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UPS Seeks Issuance of Antiabuse Rules in Response to Guidance on Small-Business Healthcare Tax Credit

AUG. 16, 2010

UPS Seeks Issuance of Antiabuse Rules in Response to Guidance on Small-Business Healthcare Tax Credit

DATED AUG. 16, 2010
DOCUMENT ATTRIBUTES
  • Authors
    King, Victoria N.
  • Institutional Authors
    United Parcel Service Inc.
  • Cross-Reference
    For Notice 2010-44, 2010-22 IRB 717, see Doc 2010-10866 or

    2010 TNT 95-8 2010 TNT 95-8: Internal Revenue Bulletin.
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2010-20136
  • Tax Analysts Electronic Citation
    2010 TNT 179-21

 

August 16, 2010

 

 

CC:PA:LPD:PR (Notice 2010-44)

 

Room 5203

 

Internal Revenue Service

 

P.O. Box 7604

 

Ben Franklin Station

 

Washington, DC 20044

 

 

Re: Notice 2010-44

United Parcel Service, Inc. ("UPS")1 is submitting this letter in order to identify an issue we believe must be addressed in guidance relating to the new Internal Revenue Code (IRC) § 45R small employer tax credit for employee health insurance expenses. Specifically, our comments relate to the need for the Treasury Department and the Internal Revenue to issue guidance on the proper determination of an employer's size. Similar guidance will also be necessary for the employer shared responsibility rules that take effect in 2014.

Under § 45R, a tax credit for employee health insurance premiums is available for employers having fewer than 25 full-time equivalent employees (and average annual wages less than $50,000). The maximum tax credit under § 45R is available only for employers with ten or fewer full-time equivalent employees (and average annual wages of no more than $25,000).

As part of the new § 45R tax credit, Congress included specific provisions to prevent larger employers from seeking to benefit from this small business tax relief provision. These anti-abuse provisions include in the employer size count certain workers who would not otherwise be considered a company's employee. Under these rules, an employer must include in its employee count leased employees. Also, all employers treated as a single employer under Internal Revenue Code §§ 414(b), (c), (m), and (o) are treated as a single employer for purposes of § 45R. In addition, Congress gave the IRS specific authority to issue regulations under § 45R, including regulations to prevent the avoidance of the employer size limitation "through the use of multiple entities."

We believe it was appropriate for Congress to have given the IRS the authority to promulgate anti-abuse guidance under the new tax credit. Absent rules preventing employers from artificially reducing their size count through such techniques as misclassifying employees as independent contractors or breaking their workforce into smaller separate units, each beneath the maximum employer size under § 45R, we believe the tax credit would provide a significant opportunity for misuse. Accordingly, we urge the IRS to issue specific guidance applying the employer size anti-abuse rules under § 45R, including examples that help employers understand the operation of the anti-abuse rules.

The employer shared responsibility rules under IRC § 4980H that take effect in 2014 will require similar guidance on the determination of an employer's size. The shared responsibility rules may impose on "applicable large employers" (i.e., those with more than 50 full-time employees) significant taxes of up to $2,000 per year for each employee of a company (or, for employers offering employee health coverage, $3,000 for each employee qualifying for premium tax credits or cost sharing reductions). Congress included in the § 4980H employer size determination anti-abuse rules similar to those in § 45R.

If some larger employers are able to claim § 45R tax credits (or avoid the future shared responsibility rules) through the use of techniques to reduce their apparent size, while other larger employers follow the intended application of the rules, the employers masking their true size will reap an unfair competitive advantage (in addition to depriving the Treasury of tax revenues that would otherwise be due). Accordingly, UPS believes that it is important for the IRS to issue clear anti-abuse rules relating to the determination of an employer's size.

Sincerely,

 

 

Victoria N. King

 

Vice President -- Public Affairs

 

UPS

 

Atlanta, GA

 

FOOTNOTE

 

 

1 UPS is the world's largest package delivery company, a leader in the U.S. less-than-truckload industry, and a global leader in supply chain management. We were founded in 1907 as a private messenger and delivery service in Seattle, Washington. Today, through the efforts of more than 408,000 worldwide employees, we deliver packages each business day for 1.8 million shipping customers to 6.1 million consignees in over 200 countries and territories. In 2009, we delivered an average of 15.1 million pieces per day worldwide, or a total of 3.8 billion packages.

 

END OF FOOTNOTE
DOCUMENT ATTRIBUTES
  • Authors
    King, Victoria N.
  • Institutional Authors
    United Parcel Service Inc.
  • Cross-Reference
    For Notice 2010-44, 2010-22 IRB 717, see Doc 2010-10866 or

    2010 TNT 95-8 2010 TNT 95-8: Internal Revenue Bulletin.
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2010-20136
  • Tax Analysts Electronic Citation
    2010 TNT 179-21
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