On August 14, 2013, the IRS issued a "document [that] contains final regulations relating to the disclosure of return information under section 6103(l)(21) of the Internal Revenue Code, as enacted by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010." Regulations Pertaining to the Disclosure of Return Information to Carry Out Eligibility Requirements for Health Insurance Affordability Programs, T.D. 9628, 2013-36 I.R.B. 169 (Aug. 14, 2013). "The [new] regulations define certain terms and prescribe certain items of return information in addition to those items prescribed by statute that will be disclosed, upon written request, under section 6103(l)(21) [of the Code." Id.
As alluded to above, the Internal Revenue Code now provides that
[t]he Secretary [of the Treasury], upon written request from the Secretary of Health and Human Services, shall disclose to officers, employees, and contractors of the Department of Health and Human Services return information of any taxpayer whose income is relevant in determining any premium tax credit under [26 U.S.C.] section 36B or any cost‑sharing reduction under section 1402 of the Patient Protection and Affordable Care Act or eligibility for participation in a State medicaid program under title XIX of the Social Security Act, a State's children's health insurance program under title XXI of the Social Security Act, or a basic health program under section 1331 of Patient Protection and Affordable Care Act.
26 U.S.C. § 6103(l)(21)(A) (emphasis added). Section 6103(l)(21)(A) goes on to say that
[s]uch return information shall be limited to—
(i) taxpayer identity information with respect to such taxpayer,
(ii) the filing status of such taxpayer,
(iii) the number of individuals for whom a deduction is allowed under section 151 with respect to the taxpayer (including the taxpayer and the taxpayer's spouse),
(iv) the modified adjusted gross income (as defined in section 36B) of such taxpayer and each of the other individuals included under clause (iii) who are required to file a return of tax imposed by chapter 1 for the taxable year,
(v) such other information as is prescribed by the Secretary by regulation as might indicate whether the taxpayer is eligible for such credit or reduction (and the amount thereof), and
(vi) the taxable year with respect to which the preceding information relates or, if avapplicable, the fact that such information is not available.
Id. The Code also says that
[t]he Secretary of Health and Human Services may disclose to an Exchange established under the Patient Protection and Affordable Care Act or its contractors, or to a State agency administering a State program described in subparagraph (A) or its contractors, any inconsistency between the information provided by the Exchange or State agency to the Secretary and the information provided to the Secretary under subparagraph (A).
Id. § 6103(l)(21)(B). Section 6103 then says that
[r]eturn information disclosed under subparagraph (A) or (B) may be used by officers, employees, and contractors of the Department of Health and Human Services, an Exchange, or a State agency only for the purposes of, and to the extent necessary in—
(i) establishing eligibility for participation in the Exchange, and verifying the appropriate amount of, any credit or reduction described in subparagraph (A),
(ii) determining eligibility for participation in the State programs described in subparagraph (A).
Id. § 6103(l)(21)(C).
The Regulations that were recently promulgated by the Department of the Treasury elaborate upon the above-quoted information-sharing provisions of 26 U.S.C. § 6103(l)(21). Under the new Regulations, the IRS must share the following types of information when asked to do so by certain federal and state agencies, and their contractors: (1) for each relevant taxpayer for the reference year where the amount of Social Security benefits not included in gross income is unavailable: (i) the aggregate of adjusted gross income under 26 U.S.C. § 62, any amount excluded from gross income under 26 U.S.C. § 911, and any amount of tax‑exempt interest received or accrued by the relevant taxpayer during the tax year; and (ii) information indicating that the amount of Social Security benefits not included in gross income is unavailable; (2) adjusted gross income under 26 U.S.C. § 62, where modified adjusted gross income ("MAGI") is unavailable, as well as information indicating that the components of MAGI other than adjusted gross income must be taken into account to determine MAGI; (3) the amount of Social Security benefits included in gross income under 26 U.S.C. § 86; (4) information indicating that certain return information of a relevant taxpayer is unavailable for the reference tax year because the relevant taxpayer jointly filed a U.S. Individual Income Tax Return for that year with a spouse who is not listed on the same application; (5) information indicating that, although a return for an individual identified on the application as a relevant taxpayer for the reference tax year is available, return information is not being provided because of possible authentication issues with respect to the identity of the relevant taxpayer; (6) information indicating that a relevant taxpayer who is identified as a dependent for the tax year in which the premium tax credit would be claimed did not have a filing requirement for the reference tax year; and (7) information indicating that a relevant taxpayer who received advance payments of the premium tax credit in the reference tax year did not file a tax return for that year reconciling the advance payments with any premium tax credit under 26 U.S.C. § 36B available for that year (i.e., to account for any difference between the projected and actual amount). 26 C.F.R. § 301.6103(l)(21)-1(a); see also Final Regs Clarify Return Information IRS Can Disclose to Exchanges for ACA Determinations, 59 Fed. Taxes Wkly. Alert (RIA) No. 2 (Aug. 15, 2013). The new Regulations "appl[y] to disclosures to the Department of Health and Human Services on or after August 14, 2013." 26 C.F.R. § 301.6103(l)(21)-1(d).
During the next few years, as the Affordable Care Act is fully implemented, it will be interesting to see how well the foregoing information-sharing provisions of the IRS and the Treasury Regulations are received by taxpayers whose tax records are given by the IRS to various federal and state agencies, and their contractors. Hopefully, the new information- sharing rules will not result in privacy violations or other unintended consequences. Undoubtedly, taxpayers will be asking the courts to decide what limits, if any, should be placed on the rights of various governmental agencies and their contractors to access an individual's tax records under § 6103(l)(21) of the Code.