a 2.5% tax to be imposed on people who went without health insurance, to the same penalties that apply to individuals who violate other tax filing laws.
In Internal Revenue Code Section 7201, the government states that:
Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned notmore than 5 years, or both, together with the costs of prosecution.
In an H.R. 3962 system, health coverage subsidies would phase out for taxpayers with incomes over 400% of the federal poverty level. A family of 4 with an annual income of about $100,000 might have to pay $15,000 per year for coverage that would meet the H.R. 3962 standards, according to the Congressional Budget Office.
The bill includes a number of exceptions that taxpayers could use to get out of the health coverage ownership requirement without paying the penalty, and the bill would authorize the Internal Revenue Service to develop hardship exemption rules.
Health insurers have asked lawmakers to create a strong individual coverage ownership mandate, to increase the percentage of young, healthy people who pay for health insurance and help reduce the riskiness of providing health insurance on a guaranteed issue, community-rated basis.
Members of the Senate Finance Committee added amendments easing the individual health ownership requirements in their health bill, S. 1796.
Here is the text of the tax penalty section of the “individual responsibility” component of H.R. 3962:
SEC. 6050X. RETURNS RELATING TO HEALTH INSURANCE COVERAGE.
`(a) Requirement of Reporting- Every person who provides acceptable coverage (as defined in section 59B(d)) to any individual during any calendar year shall, at such time as the Secretary may prescribe, make the return described in subsection (b) with respect to such individual.
`(b) Form and Manner of Returns- A return is described in this subsection if such return–
`(1) is in such form as the Secretary may prescribe, and
`(A) the name, address, and TIN of the primary insured and the name of each other individual obtaining coverage under the policy,
`(B) the period for which each such individual was provided with the coverage referred to in subsection (a), and
`(C) such other information as the Secretary may require.
`(c) Statements to Be Furnished to Individuals With Respect to Whom Information Is Required- Every person required to make a return under subsection (a) shall furnish to each primary insured whose name is required to be set forth in such return a written statement showing–
`(1) the name and address of the person required to make such return and the phone number of the information contact for such person, and
`(2) the information required to be shown on the return with respect to such individual.
The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.
`(d) Coverage Provided by Governmental Units- In the case of coverage provided by any governmental unit or any agency or instrumentality thereof, the officer or employee who enters into the agreement to provide such coverage (or the person appropriately designated for purposes of this section) shall make the returns and statements required by this section.’.
(2) PENALTY FOR FAILURE TO FILE-
(A) RETURN- Subparagraph (B) of section 6724(d)(1) of such Code is amended by striking `or’ at the end of clause (xxii), by striking `and’ at the end of clause (xxiii) and inserting `or’, and by adding at the end the following new clause:
`(xxiv) section 6050X (relating to returns relating to health insurance coverage), and’.
(B) STATEMENT- Paragraph (2) of section 6724(d) of such Code is amended by striking `or’ at the end of subparagraph (EE), by striking the period at the end of subparagraph (FF) and inserting `, or’, and by inserting after subparagraph (FF) the following new subparagraph:
`(GG) section 6050X (relating to returns relating to health insurance coverage).’.
(c) Return Requirement- Subsection (a) of section 6012 of such Code is amended by inserting after paragraph (9) the following new paragraph:
`(10) Every individual to whom section 59B(a) applies and who fails to meet the requirements of section 59B(d) with respect to such individual or any qualifying child (as defined in section 152(c)) of such individual.’.
(d) Clerical Amendments-
(1) The table of parts for subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:
`Part VIII. Health Care Related Taxes.’.
(2) The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end the following new item:
`Sec. 6050X. Returns relating to health insurance coverage.’.
(e) Section 15 Not to Apply- The amendment made by subsection (a) shall not be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986.
(f) Effective Date-
(1) IN GENERAL- The amendments made by this section shall apply to taxable years beginning after December 31, 2012.
(2) RETURNS- The amendments made by subsection (b) shall apply to calendar years beginning after December 31, 2012.