The Internal Revenue Service has issued guidance for the 2014 fee year on how the IRS and the Treasury Department will administer the definition of a “covered entity” for purposes of the health insurance fee under the Affordable Care Act. 

Notice 2014-47 applies only to the 2014 fee year, the IRS cautioned. The notice aims to resolve confusion as to the scope of the exclusions in Section 9010(c)(2) of the Tax Code from the general definition of the term “covered entity.” The notice also clarifies that a controlled group does not have to report for a controlled group member who would not qualify as a covered entity in the 2014 fee year if it were a single-person covered entity.

Section 9010(c)(1) defines the term “covered entity” to mean any entity that provides health insurance for any U.S. health risk during the calendar year in which the fee is due, such as the 2014 fee year. Generally, Section 9010(c)(2) excludes from the definition of a covered entity (a) self-insured employers; (b) governmental entities; (c) certain nonprofit corporations; and (d) non-employer established Section 501(c)(9) entities.

For the 2014 fee year, the IRS and Treasury will not treat any entity as a covered entity if it is excluded from the definition because it qualifies for one of the exclusions under Section 9010(c)(2) for the entire 2013 data year or qualifies for one of the exclusions under Section 9010(c)(2) for the entire 2014 fee year, which began on Jan. 1, 2014.

Since the IRS and the Treasury will not treat such an entity as a covered entity, it should not report its net premiums written for the 2013 data year. In addition, for the 2014 fee year, a controlled group must report net premiums written only for those people who are controlled group members at the end of the day on Dec. 31 of the 2013 data year and who would qualify as a covered entity in the fee year if it were a single-person covered entity.

A controlled group should not report net premiums written for any controlled group member who would not qualify as a covered entity in the 2014 fee year if it were a single-person covered entity. Such an entity will be treated as a member of the controlled group for other purposes, however, such as joint and several liability for the fee amount allocated to the controlled group.

The IRS said it plans to issue additional guidance in the future on the scope of the exclusions in Section 9010(c)(2) from the general definition of the term “covered entity” for fee years after the 2014 fee year.

Any entity that needs to correct a previously submitted Form 8963, “Report of Health Insurance Provider Information,” due to the clarification provided in the new notice should do so by faxing the corrected Form 8963 to (877) 797-0235 no later than Monday, Aug. 18, 2014. The IRS said it cannot process a Form 8963 received after this date.

The IRS said it and the Treasury recognize that entities will not know whether they qualify for one of the exclusions under Section 9010(c)(2) for the entire 2014 fee year until the end of 2014. Entities that reasonably project that they will qualify for an exclusion under Section 9010(c)(2) for the entire 2014 fee year may submit a corrected Form 8963 on or before Aug. 18, 2014, even though the 2014 fee year is not yet over.