Daily Tax Update - June 8, 2016: Treasury, IRS Issue Proposed Regulations on Expatriate Health Plans

Treasury, IRS Issue Proposed Regulations on Expatriate Health Plans:  Today, Treasury and the IRS—along with the Department of Labor and the Department of Health and Human Services—issued proposed regulations (REG-135702-15) regarding rules for expatriate health plans, expatriate health plan issuers, and qualified expatriates under the Expatriate Health Coverage Clarification Act of 2014 (EHCCA).  The EHCCA generally provides that, with certain exceptions, the requirements of the Affordable Care Act (ACA) do not apply with respect to expatriate health plans, expatriate health insurance issuers for coverage under expatriate health plans, and employers in their capacity as plan sponsors of expatriate health plans.

The proposed regulations provide that, beginning on January 1, 2017, coverage under an expatriate health plan that provides coverage for a qualified expatriate qualifies as “minimum essential coverage” (for purposes of section 5000A of the Code) for all participants in the plan.  The proposed regulations also do not require expatriate health plans to provide certificates of creditable coverage.  In addition, under the proposed regulations, market reform provisions enacted as part of the ACA generally do not apply to expatriate health plans, any employer solely in its capacity as a plan sponsor of an expatriate health plan, and any expatriate health insurance issuer with respect to coverage under an expatriate health plan.

The proposed regulations would be applicable for plan years (or, in the individual market, policy years) beginning on or after January 1, 2017.  Issuers, employers, administrators, and individuals are permitted to rely on these proposed regulations pending the applicability date of final regulations in the Federal Register.  Comments on the proposed regulations are due on August 9.

European Parliament Approves European Commission’s Anti-Tax Avoidance Directive Proposal, Sets Up ‘Panama Papers’ Inquiry Committee:  In a press release issued today, the European Parliament announced that it has passed the European Commission’s proposal for a European Union (EU) anti-tax avoidance directive by a vote of 486 to 88, with 103 abstentions.  The anti-tax avoidance directive reflects the Organization for Economic Cooperation and Development’s (OECD) action plan to limit base erosion and profit shifting (BEPS) and follows recommendations made by the European Parliament in November and December of last year.  According to the press release, members of the European Parliament (MEPs) also support taking further measures to “crackdown” on corporate tax avoidance, including implementing a “more ambitious” “switch-over rule” than the one proposed by the European Commission, advocating stricter limits on deductions for interest payments, prohibiting the use of “letterbox companies,” increasing the transparency of trust funds and foundations, and “swiftly” introducing a common consolidated corporate tax base (CCCTB).

The European Parliament also announced today that it will set up an inquiry committee into the so-called “Panama Papers.”  According to a press release, the committee will “investigate alleged contraventions and maladministration in the application by the EU Commission or member states of EU laws on money laundering, tax avoidance and tax evasion.”  The committee will have 65 members and 12 months to present its report.