n-04-47.pdf

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Part III. Administrative, Procedural, and Miscellaneous

Information Reporting for Advance Payments of Health Coverage Tax Credit

Notice 2004-47

PURPOSE
This notice provides that the HCTC Transaction Center (Transaction Center), as
an administrator of the Health Coverage Tax Credit (HCTC), will file and furnish the
information returns and statements required by § 6050T of the Internal Revenue Code,
unless the health insurance provider notifies the Transaction Center that the provider
will file and furnish information returns and statements.

BACKGROUND

Health Credit

Section 35 provides that under certain conditions, individuals affected by foreign
trade competition or receiving benefits from the Pension Benefit Guaranty Corporation
may claim the HCTC for a portion of their health insurance expenses. The credit is 65
percent of the eligible individual’s expenses for qualified health insurance coverage.

Advance Payment of the Health Credit

Section 7527 provides for advance payment of the credit, in the form of
payments from the Treasury Department to the individual’s health insurance provider.
Such payments reduce the premiums the individual would otherwise owe the provider
and, accordingly, reduce the amount of the HCTC available to be claimed on the eligible
individual’s income tax return.

Information Reporting of Advance Payments

Section 6050T requires the providers to file information returns with the Service
reporting advance payments the providers receive from the Treasury Department, and
to furnish the insureds an information statement showing the information filed with the
Service. The returns required of providers under § 6050T must contain, among other
things, the name, address, and taxpayer identification number of insureds who have
been declared eligible to benefit from the advance payments described in § 7527. The
information returns and statements required by § 6050T enable the Service and
taxpayers to ensure that taxpayers do not claim excessive credits on their income tax
returns. Form 1099-H,
Health Coverage Tax Credit (HCTC) Advance Payments, has
been developed for providers to use in meeting this reporting obligation.

ADMINISTRATION OF THE PROGRAM

2
The Treasury Department is administering the HCTC program by using
a HCTC Customer Contact Center and a HCTC Transaction Center to perform
various administrative duties relating to the program. The Transaction Center will,
among other things, collect the insured’s portion of the premium and forward the total
premium, which includes the advance payment, to health insurance providers through
health plan administrators.

INFORMATION REPORTING OBLIGATIONS OF HEALTH INSURANCE PROVIDERS
UNDER THE HCTC PROGRAM

Under the program developed to administer the HCTC advance payment
program, the Transaction Center will know the amount of those advance payments, and
the identity of the individuals who benefit from the payments. Accordingly, the
Transaction Center will have the information that the health insurance provider would
otherwise have to file with the Service (and furnish to the insureds) pursuant to § 6050T.
The Treasury Department and the Service believe that it is in the interest of sound tax
administration to allow health insurance providers to use the Transaction Center to
satisfy their information reporting obligations under § 6050T and not require the
providers to file information returns with the Service or furnish information statements to
the insureds. A health insurance provider receiving advance payments from the
Transaction Center will be deemed to have elected to have the Transaction Center file
these information returns and furnish these statements unless the provider notifies the
Transaction Center that the provider will file Forms 1099-H with the Service and furnish
those forms to insured individuals. Therefore, unless the health insurance provider
notifies the Transaction Center that the provider will file and furnish information returns
and statements under § 6050T, the Transaction Center will take those actions instead.
The Transaction Center may be contacted for this purpose by calling 1-866-628-4282.

WAIVER OF PENALTIES

Section 6724(a) authorizes the Service to waive any penalties for failures to
comply with § 6050T if such failures resulted from reasonable cause and not willful
neglect. The Service will not assert the penalties imposed by §§ 6721 and 6722 for
information returns and statements required to be filed and furnished regarding advance
payments made to health insurance providers against providers that elect to allow the
Transaction Center to file and furnish Forms 1099-H. If a health insurance provider
does not elect to allow the Transaction Center to file and furnish Forms 1099-H, the
normal rules for seeking a penalty waiver under §6724(a) will apply. (See § 301.6724-1
of the Regulations on Procedure and Administration.)

CONTACT FOR INFORMATION
The principal author of this notice is Nathan Rosen of the Office of the Associate
Chief Counsel (Procedure & Administration), Administrative Provisions and Judicial
Practice Division. For further information regarding this notice, contact Nathan Rosen at
(202) 622-4910 (not a toll-free call).