Congressional Subcommittees Investigate ACA Employer Reporting and Individual Tax Credits

Yesterday the Health and Oversight Subcommittees on House Committee on Ways and Means conducted a hearing surrounding tax subsidies under the Affordable Care Act.  Health Subcommittee Chairman Kevin Brady (R-TX) and Oversight Subcommittee Chairman Charles Boustany (R-LA) convened the joint hearing to discuss the income verification system used to determine individuals’ eligibility for tax credits to purchase insurance, and to address reports of incorrect tax credit payments being issued and later reclaimed by the Internal Revenue Service (IRS).  The panel of witnesses included experts in health and tax policy including Douglas Holtz-Eakin, President of the American Action Forum and Katie Mahoney, Executive Director of Health Policy for the U.S. Chamber of Commerce.

Much like the sentiment towards the law itself, the views expressed in the joint hearing were split among partisan lines.  In opening remarks, Chairman Brady and Chairman Boustany expressed deep concern with the lack of accountability and efficiency with the current income verification system and eligibility requirements for tax credits.  Chairman Brady noted that, “Today, eight months after the start of open enrollment and well over a month after the extended open enrollment ended, the income and eligibility verification system is not completed.  And the burden and the cost of that failure will fall on the American people.  That is simply unfair and unacceptable.” Without proper income verification, individuals in some cases are receiving incorrect tax credits, which they are then required to repay months later when filing tax returns.  In order for the verification system to function correctly, massive amounts of data is required to be submitted by employers.  However, due to delays in the employer mandate, the regulations around employer reporting requirements have also been delayed.  During her testimony, Katie Mahoney from the U.S. Chamber of Commerce acknowledged that it is absolutely necessary for more flexibility for employers to come into compliance with the regulations of the ACA.

The International Franchise Association has submitted comments regarding employer reporting requirements to the IRS and Department of the Treasury as part of a coalition striving to increase flexibility for employers.  Accurate employer reporting is crucial to the success of other parts of the ACA, but it must be implemented responsibly and without disrupting employers who have already seen large cost increases because of the employer mandate to provide health insurance to employees.  In addition to pushing for changes to the definition of full-time employee, the IFA will continue to protect franchise business owner’s interests from the potentially harmful effects of the ACA requirements.

Sen. Manchin Meets with Public on ACA Fix

 

 

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Earlier this week, Senator Joe Manchin (D-WV) visited a Burger King location in Vienna, West Virginia as part of a week-long tour of businesses in the state.  The meeting, attended by members of the business community and local elected officials, primarily concerned the need to reform the definition of full-time employee in the Affordable Care Act’s Employer Mandate.

Under the health law, employees who work an average of 30 or more hours per week are considered full-time employees, a number which bucks the long-time industry standard of 40 hours per week to qualify for full-time status.  Businesses with more than 50 full-time employees would either have to offer affordable health coverage or face hefty penalties.  The mandate’s additional cost burdens would have a devastating impact on small businesses, particularly those in the franchise community.

Matt Herridge of Charlton Management, the company that owns the Burger King location where the meeting was held, said that providing health coverage to employees not normally considered full-time would cost his business more than $6,000 per employee who received coverage.  The possibility of dramatically increased labor expenses is already forcing his business to weigh personnel management policy changes.

“If we start providing that to every single worker here, we would be out of business within a month,” Herrige told the Parkersburg News and Sentinel.  “Most businesses like us have cut folks back to under 30 hours. What we will have to consider later this year is whether we will follow suit or not.”

Sen. Manchin has taken leadership on this issue, cosponsoring S. 1188: the Forty Hours is Full Time Act of 2013.  The bipartisan legislation would raise the threshold for full-time status in the Affordable Care Act to the industry-standard 40 hours per week.  Companion legislation has already been introduced in the House as H.R. 2575: the Save American Workers Act of 2013.

IFA strongly supports efforts to reform the definition of full-time employee, and is working with its industry partners to ensure to legislators are fully aware of the challenges facing businesses struggling to comply with the Affordable Care Act.

For more information, please see this joint IFA and U.S. Chamber of Commerce on the impact that the Employer Mandate’s definition of full time has on businesses.

The Time is Now: Start Preparing for the Employer Mandate

This time next year, the major provisions of the Affordable Care Act, including the individual and employer mandates, will be in full effect.  Even earlier, in October of this year, the first Health Insurance Marketplaces will open.  2014 will see tax hikes, regulations, paperwork, and headaches for franchise small business owners across the country.

The 2013 IFA Convention in Las Vegas will feature a session entitled “The Health Care Law and Your Business: What You Need to Know.”    Hear the perspective of a multi-unit franchisee, a health care policy expert, and a veteran insurance broker in a terrific panel that will explore the ACA’s impact on franchising, the most newest health care regulations, and how franchise owners can prepare for 2014.

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To expand its education efforts surrounding the ACA, IFA is offering to help franchise companies host webinars on ACA employer requirements for franchisees and other stakeholders.  These hour-long sessions include information on key definitions, tax penalties, communications strategies and other topics as well as a Q&A session with a health care expert from Washington Council Ernst & Young.  For more information on this member service, please contact IFA’s Kevin Serafino at kserafino@franchise.org.

U.S. Chamber says economic growth should be “front and center” in 2013; tax reform can “turbo-charge” growth

This morning, IFA was fortunate to have a front row seat at the annual “State of American Business” event at the headquarters of the U.S. Chamber of Commerce, the world’s largest business association located across Lafayette Park from the White House. The event, which brings together representatives from trade associations representing all sectors of the U.S. economy, sets the tone for the annual lobbying agenda for the business community.

U.S. Chamber President Tom Donohue

Chamber President Tom Donohue laid out a series of pro-growth priorities sure to excite anyone in the franchise industry who is frustrated with the ongoing pace of the recovery. According to Donohue, the American Jobs and Growth Agenda would generate stronger economic growth by producing more American energy, expanding American trade, modernizing our regulatory system, and reforming our immigration and visa policies. The agenda also emphasizes the urgent need to address the fiscal crisis with a bold plan that slows the growth of runaway spending, reforms entitlement programs, and overhauls our tax code. According to IHS Global Insight, franchise businesses have been on a slow, but steady, recovery from the recession, and now stand poised to accelerate growth plans if more confidence could be instilled in the economy for existing and prospective franchise investors. As such, Donohue’s comments and the Chamber’s agenda in the year ahead should be welcome news to franchisees, franchisors or prospective franchise investors.

“Economic growth cannot solve all of our problems, but without growth, we will not be able to solve any of them,” said Donohue. “The imperative of economic growth should not be an afterthought. It must be job one. The over-riding objective of this ambitious plan is to generate stronger economic growth in order to create jobs, lift incomes, and expand opportunity for all Americans. America needs big solutions so it’s time to put the smallness of politics aside. We call upon all of America’s leaders in and out of government to put country first.”

Specifically addressing the need for comprehensive tax reform, which is a top priority for IFA, Donohue cautioned lawmakers against using tax reform as a vehicle to continue their reckless spending habits. “Tax reform is not a substitute for spending restraint. It must be done after or concurrent to spending cuts. The right kind of tax reform will turbo-charge our growth, create jobs, and generate more revenues for government at all levels” He warned that the tax increases recently levied on small businesses as a result of the end-of-year fiscal cliff deal will hold back growth in the first part of the year.

“As illustrated by the Chamber’s latest survey of small business members, there is significant uncertainty over health care, regulations, taxes, and deficits,” he said. The Chamber’s Small Business Survey results echo IFA’s latest member survey, which showed the uncertainty of numerous regulatory and public policy challenges were holding back growth.

In IFA’s survey, 64 percent of franchisors report the Affordable Care Act will create some significant uncertainty in long-term planning and healthcare reforms will create significant uncertainty in long-term planning for 71.6 percent of franchisee respondents. More than 10 percent agreed with the statement: “We are no longer confident that our business model is profitable.”

The Chamber forecasts growth of 1.5-1.75 percent in the first half of 2013, with growth accelerating to as high as 2.5 percent in the second half of the year. But Washington “deadlines” in the coming weeks and months, such as the need to raise the debt ceiling and pass a budget, may overshadow growth and will continue to shake the confidence of the business community.

On the bright side, if Congress can address these policies, it will likely accelerate job creation and franchise development across the nation. According to IFA President & CEO Steve Caldeira, franchise growth remains slow due to the rising tax burden placed on small business franchisees and the out of control spending by Washington on entitlement programs.

“While we are pleased the industry continues growing at faster rates than other sectors of the economy, we could be growing much faster, creating more new jobs and businesses, if Washington addressed the tax, spending and regulatory uncertainty plaguing the small business community in a meaningful way,” Caldeira said during the recent unveiling of IFA’s 2013 economic forecast for franchising.

To read or watch the full speech, please click here.

IRS issues employer mandate details

IRS issues employer mandate guidance (REUTERS)

IRS issues employer mandate guidance (REUTERS)

The IRS yesterday (December 28, 2012) issued a Notice of Proposed Rulemaking on the employer requirements under the Affordable Care Act (Internal Revenue Code §4980H), many of which will take effect on January 1, 2014.

The mandate will require “applicable large employers” to either offer full-time employees (and their dependents) an “affordable” health benefits package that meets a “minimum value” standard, or face possible penalties. Applicable large employers are defined as employers with 50 or more full-time-equivalent employees. IFA is reviewing the extensive 144 page rule, which was accompanied by a Q&A document, and will have a full analysis soon. The full rule is available here.

Also, IFA is offering franchise system webinars for IFA members interested in learning about the details of the law’s requirements, penalties and other implications for franchise businesses. To request a webinar, please email Kevin Serafino (kserafino@franchise.org).

In yesterday’s rule, the proposed regulations put forth are organized as follows:

· Definitions

· Rules for determining status as an applicable large employer and applicable large employer member

· Rules for determining full-time employees

· Rules for determining assessable tax payments under IRC §4980H(a)

· Rules for determining whether an employer is subject to assessable tax payments under section IRC §4980H(b)

· Rules relating to the administration and assessment of assessable tax payments under IRC §4980H

· Rules relating to transition relief in certain circumstances

The notice of proposed rulemaking is scheduled for publication in the January 2, 2013, Federal Register, and comments are due by March 18, 2013. In addition, the IRS announced a public hearing on the notice of proposed rulemaking for April 23, 2013, at 10 am. IFA will be submitting formal comments building upon the extensive comments already submitting regarding the law.