In Chief Counsel Memorandum 20200801F, released on February 21, 2020, the IRS established its position that no statute of limitations applies to employer shared responsibility payments that may be assessed under Section 4980H of the Internal Revenue Code (the “Code”).  This IRS internal guidance should serve as a warning for applicable large employers that non-compliance with the Affordable Care Act’s employer shared responsibility rules can result in significant penalties that may be assessed at any time in the future.

The IRS bases its position on the fact that the information returns on Forms 1094-C and 1095-C do not provide sufficient information to calculate the tax liability due by an employer under Section 4980H of the Code.  In Beard v. Commissioner, 82 T.C. 766 (1984), aff’d 793 F.2d 139 (6th Cir. 1986), the tax court set forth a four-part test for determining whether a document is sufficient to start a statute of limitations under Section 6501 of the Code, with the first test requiring that the document include sufficient data to calculate the taxpayer’s tax liability.  In the IRS’s view, since neither Form 1094-C nor the Form 1095-C includes information with respect to an employee’s eligibility for a premium tax credit – which is necessary data for determining whether a Section 4980H penalty applies – an employer cannot know whether it has potential liability under Section 4980H at the time those forms are filed.  As a result, the IRS concluded that the statute of limitations