Purpose: This IRM section provides procedures for Appeals Technical Employees working Employer Shared Responsibility Payment (ESRP) cases.

Audience: Appeals Technical Employees (ATEs)

Policy Owner: Director, Case and Operations Support.

Program Owner: Director, Policy, Planning, Quality and Analysis.

Contact Information: Appeals employees should follow established procedures on How to Contact an Analyst. Other employees should contact the Content Point of Contact (POC) shown on the Product Catalog Information page for this IRM.

In 2010, The Patient Protection and Affordable Care Act (ACA), P.L. 111-148, added section 4980H to the Internal Revenue Code (IRC). IRC 4980H, Shared Responsibility for Employers Regarding Health Coverage, imposes on an applicable large employer (ALE) liability for an ESRP if either subsection (a) or (b) is met.

Under IRC 4980H(a), an ALE is liable for an ESRP if the ALE does not offer minimum essential coverage (MEC) to at least 95% (70% for 2015) of full-time employees (and their dependents) and at least one of its full-time employees is allowed a premium tax credit (PTC).

Under IRC 4980H(b), an ALE is liable for an ESRP if the ALE offers coverage to at least 95% (70% for 2015) of full-time employees (and their dependents), but at least one full-time employee is allowed the PTC because the coverage was unaffordable or did not provide minimum value, or the full-time employee was not offered coverage.

All ALEs are required to file information returns under IRC 6056. ALEs are only required to file information returns pursuant to IRC 6055 if they are the plan sponsor of a self-insured health insurance plan. Some ALEs can fall under the requirements of both IRC 6055 and IRC 6056 if they have both a self-insured health plan and a third party health plan. No matter which code section imposes the reporting requirement, ALEs will use a Form 1094-C with the attached Form(s) 1095-C to report information about offers of health coverage and enrollment in health coverage for their employees.

SB/SE issues Letter 226-J, ESRP Preliminary Contact, to certain ALEs to notify them that they may be liable for an ESRP, upon determining that, for at least one month in the calendar year under review, one or more of the ALE’s full-time employees was enrolled in a qualified health plan for which a PTC was allowed (and the ALE did not qualify for an affordability safe harbor or other relief for the employee). See IRM 25.21.4.8, Affordability Safe Harbors. The determination of whether an ALE may be liable for an ESRP and the amount of the proposed ESRP in Letter 226-J are based on information from Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns filed by the ALE’s employees.

If the ALE disagrees with the IRS’s proposed ESRP, the ALE can request a pre-assessment Appeals conference in response to one of the following letters:

Appeals Account and Processing Support (APS) receives systemic email notification that the SB/SE ESRP Compliance group transferred a case to Appeals via the Appeals Electronic Case Receipts (AECR) SharePoint intake site. Access this site from Appeals’ intranet home page > Systems and Technology > SharePoint Sites > Shared Programs Hub > Electronic Case Receipts. Upon notification, APS will:

Follow the procedures in IRM 8.6.1.2, New Receipts and Initial Case Actions, that require the ATE complete initial case actions within 45 days of receiving a newly assigned or transferred case. Mail Letter 5157, Non-docketed Acknowledgement & Conference, with required enclosures.

On the IDRS account transcript, confirm that Transcript Code (TC) 971 and Action Code (AC) 782 IDRS are posted to the MFT 43 account for this ESRP liability.

Verify the case is correctly carded-in on ACDS, as described in IRM 8.20.5.32.1, Employer Shared Responsibility Payment (ESRP).

The ESRP administrative file should contain the following items:

Appeals has primary responsibility for resolving disputes without litigation to the maximum extent possible. For guidance on conference procedures, preparing an Appeals Case Memo (ACM) and settlement options, see the following:

This section provides information on documents needed for closing ESRP liability cases. An Appeals Case Memo (ACM) and Form 5402, Appeals Transmittal and Case Memo, are required for each work unit. The ACM must adequately explain and support the basis of the settlement. The ATE will complete Form 5402, as instructed below:

In general, deficiency procedures are required in respect to a tax imposed by IRC subtitles A or B (income, estate, or gift) or chapter 41, 42, 43, or 44 tax. See IRC 6212, Notice of Deficiency. IRC 4980H falls under IRC Subtitle D-Miscellaneous Excise Taxes, Chapter 43 - Qualified Pension, Etc. Plans. However, this Chapter 43 liability is not subject to deficiency procedures because IRC 4980H(d), Administration and Procedure, provides that an ESRP liability will be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68.

Prepare the closing documents identified for an agreed or unagreed closure. See:

The ATE will maintain a hard copy of all Appeals case documents for the case file. The initial employer ECF received from SB/SE will not be returned to SB/SE.

APS will follow the procedures in IRM 8.20.7.28, Employer Shared Responsibility Payment (ESRP) Cases, that include:

Per IRM 25.21.4.16.2, Processing Cases After Appeals, the SB/SE ESRP Compliance Group will:

When Appeals receives a remittance, prepare Form 3244-A, Payment Posting Voucher-Examination, or Form 3244, Payment Posting Voucher. See IRM 8.7.17.3, Forms 3244-A and 3244, and IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244.

For a pre-assessed ESRP payment, use TC 640 "Advance Payment on Deficiency," with Designated Payment Code (DPC) "43," as shown in the following:

For a refund claim or request for reconsideration, the IRS can consider new information provided by an employer if the case was not previously closed using a closing agreement under IRC 7121, Closing Agreements, and/or Appeals did not settle the case based on hazards of litigation. See IRM 8.7.7.16, Reconsideration of Claims for Liabilities Previously Considered by Appeals, and IRM 1.2.1.9.3, Policy Statement 8-3 (Formerly P-8-50), Mutual Concession Cases Closed by Appeals Will Not be Reopened by Service Except Under Certain Circumstances.

If Compliance disallows the claim for refund or request for reconsideration of the new information and the employer appeals the disallowance, Compliance must document the reason for the disallowance before forwarding the protested case to Appeals following normal ESRP case procedures. See IRM 25.21.4.21, Claims of Requests for Reconsideration.

IRC 4980H(d)(3), Coordination with Credits, Etc., requires the IRS establish rules, regulations, or guidance for the repayment of an ESRP (including interest) if:

IRS will administer this provision through a time-based review cycle to determine the need for reducing an ALE’s ESRP. Appeals is not involved with the time-based review process.