This Notice provides limited penalty relief for taxpayers who have a balance due on their 2014 income tax return as a result of reconciling advance payments of the premium tax credit against the premium tax credit allowed on the tax return.

Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for February 2015.

Notice 2015–8 provides guidance on Section 45R for certain small employers that cannot offer a qualified health plan (QHP) through the Small Business Health Options Program (SHOP) Exchange because the employer’s principal business address is in a county in Iowa in which a QHP through a SHOP Exchange will not be available for all or part of the 2015 calendar year.

This Notice provides limited penalty relief for taxpayers who have a balance due on their 2014 income tax return as a result of reconciling advance payments of the premium tax credit against the premium tax credit allowed on the tax return.

This notice announces that the Treasury Department and IRS anticipate issuing proposed regulations that would permit a state or local retirement system that is a governmental plan (within the meaning of section 414(d)) to cover public charter school employees if certain requirements are satisfied. The notice also announces that broader transition relief will be addressed in the proposed regulations. The notice includes a request for public comments.

This notice provides rules for claimants to make one-time claims for the retroactively extended 2014 biodiesel mixture and alternative fuel excise tax credits. It also provides guidance for claimants to claim the other retroactively extended credits for 2014, including the alternative fuel mixture excise tax credit.

It is the policy of the Internal Revenue Service to announce at an early date whether it will follow the holdings in certain cases. An Action on Decision is the document making such an announcement. An Action on Decision will be issued at the discretion of the Service only on unappealed issues decided adverse to the government. Generally, an Action on Decision is issued where its guidance would be helpful to Service personnel working with the same or similar issues. Unlike a Treasury Regulation or a Revenue Ruling, an Action on Decision is not an affirmative statement of Service position. It is not intended to serve as public guidance and may not be cited as precedent.

Actions on Decisions shall be relied upon within the Service only as conclusions applying the law to the facts in the particular case at the time the Action on Decision was issued. Caution should be exercised in extending the recommendation of the Action on Decision to similar cases where the facts are different. Moreover, the recommendation in the Action on Decision may be superseded by new legislation, regulations, rulings, cases, or Actions on Decisions.

Prior to 1991, the Service published acquiescence or nonacquiescence only in certain regular Tax Court opinions. The Service has expanded its acquiescence program to include other civil tax cases where guidance is determined to be helpful. Accordingly, the Service now may acquiesce or nonacquiesce in the holdings of memorandum Tax Court opinions, as well as those of the United States District Courts, Claims Court, and Circuit Courts of Appeal. Regardless of the court deciding the case, the recommendation of any Action on Decision will be published in the Internal Revenue Bulletin.

The recommendation in every Action on Decision will be summarized as acquiescence, acquiescence in result only, or nonacquiescence. Both “acquiescence” and “acquiescence in result only” mean that the Service accepts the holding of the court in a case and that the Service will follow it in disposing of cases with the same controlling facts. However, “acquiescence” indicates neither approval nor disapproval of the reasons assigned by the court for its conclusions; whereas “acquiescence in result only” indicates disagreement or concern with some or all of those reasons. “Nonacquiescence” signifies that, although no further review was sought, the Service does not agree with the holding of the court and, generally, will not follow the decision in disposing of cases involving other taxpayers. In reference to an opinion of a circuit court of appeals, a “nonacquiescence” indicates that the Service will not follow the holding on a nationwide basis. However, the Service will recognize the precedential impact of the opinion on cases arising within the venue of the deciding circuit.

The Commissioner does NOT ACQUIESCE in the following decisions:

Gracia v. Commissioner, ^[1]

T.C. Memo. 2004–147

Estate of Martinez v. Commissioner, ^[2]

T.C. Memo. 2004–150

Mirarchi v. Commissioner, ^[3]

T.C. Memo. 2004–148

Price v. Commissioner, ^[4]

T.C. Memo. 2004–149

This revenue ruling provides various prescribed rates for federal income tax purposes for February 2015 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, with respect to housing credit dollar amount allocations made before January 1, 2015 shall not be less than 9%.

Finally,Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

This notice provides rules claimants must follow to make a one-time claim for payment of the credits and payments allowable under §§ 6426(c), 6426(d) and 6427(e) of the Internal Revenue Code (Code) for biodiesel (including renewable diesel) mixtures and alternative fuels sold or used during calendar year 2014 (collectively, 2014 biodiesel and alternative fuel incentives). These rules are prescribed under § 160(e) of the Tax Increase Prevention Act of 2014 (Pub. L. 113–295) (the Act). This notice also provides instructions for how a claimant may offset its § 4081 liability with the § 6426(e) alternative fuel mixture credit, and provides instructions for how a claimant may make certain income tax claims for biodiesel, second generation biofuel, and alternative fuel.

Sections 6426(a) and (c) allow a blender of a biodiesel (including renewable diesel) mixture to claim a $1.00-per-gallon credit against its tax liability under § 4081 (relating to the tax imposed on taxable fuel). Similarly, §§ 6426(a) and (e) allow a blender of an alternative fuel mixture to claim a credit against its tax liability under § 4081, except that the credit amount is $0.50 per gallon. Sections 6426(a) and (d) allow a person that sells or uses alternative fuel as a fuel in a motor vehicle or motorboat and in aviation to claim a $0.50-per-gallon credit against the claimant’s tax liability under § 4041 (relating to the tax imposed on diesel fuel and alternative fuel).

Blenders of biodiesel (including renewable diesel) mixtures and persons that sell or use alternative fuel as a fuel in a motor vehicle or motorboat and in aviation may claim any excess credit under §§ 6426(c) or (d) as a payment under § 6427(e) or as a refundable income tax credit under § 34. As an alternative to the payments and credits allowed under §§ 6426, 6427, and 34, a blender of a biodiesel (including renewable diesel) mixture may claim a nonrefundable income tax credit under § 40A (see Section 8 of this notice for additional information).

The Code provisions that authorize these credits and payments expired for sales and uses after December 31, 2013 (September 30, 2014, in the case of any sale or use involving liquefied hydrogen), but were reinstated by the Act for sales and uses during 2014. Section 160(e) of the Act directs the Secretary of the Treasury (Secretary) to issue guidance providing for a one-time submission of claims under §§ 6426(c), 6426(d) and 6427(e) covering periods during 2014. The Act requires the guidance to provide for a 180-day period for the submission of claims (in such manner as prescribed by the Secretary) to begin no later than 30 days after the guidance is issued.

Sections 152 and 153 of the Act also reinstated Code provisions authorizing credits for second generation biofuel producers (§ 40(b)(6)) and biodiesel and renewable diesel used as fuel (§ 40A), respectively. The second generation biofuel producer credit expired for production after December 31, 2013, and was reinstated by the Act for production during 2014. The credit for biodiesel and renewable diesel used as fuel expired for sales and uses after December 31, 2013, and was reinstated by the Act for sales and uses during 2014.

This notice provides the procedure for claiming 2014 biodiesel and alternative fuel incentives. Claimants that filed “protective” or anticipatory claims during 2014 for biodiesel and alternative fuel incentives covered by this notice should refile their claims pursuant to the procedures provided in this notice. The IRS will not treat as perfected any such protective or anticipatory claims previously filed with the IRS that are not timely supplemented in accordance with these procedures.

Except as provided by this notice, the rules in Notice 2005–4, 2005–1 C.B. 289 (providing guidance on alcohol and biodiesel fuel tax credits and payments), as modified by Notice 2005–62, 2005–2 C.B. 443 (providing guidance for certain biodiesel issues not addressed in Notice 2005–4), and Notice 2006–92, 2006–2 C.B. 774 (providing guidance on alternative fuel and alternative fuel mixture taxes, credits, and payments), apply to claims for 2014 biodiesel and alternative fuel incentives.

The § 6426(e) alternative fuel mixture credit expired on December 31, 2013 (September 30, 2014, in the case of any liquefied hydrogen mixtures), and was reinstated by the Act for sales and uses during 2014. This notice prescribes a method for submitting claims relating to alternative fuel mixtures (including liquefied hydrogen mixtures, if the credit was not previously claimed) sold or used during 2014.

This notice does not affect the income tax claims described in Section 8 of the notice.

Claimants must follow the procedures listed below to make a one-time claim under this notice for payment of credits and payments allowable under §§ 6426(c), 6426(d), and 6427(e) relating to biodiesel and alternative fuel incentives.

Although a claimant may submit its claim under this notice as early as January 16, 2015, the 180-day claim period for 2014 biodiesel and alternative fuel incentives begins on February 9, 2015. Consequently, all claims for 2014 biodiesel and alternative fuel incentives must be filed on or before August 8, 2015. The IRS will not process claims filed after that date. The IRS will deem any claim that is submitted by the method prescribed in this notice before February 9, 2015, as filed on February 9, 2015.

If the IRS does not pay a 2014 biodiesel and alternative fuel incentives claim that conforms to this notice within 60 days after the claim is received, the IRS will pay the claim with interest from the claim filing date (February 9, 2015, in the case of claims submitted before that date) using the overpayment rate and method provided by § 6621 of the Code.

For 2014, all alternative fuel mixture credit claims allowed by § 6426(e), including claims for the fourth quarter, must be made on Form 720X, Amended Quarterly Federal Excise Tax Return. Although in prior years § 6426(e) claims could be made on the Form 720, Quarterly Federal Excise Tax Return, the IRS is unable to process 2014 claims on the fourth quarter Form 720 due to the timing of enactment of the Act. Failure to file a Form 720, Quarterly Federal Excise Tax Return, and remit the § 4081 tax due for any quarter in 2014 before submitting a claim allowed by § 6426(e) on Form 720X will result in delayed processing of the claim and delayed payment of refunds resulting from the credit. Similarly, failure to follow the claim procedure in this section will result in delayed processing and payment of 2014 § 6426(e) claims. Claimants are reminded that the claim for a § 6426(e) credit for any quarter may not exceed the § 4081 liability incurred in the quarter for which the credit is being claimed. Form 720X allows claimants to adjust multiple quarters on a single Form 720X.

The claim period for the 2014 alternative fuel mixture credit begins on February 9, 2015. The IRS will deem any claim that is submitted by the method prescribed in section 6 of this notice before February 9, 2015, as filed on February 9, 2015. Generally, claims for the § 6426(e) alternative fuel mixture credit must be made within three years from the time the return was filed or two years from the time the tax was paid, whichever is later.

This notice does not affect 2014 claims for the nonrefundable income tax credit under § 40(b)(6) for second generation biofuel producers. Taxpayers should continue to submit these claims separately on, and in accordance with, Form 6478, Biofuel Producer Credit. The notice also does not affect 2014 claims for the nonrefundable income tax credits under § 40A(b)(1) for biodiesel mixtures, § 40A(b)(2) for biodiesel (including renewable diesel), or under § 40A(b)(4) for the small agri-biodiesel producer credit. Taxpayers should continue to submit these claims separately on, and in accordance with, Form 8864, Biodiesel and Renewable Diesel Fuels Credit. A taxpayer must submit Form 8864 with its income tax return in accordance with the instructions to its income tax return form. Taxpayers are reminded that under § 40A(c), credits allowable under § 40A must be reduced to the extent that any benefit is claimed under §§ 6426 and 6427 with respect to the same biodiesel (including renewable diesel).

Similarly, this notice does not affect 2014 claims for the refundable income tax credit under § 34 for biodiesel mixtures or alternative fuel. Taxpayers should continue to submit these claims separately on, and in accordance with, Form 4136, Credit for Federal Tax Paid on Fuels. A taxpayer must submit Form 4136 with its income tax return in accordance with the instructions to its income tax return form. Taxpayers are reminded that under § 34(b), credits are not allowed under § 34 for any amount properly payable under § 6427 and claimed in a timely filed claim. For this purpose, the IRS will treat as timely filed any claim submitted for amounts payable under § 6427 that conforms to the rules provided in this notice.

The principal author of this notice is Amanda F. Dunlap of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Amanda F. Dunlap on (202) 317-6855 (not a toll-free number).

The IRS and the Treasury Department anticipate issuing proposed regulations under § 414(d) of the Internal Revenue Code (Code) to define the term “governmental plan.” This document describes specific rules that the IRS and Treasury Department are considering proposing that relate to whether a State or local retirement system that covers employees of a charter school is a governmental plan within the meaning of § 414(d). Section III of this notice describes the guidance under consideration, which would provide that employees of a public charter school may participate in a State or local retirement system if certain conditions are satisfied. Section IV of this notice discusses the potential for broader transition relief for governmental plans once final regulations under § 414(d) are issued. Section V of this notice requests comments on the guidance under consideration described in section III of this notice.

Section 414(d) of the Code provides that the term governmental plan generally means “a plan established and maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing.” See sections 3(32) and 4021(b)(2) of the Employee Retirement Income Security Act of 1974 (ERISA) for definitions of the term “governmental plan,” which govern for purposes of title I and title IV of ERISA, respectively.^[5]

Currently, there are no regulations interpreting § 414(d) of the Code. Neither § 414(d) of the Code nor ERISA define key terms relating to governmental plans, including the terms “established and maintained,” “political subdivision,” “agency,” and “instrumentality.” Revenue Ruling 89–49, 1989–1 C.B. 117, provides guidance for determining whether a retirement plan maintained by an organization is a governmental plan within the meaning of § 414(d). The revenue ruling lists several factors for determining whether a sponsoring organization or participating employer is an agency or instrumentality of the United States or any State or political subdivision of a State. The factors in Rev. Rul. 89–49 are similar to the factors listed in Rev. Rul. 57–128, 1957–1 CB 31, which provides guidance on whether an entity is an instrumentality that is wholly-owned by one or more States or political subdivisions of a State for purposes of the exemption from employment taxes under §§ 3121(b)(7) and 3306(c)(7) of the Code.

Rev. Rul. 57–128 lists the following factors to be considered in determining whether an organization is an instrumentality of one or more States or political subdivisions thereof: (1) whether the organization is used for a governmental purpose and performs a governmental function; (2) whether performance of its function is on behalf of one or more States or political subdivisions; (3) whether there are any private interests involved, or whether the States or political subdivisions involved have the powers and interests of an owner; (4) whether control and supervision of the organization is vested in public authority or authorities; (5) whether express or implied statutory authority or other authority is necessary for the creation and/or use of such an instrumentality, and whether such authority exists; and (6) the degree of the organization’s financial autonomy and the source of its operating expenses.

Rev. Rul. 89–49 focuses more on the degree of control that the Federal or State government has over the organization’s everyday operations than Rev. Rul. 57–128. Other factors considered in Rev. Rul. 89–49 include: whether there is specific legislation creating the organization; the source of funds for the organization; the manner in which the organization’s trustees or operating board are selected; and whether the applicable government unit considers the employees of the organization to be employees of the applicable government unit. Rev. Rul. 89–49 provides that satisfaction of one or all of the factors is not necessarily determinative of whether an organization is a governmental entity.

On November 8, 2011, the IRS and Treasury Department published an Advance Notice of Proposed Rulemaking (ANPRM) (REG–157714–06), relating to the definition of a governmental plan under § 414(d) of the Code, in the Federal Register (76 FR 69172) (§ 414(d) ANPRM). The § 414(d) ANPRM describes guidance under consideration that would set forth rules relating to the determination of whether a retirement plan is a governmental plan within the meaning of § 414(d).^[6] The guidance under consideration would define key terms relating to governmental plans, including “established and maintained,” “political subdivision,” and “agency or instrumentality.”

For purposes of determining whether an entity is an agency or instrumentality of the United States or an agency or instrumentality of a State or political subdivision of a State, the guidance under consideration described in the § 414(d) ANPRM would provide a facts and circumstances analysis. The factors used in this analysis are drawn from the factors historically used in governmental plan determinations, including the factors set forth in Rev. Ruls. 57–128 and 89–49, as well as court decisions.^[7] The factors described in the anticipated guidance described in the § 414(d) ANPRM include whether the entity’s governing board or body is controlled by a State or political subdivision; whether the members of the entity’s governing board or body are publicly nominated and elected; the extent to which a State has financial responsibility for the general debts and other liabilities of entity; and the extent to which the entity is delegated, pursuant to statute, the authority to exercise sovereign powers. For a complete discussion of each of the factors in the guidance under consideration described in the § 414(d) ANPRM, see the discussion under the heading “Definition of agency or instrumentality of a State or a political subdivision of a State” in the “Explanation of Provisions” section of the Appendix to the § 414(d) ANPRM.

The § 414(d) ANPRM requested comments from the public on the guidance under consideration. With respect to this request, members of the public charter school community submitted over 2,000 comments, which, together with all of the other comment letters received, the IRS and Treasury Department continue to review. Although the § 414(d) ANPRM does not change the law regarding or directly address whether a charter school is a governmental entity or whether employees of charter schools are permitted to participate in a governmental plan (such as a State or local retirement system), comments from members of the charter school community raised several concerns with the guidance under consideration. Mainly, the commenters expressed concern that if the guidance described in the § 414(d) ANPRM were published in its current form as a final regulation, the guidance would deter State or local retirement systems from permitting charter school employee participation in their retirement systems in order to retain their governmental plan status. Commenters indicated that this, in turn, would jeopardize the retirement security of charter school employees and adversely affect charter schools’ ability to attract and retain teachers.

Forty-two States and the District of Columbia have laws authorizing the chartering of independent public schools of choice. These schools, often referred to as public charter schools, are generally funded with public revenue on a per-pupil basis. Public charter schools do not charge tuition, are open to all students within a specified geographic boundary, and are viewed by States as part of the public school system. However, public charter schools typically operate independently of the governance structures that generally are in place for other public schools, such as a district board of education.

In general, States that authorize public charter schools either require or permit public charter school employees to participate in their State retirement systems. In response to the § 414(d) ANPRM, commenters from the public charter school community expressed concern that the autonomy granted to public charter schools would mean that charter school employees would not be able to continue participation in State or local retirement systems. Commenters argued that Congress intended charter schools to be treated as public schools, but recognized that charter schools were not subject to governmental control in the same manner as traditional public schools.^[8] Commenters requested that, when the guidance under consideration described in the § 414(d) ANPRM is ultimately issued, the guidance permit participation of public charter school employees in governmental plans. One request was that the proposed regulations provide the use of a safe harbor to permit public charter school employees to participate in State or local retirement systems. Other requests included that the proposed regulations provide a revised set of factors, without distinction between main factors and other factors, that a typical public charter school would more clearly satisfy; that the proposed regulations include an example under the facts and circumstances test showing that a typical public charter school is an agency or instrumentality of a State or political subdivision of a State; and that the proposed regulations provide a grandfathering rule permitting current and future public charter school employees to participate in a State or local retirement system.

After review and consideration of comments received with respect to the § 414(d) ANPRM, the IRS and Treasury Department are considering issuing the guidance described in section III.A of this notice relating to whether a State or local retirement system that covers employees of a public charter school is a governmental plan within the meaning of § 414(d). The guidance under consideration would take into account the special and unique nature of public charter schools, the governance structure associated with these schools, the structure of many public school systems that permit or encourage public school teachers to move between public charter and traditional public schools, and the relationship between public charter schools and the agencies authorized by the State or political subdivision of the State (such as an authorized public chartering agency as defined in 20 U.S.C. § 7721i(4)) that hold these schools accountable for academic results. It is expected that the principles described in section III.A of this notice would apply regardless of whether the retirement plan is a defined benefit, defined contribution, § 403(b), or § 457(b) governmental plan. The IRS and Treasury Department intend the guidance described in section III.A of this notice to cover only employees of public charter schools and anticipate that the effect of participation of employees of entities other than public charter schools in a State or local retirement system on the system’s status as a governmental plan under § 414(d) of the Code would be determined in accordance with the general rules set forth in the regulations after final regulations under § 414(d) are issued.

Comments are requested regarding the guidance under consideration that is described in III.A of this notice. Comments are also requested regarding whether the requirements of the guidance under consideration described in section III.A of this notice are sufficient to limit the guidance to participation of employees of public charter schools in a State or local retirement system and, for example, to not cover participation of employees of entities that provide management or other services to public charter schools. Written comments should be submitted by May 11, 2015. Send submissions to CC:PA:LPD:PR, (Notice 2015–07), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044. Comments may also be hand delivered Monday through Friday between the hours of 8 a.m. and 4:00 p.m. to: Internal Revenue Service, CC:PA:LPD:PR, (Notice 2015–07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington DC. Alternatively, comments may be submitted via the Internet at notice.comments@irscounsel.treas.gov (Notice 2015–07). All comments will be available for public inspection.

The principal author of this notice is Pamela R. Kinard of the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this notice, contact Ms. Kinard or Sarah Bolen at (202) 317-6799 (not a toll-free number).

This notice provides guidance on section 45R of the Internal Revenue Code

(Code) for certain small employers that cannot offer a qualified health plan (QHP) through the Small Business Health Options Program (SHOP) Exchange because the employer’s principal business address is in a county in Iowa in which a QHP through a SHOP Exchange will not be available for all or part of 2015 calendar year. Section IV of this notice includes a list of those counties. With respect to those employers in Iowa, this notice provides guidance on how to satisfy the requirements for the section 45R credit for coverage provided during the 2015 calendar year and the portion of a health plan year beginning in 2015, if any, that continues into 2016. (See Notice 2014–6, 2014 I.R.B. 279, for guidance on counties in other states in which a QHP through a SHOP Exchange might not be available during 2014.)

Section 45R was added to the Code by section 1421 of the Patient Protection and Affordable Care Act, enacted March 23, 2010, Pub. L. No. 111–148. Section 45R offers a tax credit to certain small employers that provide health insurance coverage to their employees (eligible small employers). The credit generally is available for taxable years beginning after December 31, 2009. For taxable years beginning after December 31, 2013, the credit is available only with respect to premiums paid by a small employer for a QHP offered by the employer to its employees through a SHOP Exchange, and is available only for a period of two-consecutive-taxable years. Additionally, for taxable years beginning after December 31, 2013, the maximum credit rate is increased to 50 percent from 35 percent for eligible small employers (and to 35 percent from 25 percent for tax-exempt eligible small employers). An eligible small employer may claim the credit by filing an income tax return and attaching Form 8941, “Credit for Small Employer Health Insurance Premiums” (or in the case of tax-exempt eligible small employers, filing Form 990–T, “Exempt Organization Business Income Tax Return,” and attaching Form 8941).

The Treasury Department and the IRS issued final regulations under section 45R on June 30, 2014 (79 FR 36640). The regulations provide guidance on determining eligibility for the credit and calculating and claiming the credit.

The Treasury Department and the IRS have been advised by the Department of Health and Human Services (HHS) that for calendar year 2015 the SHOP Exchanges in Iowa will not have QHPs available in certain counties for employers to offer to their employees. Under HHS regulations governing employer eligibility for SHOP Exchanges, an employer may either (1) offer coverage to all of its eligible full-time employees through the SHOP whose service area includes the employer’s principal business address, or (2) offer coverage to each eligible full-time employee through the SHOP whose service area includes that employee’s primary worksite. 45 CFR 155.710(b)(3). Under either approach, an employer may offer SHOP coverage to employees whose primary worksite is at its principal business address only if that address is located within the service area of the SHOP. As a result, absent the relief provided in this notice, an otherwise eligible small employer with its principal business address in a county without any QHPs available would be denied the opportunity to claim the section 45R credit for 2015. To provide these otherwise eligible small employers an opportunity to claim the section 45R credit for 2015, this notice provides relief for those employers for the plan year of the employer’s group health plan beginning in 2015, including any portion of that plan year that continues into 2016, with respect to employees whose primary worksite is at the employer’s principal business address.

On December 17, 2013, the Treasury Department and the IRS issued Notice 2014–6, 2014–2 I.R.B. 279, which provided transition relief for employers in certain counties in Washington and Wisconsin with no SHOP coverage available in 2014. The Treasury Department and the IRS have determined that similar relief, described in section III of this notice, is appropriate for employers in certain counties in Iowa with no SHOP coverage available in 2015. Nothing in this notice is intended to modify or otherwise affect the relief provided in Notice 2014–6.

An eligible small employer with a principal business address in one of the counties listed in section IV below may calculate the credit under section 45R by treating health insurance coverage provided for the 2015 health plan year as qualifying for the section 45R credit, provided that that the coverage would have qualified for a credit under section 45R under the rules applicable before January 1, 2014. This treatment applies with respect to the coverage provided during the 2015 calendar year and during any portion of a health plan year beginning in 2015 that continues into 2016. If the eligible small employer claims the section 45R credit for the 2015 taxable year, then the credit will be calculated at the 50 percent rate (35 percent for tax-exempt eligible small employers) for the entire 2015 taxable year. If the eligible small employer first claims the section 45R credit for the 2015 taxable year, the 2015 taxable year will be the first year of the two-consecutive-taxable year credit period. If the eligible small employer first claims the section 45R credit for the 2014 taxable year, then the 2015 taxable year will be the second year of the two-consecutive-taxable year credit period, regardless of whether the eligible small employer takes advantage of the relief in this notice regarding the credit for coverage provided under the rules applicable before January 1, 2014.

The relief in this notice is illustrated by the following examples. The examples assume that the employer is an eligible small employer that is not a tax-exempt employer, and that its principal business address is in a county listed in this notice.

Example 1. (i) Facts. Employer does not claim the credit for coverage provided for its 2014 taxable year. Employer has a 2015 health plan year and a 2015 taxable year that both begin January 1, 2015, and end December 31, 2015. Employer provides health insurance coverage from January 1, 2015, through December 31, 2015, that would have qualified Employer for a credit under section 45R under the rules applicable to taxable years beginning before January 1, 2014.

(ii) Conclusion. Employer may claim the credit at the 50 percent rate under section 45R for coverage provided for the entire 2015 taxable year. If Employer claims the credit for coverage provided for the 2015 taxable year, the 2015 taxable year is the first year of its two-consecutive-taxable year credit period.

Example 2. (i) Facts. Employer does not claim the credit for coverage provided for its 2014 taxable year. Employer has a 2015 taxable year that begins January 1, 2015, and ends December 31, 2015, and a 2015 health plan year that begins April 1, 2015, and ends March 31, 2016. From April 1, 2015 through December 31, 2015 (the initial months of its plan year that begins April 1, 2015) and from January 1, 2016 through March 31, 2016, Employer provides coverage that would have qualified Employer for a credit under section 45R under the rules applicable to taxable years beginning before January 1, 2014.

(ii) Conclusion. Employer may claim the credit at the 50 percent rate under section 45R for coverage provided from April 1, 2015 through December 31, 2015. Employer may also claim the credit under section 45R for coverage provided for its 2016 taxable year from January 1, 2016 through March 31, 2016 (in addition to any credit under section 45R for which Employer is eligible based on coverage provided from April 1 through December 31 of the 2016 taxable year).

Example 3. (i) Facts. Employer has a 2015 taxable year that begins January 1, 2015 and ends December 31, 2015, and a 2015 health plan year that begins May 1, 2015 and ends April 30, 2016. Employer provided coverage through a SHOP plan for 2014 and qualifies for, and claims, the credit for 2014. In 2015, Employer provides coverage through a SHOP plan for January 2015. Beginning February 1 and through April 30, 2015, Employer provides coverage with a policy for the remainder of the plan year that would have qualified Employer for a credit under section 45R under the rules applicable to taxable years beginning before January 1, 2014. From May 1, 2015, through December 31, 2015 (the initial months of its plan year that begins May 1, 2015), and from January 1, 2016, through April 30, 2016, Employer provides coverage that would have qualified Employer for a credit under section 45R under the rules applicable to taxable years beginning before January 1, 2014.

(ii) Conclusion. Employer may claim the credit at the 50 percent rate under section 45R for coverage provided from January 1, 2015, through December 31, 2015. Employer may not claim the credit under section 45R for coverage provided for its 2016 taxable year because its two-consecutive-taxable year period ends with 2015.

Adair, Adams, Appanoose, Audubon, Benton, Black Hawk, Boone, Bremer, Buchanan, Buena Vista, Butler, Calhoun, Carroll, Cass, Cedar, Cerro Gordo, Cherokee, Chickasaw, Clarke, Clinton, Crawford, Dallas, Davis, Decatur, Delaware, Des Moines, Dubuque, Floyd, Franklin, Fremont, Greene, Grundy, Guthrie, Hamilton, Hancock, Hardin, Harrison, Henry, Humboldt, Iowa, Jackson, Jasper, Jefferson, Johnson, Jones, Keokuk, Kossuth, Lee, Linn, Louisa, Lucas, Madison, Mahaska, Marion, Marshall, Mills, Mitchell, Monona, Monroe, Montgomery, Muscatine, Page, Palo Alto, Pocahontas, Polk, Pottawattamie, Poweshiek, Ringgold, Sac, Scott, Shelby, Story, Tama, Taylor, Union, Van Buren, Wapello, Warren, Washington, Wayne, Webster, Winnebago, Worth, Wright.

This notice is effective as of January 16, 2015 and applies to periods after December 31, 2014.

The principal author of this notice is Stephanie Caden of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this notice contact Stephanie Caden at (202) 317-5500 (not a toll-free number).

This Notice provides limited relief for taxpayers who have a balance due on their 2014 income tax return as a result of reconciling advance payments of the premium tax credit against the premium tax credit allowed on the tax return. Specifically, this Notice provides relief from the penalty under § 6651(a)(2) of the Internal Revenue Code for late payment of a balance due and the penalty under § 6654(a) for underpayment of estimated tax. To qualify for the relief, taxpayers must meet certain requirements described below. This relief applies only for the 2014 taxable year.

This relief does not apply to any underpayment of the individual shared responsibility payment resulting from the application of § 5000A because such underpayments are not subject to either the § 6651(a)(2) penalty or the § 6654(a) penalty.

Section 6651(a)(2) imposes a penalty on a failure to pay (on or before the due date for payment, including any extension of time for payment) an amount shown as tax on any return. However, the § 6651(a)(2) penalty is not imposed if the taxpayer shows that the failure was due to reasonable cause and not willful neglect. In general, individuals must pay the tax shown on the return by April 15.

Section 6654(a) imposes a penalty in the case of an underpayment of estimated tax by an individual. Generally, taxpayers are required to make tax payments on non-wage income in quarterly installments. An underpayment of estimated tax is the excess of the required quarterly estimated tax payment over the amount actually paid on or before the due date for the payment. Most taxpayers will avoid this penalty if they owe less than $1,000 in tax on their 2014 income tax return after subtracting their withholding, or if their withholding and estimated taxes total at least 90% of the tax for taxable year 2014, or 100% of the tax shown on their 2013 taxable year return. Additionally, § 6654(e)(3) authorizes the Internal Revenue Service (the Service) to waive the § 6654(a) penalty for underpayments of estimated tax in unusual circumstances to the extent its imposition would be against equity and good conscience.

Beginning in 2014, an eligible individual covered, or whose family member is covered, under a qualified health plan through an Affordable Insurance Exchange (Exchange), also called a Health Insurance Marketplace, is allowed a premium tax credit under § 36B.

Section 1412 of the Patient Protection and Affordable Care Act, Pub. L. No. 111–148, 124 Stat. 119, and the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111–152, 124 Stat. 1029, provides that a taxpayer may receive assistance in paying premiums for coverage in a qualified health plan through advance payments of the premium tax credit. Advance credit payments are made directly to the insurance provider. The amount of the advance credit payments is determined when an individual enrolls in a qualified health plan through an Exchange and is based on projected household income and family size for the year of coverage.

A taxpayer claims the premium tax credit on the income tax return for the taxable year of coverage. The amount of the credit is based on actual household income and family size for the year reflected on the tax return. Under § 36B(f)(2) and § 1.36B–4(a)(1)(i) of the Income Tax Regulations, a taxpayer must reconcile, or compare, the amount of premium tax credit allowed on the tax return with advance credit payments. Changes in the circumstances on which the advance credit payments are based could result in a difference between the amount of advance credit payments and the premium tax credit to which the taxpayer is entitled. If advance credit payments are more than the premium tax credit allowed on the return, the difference (excess advance payments) is treated as additional tax and may result in either a smaller refund or a larger balance due (or, if the premium tax credit allowed is more than the advance credit payments made, the excess credit amount may result in a larger refund or lower balance due). Taxable year 2014 is the first year for which taxpayers will be required to reconcile advance credit payments with the premium tax credit.

Some taxpayers who have a balance due on their 2014 income tax returns attributable to the reconciliation of their advance credit payments and the premium tax credit calculated on their returns may not be able to pay by the due date for payment, generally April 15. Taxpayers who do not pay their entire tax liability by the due date for payment generally would be liable for the § 6651(a)(2) penalty for failure to pay, unless they requested and were granted relief due to reasonable cause. Additionally, some taxpayers may discover when they reconcile advance credit payments with the premium tax credit that their estimated tax payments were understated, potentially making these taxpayers liable for the § 6654(a) estimated tax penalty. Therefore, in consideration of these factors, and consistent with the authority in § 6651(a)(2) and § 6654(e)(3) to provide relief from penalties for taxpayers, this Notice provides relief from the § 6651(a)(2) and § 6654(a) penalties for taxpayers who satisfy the requirements in this Notice.

Pursuant to this Notice, the Service will abate the § 6651(a)(2) penalty for taxable year 2014 for taxpayers who (i) are otherwise current with their filing and payment obligations; (ii) have a balance due for the 2014 taxable year due to excess advance payments of the premium tax credit; and (iii) report the amount of excess advance credit payments on their 2014 tax return timely filed, including extensions (Line 46 of Form 1040 or Line 29 of Form 1040A).

Further, the Service will waive the § 6654 penalty for taxable year 2014 for an underpayment of estimated tax for taxpayers who have an underpayment attributable to excess advance credit payments if the taxpayers (i) are otherwise current with their filing and payment obligations; and (ii) report the amount of the excess advance credit payments on a 2014 tax return timely filed, including extensions.

For purposes of this Notice, taxpayers will be treated as current with their filing and payment obligations if as of the date they file their 2014 income tax returns, they (i) have filed, or filed an extension for, all currently required federal tax returns, and (ii) paid or have entered into an installment agreement (which is not in default), an offer in compromise, or both to satisfy a federal tax liability. If a taxpayer has not paid a tax due because there is a genuine dispute between the taxpayer and the Service that has not been finally determined as to the existence or amount of the correct tax liability under the law, then the amount of tax in dispute will be treated as being current during the pendency of the dispute.

Taxpayers should be aware that this Notice does not extend the time to file a return. To obtain an automatic extension of time to file, a taxpayer should file Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return,” on or before April 15, 2015. Additionally, § 6601 imposes interest on amounts of tax not paid by the due date, determined without regard to an extension of time for payment. Taxpayers will be required to pay interest on the balance due from the original deadline to pay, which is generally April 15, 2015, even if they qualify for penalty relief under this Notice. Nothing in this Notice affects the ability of a taxpayer to claim relief based on existing law and procedures.

The principal author of this Notice is Danielle W. Pierce of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this Notice, contact Danielle Pierce at (202) 317-6845 (not a toll-free number).