The city of Augusta has received a bill for just over $2 million from the Internal Revenue Service and may face more fines that could soar as high as $10 million.
A copy of the bill obtained through an Open Records Request shows that it is from 2017 and includes more than $157,000 in interest.
The penalty was assessed because the city did not file the proper annual documentation related to The Affordable Care Act, according to several sources within the city government. Those same sources indicated that 2016 was the only year the city actually filed the proper paperwork, and they expect to receive a bill for penalties and interest for 2018 through 2021 in addition to the current bill. If those bills are comparable, that would mean the city could owe the IRS over $10 million.
One elected official said ADP was hired last year to fix the reporting problem going forward, but when the agenda item came up at a commission meeting, no one told commissioners that it was because of a matter that would lead to an IRS penalty in the millions.
Mayor Garnett Johnson on Feb. 6, 2023 signed an amendment to ADP’s current contract engaging ADP to handle Affordable Care Act reporting as well as Health Compliance Services. According to the contract ADP would be paid $7,500 to go back and handle reporting for 2017- 2019.. The contract also calls for a $1.10 per employee per month ongoing fee for health compliance services.
In addition to engaging ADP, one person suggested in the legal session to engage Congressman Rick Allen’s help in getting the IRS to work with the city on the issue, according to the source within the government. City Attorney Wayne Brown instead wanted to hire outside counsel to deal with the issue.
Brown moved forward with hiring outside counsel as the law firm Smith Gambrell and Russell of Atlanta to send a written response to The Augusta Press related to its Open Records Request. A copy of that letter can be found below.
Augusta General Counsel Wayne Brown refused to discuss the matter.
“I do not comment on anything unless it is a legal matter,” Brown said.
When reminded that this is a legal matter since it was discussed in legal session on March 7 and will be discussed again in legal session on March 14, Brown repeated his position.
“My comment is no comment. Goodbye,” Brown said.
Anthony Burke of the IRS says that he can’t comment on a specific case. He added that the because the U.S. Supreme Court decided fees associated with the ACA were actually taxes, all entities that employ people must file forms stating that insurance is provided through the ACA or have the employee sign documents stating they have insurance through another source. Uninsured employees face a tax.
According to the IRS website, “Form 1094-C (is a) Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C (documents) Employer-Provided Health Insurance Offer and Coverage.”
Under the law, failure to file the documents gives the IRS the ability to tax the employer $280 per employee.
The IRS says that for the years noted, the city never sent out the 1094 and 1095 forms to its employees. Normally, it would be the responsibility of the Human Resources Department to send out the forms.
In a letter to commissioners dated March 9, Interim City Administrator Takiyah Douse stated that the IRS requested a meeting with Finance Director Donna Williams in June 2022, so city employees were aware of the matter, but commissioners say they were not told about it until this past week.
Anita Rookard, director of the Augusta Human Resources Department, did not return a call for clarification or comment.
Several Augusta elected officials confirmed off the record that the city may indeed be liable, but would not issue an on-the-record comment since the matter may become a legal issue for the city.
