By Edward R. Jenkins Jr., CPA, CGMA

A year ago, on Feb. 1, 2017, the PICPA Federal Taxation Committee weighed in on a Health Care Executive Order:

President Donald Trump issued an executive order on Jan. 20, 2017, regarding the Patient Protection and Care Act (PPACA). Section 2 of that order states: “To the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the act that would impose a fiscal burden on any state or a cost, fee, tax, penalty, or regulatory burden on individuals, families, health care providers, health insurers, patients, recipients of health care services, purchasers of health insurance, or makers of medical devices, products, or medications.”

The Treasury Inspector General for Tax Administration (TIGTA) recently published data on the effect that order had on government receipts and noncompliance. On Jan. 31, 2018, TIGTA published Results of the 2017 Filing Season.¹ In that report, TIGTA notes that 2.5 million taxpayers filed 2016 income tax returns that were “silent” about whether or not they had minimum essential health care coverage (MEC) all year.

If you compare tax year 2016 to 2015, there were 1.4 percent more tax returns filed (106.2 million for 2016 and 104.7 million for 2015) reporting that all family members had MEC. There was a 3.6 percent reduction in returns that claimed an exemption from coverage (10.8 million on 2016 returns and 11.2 million on 2015 returns). Lastly, the number of returns reporting a Shared Responsibility Payment (SRP) – the tax that is due when a taxpayer fails to have MEC for a majority of the year – dropped a whopping 26.8 percent from 5.6 million on 2015 returns to 4.1 million on 2016 returns.

Prior to issuance of the executive order, the IRS planned to not process the “silent” returns. As a result of the executive order, the IRS processed the silent returns and went on to issue any refunds claimed. Noteworthy is the fact that the SRP went from $975 in 2015 to $2,085 in 2016.

In summary, the TIGTA report indicates a substantial amount of government revenue was forgone by processing the silent returns as a result of the executive order, in direct conflict with the requirements of the Affordable Care Act enacted by Congress. The IRS will now have to chase down 2.5 million non-compliant taxpayers who already got their refunds, at a significant cost to the government.

The IRS has noted they will not process silent 2017 returns this filing season.

¹ https://www.treasury.gov/tigta/auditreports/2018reports/201840012fr.pdf

Edward R. Jenkins Jr., CPA, CGMA, is an instructor of accounting at Pennsylvania State University in University Park, Pa., a tax consultant for Boyer & Ritter LLC in State College, Pa., and a member of the PICPA Federal Taxation Committee.