Agency: IRS Failed To Tally Paperwork Burden From Healthcare Mandate

By Megan R. Wilson - 03/18/13 02:42 PM ET

The federal government’s small-business advocate is taking aim at the healthcare reform law’s insurance mandates.

The Office of Advocacy, an independent agency within the Small Business Administration, is calling out the Internal Revenue Service (IRS) for failing to conduct a regulatory flexibility analysis in the crafting of the rules. The analysis is required under a 32-year-old law called the Regulatory Flexibility Act, which requires that agencies spell out how their regulation will impact small businesses in both hours and dollars.

That requirement, which was strengthened by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1995, has not been followed in the rule-making process for the mandate for employers to provide insurance, according to Winslow Sargeant, the chief counsel for the advocacy office.

The IRS said it did not need to go through that assessment because only large employers — defined as businesses that employ 50 or more people — are required under the healthcare law to either provide workers with health insurance or pay a fine.

But Sargeant and his assistant chief counsel, Dillon Taylor, said the act of a small business assessing whether or not it should comply with the regulation — and the paperwork it must keep in case it does — impose a heavy burden.

The IRS, they argue, must analyze the paperwork burden from the rule and then put those findings forward in the Federal Register for comment. That would give small businesses “adequate data to assess the amount of paperwork burden that may be generated by the proposed rule,” the Office argues, and provide the IRS with “valuable insight into the effects of the [proposal].”

Monday was the deadline to comment on the bevy of regulations that will implement the insurance mandate. By mid-day, those rules had only received 223 comments on the Regulations.gov website. The IRS’s review of those comments will begin on Tuesday.

The stakes are high for the mandate – and a retroactive analysis could push back the implementation even further. If the IRS does not listen to the call for the data analysis, it could face a lawsuit that would force it to back to the drawing board to run the numbers.

The Office of Advocacy has come under fire from watchdog groups who say it works to kill regulations.

In January, the Center for Effective Government and the Center for Progressive Reform alleged that the SBA Office is a mouthpiece for industry lobbyists who want regulations shut down — an accusation that Sargeant has since denied.

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