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Originally published May 17, 2013 at 1:11 PM | Page modified May 18, 2013 at 1:38 AM

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GOP hopes IRS scandal will snag health care law

Political scandals have strange ways of causing collateral damage, and Republicans are hoping the furor over federal tax enforcers singling out conservative groups will ensnare their biggest target: President Barack Obama's health care law.

Associated Press

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WASHINGTON —

Political scandals have strange ways of causing collateral damage, and Republicans are hoping the furor over federal tax enforcers singling out conservative groups will ensnare their biggest target: President Barack Obama's health care law.

But no one appears to have connected the factual dots yet, and it's unclear whether they will.

The Internal Revenue Service has a major role in carrying out the health care law, because financial assistance to help the uninsured afford coverage will be funneled through the tax system. At the same time, the IRS is also responsible for penalties on individuals and employers who fail to comply with the law's requirements.

In the latest twist, it turns out that the former head of the office that subjected tea-party groups seeking tax exemptions to tougher scrutiny is now running the tax agency's division in charge of implementing the health care law.

That official apparently switched roles before internal alarm bells went off about the problem. But feed all that into today's frenzied world of online speculation, and red-meat associations are irresistible.

"Now we've learned that the IRS, which is tasked with enforcing this very unpopular bill of Obamacare, the IRS admitted they targeted Americans," Rep. Michele Bachmann, R-Minn., said during floor debate this week on repealing the health care law.

"And so this gargantuan government expansion known as Obamacare will allow bureaucrats access to our most intimate, personal health information," she added. "It will be a huge database that government is putting together and building right now. Under Obamacare, the average American will pay more, they'll get less, and now they have to worry that their government may punish them because of their beliefs."

Nonsense, says Rep. Sander Levin, D-Mich., ranking Democrat on the Ways and Means Committee, which oversees the IRS.

"There really isn't a tie," said Levin. "This is another effort by the Republicans to essentially try to score political points."

The head of the IRS health care office, Sarah Hall Ingram, was in charge of the tax exempt division when agents first started improperly targeting conservative groups over their applications for tax-exempt status. The fallout has already led to the ouster of acting IRS Commissioner Steven Miller, followed by the announcement that the current head of the division will retire.

But the IRS said Ingram was re-assigned to help the agency implement the health care law in December 2010, about six months before a Treasury inspector general's report said her subordinate, the director of exempt organizations, learned about the targeting.

"There isn't any evidence that Sarah Ingram had any inkling of the problems," said Levin. By comparison, Levin continued, ousted commissioner Miller failed to adequately inform Congress after he learned.

Tom Davis, a former Republican congressman from Virginia, said GOP lawmakers are right to be looking for a connection, but must be careful not to overplay their hand.

The health care law "is 50-50 with the public on a good day," said Davis. "You put that together with the IRS and it's combustible. For Republicans, I think they need to go a little slower and get some facts in."

"I don't think it's just a couple of underlings, but they don't have any smoking gun yet," he added.

Though it plays a crucial role in carrying out the health care law, the IRS is part of the back-office operation. IRS agents won't be setting up health insurance markets, and they won't have a say in which health plans people get to pick or what doctors they see.

However, agency officials will determine who is eligible for financial assistance under the law - and who must pay penalties.

The reason the IRS is involved in what's essentially a social program is that lawmakers crafted the financial subsidies available under the health law as tax credits. The agency already administers another major social program, the earned income tax credit, which long ago surpassed welfare as the main source of government assistance for low-income families.

The IRS is involved with four major components of the health care law. The most important one is determining if individual Americans are entitled to new tax credits to help pay private insurance premiums. It's a complex calculation.

Keyed to income on a sliding scale, the credits are available starting in 2014 to households making up to four times the federal poverty level, or about $94,000 for a family of four. Individuals or families are eligible if they don't have affordable coverage on the job. But if you understate your income to get a bigger credit, you'll owe more taxes next year.

The agency is also in charge of assessing penalties on people who ignore the law's requirement to carry health insurance, which applies to virtually all Americans starting next year.

On the employer side, the IRS administers a tax credit to help small businesses with low-wage employees afford coverage, and it's also in charge of imposing penalties on companies with 50 or more employees that don't offer coverage.

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