Bulletin No. 2023–32

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Bulletin No. 2023–32

August 7, 2023

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

EMPLOYEE PLANS

EMPLOYMENT TAX

Notice 2023-53, page 424.

T.D. 9978, page 415.

This notice sets forth updates on the corporate bond

monthly yield curve, the corresponding spot segment rates

for July 2023 used under § 417(e)(3)(D), the 24-month average segment rates applicable for July 2023, and the 30-year

Treasury rates, as reflected by the application of § 430(h)(2)

(C)(iv).

EMPLOYEE PLANS, EXCISE TAX

REG-124930-21, page 431.

These proposed rules would amend regulations regarding

coverage of certain preventive services under the Patient

Protection and Affordable Care Act, which requires non-grandfathered group health plans and non-grandfathered group or

individual health insurance coverage to cover certain contraceptive services without cost sharing. Current regulations include exemptions and optional accommodations for

entities and individuals with religious or moral objections to

coverage of contraceptive services. These rules propose

rescinding the moral exemption rule. These proposed rules

also would establish a new individual contraceptive arrangement that individuals enrolled in plans or coverage sponsored, arranged, or provided by objecting entities may use to

obtain contraceptive services at no cost directly from a provider or facility that furnishes contraceptive services. Under

these proposed rules, a provider or facility that furnishes

contraceptive services in accordance with the individual contraceptive arrangement for eligible individuals would be able

to be reimbursed for its costs by entering into an arrangement with an issuer on a Federally-facilitated Exchange or

State Exchange on the Federal platform, which in turn may

seek a user fee adjustment.

Finding Lists begin on page ii.

These final regulations under sections 3111, 3131, 3132,

3134 and 3221 of the Internal Revenue Code (Code), issued

under the authority granted by the Families First Coronavirus

Response Act (Families First Act), the Coronavirus Aid, Relief,

and Economic Security Act (CARES Act) in 2020, and the

American Rescue Plan Act of 2021 (ARP), implement the

authority granted under these sections to prescribe regulations as may be necessary for reconciling advance payments

of refundable employment tax credits provided under these

sections and recapturing erroneous refunds of the credits.

The regulations authorize the assessment and collection of

any erroneous refund of the credits in the normal course

of processing the applicable employment tax returns. This

allows the IRS to efficiently recover any refund, while preserving administrative protections for taxpayers.

EXEMPT ORGANIZATIONS

Announcement 2023-22, page 429.

Revocation of IRC 501(c)(3) Organizations for failure to meet

the code section requirements. Contributions made to the

organizations by individual donors are no longer deductible

under IRC 170(b)(1)(A).

INCOME TAX

Notice 2023-55, page 427.

The notice provides temporary relief in determining whether

a foreign tax meets the definition of a foreign income tax

under sections 901 and 903 for the 2022 and 2023 tax years

(the relief period). For foreign taxes paid during any taxable

year within the relief period, taxpayers may apply: (1) former

§ 1.901-2(a) and (b), before it was amended by Treasury

Decision 9959, subject to a modification to the nonconfiscatory gross basis tax rule as described in the notice, and (2)

existing § 1.903-1 without the attribution requirement.

Rev. Rul. 2023-13, page 413.

Federal rates; adjusted federal rates; adjusted federal longterm rate, and the long-term tax exempt rate. For purposes

of sections 382, 1274, 1288, 7872 and other sections of

the Code, tables set forth the rates for August 2023.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

August 7, 2023

Bulletin No. 2023–32

Part I

Section 1274.—

Determination of Issue

Price in the Case of Certain

Debt Instruments Issued for

Property

(Also Sections 42, 280G, 382, 467, 468, 482, 483,

1288, 7520, 7872.)

Rev. Rul. 2023-13

This revenue ruling provides various

prescribed rates for federal income tax

AFR

110% AFR

120% AFR

130% AFR

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

AFR

110% AFR

120% AFR

130% AFR

Short-term adjusted AFR

Mid-term adjusted AFR

Long-term adjusted AFR

Bulletin No. 2023–32

purposes for August 2023 (the current

month). Table 1 contains the shortterm, mid-term, and long-term applicable federal rates (AFR) for the current

month for purposes of section 1274(d)

of the Internal Revenue Code. Table 2

contains the short-term, mid-term, and

long-term adjusted applicable federal

rates (adjusted AFR) for the current

month for purposes of section 1288(b).

Table 3 sets forth the adjusted federal long-term rate and the long-term

tax-exempt rate described in section

382(f). Table 4 contains the appropriate

percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed

in service during the current month.

However, under section 42(b)(2), the

applicable percentage for non-federally

subsidized new buildings placed in service after July 30, 2008, shall not be

less than 9%. Finally, Table 5 contains

the federal rate for determining the

present value of an annuity, an interest for life or for a term of years, or a

remainder or a reversionary interest for

purposes of section 7520.

REV. RUL. 2023-13 TABLE 1

Applicable Federal Rates (AFR) for August 2023

Period for Compounding

Annual

Semiannual

Quarterly

Short-term

5.07%

5.01%

4.98%

5.59%

5.51%

5.47%

6.10%

6.01%

5.97%

6.62%

6.51%

6.46%

Mid-term

4.09%

4.05%

4.03%

4.51%

4.46%

4.44%

4.92%

4.86%

4.83%

5.34%

5.27%

5.24%

6.17%

6.08%

6.03%

7.22%

7.09%

7.03%

Long-term

4.03%

3.99%

3.97%

4.44%

4.39%

4.37%

4.85%

4.79%

4.76%

5.26%

5.19%

5.16%

Annual

3.84%

3.10%

3.05%

REV. RUL. 2023-13 TABLE 2

Adjusted AFR for August 2023

Period for Compounding

Semiannual

3.80%

3.08%

3.03%

413

Quarterly

3.78%

3.07%

3.02%

Monthly

4.96%

5.45%

5.94%

6.42%

4.02%

4.42%

4.81%

5.21%

6.00%

6.99%

3.96%

4.35%

4.74%

5.13%

Monthly

3.77%

3.06%

3.01%

August 7, 2023

REV. RUL. 2023-13 TABLE 3

Rates Under Section 382 for August 2023

Adjusted federal long-term rate for the current month

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal

long-term rates for the current month and the prior two months.)

3.05%

REV. RUL. 2023-13 TABLE 4

Appropriate Percentages Under Section 42(b)(1) for August 2023

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after

July 30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit

7.94%

Appropriate percentage for the 30% present value low-income housing credit

3.40%

REV. RUL. 2023-13 TABLE 5

Rate Under Section 7520 for August 2023

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a

remainder or reversionary interest

Section 42.—Low-Income

Housing Credit

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

August 2023. See Rev. Rul. 2023-13, page 413.

Section 280G.—Golden

Parachute Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

August 2023. See Rev. Rul. 2023-13, page 413.

Section 382.—Limitation

on Net Operating Loss

Carryforwards and

Certain Built-In Losses

Following Ownership

Change

The adjusted applicable federal long-term rate

is set forth for the month of August 2023. See Rev.

Rul. 2023-13, page 413.

Section 467.—Certain

Payments for the Use of

Property or Services

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

August 2023. See Rev. Rul. 2023-13, page 413.

Section 468.—Special

Rules for Mining and Solid

Waste Reclamation and

Closing Costs

The applicable federal short-term rates are set

forth for the month of August 2023. See Rev. Rul.

2023-13, page 413.

Section 482.—Allocation

of Income and Deductions

Among Taxpayers

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

August 2023. See Rev. Rul. 2023-13, page 413.

5.00%

Section 483.—Interest on

Certain Deferred Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

August 2023. See Rev. Rul. 2023-13, page 413.

Section 1288.—Treatment

of Original Issue Discount

on Tax-Exempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month

of August 2023. See Rev. Rul. 2023-13, page 413.

Section 7520.—Valuation

Tables

The applicable federal mid-term rates are set

forth for the month of August 2023. See Rev. Rul.

2023-13, page 413.

Section 7872.—Treatment

of Loans With BelowMarket Interest Rates

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

August 2023. See Rev. Rul. 2023-13, page 413.

August 7, 2023

414

Bulletin No. 2023–32

26 CFR 31.3111-6, 26 CFR 31.3131-1, 26 CFR

31.3132-1, 26 CFR 31.3134-1, 26 CFR 31.32215: Recapture of Certain Excess Employment Tax

Credits under COVID

T.D. 9978

DEPARTMENT OF THE

TREASURY

Internal Revenue Service

26 CFR Part 31

RIN 1545-BQ08

Recapture of Certain

Excess Employment Tax

Credits under COVID-19

Legislation

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Final regulations and removal

of temporary regulations.

SUMMARY: This document sets forth

the final regulations under sections 3111,

3131, 3132, 3134, and 3221 of the Internal

Revenue Code (Code) issued under the

authority granted by the Families First

Coronavirus Response Act, the Coronavirus

Aid, Relief, and Economic Security Act,

and the American Rescue Plan Act of

2021. These final regulations authorize the

assessment of any erroneous refund of the

tax credits paid under sections 7001 and

7003 of the Families First Coronavirus

Response Act (including any increases in

those credits under section 7005 thereof),

and section 2301 of the Coronavirus Aid,

Relief, and Economic Security Act, as well

as under sections 3131, 3132 (including

any increases in those credits under section

3133), and 3134 of the Code.

DATES: Effective date: These final regulations are effective on July 24, 2023.

Applicability date: For date of applicability, see §§ 31.3111-6(e), 31.31311(d), 31.3132-1(d), 31.3134-1(d), and

31.3221-5(e).

FOR FURTHER INFORMATION

CONTACT: NaLee Park at 202-3176798 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document sets forth amendments

to the Employment Tax Regulations (26

CFR part 31) under sections 3111, 3131,

3132, 3133, 3134, and 3221.

The Families First Coronavirus

Response Act (Families First Act), Pub.

L. 116-127, 134 Stat. 178 (March 18,

2020), as amended and extended by the

COVID-related Tax Relief Act of 2020

(Tax Relief Act), enacted as Subtitle B of

Title II of Division N of the Consolidated

Appropriations Act, 2021, Pub. L. 116260, 134 Stat.1182 (December 27, 2020),

and the Coronavirus Aid, Relief, and

Economic Security Act (CARES Act),

Pub. L. 116-136, 134 Stat. 281 (March

27, 2020), as amended and extended by

the Taxpayer Certainty and Disaster Tax

Relief Act of 2020 (Relief Act), enacted

as Division EE of the Consolidated

Appropriations Act, 2021, provided

relief to taxpayers from economic hardships resulting from the Coronavirus

Disease 2019 (COVID-19), including

paid sick and family leave credits to eligible employers with respect to qualified

leave wages paid for a period of leave

taken beginning April 1, 2020, and ending

March 31, 2021, and an employee retention credit (ERC) with respect to qualified wages paid after March 12, 2020,

and before July 1, 2021, respectively.

The American Rescue Plan Act of 2021

(ARP), Pub. L. 117-2, 135 Stat. 4 (March

11, 2021), provided additional COVID-19

relief with similar paid leave credits under

sections 3131 through 3133 of the Code,

enacted by section 9641 of the ARP, with

respect to qualified leave wages paid for

a period of leave taken beginning April

1, 2021, and ending September 30, 2021,

and a substantially similar ERC under section 3134 of the Code, enacted by section

9651 of the ARP, with respect to qualified

wages paid after June 30, 2021, and before

January 1, 2022.1

I. Paid Sick and Family Leave Credits2

A. Families First Act, as amended and

extended by the Tax Relief Act

The Emergency Paid Sick Leave Act

(EPSLA) and the Emergency Family

and Medical Leave Expansion Act

(EFMLEA), enacted as Divisions E and

C of the Families First Act, respectively,

generally required certain employers with

fewer than 500 employees to provide

up to 80 hours of paid sick leave for the

care of the employees themselves or for

others for certain COVID-related reasons

specified in the statute, at specified daily

and aggregate rates of pay, and up to 10

weeks of paid family and medical leave

at two-thirds the employee’s regular rate

of pay, up to $200 per day and $10,000

in the aggregate if the employee was

unable to work or telework because the

employee was caring for a son or daughter

whose school or place of care was closed

or whose child care provider was unavailable due to certain circumstances related

to COVID-19.

Sections 7001 and 7003 of the Families

First Act generally provide that non-governmental employers subject to the paid

leave requirements under EPSLA and

EFMLEA are entitled to fully refundable

tax credits to cover the wages paid for leave

taken for those periods of time between

April 1, 2020, and December 31, 2020,

during which employees were unable to

Section 80604 of the Infrastructure Investment and Jobs Act (Infrastructure Act), Pub. L. 117-68, 135 Stat. 429 (November 15, 2021) amended section 3134(n) of the Code to provide that the

ERC under section 3134 applies only to wages paid after June 30, 2021, and before October 1, 2021 (or, in the case of wages paid by an eligible employer which is a recovery startup business,

January 1, 2022). Therefore, the only type of employer eligible for the ERC for wages paid after September 30, 2021, and before January 1, 2022, is an employer that meets the definition of a

recovery startup business under section 3134(c)(5). See Notice 2021-65, 2021-51 IRB 880, for guidance for employers that received an advance payment of the ERC or reduced tax deposits

in anticipation of the credit for the fourth quarter of 2021 prior to the amendments made by the Infrastructure Act.

Detailed information on the paid sick leave credits and paid family leave credits under the Families First Act, as amended by the Tax Relief Act, and under the ARP is provided in TD 9904,

85 FR 45514, and TD 9953, 86 FR 50637, respectively. Also see the IRS.gov website at: Coronavirus Tax Relief for Businesses and Tax-Exempt Entities | Internal Revenue Service (irs.gov).

Bulletin No. 2023–32

415

August 7, 2023

work or telework for specified reasons

related to COVID-19, plus allocable qualified health plan expenses. These paid sick

leave credits and paid family leave credits

(collectively, paid sick and family leave

credits) are allowed against the taxes

imposed on employers by section 3111(a)

of the Code (the Old-Age, Survivors, and

Disability Insurance tax (social security

tax)), first reduced by any credits claimed

under section 3111(e) and (f), and section

3221(a) (the Railroad Retirement Tax Act

Tier 1 tax), on all wages and compensation paid to all employees. Under section 7005 of the Families First Act, the

qualified leave wages for which the credits are claimed are not subject to the taxes

imposed on employers by sections 3111(a)

and 3221(a) of the Code. In addition, section 7005 provides that the credits under

sections 7001 and 7003 of the Families

First Act are increased by the amount of

the tax imposed by section 3111(b) of the

Code (employer’s share of the Hospital

Insurance tax (Medicare tax)) on qualified

leave wages.3

Although the requirement to provide

employees with paid leave under EPSLA

and EFMLEA expired on December 31,

2020, the paid sick and family leave credits were extended by the Tax Relief Act for

qualified leave wages paid for periods of

leave taken through March 31, 2021, that

would have satisfied the requirements of

EPSLA and EFMLEA.

B. ARP

The ARP added sections 3131 through

3133 of the Code, which provide refundable paid sick and family leave credits similar to those provided under the

Families First Act. Sections 3131 through

3133 extend the paid sick and family leave

credits to non-governmental employers

with fewer than 500 employees and certain governmental entities4 without regard

to the number of employees that provided

paid sick and family leave for specified

reasons related to COVID-19 with respect

to periods of leave beginning on April 1,

2021, through September 30, 2021. The

paid sick and family leave credits under

sections 3131 through 3133 are available to eligible employers that provided

employees with paid leave that would

have satisfied the requirements of EPSLA

and EFMLEA, with certain modifications

made pursuant to the ARP.

Under section 3131, a credit is available to eligible employers that paid qualified sick leave wages to an employee for

up to 80 hours of leave provided during

the period beginning April 1, 2021,

and ending September 30, 2021, if the

employee was unable to work or telework

due to any of the COVID-related reasons specified in the statute. Under section 3132, a credit is available to eligible

employers that paid qualified family leave

wages to an employee for up to 12 weeks

of paid family leave provided during the

period beginning April 1, 2021, and ending September 30, 2021, if the employee

was unable to work or telework due to

any of the conditions for which eligible

employers may provide COVID-related

paid sick leave. Qualified family leave

wages are two-thirds of the wages paid at

the employee’s regular rate of pay, up to a

maximum of $200 per day and $12,000 in

the aggregate.

The paid sick and family leave credits

under sections 3131 and 3132 are allowed

against the taxes imposed on employers under section 3111(b) and against so

much of the taxes imposed under section

3221(a) as are attributable to the rate in

effect under section 3111(b), as applicable, on all wages and compensation paid

to all employees, and any credit amounts

in excess of these taxes are treated as an

overpayment to be refunded under sections 6402(a) and 6413(b). See sections

3131(b)(4)(A), 3131(f)(1), 3132(b)(3)(A),

and 3132(f)(1).

II. Employee Retention Credit5

A. CARES, as amended and extended by

the Relief Act

Section 2301 of the CARES Act, as

originally enacted, provides for the ERC

for eligible employers, including tax-exempt organizations, that paid qualified

wages, including certain health plan

expenses, to some or all of their employees after March 12, 2020, and before

January 1, 2021. The ERC, as originally

enacted, is a fully refundable tax credit

for employers equal to 50 percent of qualified wages. Section 2301(b)(1) of the

CARES Act limits the amount of qualified wages with respect to any employee

that may be taken into account to

$10,000 for all calendar quarters in 2020.

Therefore, the maximum credit amount

with respect to each employee for all four

calendar quarters in 2020 is $5,000. For

employers that averaged more than 100

full-time employees during 2019, qualified wages are wages and compensation

(including allocable qualified health plan

expenses) paid to employees who were

not providing services because operations were fully or partially suspended

due to orders from an appropriate governmental authority limiting commerce,

travel, or group meetings (for commercial, social, religious, or other purposes)

due to COVID-19 or due to a significant

decline in gross receipts. For employers

that averaged 100 full-time employees or

fewer during 2019, qualified wages are

wages and compensation (including allocable qualified health plan expenses) paid

to any employee during the period operations were fully or partially suspended

due to orders from an appropriate governmental authority limiting commerce,

travel, or group meetings (for commercial, social, religious, or other purposes)

due to COVID-19 or due to a significant

decline in gross receipts, regardless of

The credit for the employer’s share of Medicare tax does not apply to eligible employers that are subject to the Railroad Retirement Tax Act (RRTA) because under section 7005(a) of the

Families First Act, qualified leave wages are not subject to Medicare tax under RRTA due to that section’s reference to section 3221(a) of the Code, that refers to both social security tax and

Medicare tax.

Section 9641 of the ARP added sections 3131(f)(5) and 3132(f)(5) to the Code that extends paid sick and family leave credits to certain governmental employers (without regard to the number of employees). However, the credits are not allowed for the government of the United States, or any agency or instrumentality of the United States Government, except for an organization

described in section 501(c)(1) of the Code and exempt from tax under section 501(a).

Detailed information about the ERC under the CARES Act, as amended by the Relief Act, and under the ARP is provided in TD 9904 and TD 9953, respectively. For more information, see

Notice 2021-20, 2021-11 IRB 922, Notice 2021-23, 2021-16 IRB 1113, Notice 2021-24, 2021-18 IRB 1122, Notice 2021-49, 2021-34 IRB 316, and Rev. Proc. 2021-33, 2021-34 IRB 327.

Also see the IRS.gov website at: Coronavirus Tax Relief for Businesses and Tax-Exempt Entities | Internal Revenue Service (irs.gov).

August 7, 2023

416

Bulletin No. 2023–32

whether their employees were providing

services.

The ERC available under section 2301

of the CARES Act for a calendar quarter

is allowed against the taxes imposed on

employers by section 3111(a) of the Code,

first reduced by any credits allowed under

section 3111(e) and (f) and sections 7001

and 7003 of the Families First Act, and

the taxes imposed under section 3221(a)

of the Code that are attributable to the

rate in effect under section 3111(a), first

reduced by any credits allowed under sections 7001 and 7003 of the Families First

Act, on the wages and compensation paid

with respect to the employment of all the

employees of the eligible employer for

that calendar quarter.

Section 2301 of the CARES Act was

subsequently amended by sections 206

and 207 of the Relief Act. Section 206

of the Relief Act adopted retroactive

amendments and technical changes to

section 2301 of the CARES Act for qualified wages paid after March 12, 2020,

and before January 1, 2021, primarily

expanding eligibility for certain employers to claim the credit. Section 207 of the

Relief Act further amended section 2301

of the CARES Act to extend the application of the ERC to qualified wages paid

after December 31, 2020, and before July

1, 2021, to modify the gross receipts test

for calendar quarters in 2021, and to modify the calculation of the credit amount

for qualified wages paid during that time.

Under section 2301 of the CARES Act, as

amended by section 207 of the Relief Act,

the ERC is equal to 70 percent of qualified wages. The Relief Act also increased

the amount of qualified wages that could

be taken into account per employee

to $10,000 per employee per calendar

quarter in 2021. Therefore, the maximum credit amount with respect to each

employee for any calendar quarter in 2021

is $7,000. Additionally, the threshold distinguishing small employers from large

employers for purposes of applying certain criteria to determine eligibility for the

credit was increased from 100 employees

to 500 employees.

B. ARP and Infrastructure Act

Section 9651 of the ARP enacted section 3134 of the Code, effective for calendar quarters beginning after June 30,

2021, to provide an ERC for qualified

wages paid after June 30, 2021, and before

January 1, 2022. The ERC under section

3134 is substantially similar to the ERC

under section 2301 of the CARES Act,

though the ARP made some modifications including expanding the definition

of eligible employer and the definition of

qualified wages.6 Additionally, the ERC

available under section 3134 of the Code

for a calendar quarter is allowed against

the taxes imposed on employers under

section 3111(b), first reduced by any

credits allowed under sections 3131 and

3132, and the taxes imposed under section

3221(a) that are attributable to the rate in

effect under section 3111(b), first reduced

by any credits allowed under sections

3131 and 3132, on the wages and compensation paid with respect to the employment of all the employees of the eligible

employer for that calendar quarter. Any

credit amounts in excess of these taxes are

treated as an overpayment to be refunded

under sections 6402(a) and 6413(b). See

section 3134(b)(3), 3134(c)(1).

The ERC is available to any employer

that carried on a trade or business during

a calendar quarter between June 30,

2021, and January 1, 2022, that met the

requirements to be an eligible employer

under section 3134(c)(2), which include

experiencing a full or partial suspension

of business operations due to orders from

an appropriate governmental authority

limiting commerce, travel, or group meetings (for commercial, social, religious,

or other purposes) due to COVID-19,

experiencing a decline in gross receipts,

or qualifying as a recovery startup business. See Notice 2021-49. Section 80604

of the Infrastructure Act amended section

3134(n) to provide that the ERC applies

only to wages paid after June 30, 2021,

and before October 1, 2021 (or, in the case

of wages paid by an eligible employer

that was a recovery startup business in the

fourth quarter of 2021, January 1, 2022).7

III. Refundability of Credits

Sections 7001(b)(4) and 7003(b)(3) of

the Families First Act provide that if the

amount of the paid sick and family leave

credits under these sections (including

any increases in the credits under section

7005) for the period of leave taken from

April 1, 2020 through March 31, 2021,

exceeds the taxes imposed by section

3111(a) of the Code, first reduced by any

credits claimed under section 3111(e) and

(f), or section 3221(a) for any calendar

quarter, the excess shall be treated as an

overpayment that shall be refunded under

sections 6402(a) and 6413(b). For the

period after March 12, 2020, and before

July 1, 2021, section 2301(b)(3) of the

CARES Act provides that if the amount of

the ERC exceeds the applicable employment taxes8 (first reduced by any credits

allowed under section 3111(e) and (f) of

the Code, sections 7001 and 7003 of the

Families First Act, and section 303(d) of

the Relief Act), the excess shall be treated

as an overpayment that shall be refunded

under sections 6402(a) and 6413(b) of the

Code.

With respect to the paid sick and family leave credits and ERC enacted by the

ARP, sections 3131(b)(4)(A), 3132(b)(3)

(A), and 3134(b)(3) of the Code provide

that if the amount of the paid sick and

family leave credits under these sections

(including any increases in the credits

under section 3133(a)) and ERC exceeds

the taxes imposed under section 3111(b)

and so much of the taxes imposed under

section 3221(a) as are attributable to the

rate in effect under section 3111(b), as

applicable, for any calendar quarter, after

application of the other credits previously

applied, the excess shall be treated as an

For more information on the changes made to the ERC when section 3134 was added to the Code, see Notice 2021-49.

Employers that qualify because they are recovery startup businesses may claim the ERC for wages paid after September 30, 2021, and before January 1, 2022. For more information, see

Notice 2021-65 for amendments made by the Infrastructure Act. Notice 2021-65 explains the retroactive termination of the ERC and provides instructions for employers that became ineligible

and must repay any advance payment of ERC or seek to avoid failure to deposit penalties for the fourth quarter of 2021.

“Applicable employment taxes” are defined in section 2301(c)(1) of the CARES Act as the taxes imposed by section 3111(a) of the Code or so much of the taxes imposed under section

3221(a) of the Code as are attributable to the rate in effect under section 3111(a) of the Code.

Bulletin No. 2023–32

417

August 7, 2023

overpayment that shall be refunded under

sections 6402(a) and 6413(b).

Section 6402(a) generally provides

that, within the applicable period of limitations, overpayments may be credited against any liability in respect of an

Internal Revenue tax on the part of the

person who made the overpayment, and

any remaining balance refunded to that

person. Section 6413(b) provides that if

more than the correct amount of employment tax imposed by sections 3101, 3111,

3201, 3221, or 3402 is paid or deducted

and the overpayment cannot be adjusted

under section 6413(a)9, the amount of the

overpayment shall be refunded (subject to

the applicable statute of limitations) as the

Secretary may prescribe in regulations.

The IRS revised Form 941, Employer’s

Quarterly Federal Tax Return, Form 943,

Employer’s Annual Federal Tax Return

for Agricultural Employees, Form 944,

Employer’s Annual Federal Tax Return,

and Form CT-1, Employer’s Annual

Railroad Retirement Tax Return, several

times in calendar years 2020 through

2022 so that employers could use these

returns to claim the paid sick and family

leave credits under the Families First Act

and under sections 3131 through 3133 of

the Code and the ERC under the CARES

Act and under section 3134 of the Code

(collectively, COVID-19 credits). The

revised employment tax returns allowed

for any of these credits in excess of the

taxes imposed under section 3111(a) or

3111(b), as applicable, and so much of the

taxes imposed under section 3221(a) as

are attributable to the rate in effect under

section 3111(a) or 3111(b), as applicable,

to be credited against other employment

taxes and then for any remaining balance

to be credited or refunded to the employer

in accordance with section 6402(a) or

section 6413(b). Form 941-X, Adjusted

Employer’s Quarterly Federal Tax

Return or Claim for Refund, Form 943X, Adjusted Employer’s Annual Federal

Tax Return for Agricultural Employees or

Claim for Refund, Form 944-X, Adjusted

Employer’s Annual Federal Tax Return

or Claim for Refund, and Form CT-1X,

Adjusted Employer’s Annual Railroad

Retirement Tax Return or Claim for

Refund were also revised so that employers can use these returns to amend previous employment tax returns to adjust or

claim COVID-19 credits for prior periods.

IV. Advance Payment of Credits and

Erroneous Refunds

Section 3606 of the CARES Act

amended sections 7001(b)(4) and 7003(b)

(3) of the Families First Act to provide

that, in anticipation of the paid sick and

family leave credits under these sections,

including any refundable portions (including any increases in the credits under section 7005), these credits may be advanced,

according to forms and instructions provided by the Secretary, up to the total

allowable amount and subject to applicable limits for the calendar quarter. Section

2301(l)(1) of the CARES Act provides

that the Secretary shall issue such forms,

instructions, regulations, and guidance as

are necessary to allow the advance payment of the ERC under section 2301, subject to the limitations provided in section

2301 and based on such information as the

Secretary shall require. Section 2301(j)(2)

(A) of the CARES Act, as amended by

section 207(g)(1) of the Relief Act, provides that, under rules provided by the

Secretary, eligible employers for which

the average number of full-time employees (within the meaning of section 4980H

of the Code) employed by the eligible

employer during 2019 was not greater

than 500 may elect, for calendar quarters

in 2021, to receive an advance payment of

the ERC for the quarter in an amount not

to exceed 70 percent of the average quarterly wages paid in calendar year 2019.

Similarly, sections 3131(b)(4)(B) and

3132(b)(3)(B) provide that, in anticipation of the paid sick and family leave

credits under these sections (including

any increases in the credits under section

3133(a)) and any refundable portions,

these credits are to be advanced, according to forms and instructions provided

by the Secretary, up to the total allowable amount of the credits and subject to

applicable limits for the calendar quarter.

Section 3134(j)(2)(A) provides that, under

rules provided by the Secretary, eligible

employers for which the average number

of full-time employees (within the meaning of section 4980H) employed by the

eligible employer during 2019 was not

greater than 500 may elect, for calendar

quarters in 2021, to receive an advance

payment of the ERC for the quarter in an

amount not to exceed 70 percent of the

average quarterly wages paid in calendar

year 2019.

To implement the advance payment

provisions, employers that were eligible

to receive an advance of the tax credits

used IRS Form 7200, Advance Payment

of Employer Credits Due To COVID-19,

to request an advance of the COVID-19

credits.10 Employers were required to reconcile any advance payments claimed on

Form 7200 with total credits claimed and

total taxes due on their employment tax

returns, including amended tax returns.

A refund or credit of any portion of the

COVID-19 credits, regardless of whether

they were advanced, claimed by a taxpayer in excess of the amount to which the

taxpayer is entitled is an erroneous refund

that the employer must repay.

V. Assessment Authority

Section 6201 authorizes and requires

the Secretary to determine and assess tax

liabilities, including interest, additional

amounts, additions to the tax, and assessable penalties. The Code or other statutory

authority provides for the administrative

recapture of certain erroneous refunds of

the COVID-19 credits either by directly

authorizing the assessment of the erroneous refunds or by authorizing the promulgation of regulations or other guidance

to do so.

Section 6413(a) addresses interest-free adjustments of overpayments. The section provides that if more than the correct amount of employment tax imposed by section 3101, 3111, 3201,

3221, or 3402 is paid with respect to any payment of remuneration, proper adjustments with respect to both the tax and the amount to be deducted, shall be made, without interest, in the

manner and at the times as the Secretary may prescribe in regulations.

Employers are no longer able to request an advance payment of any credit on Form 7200. The advance payment of COVID-19 credits ended on January 31, 2022.

August 7, 2023

418

Bulletin No. 2023–32

Specifically, with regard to paid sick

and family leave credits, sections 7001(f)

and 7003(f) of the Families First Act and

sections 3131(g) and 3132(g) of the Code

provide, in relevant part, that the Secretary

will provide such regulations or other

guidance as may be necessary to carry out

the purposes of the credits, including regulations or other guidance to prevent the

avoidance of the purposes of the limitations under these provisions and to recapture the benefit of the credit where there

is a subsequent adjustment to the credit.

See sections 7001(f) and 7003(f) of the

Families First Act, and sections 3131(g)

(1), 3131(g)(4), 3132(g)(1), and 3132(g)

(4) of the Code.

With regard to the ERC, section

2301(l) of the CARES Act provides in

relevant part that the Secretary shall issue

such forms, instructions, regulations, and

guidance as are necessary to reconcile

an advance payment of the ERC with the

amount determined at the time of filing the

employment tax return for the applicable

calendar quarter or taxable year. Section

2301(j)(3)(B) of the CARES Act, as

amended by section 207 of the Relief Act,

allows for the direct assessment of certain

erroneous refunds of advanced portions of

the ERC by providing that if a small eligible employer specified in section 2301(j)

(2) of the CARES Act receives excess

advance payments of the credit, then the

taxes imposed by chapter 21 or 22 of

the Code (whichever is applicable) for

the calendar quarter are increased by the

amount of the excess. Section 2301(l) of

the CARES Act generally, as amended by

sections 206 and 207 of the Relief Act, further provides that the Secretary shall issue

such forms, instructions, regulations, and

other guidance as are necessary to prevent

the avoidance of the purposes of the limitations under section 2301 of the CARES

Act. Correspondingly, section 3134(j)

(3)(B) of the Code allows for the direct

assessment of certain erroneous refunds of

advanced portions of the credit by providing that if a small eligible employer specified in section 3134(j)(2) receives excess

advance payments of the credit, then the

taxes imposed under section 3111(b) or so

much of the taxes imposed under section

3221(a) as are attributable to the rate in

effect under section 3111(b), as applicable,

for the calendar quarter are increased by

Bulletin No. 2023–32

the amount of the excess. Section 3134(m)

(3) further provides that the Secretary will

issue such forms, instructions, regulations, and other guidance as are necessary

to prevent the avoidance of the purposes

of the limitations under section 3134.

VI. Temporary Regulations

On July 29, 2020, temporary regulations (TD 9904, 2020-34 IRB 413 (August

17, 2020)) amending the Employment

Tax Regulations under sections 3111 and

3221 to provide for the recapture of erroneous refunds of the paid sick and family

leave credits under the Families First Act

and erroneous refunds of the ERC under

the CARES Act, pursuant to the authority granted under these acts to prescribe

those regulations, were published in the

Federal Register (85 FR 45514). A notice

of proposed rulemaking (REG-11187920) cross-referencing the temporary regulations was published in the Federal

The text of the temporary regulations

served as the text of the proposed regulations. No public hearing was requested

or held. Two comments responding to

the notice of proposed rulemaking were

received. All comments were considered

and are available for public inspection and

copying at https://www.regulations.gov or

upon request. After consideration of the

comments, the proposed regulations are

adopted by this Treasury decision with a

minor modification, and the corresponding temporary regulations are removed.

The public comments are discussed under

“Summary of Comments and Explanation

of Provisions.”

On September 10, 2021, temporary

regulations (TD 9953, 2021-39 IRB 430

(September 27, 2021)) amending the

Employment Tax Regulations under sections 3131 through 3134 to provide for the

recapture of erroneous refunds of the paid

sick and family leave credits and ERC

under the ARP, pursuant to the authority granted under that act to prescribe

those regulations, were published in the

Federal Register (86 FR 50637). A notice

of proposed rulemaking (REG-10907721) cross-referencing the temporary regulations was published in the Federal

The text of the temporary regulations

419

served as the text of the proposed regulations. No public hearing was requested or

held, and no comments were received on

the proposed regulations. The proposed

regulations are adopted by this Treasury

decision with a minor modification, and

the corresponding temporary regulations

are removed.

Accordingly, this document amends

the Employment Tax Regulations (26

CFR part 31) by finalizing the regulations

under sections 3111, 3131, 3132, 3134,

and 3221 of the Code.

Summary of Comments and

Explanation of Revisions

The Department of the Treasury

(Treasury Department) and the IRS

received two comments in response to the

proposed regulations under sections 3111

and 3221 but no comments in response to

the proposed regulations under sections

3131 through 3134. Neither comment

received addressed the assessment and

recapture of erroneous refunds of credits under the Families First Act and the

CARES Act. One commenter said that the

CARES Act should not fund businesses

that primarily or exclusively employ

non-citizen and temporary visa workers.

The second commenter requested that the

Treasury Department and the IRS consider providing additional guidance on

potential reporting issues, including for

certain retirement-related provisions in

the CARES Act. These issues are outside

the scope of these regulations. For this reason, these final regulations do not address

these comments and adopt the proposed

regulations with a minor modification.

The corresponding temporary regulations

are removed.

These final regulations provide that

erroneous refunds of COVID-19 credits are treated as underpayments of the

taxes imposed under section 3111(a) or

3111(b), as applicable, and so much of the

taxes imposed under section 3221(a) as

are attributable to the rate in effect under

section 3111(a) or 3111(b), as applicable,

and are, therefore, subject to assessment

and administrative collection procedures.

This allows the IRS to prevent the avoidance of the purposes of the limitations

under the credit provisions and to recover

the erroneous refund amounts efficiently

August 7, 2023

while also preserving administrative protections afforded to taxpayers with respect

to contesting their tax liabilities under the

Code and avoiding unnecessary costs and

burdens associated with litigation. These

assessment and administrative collection

procedures may apply both in the processing of employment tax returns and

in examining returns for excess claimed

credits. These assessment and administrative collection procedures are not

intended to be exclusive and therefore do

not replace the existing recapture methods but rather represent an alternative

method available to the IRS. These final

regulations also provide that the determination of any amount of credits erroneously refunded must take into account any

credit amounts advanced to an employer

under the process established by the IRS

in accordance with sections 7001(b)(4)

(A)(ii) and 7003(b)(3)(B) of the Families

First Act, as modified by section 3606 of

the CARES Act, and section 2301(l)(1) of

the CARES Act.

In certain circumstances, third-party

payors claim tax credits on behalf of their

common law employer clients. These final

regulations clarify that employers against

which an erroneous refund of credits may

be assessed as an underpayment include

persons treated as the employer under sections 3401(d), 3504, and 3511, consistent

with their liability for the employment

taxes against which the credits applied.

In addition, these final regulations clarify the proposed regulations by expressly

stating that the common law employer

clients of these third-party payors that

remain subject to all provisions of law

applicable to employers with respect to

the payment of wages or compensation,

as applicable, may also be assessed for

an erroneous refund of credits. This clarification makes clear to employers what

had been implicit in the proposed regulations, that the existing rules in sections

3504 and 3511(c) concerning the liability of common law employer clients of

third-party payors remain applicable in

this situation. Specifically, section 3504

provides that where a fiduciary, agent, or

other person is acting for an employer in

performing acts required of the employer

under the Code, “the employer for whom

such fiduciary, agent, or other person

acts shall remain subject to the provisions of law (including penalties) applicable in respect of employers.” See also

§§ 31.3504-1(a) and 31.3504-2(c)(2).

Similarly, section 3511(c) and § 31.35111(a)(3) provide that, for third-party payors

that are Certified Professional Employer

Organizations (CPEO), an employer client of a CPEO is treated as an employer

(and therefore subject to all applicable

provisions of law) for purposes of Federal

employment taxes imposed on remuneration paid by the CPEO to non-worksite

employees.11 While sections 3504 and

3511 applied in the same manner as a matter of law under the proposed regulations,

the final regulations expressly state these

rules to avoid any confusion and help

employers better understand their legal

responsibilities stemming from sections

3504 and 3511.

Section 7805(b)(1)(A) and (B) of the

Code generally provide that no temporary,

proposed, or final regulation relating to

the Internal Revenue laws may apply to

any taxable period ending before the earliest of (A) the date on which the regulation

is filed with the Federal Register, or (B)

in the case of a final regulation, the date on

which a proposed or temporary regulation

to which the final regulation relates was

filed with the Federal Register.

Consistent with the authority provided

by section 7805(b)(1)(B), §§ 31.3111-6,

31.3131-1, 31.3132-1, 31.3134-1, and

31.3221-5 are applicable to credits paid

on or after the date on which the related

proposed and temporary regulations were

filed with the Federal Register.

Special Analyses

Pursuant to the Memorandum

of Agreement, Review of Treasury

Regulations under Executive Order 12866

(June 9, 2023), tax regulatory actions

issued by the IRS are not subject to the

requirements of section 6 of Executive

Order 12866, as amended. Therefore,

a regulatory impact assessment is not

required.

Pursuant to the Regulatory Flexibility

Act (5 U.S.C. chapter 6), the Secretary

certifies that these final regulations will

not have a significant economic impact

on a substantial number of small entities

because these final regulations impose no

compliance burden on any business entities, including small entities. Although

these final regulations will apply to all

employers eligible for the employment

tax credits under the Families First Act,

the CARES Act, and sections 3131, 3132,

and 3134 of the Code, including small

businesses and tax-exempt organizations

with fewer than 500 employees, and will

therefore be likely to affect a substantial

number of small entities, the economic

impact will not be significant. These final

regulations do not affect the employer’s

employment tax reporting or the necessary

information to substantiate entitlement to

the credits. Rather, these final regulations

merely implement the statutory authority granted under sections 7001(f) and

7003(f) of the Families First Act, section

2301(l) of the CARES Act, and sections

3131(g), 3132(g), and 3134(m) of the

Code that authorize the IRS to assess,

reconcile, and recapture any portion of

the credits erroneously credited, paid, or

refunded in excess of the actual amount

allowed as if the amounts were taxes

imposed under section 3111(a) or 3111(b),

whichever is applicable, and so much of

the taxes imposed under section 3221(a) as

are attributable to the rate in effect under

section 3111(a) or 3111(b), as applicable,

subject to assessment and administrative

collection procedures. Notwithstanding

this certification, the Treasury Department

and the IRS did not receive any comments

on any impact these regulations would

have on small entities.

Section 3511(a) provides that the CPEO is treated as the sole employer (i.e., solely subject to all provisions of law applicable to employers) for purposes of Federal employment taxes

imposed on remuneration paid to worksite employees, as defined in section 7705(e). Therefore, for remuneration paid by a CPEO to worksite employees, the employer client is not subject to

any provisions of law applicable to employers with respect to the payment of this remuneration. For this reason, the clarification in these final regulations concerning the assessment against

employer clients of a third-party payor for an erroneous refund of credits does not apply to erroneous refunds of credits that were claimed based on remuneration paid by a CPEO to worksite

employees.

August 7, 2023

420

Bulletin No. 2023–32

Statement of Availability of IRS

Documents

IRS notices and other guidance cited in

this preamble are published in the Internal

Revenue Bulletin (or Cumulative Bulletin)

and are available from the Superintendent

of Documents, U.S. Government

Publishing Office, Washington, DC

20402, or by visiting the IRS website at

https://www.irs.gov.

Drafting Information

The principal author of these final

regulations is NaLee Park, Office of the

Associate Chief Counsel (Employee

Benefits, Exempt Organizations, and

Employment Taxes). However, other personnel from the Treasury Department and

the IRS participated in the development of

these regulations.

List of Subjects in 26 CFR Part 31

Employment taxes, Fishing vessels,

Gambling, Income taxes, Penalties,

Pensions, Railroad retirement, Reporting

and recordkeeping requirements, Social

security, Unemployment compensation.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 31 is

amended as follows:

PART 31—EMPLOYMENT TAXES

AND COLLECTION OF INCOME

TAX AT SOURCE

Paragraph 1. The authority citation

for part 31 is amended by:

a. Removing the entry for § 31.3111-6T;

b. Adding an entry in numerical order

for § 31.3111-6;

c. Removing the entries for

§§ 31.3131-1T, 31.3132-1T, 31.3134-1T,

and 31.3221-5T

d. Adding entries in numerical order

for §§ 31.3131-1, 31.3132-1, 31.3134-1.

and 31.3221-5.

The general authority and additions

read, in part, as follows:

Authority: 26 U.S.C. 7805.

Section 31.3111-6 also issued under

secs. 7001 and 7003, Pub. L. 116-127, 134

Bulletin No. 2023–32

Stat. 178, and sec. 2301, Pub. L. 116-136,

134 Stat. 281.

*****

Section 31.3131-1 also issued under 26

U.S.C. 3131(g).

Section 31.3132-1 also issued under 26

U.S.C. 3132(g).

Section 31.3134-1 also issued under 26

U.S.C. 3134(m)(3).

Section 31.3221-5 also issued under

secs. 7001 and 7003, Pub. L. 116-127, 134

Stat. 178, and sec. 2301, Pub. L. 116-136,

134 Stat. 281.

*****

Par. 2. Section 31.3111-6 is added to

read as follows:

§31.3111-6 Recapture of credits

under the Families First Coronavirus

Response Act and the Coronavirus Aid,

Relief, and Economic Security Act.

(a) Recapture of erroneously refunded

credits under the Families First

Coronavirus Response Act. Any amount

of credits for qualified sick leave wages

or qualified family leave wages under

sections 7001 and 7003, respectively, of

the Families First Coronavirus Response

Act (Families First Act), Pub. L. 116127, 134 Stat. 178 (2020), as modified

by section 3606 of the Coronavirus

Aid, Relief, and Economic Security Act

(CARES Act), Pub. L. 116-136, 134 Stat.

281 (2020), plus any amount of credits

for qualified health plan expenses under

sections 7001 and 7003, and including

any increases in those credits under section 7005 of the Families First Act, that

are treated as overpayments and refunded

or credited to an employer under section 6402(a) or 6413(b) of the Internal

Revenue Code (Code) and to which the

employer is not entitled, resulting in an

erroneous refund to the employer, shall

be treated as an underpayment of the

taxes imposed by section 3111(a) of the

Code and may be assessed and collected

by the Secretary in the same manner as

the taxes.

(b) Recapture of erroneously refunded

credits under the Coronavirus Aid,

Relief, and Economic Security Act. Any

amount of credits for qualified wages

under section 2301 of the CARES Act

that is treated as an overpayment and

refunded or credited to an employer

421

under section 6402(a) or 6413(b) of the

Code and to which the employer is not

entitled, resulting in an erroneous refund

to the employer, shall be treated as an

underpayment of the taxes imposed by

section 3111(a) of the Code and may be

assessed and collected by the Secretary

in the same manner as the taxes.

amount of credits erroneously refunded as

described in paragraphs (a) and (b) of this

section must take into account any amount

of credits advanced to an employer under

the process established by the Internal

Revenue Service in accordance with sections 7001(b)(4)(A)(ii) and 7003(b)(3)(B)

of the Families First Act, as modified by

section 3606 of the CARES Act, and section 2301(l)(1) of the CARES Act.

(d) Third party payors. For purposes

of this section, employers against whom

an erroneous refund of the credits under

sections 7001 and 7003 of the Families

First Act (including any increases in

those credits under section 7005 of the

Families First Act), as modified by section 3606 of the CARES Act, and the

credits under section 2301 of the CARES

Act can be assessed as an underpayment

of the taxes imposed by section 3111(a)

include persons treated as the employer

under sections 3401(d), 3504, and 3511

of the Code, consistent with their liability for the section 3111(a) taxes against

which the credit applied, and also include

those persons’ common law employer

clients that remain subject to all provisions of law applicable to employers with

respect to the payment of wages.

(e) Applicability date. This section

applies to all credit refunds under sections 7001 and 7003 of the Families

First Act (including any increases in

those credits under section 7005 of the

Families First Act), as modified by section 3606 of the CARES Act, advanced

or paid on or after July 24, 2020, and all

credit refunds under section 2301 of the

CARES Act advanced or paid on or after

July 24, 2020.

§31.3111-6T [Removed]

Par. 3. Section 31.3111-6T is removed.

Par. 4. Section 31.3131-1 is added to

read as follows:

August 7, 2023

§31.3131-1 Recapture of credits.

(a) Recapture of erroneously refunded

credits. Any amount of credits for qualified

sick leave wages under section 3131(a),

including any increase to the amount

of the credits under sections 3131(d),

3131(e), and 3133, that are treated as

overpayments and refunded or credited

to an employer under section 6402(a)

or 6413(b) and to which the employer

is not entitled, resulting in an erroneous

refund to the employer, shall be treated

as an underpayment of the taxes imposed

under section 3111(b) and so much of the

taxes imposed under section 3221(a) as

are attributable to the rate in effect under

section 3111(b), as applicable, and may be

assessed and collected by the Secretary in

the same manner as the taxes.

(b) Advance credit amounts erroneously refunded. The determination of any

amount of credits erroneously refunded

as described in paragraph (a) of this section must take into account any amount

of credits advanced to an employer under

the process established by the Internal

Revenue Service in accordance with section 3131(b)(4)(B) and 3131(g)(6).

this section, employers against whom an

erroneous refund of the credits under section 3131 (including any increases in those

credits under section 3133) can be assessed

as an underpayment of the taxes imposed

under section 3111(b) and so much of the

taxes imposed under section 3221(a) as

are attributable to the rate in effect under

section 3111(b), as applicable, include

persons treated as the employer under sections 3401(d), 3504, and 3511, consistent

with their liability for the section 3111(b)

or 3221(a) taxes against which the credit

applied, and also include those persons’

common law employer clients that remain

subject to all provisions of law applicable

to employers with respect to the payment

of wages or compensation, as applicable.

(d) Applicability date. This section

applies to all credit refunds under section

3131 (including any increases in those

credits under section 3133), advanced or

paid on or after September 8, 2021.

§31.3131-1T [Removed]

Par. 5. Section 31.3131-1T is removed.

August 7, 2023

Par. 6. Section 31.3132-1 is added to

read as follows:

§31.3132-1 Recapture of credits.

(a) Recapture of erroneously refunded

credits. Any amount of credits for qualified family leave wages under section

3132, including any increase to the amount

of the credits under sections 3132(d),

3132(e), and 3133, that are treated as

overpayments and refunded or credited

to an employer under section 6402(a)

or 6413(b) and to which the employer

is not entitled, resulting in an erroneous

refund to the employer, shall be treated

as an underpayment of the taxes imposed

under section 3111(b) and so much of the

taxes imposed under section 3221(a) as

are attributable to the rate in effect under

section 3111(b), as applicable, and may be

assessed and collected by the Secretary in

the same manner as the taxes.

(b) Advance credit amounts erroneously refunded. The determination of any

amount of credits erroneously refunded

as described in paragraph (a) of this section must take into account any amount

of credits advanced to an employer under

the process established by the Internal

Revenue Service in accordance with section 3132(b)(3)(B) and 3132(g)(6).

of this section, employers against whom

an erroneous refund of the credits under

section 3132 (including any increases

in those credits under section 3133) can

be assessed as an underpayment of the

taxes imposed under section 3111(b)

and so much of the taxes imposed under

section 3221(a) as are attributable to the

rate in effect under section 3111(b), as

applicable, include persons treated as the

employer under sections 3401(d), 3504,

and 3511, consistent with their liability

for the section 3111(b) or 3221(a) taxes

against which the credit applied, and

also include those persons’ common law

employer clients that remain subject to all

provisions of law applicable to employers with respect to the payment of wages

or compensation, as applicable.

(d) Applicability date. This section

applies to all credit refunds under section

3132 (including any increases in those

credits under section 3133) advanced or

paid on or after September 8, 2021.

422

§31.3132-1T [Removed]

Par. 7. Section 31.3132-1T is removed.

Par. 8. Section 31.3134-1 is added to

read as follows:

§31.3134-1 Recapture of credits.

(a) Recapture of erroneously refunded

credits. Any amount of credits for qualified wages under section 3134 of the Code

that is treated as an overpayment and

refunded or credited to an employer under

section 6402(a) or 6413(b) of the Code

and to which the employer is not entitled,

resulting in an erroneous refund to the

employer, shall be treated as an underpayment of the taxes imposed under section

3111(b) and so much of the taxes imposed

under section 3221(a) as are attributable

to the rate in effect under section 3111(b),

as applicable, and may be assessed and

collected by the Secretary in the same

manner as the taxes.

(b) Advance credit amounts erroneously refunded. The determination of any

amount of credits erroneously refunded

as described in paragraph (a) of this section must take into account any amount

of credits advanced to an employer under

the process established by the Internal

Revenue Service in accordance with section 3134(j) and 3134(m).

of this section, employers against whom

an erroneous refund of the credits under

section 3134 can be assessed as an underpayment of the taxes imposed under section 3111(b) and so much of the taxes

imposed under section 3221(a) as are

attributable to the rate in effect under

section 3111(b), as applicable, include

persons treated as the employer under

sections 3401(d), 3504, and 3511, consistent with their liability for the section

3111(b) or 3221(a) taxes against which

the credit applied, and also include those

persons’ common law employer clients

that remain subject to all provisions of

law applicable to employers with respect

to the payment of wages or compensation, as applicable.

(d) Applicability date. This section

applies to all credit refunds under section 3134 advanced or paid on or after

September 8, 2021.

Bulletin No. 2023–32

§31.3134-1T [Removed]

Par. 9. Section 31.3134-1T is removed.

Par. 10. Section 31.3221-5 is added to

read as follows:

§31.3221-5 Recapture of credits

under the Families First Coronavirus

Response Act and the Coronavirus Aid,

Relief, and Economic Security Act.

(a) Recapture of erroneously refunded

credits under the Families First

Coronavirus Response Act. Any amount

of credits for qualified sick leave wages

or qualified family leave wages under sections 7001 and 7003, respectively, of the

Families First Coronavirus Response Act

(Families First Act), Pub. L. 116-127, 134

Stat. 178 (2020), as modified by section

3606 of the Coronavirus Aid, Relief, and

Economic Security Act (CARES Act),

Pub. L. 116-136, 134 Stat. 281 (2020), plus

any amount of credits for qualified health

plan expenses under sections 7001 and

7003, that are treated as overpayments and

refunded or credited to an employer under

section 6402(a) or 6413(b) of the Internal

Revenue Code (Code) and to which the

employer is not entitled, resulting in an

erroneous refund to the employer, shall be

treated as an underpayment of the taxes

imposed by section 3221(a) of the Code

and may be assessed and collected by the

Secretary in the same manner as the taxes.

Bulletin No. 2023–32

(b) Recapture of erroneously refunded

credits under the Coronavirus Aid,

Relief, and Economic Security Act. Any

amount of credits for qualified wages

under section 2301 of the CARES Act

that is treated as an overpayment and

refunded or credited to an employer

under section 6402(a) or 6413(b) of the

Code and to which the employer is not

entitled, resulting in an erroneous refund

to the employer, shall be treated as an

underpayment of the taxes imposed by

section 3221(a) of the Code and may be

assessed and collected by the Secretary

in the same manner as the taxes.

amount of credits erroneously refunded as

described in paragraphs (a) and (b) of this

section must take into account any amount

of credits advanced to an employer under

the process established by the Internal

Revenue Service in accordance with sections 7001(b)(4)(A)(ii) and 7003(b)(3)(B)

of the Families First Act, as modified by

section 3606 of the CARES Act, and section 2301(l)(1) of the CARES Act.

(d) Third party payors. For purposes of

this section, employers against whom an

erroneous refund of the credits under sections 7001 and 7003 of the Families First

Act, as modified by section 3606 of the

CARES Act, and the credits under section

2301 of the CARES Act can be assessed as

an underpayment of the taxes imposed by

423

section 3221(a) include persons treated as

the employer under sections 3401(d), 3504,

and 3511 of the Code, consistent with their

liability for the section 3221(a) taxes against

which the credit applied, and also include

those persons’ common law employer clients that remain subject to all provisions of

law applicable to employers with respect to

the payment of compensation.

(e) Applicability date. This section

applies to all credit refunds under sections 7001 and 7003 of the Families First

Act, as modified by section 3606 of the

CARES Act, advanced or paid on or after

July 24, 2020, and all credit refunds under

section 2301 of the CARES Act advanced

or paid on or after July 24, 2020.

§31.3221-5T [Removed]

Par. 11.

removed.

Section

31.3221-5T

Douglas W. O’Donnell,

Deputy Commissioner for Services

and Enforcement.

Approved: July 10, 2023

Lily L. Batchelder,

Assistant Secretary of the Treasury

(Tax Policy).

(Filed by the Office of the Federal Register July 24,

2023, 11:15 a.m., and published in the issue of the

Federal Register for July 26, 2023, 88 FR 48118)

August 7, 2023

Part III

Update for Weighted

Average Interest Rates,

Yield Curves, and Segment

Rates

under § 414(y)) pursuant to § 412. Section

430(h)(2) specifies the interest rates that

must be used to determine a plan’s target

normal cost and funding target. Under

this provision, present value is generally

determined using three 24-month average

interest rates (“segment rates”), each of

which applies to cash flows during specified periods. To the extent provided under

§ 430(h)(2)(C)(iv), these segment rates

are adjusted by the applicable percentage

of the 25-year average segment rates for

the period ending September 30 of the

year preceding the calendar year in which

the plan year begins.1 However, an election may be made under § 430(h)(2)(D)

(ii) to use the monthly yield curve in place

of the segment rates.

Notice 2007-81, 2007-44 I.R.B. 899,

provides guidelines for determining the

monthly corporate bond yield curve, and

the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent

with the methodology specified in Notice

2007-81, the monthly corporate bond

yield curve derived from June 2023 data

is in Table 2023-6 at the end of this notice.

Notice 2023-53

This notice provides guidance on the

corporate bond monthly yield curve, the

corresponding spot segment rates used

under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the

Internal Revenue Code. In addition, this

notice provides guidance as to the interest rate on 30-year Treasury securities

under § 417(e)(3)(A)(ii)(II) as in effect for

plan years beginning before 2008 and the

30-year Treasury weighted average rate

under § 431(c)(6)(E)(ii)(I).

YIELD CURVE AND SEGMENT

RATES

Section 430 specifies the minimum

funding requirements that apply to single-employer plans (except for CSEC plans

Applicable Month

July 2023

The spot first, second, and third segment

rates for the month of June 2023 are,

respectively, 5.26, 5.23, and 5.16.

The 24-month average segment rates

determined

under

§ 430(h)(2)(C)(i)

through (iii) must be adjusted pursuant

to § 430(h)(2)(C)(iv) to be within the

applicable minimum and maximum percentages of the corresponding 25-year

average segment rates. For this purpose,

any 25-year average segment rate that is

less than 5% is deemed to be 5%. The

25-year average segment rates for plan

years beginning in 2022 and 2023 were

published in Notice 2021-54, 2021-41

I.R.B. 457, and Notice 2022-40, 2022-40

I.R.B. 266, respectively. The applicable

minimum and maximum percentages are

95% and 105% for a plan year beginning

in 2022 or 2023.

24-MONTH AVERAGE CORPORATE

BOND SEGMENT RATES

The three 24-month average corporate

bond segment rates applicable for July

2023 without adjustment for the 25-year

average segment rate limits are as follows:

24-Month Average Segment Rates Without 25-Year Average Adjustment

First Segment

Second Segment

3.22

4.22

The adjusted 24-month average segment rates set forth in the chart below

reflect § 430(h)(2)(C)(iv) of the Code. The

24-month averages applicable for July

2023, adjusted to be within the applicable

minimum and maximum percentages of

Third Segment

4.34

the corresponding 25-year average segment rates in accordance with § 430(h)(2)

(C)(iv) of the Code, are as follows:

Adjusted 24-Month Average Segment Rates

For Plan Years

Beginning In

Applicable Month

First Segment

Second Segment

Third Segment

2022

July 2023

4.75

5.18

5.92

2023

July 2023

4.75

5.00

5.74

30-YEAR TREASURY SECURITIES

INTEREST RATES

Section 431 specifies the minimum

funding requirements that apply to

multiemployer plans pursuant to § 412.

Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A),

based on the plan’s current liability.

Section 431(c)(6)(E)(ii)(I) provides

that the interest rate used to calculate

current liability for this purpose must

be no more than 5 percent above and

no more than 10 percent below the

Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount

of the full funding limitation under § 433(c)(7)(C)).

August 7, 2023

424

Bulletin No. 2023–32

weighted average of the rates of interest

on 30-year Treasury securities during

the four-year period ending on the last

day before the beginning of the plan

year. Notice 88-73, 1988-2 C.B. 383,

provides guidelines for determining the

weighted average interest rate. The rate

of interest on 30-year Treasury securities for June 2023 is 3.86 percent. The

Service determined this rate as the average of the daily determinations of yield

on the 30-year Treasury bond maturing

in May 2053. For plan years beginning

in July 2023, the weighted average of

the rates of interest on 30-year Treasury

securities and the permissible range of

rates used to calculate current liability

are as follows:

For Plan Years Beginning In

Treasury Weighted Average Rates

30-Year Treasury Weighted Average

Permissible Range 90% to 105%

July 2023

2.72

2.45 to 2.85

under § 417(e)(3)(D) are segment rates

computed without regard to a 24-month

average. Notice 2007-81 provides guidelines for determining the minimum

present value segment rates. Pursuant to

that notice, the minimum present value

segment rates determined for June 2023

are as follows:

MINIMUM PRESENT VALUE

SEGMENT RATES

In general, the applicable interest rates

Month

June 2023

Minimum Present Value Segment Rates

First Segment

Second Segment

5.26

5.23

DRAFTING INFORMATION

The principal author of this notice is

Tom Morgan of the Office of Associate

Bulletin No. 2023–32

Chief Counsel (Employee Benefits,

Exempt Organizations, and Employment

Taxes). However, other personnel from

the IRS participated in the development

425

Third Segment

5.16

of this guidance. For further information

regarding this notice, contact Mr. Morgan

at 202-317-6700 or Tony Montanaro at

626-927-1475 (not toll-free numbers).

August 7, 2023

Table 2023-6

Monthly Yield Curve for June 2023

Derived from June 2023 Data

Maturity

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

20.0

Yield

5.73

5.60

5.47

5.35

5.24

5.15

5.07

5.01

4.97

4.96

4.95

4.96

4.98

5.01

5.04

5.08

5.12

5.15

5.18

5.22

5.24

5.27

5.29

5.30

5.32

5.33

5.34

5.33

5.32

5.31

5.30

5.29

August 7, 2023

Maturity

20.5

21.0

21.5

22.0

22.5

23.0

23.5

24.0

24.5

25.0

25.5

26.0

26.5

27.0

27.5

28.0

28.5

29.0

29.5

30.0

30.5

31.0

31.5

32.0

32.5

33.0

33.5

34.0

34.5

35.0

35.5

36.0

36.5

37.0

37.5

38.0

38.5

39.0

39.5

40.0

Yield

5.28

5.27

5.26

5.25

5.24

5.23

5.22

5.21

5.20

5.19

5.18

5.17

5.16

5.15

Maturity

40.5

41.0

41.5

42.0

42.5

43.0

43.5

44.0

44.5

45.0

45.5

46.0

46.5

47.0

47.5

48.0

48.5

49.0

49.5

50.0

50.5

51.0

51.5

52.0

52.5

53.0

53.5

54.0

54.5

55.0

55.5

56.0

56.5

57.0

57.5

58.0

58.5

59.0

59.5

60.0

Yield

5.15

5.14

5.13

5.12

5.11

426

Maturity

60.5

61.0

61.5

62.0

62.5

63.0

63.5

64.0

64.5

65.0

65.5

66.0

66.5

67.0

67.5

68.0

68.5

69.0

69.5

70.0

70.5

71.0

71.5

72.0

72.5

73.0

73.5

74.0

74.5

75.0

75.5

76.0

76.5

77.0

77.5

78.0

78.5

79.0

79.5

80.0

Yield

5.11

5.10

5.09

Maturity

80.5

81.0

81.5

82.0

82.5

83.0

83.5

84.0

84.5

85.0

85.5

86.0

86.5

87.0

87.5

88.0

88.5

89.0

89.5

90.0

90.5

91.0

91.5

92.0

92.5

93.0

93.5

94.0

94.5

95.0

95.5

96.0

96.5

97.0

97.5

98.0

98.5

99.0

99.5

100.0

Yield

5.09

5.08

Bulletin No. 2023–32

Temporary Relief Under

Sections 901 and 903 of

the Internal Revenue Code

This notice announces temporary relief

for taxpayers in determining whether a

foreign tax is eligible for a foreign tax

credit under §§ 901 and 903 of the Internal

Revenue Code (Code). This temporary

relief, as described in section 3 of this

notice, applies with respect to § 1.901-2(a)

and (b) (the definition of a foreign income

tax and the net gain requirement) and to

§ 1.903-1(c)(1)(iv) (jurisdiction to tax

excluded income) and § 1.903-1(c)(2)(iii)

(source-based attribution requirement).1

the IRS published Notice 2023-31 in the

Internal Revenue Bulletin (IRB 2023-16)

relating to proposed § 1.903-1(c)(2)(iii)

(B) (the single-country exception).

Following the publication of the 2022

FTC final regulations and subsequent

guidance, the Treasury Department and

the IRS received questions regarding the

application of the 2022 FTC final regulations and requests to modify those regulations. The Treasury Department and the

IRS continue to analyze issues related to

the 2022 FTC final regulations and are

considering proposing amendments to

those regulations. As that analysis is ongoing, taxpayers may apply the temporary

relief in section 3 of this notice during the

relief period, as defined in section 4 of this

notice. The Treasury Department and the

IRS are considering whether, and under

what conditions, to provide additional

temporary relief beyond the relief period.

SECTION 2. BACKGROUND

SECTION 3. TEMPORARY RELIEF

Section 901 allows a credit for foreign

income, war profits, and excess profits

taxes, and § 903 provides that such taxes

include a tax paid in lieu of a generally-imposed foreign income, war profits,

or excess profits tax (collectively, foreign income taxes). On January 4, 2022,

the Department of the Treasury (Treasury

Department) and the Internal Revenue

Service (IRS) published Treasury Decision

9959 in the Federal Register (87 FR 276)

(2022 FTC final regulations), which contained final regulations under §§ 901 and

903. Correcting amendments to the 2022

FTC final regulations were published in the

Federal Register on July 27, 2022 (87 FR

45018 and 87 FR 45021). On November

22, 2022, the Treasury Department and

the IRS published proposed regulations

(REG-112096-22) in the Federal Register

(87 FR 71271), which included proposed

rules relating to the cost recovery requirement and the substitution requirement

for covered withholding taxes. On April

17, 2023, the Treasury Department and

To determine whether foreign taxes

paid2 in the relief period are foreign

income taxes, a taxpayer may apply the

following temporary relief. First, instead

of applying existing § 1.901-2(a) and (b),

taxpayers may apply § 1.901-2(a) and (b)

as contained in 26 CFR part 1, revised

as of April 1, 2021 (former § 1.901-2(a)

and (b)), except that, for this purpose, the

seventh and eighth sentences of former

§ 1.901-2(b)(4)(i) (flush language),3 which

describe the “nonconfiscatory gross basis

tax rule,” are deleted and replaced with

the following: “No foreign tax whose base

is gross receipts or gross income satisfies

the net income requirement, except in the

case of a foreign tax whose base consists

solely of investment income that is not

derived from a trade or business, or wage

income (or both).” Second, taxpayers may

apply existing § 1.903-1 without applying § 1.903-1(c)(1)(iv) (jurisdiction to tax

excluded income) and § 1.903-1(c)(2)(iii)

(source-based attribution requirement).

Notice 2023-55

SECTION 1. PURPOSE

Under the temporary relief, a gross

basis tax imposed on the gross receipts or

gross income arising from the provision

of digital services (DST) does not satisfy

the net income requirement of former

§ 1.901-2(b)(4)(i), because the base of

the tax is gross receipts or gross income

and does not consist solely of investment

income that is not derived from a trade

or business, or wage income. In addition, under existing § 1.903-1, without

taking into account § 1.903-1(c)(1)(iv)

and § 1.903-1(c)(2)(iii), a foreign country’s DST that applies by its terms to any

income subject to that foreign country’s

net income tax remains not creditable

as a tax in lieu of an income tax. See

§ 1.903-1(c)(1)(ii) and (c)(2)(ii); see also

§ 1.903-1(d)(1) (Example 1).

When applying the temporary relief,

examples and cross-references in former § 1.901-2(a) and (b) and the existing

Income Tax Regulations will be considered

modified as appropriate. Appropriate modifications include the following. Examples

1-3 of former § 1.901-2(b)(4)(iv) analyze

the nonconfiscatory gross basis tax rule

and therefore are inapplicable. References

in the existing Income Tax Regulations to

a “foreign income tax” include a foreign

tax that satisfies the requirements in former § 1.901-2(a) and (b), as modified in

this section 3. Additionally, all cross-references in former § 1.901-2(a) and (b)

to provisions in former § 1.901-2 (other

than former § 1.901-2(a) and (b)) or other

former Income Tax Regulations (such

as §§ 1.901-2A and 1.903-1) are construed, as applicable, as cross-references

to the corresponding provisions (taking

into account any renumbering of those

provisions) of the existing Income Tax

Regulations.

Taxpayers may apply this temporary

relief to foreign taxes paid in any relief

year, as defined in section 4 of this notice,

provided that the taxpayer satisfies the following requirements. First, the taxpayer

must apply the temporary relief to (1) all

Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

The term “paid” in this notice has the meaning in § 1.901-2(g)(5).

The seventh and eighth sentences in former § 1.901-2(b)(4)(i) (flush language) are the following: “A foreign tax whose base is gross receipts or gross income does not satisfy the net income

requirement except in the rare situation where that tax is almost certain to reach some net gain in the normal circumstances in which it applies because costs and expenses will almost never

be so high as to offset gross receipts or gross income, respectively, and the rate of the tax is such that after the tax is paid persons subject to the tax are almost certain to have net gain. Thus,

a tax on the gross receipts or gross income of businesses can satisfy the net income requirement only if businesses subject to the tax are almost certain never to incur a loss (after payment

of the tax).”

Bulletin No. 2023–32

427

August 7, 2023

foreign taxes paid by the taxpayer in the

taxpayer’s relief year, and (2) all foreign

taxes (i) that are paid by any other person

in a taxable year that begins on or after

December 28, 2021 and that ends with or

within the taxpayer’s relief year, and (ii)

for which the taxpayer would be eligible

to claim a credit, as provided in § 901

(determined without regard to the limitations described in § 1.901-1(b)), if the taxpayer applied the temporary relief to such

foreign taxes. This includes foreign taxes

paid by a controlled foreign corporation

(CFC) of which the taxpayer is a United

States shareholder (U.S. shareholder) in

the CFC’s taxable year that ends with or

August 7, 2023

within the U.S. shareholder’s relief year.

Additionally, a member of a consolidated

group may apply the temporary relief to a

relief year only if all members of the consolidated group apply the temporary relief

to the relief year. Finally, the taxpayer may

not apply the temporary relief in a relief

year to claim a credit, as provided under

§ 901, for any amount of foreign tax for

which a deduction is allowed in the relief

year or any other taxable year.

SECTION 4. RELIEF PERIOD

For purposes of this notice, the relief

period means taxable years beginning on

428

or after December 28, 2021, and ending

on or before December 31, 2023, and

relief year means any taxable year within

the relief period.

SECTION 5. DRAFTING

INFORMATION

The principal authors of this

notice are Moshe Dlott and Teisha M.

Ruggiero of the Office of Associate

Chief Counsel (International). For further information regarding this notice,

contact Mr. Dlott at (202) 317-4967 or

Ms. Ruggiero at (646) 259-8116 (not

toll-free numbers).

Bulletin No. 2023–32

Part IV

Deletions From

Cumulative List

of Organizations,

Contributions to Which are

Deductible Under Section

170 of the Code

Announcement 2023-22

The Internal Revenue Service has

revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and

170(c)(2) of the Internal Revenue Code of

1986.

Generally, the IRS will not disallow

deductions for contributions made to a

listed organization on or before the date

of announcement in the Internal Revenue

Bulletin that an organization no longer

qualifies. However, the IRS is not precluded from disallowing a deduction for

any contributions made after an organization ceases to qualify under section 170(c)

(2) if the organization has not timely filed

a suit for declaratory judgment under section 7428 and if the contributor (1) had

knowledge of the revocation of the ruling

or determination letter, (2) was aware that

such revocation was imminent, or (3) was

in part responsible for or was aware of the

activities or omissions of the organization

that brought about this revocation.

NAME OF ORGANIZATION

AMERICAN CANCER FOUNDATION OF ATLANTA INC

AMERICAN CANCER FOUNDATION OF BOSTON INC.

AMERICAN CANCER FOUNDATION OF WISCONSIN INC

AMERICAN CANCER FOUNDATION OF SAN FRANCISCO INC

AMERICAN CANCER FOUNDATION OF SAN BERNARDINO INC

AMERICAN CANCER FOUNDATION OF SAN ANTONIO INC

AMERICAN CANCER FOUNDATION OF RIVERSIDE

AMERICAN CANCER FOUNDATION OF PITTSBURGH INC

AMERICAN VANCER FOUNDATION OF PHILADELPHIA INC

AMERICAN CANCER FOUNDATION OF SAN DEIGO INC

AMERICAN CANCER SOCIETY OF NORTH DAKOTA INC

AMERICAN CANCER SOCIETY OF PENNSYLVANIA INC

AMERICAN CANCER SOCIETY OF STATEN ISLAND INC

AMERICAN CANCER SOCIETY OF WISCONSIN

CHILDREN CANCER SOCIETY OF AMERICA INC

UNITED WAY OF NEW YORK INC

UNITED WAY OF LOS ANGELES INC.

UNITED WAY OF MICHIGAN INC

UNITED WAY OF SAN FRANCISCO INC.

AMERICAN CANCER SOCIETY FOR CHILDREN OF NORTH DAKOTA

INC.

AMERICAN CANCER FOUNDATION OF MICHIGAN INC

AMERICAN CANCER FOUNDATION OF TEXAS INC

Bulletin No. 2023–32

429

If on the other hand a suit for declaratory judgment has been timely filed,

contributions from individuals and organizations described in section 170(c)(2)

that are otherwise allowable will continue to be deductible. Protection under

section 7428(c) would begin on August

07, 2023 and would end on the date the

court first determines the organization is

not described in section 170(c)(2) as more

particularly set for in section 7428(c)(1).

For individual contributors, the maximum

deduction protected is $1,000, with a husband and wife treated as one contributor.

This benefit is not extended to any individual, in whole or in part, for the acts or

omissions of the organization that were

the basis for revocation.

Effective

Date of

Revocation

1/1/2021

STATEN ISLAND, NEW YORK

NEW YORK, NY

STATEN ISLAND, NEW YORK

1/1/2021

STATEN ISLAND, NEW YORK

LOCATION

August 7, 2023

NAME OF ORGANIZATION

AMERICAN CANCER FOUNDATION OF HOUSTON INC

AMERICAN CANCER FOUNDATION OF LONG BEACH

AMERCAN CANCER SOCIETY OF ADULTS INC

AMERCAN CANCER SOCIETY OF NEW YORK INC

AMERICAN CANCER FOUNDATION OF MADISON INC

AMERICAN CANCER SOCIETY OF BISMARK INC

AMERICAN CANCER FOUNDATION OF MANHATTAN INC

AMERICAN CANCER FOUNDATION OF UNITED STATES INC

AMERICAN CANCER SOCIETY OF MICHIGAN

AMERICAN CANCER FOUNDATION OF MASSACHETTS INC

AMERICAN CANCER FOUNDATION OF DETROIT INC

AMERICAN CANCER FOUNDATION OF OHIO

INSTITUTE FOR COMMUNITY WELLNESS

AMERICAN CANCER FOUNDATIONOF GRAND RAPIDS, INC

AMERICAN CANCER FOUNDATION OF GREEN BAY, INC.

AMERICAN CANCER FOUNDATION OF LANSING

AMERICAN CANCER FOUNDATION OF MILWAUKEE

AMERICAN CANCER FOUNDATION OF NEW YORK

AMERICAN CANCER FOUNDATION OF OAKLAND

AMERICAN CANCER FOUNDATION OF PENNSYLVANIA, INC

August 7, 2023

430

Effective

Date of

Revocation

1/1/2021

LOCATION

STATEN ISLAND, NEW YORK

BRONX, NEW YORK

STATEN ISLAND, NEW YORK

Bulletin No. 2023–32

Notice of Proposed

Rulemaking

Exchange or State Exchange on the

Federal platform, which in turn may seek

a user fee adjustment.

Coverage of Certain

Preventive Services Under

the Affordable Care Act

DATES: To be assured consideration,

comments must be received at one of the

addresses provided below, by [Insert date

60 days after date of publication in the

FEDERAL REGISTER].

REG 124930-21

AGENCY: Internal Revenue Service,

Department of the Treasury; Employee

Benefits

Security

Administration,

Department of Labor; Centers for Medicare

& Medicaid Services, Department of

Health and Human Services.

ACTION: Notice of proposed rulemaking.

SUMMARY: These proposed rules

would amend regulations regarding coverage of certain preventive services under

the Patient Protection and Affordable

Care Act, which requires non-grandfathered group health plans and non-grandfathered group or individual health

insurance coverage to cover certain contraceptive services without cost sharing.

Current regulations include exemptions

and optional accommodations for entities

and individuals with religious or moral

objections to coverage of contraceptive

services. These rules propose rescinding

the moral exemption rule. These proposed rules also would establish a new

individual contraceptive arrangement

that individuals enrolled in plans or coverage sponsored, arranged, or provided

by objecting entities may use to obtain

contraceptive services at no cost directly

from a provider or facility that furnishes

contraceptive services. Contraceptive

services would be available through

the proposed individual contraceptive

arrangement without any involvement

on the part of an objecting entity. Under

these proposed rules, a provider or facility that furnishes contraceptive services

in accordance with the individual contraceptive arrangement for eligible individuals would be able to be reimbursed for

its costs by entering into an arrangement

with an issuer on a federally-facilitated

Bulletin No. 2023–32

ADDRESSES: In commenting, please

refer to file code CMS‑9903‑P.

Comments, including mass comment

submissions, must be submitted in one of

the following three ways (please choose

only one of the ways listed):

1. Electronically. You may submit

electronic comments on this regulation to

https://www.regulations.gov. Follow the

“Submit a comment” instructions.

2. By regular mail. You may mail written

comments to the following address ONLY:

enters for Medicare & Medicaid

Services,

Department of Health and Human

Services,

Attention: CMS-9903-P,

P.O. Box 8016,

Baltimore, MD 21244-8016.

Please allow sufficient time for mailed

comments to be received before the close

of the comment period.

3. By express or overnight mail. You

may send written comments to the following address ONLY:

enters for Medicare & Medicaid

Services,

Department of Health and Human

Services,

Attention: CMS-9903-P,

Mail Stop C4-26-05,

7500 Security Boulevard,

Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION

CONTACT: Jason Sandoval, Internal

Revenue Service, Department of the

431

Treasury, at (202) 317-5500; Beth Baum

or Matthew Meidell, Employee Benefits

Security Administration, Department

of Labor, at (202) 693-8335; David

Mlawsky, Centers for Medicare &

Medicaid Services, Department of

Health and Human Services, at (410)

786-6851; for matters related to financial support, Allison Yadsko, Centers

for Medicare & Medicaid Services,

Department of Health and Human

Services, at (410) 786-1740.

Customer Service Information: Individuals

interested in obtaining information from

the Department of Labor (DOL) concerning employment-based health coverage laws may call the Employee Benefits

Security Administration (EBSA) TollFree Hotline at 1‑866-444-EBSA (3272)

or visit the DOL’s website (www.dol.

gov/ebsa). In addition, information from

the Department of Health and Human

Services (HHS) on private health insurance coverage and coverage provided by

non-Federal Governmental group health

plans can be found on the Centers for

Medicare & Medicaid Services (CMS)

website (www.cms.gov/cciio), and information on health care reform can be found

at www.HealthCare.gov.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

Comments received before the close of the

comment period are available for viewing

by the public, including any personally

identifiable or confidential business information that is included in a comment. We

post comments received before the close

of the comment period on the following

website as soon as possible after they have

been received: https://www.regulations.

gov. Follow the search instructions on that

website to view public comments. CMS

will not post on regulations.gov public

comments that make threats to individuals or institutions or suggest that the commenter will take actions to harm another

individual. CMS continues to encourage

individuals not to submit duplicative comments. We will post acceptable comments

from multiple unique commenters even if

the content is identical or nearly identical

to other comments.

August 7, 2023

I. Background

A. Legislative, Regulatory and Judicial

History

The Patient Protection and Affordable

Care Act (Pub. L. 111–148) was enacted

on March 23, 2010. The Health Care

and Education Reconciliation Act of

2010 (Pub. L. 111–152) was enacted on

March 30, 2010. These statutes are collectively known as the Affordable Care Act

(ACA). The ACA reorganized, amended,

and added to the provisions of part A of

title XXVII of the Public Health Service

Act (PHS Act) relating to group health

plans and health insurance issuers in the

group and individual markets. The ACA

added section 715(a)(1) to the Employee

Retirement Income Security Act of 1974

(ERISA) and section 9815(a)(1) to the

Internal Revenue Code (Code) to incorporate the provisions of part A of title XXVII

of the PHS Act into ERISA and the Code,

and to make them applicable to group

health plans and health insurance issuers

providing health insurance coverage in

connection with group health plans. The

sections of the PHS Act incorporated into

ERISA and the Code are sections 2701

through 2728.

Section 2713 of the PHS Act, as added

by the ACA and incorporated into ERISA

and the Code, requires non-grandfathered

group health plans and health insurance

issuers offering non-grandfathered group

or individual health insurance coverage

to provide coverage of certain specified

preventive services without cost sharing,

including, under section 2713(a)(4) of the

PHS Act, benefits for certain women’s

preventive health services as provided for

in comprehensive guidelines supported

by the Health Resources and Services

Administration (HRSA).1,2 On August

1, 2011, HRSA adopted guidelines for

women’s preventive health services (2011

HRSA-Supported Guidelines) based on

recommendations of the independent

Institute of Medicine (IOM), now known

as the National Academy of Medicine.3 As

relevant here, the 2011 HRSA-Supported

Guidelines included sterilization procedures, patient education and counseling

for women with reproductive capacity,

and all Food and Drug Administration

(FDA)-approved, cleared, or granted contraceptives, as prescribed by a health care

provider (collectively, contraceptive services).4 Except as discussed later in this

section, non-grandfathered group health

plans and health insurance issuers offering non-grandfathered group or individual

health insurance coverage were required

to provide coverage consistent with the

2011 HRSA-Supported Guidelines, without cost sharing, for plan years (or, in the

individual market, policy years) beginning on or after August 1, 2012. As fully

discussed in footnote 4 of this preamble,

the 2011 HRSA-Supported Guidelines

have been updated several times; plans

and issuers are currently required to provide coverage without cost sharing consistent with the HRSA-Supported Guidelines

as amended in 2019.

HHS, DOL, and the Department of the

Treasury (collectively, the Departments)

previously issued rules and guidance

implementing section 2713 of the PHS

Act, including guidance specific to coverage of contraceptive services.5 The

Departments also previously issued

rules providing exemptions from the

In addition to the specified preventive services addressed in section 2713 of the PHS Act, section 3203 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted

on March 27, 2020, requires non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance to cover any qualifying

coronavirus preventive service without cost sharing, pursuant to section 2713(a) of the PHS Act (including the regulations under 26 CFR 54.9815-2713, 29 CFR 2590.715-2713, and 45 CFR

147.130 (or any successor regulations)).

The final regulations generally provide that plans and issuers must cover a preventive service pursuant to a new or changed recommendation starting with the first plan year (or, in the individual market, policy year) that begins on or after the date that is one year after the date on which the new recommendation is issued. 26 CFR 54.9815-2713(b)(1); 29 CFR 2590.715-2713(b)

(1); 45 CFR 147.130(b)(1). Coverage of qualifying coronavirus preventive services must begin on an expedited timeline. Pub. L. 116-136, § 3203, 134 Stat. 367 (2020); 26 CFR 54.98152713T(b)(3); 29 CFR 2590.715-2713(b)(3); 45 CFR 147.130(b)(3).

The references to “women” in these proposed rules should be considered to include any individual potentially capable of becoming pregnant, including cisgender women, transgender men,

and non-binary individuals. Plans and issuers are required to cover contraceptive services for all such individuals consistent with the requirements in 26 CFR 54.9815-2713, 29 CFR 2590.7152713, and 45 CFR 147.130. See FAQs About Affordable Care Act Implementation (Part XXVI) (May 11, 2015), Q5, available at https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/

our-activities/resource-center/faqs/aca-part-xxvi.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/aca_implementation_faqs26.pdf.

The references in this document to “contraception,” “contraceptive,” “contraceptive coverage,” or “contraceptive services” generally include all contraceptives, sterilization, and related

patient education and counseling recommended by the HRSA-Supported Women’s Preventive Services Guidelines, unless otherwise indicated. The Guidelines issued in 2011 referred

to “Contraceptive Methods and Counseling” as “[a]ll Food and Drug Administration approved contraceptive methods, sterilization procedures, and patient education and counseling for

all women with reproductive capacity.” The Guidelines, as amended in December 2016 refer, under the header “Contraception,” to: “the full range of female-controlled U.S. Food and

Drug Administration-approved contraceptive methods, effective family planning practices, and sterilization procedures,” “contraceptive counseling, initiation of contraceptive use, and

follow-up care (e.g., management, and evaluation as well as changes to and removal or discontinuation of the contraceptive method),” and “instruction in fertility awareness-based methods,

including the lactation amenorrhea method.” See https://www.hrsa.gov/womens-guidelines-2016/index.html. The Guidelines as amended in 2019 maintain the contraception guideline, and

note, under the header “Contraception”, the applicability of the Religious Exemptions and Accommodations for Coverage of Certain Preventive Services. See https://www.hrsa.gov/womens-guidelines-2019. The Guidelines as amended in December 2021, which are effective for plan years and policy years beginning on or after December 30, 2022, refer, under the header

“Contraception,” to “the full range of contraceptives and contraceptive care to prevent unintended pregnancies and improve birth outcomes.” Unlike in previous versions of the Guidelines,

the term “methods” no longer appears in that phrase, as the FDA does not and never has approved, granted, or cleared contraceptive methods, only contraceptive products. With the removal

of the phrase “female-controlled”, all condoms are included in the December 2021 guidelines, which include “screening, education, counseling, and provision of contraceptives (including in

the immediate postpartum period)” including “follow-up care (e.g., management, evaluation and changes, including the removal, continuation, and discontinuation of contraceptives).” The

2021 Guidelines include “the full range of U.S. Food and Drug Administration (FDA)- approved, -granted, or -cleared contraceptives, effective family planning practices, and sterilization

procedures be available as part of contraceptive care.” The 2021 Guidelines do not include sterilization surgery for men. See https://www.hrsa.gov/womens-guidelines/index.html. The following sentence appears in the December 2016 Guidelines: “Additionally, instruction in fertility awareness-based methods, including the lactation amenorrhea method, although less effective,

should be provided for women desiring an alternative method.” Although that specific sentence does not appear in the December 2021 Guidelines, HRSA maintains that other language in

the December 2021 Guidelines establishes that such instruction is included in those Guidelines. Additionally, the U.S. District Court for the Eastern District of Texas has issued a temporary

restraining order and preliminary injunction that the effective date of the deletion of that sentence from the December 2021 Guidelines is delayed until further order of the Court, and as a

consequence the sentence remains in those Guidelines. The Court enjoined HRSA and all persons in active concert or participation with them from using or applying the December 2021

Guidelines to delete the above language, thereby maintaining that current language unless and until it is changed through a final rule issued after notice to the public and an opportunity to

comment. Tice-Harouff v. Johnson, 6:22-cv-201-JDK (E.D. Tex. Aug. 12, 2022).

See section II.B of the preamble for a description of the applicable guidance.

August 7, 2023

432

Bulletin No. 2023–32

contraceptive coverage requirement for

entities and individuals with moral or

religious objections to contraceptive

coverage, and accommodations through

which objecting entities are not required

to contract, arrange, pay, or provide

a referral for contraceptive coverage

while at the same time ensuring that

participants, beneficiaries, and enrollees enrolled in coverage sponsored or

arranged by an objecting entity could

separately obtain contraceptive services

at no cost. Specifically, the Departments

have issued:

• Interim final rules on July 19,

2010, at 75 FR 41726 (July 2010 interim

final rules), which implemented the preventive services requirements of section

2713 of the PHS Act;

• Interim final rules amending the July 2010 interim final rules on

August 3, 2011, at 76 FR 46621 (August

2011 interim final rules), which provided HRSA with the authority to exempt

group health plans established or maintained by certain religious employers

(and group health insurance coverage

provided in connection with those plans)

from the requirement to cover contraceptive services consistent with the HRSASupported Guidelines;

• Final rules on February 15, 2012,

at 77 FR 8725 (February 2012 final rules),

which finalized the definition of “religious

employer” in the August 2011 interim

final rules without modification;

• An advanced notice of proposed rulemaking on March 21, 2012,

at 77 FR 16501 (March 2012 ANPRM),

soliciting comments on how to provide

for coverage of recommended preventive

services, including contraceptive services,

without cost sharing, while simultaneously ensuring that certain nonprofit

organizations with religious objections

to contraceptive coverage would not be

required to contract, arrange, pay, or provide a referral for that coverage;

• Proposed rules on February 6,

2013, at 78 FR 8456 (February 2013

proposed rules), which proposed to simplify and clarify the definition of “religious employer” for purposes of the

religious employer exemption, and proposed accommodations for group health

plans established or maintained by certain nonprofit religious organizations

with religious objections to contraceptive

coverage (and group health insurance

coverage provided in connection with

those plans) and for insured student health

plans arranged by certain nonprofit religious organizations that are institutions of

higher education with religious objections

to contraceptive coverage;

• Final rules on July 2, 2013, at 78

FR 39870 (July 2013 final rules), which

simplified and clarified the definition of

“religious employer” for purposes of the

religious employer exemption, established

an accommodation process for health

coverage established or maintained or

arranged by eligible organizations,6 and

established the process for participating

issuers to seek a user fee adjustment under

the applicable accommodations;

• Interim final rules on August

27, 2014, at 79 FR 51092 (August 2014

interim final rules), which amended the

July 2013 final rules in light of the United

States Supreme Court’s interim order

in connection with an application for an

injunction in Wheaton College v. Burwell7

(Wheaton interim order), and provided an

alternative process that an eligible organization may use to provide notice of its

religious objection to the coverage of contraceptive services;

• Proposed rules on August 27,

2014, at 79 FR 51118 (August 2014

proposed rules), which proposed potential changes to the definition of “eligible

organization” for purposes of the accommodation process in light of the Supreme

Court’s decision in Burwell v. Hobby

Lobby Stores, Inc.;8

• Final rules on July 14, 2015, at

80 FR 41317 (July 2015 final rules), which

finalized the July 2010 interim final rules,

the August 2014 interim final rules related

to the process an eligible organization uses

to provide notice of its religious objection

to the coverage of contraceptive services,

as well as the August 2014 proposed rules,

which had proposed expanding the definition of “eligible organization” to allow

closely held for-profit entities to access an

accommodation with respect to the coverage of contraceptive services;

• A request for information on July

26, 2016, at 81 FR 47741 (July 2016 RFI),

which requested public comments on

alternative ways for objecting organizations to obtain an accommodation in light

of the Supreme Court’s decision in Zubik

v. Burwell;9

• Frequently Asked Questions on

January 9, 2017 (FAQs Part 36), which

summarized alternative potential accommodations and stated that the Departments

were not modifying the existing accommodations because the Departments continued to be of the view that the existing

accommodations were consistent with

the Religious Freedom Restoration Act

(RFRA)10 and that alternative accommodations were not feasible;11

• Interim final rules on October

13, 2017, at 82 FR 47792 (October 2017

Religious Exemption interim final rules),

which expanded existing religious exemptions from the contraceptive coverage

requirement to objecting entities and individuals and made the existing accommodation process optional;

• Interim final rules on October

13, 2017, at 82 FR 47838 (October 2017

Moral Exemption interim final rules),

which created exemptions for entities and

individuals that object to the contraceptive coverage requirement based on moral

convictions, and provided objecting entities access to the optional accommodation

process;

That accommodation process, which was the only process by which certain employers could avoid the contraceptive coverage requirement under the July 2013 final rules, now forms the

basis for what is instead an optional accommodation process under final rules published on November 15, 2018, at 83 FR 57536 (November 2018 Religious Exemption final rules).

Wheaton College v. Burwell, 134 S. Ct. 2806, 573 U.S. 958, 189 L. Ed. 2d 856 (2014).

Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751, 573 U.S. 682, 189 L. Ed. 2d 675 (2014).

Zubik v. Burwell, 136 S. Ct. 1557 (2016).

42 U.S.C. 2000bb-1, et seq.

FAQs About Affordable Care Act Implementation Part 36 (Jan. 17, 2017), available at https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/acapart-36.pdf and https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/aca-faqs-part36_1-9-17-final.pdf.

Bulletin No. 2023–32

433

August 7, 2023

• Final rules on November 15,

2018, at 83 FR 57536 (November 2018

Religious Exemption final rules), which

finalized the expanded religious exemptions and optional accommodation process

in the October 2017 Religious Exemption

interim final rules;

• Final rules on November 15,

2018, at 83 FR 57592 (November 2018

Moral Exemption final rules), which

finalized the new moral exemptions and

optional accommodation process in the

October 2017 Moral Exemption interim

final rules;

• Frequently Asked Questions on

August 16, 2021 (FAQs Part 48), which

announced the Departments would initiate

rulemaking to amend the November 2018

Religious and Moral Exemption final

rules in light of recent litigation;12

• Frequently Asked Questions on

January 10, 2022 (FAQs Part 51), which

acknowledged complaints received about

compliance with the contraceptive coverage requirement and clarified currently

applicable guidance;13 and

• Frequently Asked Questions

on July 28, 2022 (FAQs Part 54), which

further clarified the contraceptive coverage requirement and currently applicable

guidance.14

During the period in which the

Departments issued these rules and guidance, organizations and individuals filed

lawsuits challenging the contraceptive

coverage requirement and regulations

as being inconsistent with various legal

protections, including RFRA. Plaintiffs

included religious nonprofit organizations, for-profit businesses controlled by

religious individuals, and others, including several non-religious organizations

that opposed the required coverage of certain contraceptives on the basis of non-religious moral convictions. These lawsuits

first led to the Supreme Court’s ruling

in Burwell v. Hobby Lobby Stores, Inc.15

The Supreme Court ruled in Hobby Lobby

that, under RFRA, the contraceptive coverage requirement could not be applied

to closely held for-profit corporations

because doing so imposed a substantial

burden on the owners’ exercise of religion

and was not the least restrictive means

of advancing a compelling governmental

interest.16 In response to Hobby Lobby, the

July 2015 final rules allowed closely held

for-profit companies to access the existing

accommodation process.

Later, a second series of legal challenges were filed by religious nonprofit organizations that argued that the

accommodation itself impermissibly

burdened their religious beliefs. On May

16, 2016, the Supreme Court issued a

per curiam decision in Zubik v. Burwell,

vacating the judgments of the Courts of

Appeals—most of which had ruled in the

Departments’ favor—and remanding the

cases “in light of the substantial clarification and refinement in the positions of

the parties” that had been supplied in supplemental briefs.17 The Court anticipated

that, on remand, the Courts of Appeals

would “allow the parties sufficient time

to resolve any outstanding issues between

them.”18 The Departments issued the July

2016 RFI to gather public comments in

response to the Zubik decision.

FAQs Part 36 summarized the public

comments and suggestions regarding the

accommodation process. In Zubik, the

Court suggested that the parties submit to

the court information about whether costfree contraceptive coverage could be provided to employees, through the objecting

employers’ health insurance issuers, without the employers having to provide any

notice to the issuers or the Government.19

Some comments received in response to

the July 2016 RFI suggested that such

an accommodation process would not be

acceptable to some employers with religious objections, and some comments

suggested that it would create significant

administrative and operational challenges

that would potentially undermine individuals’ seamless access to full and equal

health coverage, including contraceptive

coverage. Commenters also noted that the

process would not work for self-insured

plans for which there is no issuer with

a duty to provide coverage. The Zubik

plaintiffs alternatively suggested creating

contraceptive-only insurance policies in

which women would affirmatively enroll.

Comments received in response to the

July 2016 RFI expressed, among other

concerns, that these policies might not be

authorized under State contract and insurance law.

Beginning in 2015, lawsuits challenging the contraceptive coverage requirement were also filed by non-religious

organizations with moral objections to

contraceptive coverage. In one case,

March for Life v. Burwell, a nonprofit,

non-religious organization and two of

the organization’s individual employees filed a complaint claiming that the

contraceptive coverage requirement (1)

violated the equal protection component

of the Due Process Clause of the Fifth

Amendment, (2) violated the individual

employees’ rights under RFRA, (3) violated the individuals’ rights under the First

Amendment’s Free Exercise Clause, and

(4) was arbitrary and capricious under the

Administrative Procedure Act (APA).20

Challenges by non-religious, nonprofit

organizations led to conflicting opinions

among Federal courts. On August 31,

2015, the District Court for the District

of Columbia agreed with the March for

Life plaintiffs on the organization’s equal

FAQs About Affordable Care Act Implementation Part 48 (Aug. 16, 2021), available at https://www.cms.gov/files/document/faqs-part-48.pdf and https://www.dol.gov/sites/dolgov/files/

EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-48.pdf.

FAQs About Affordable Care Act Implementation Part 51, Families First Coronavirus Response Act and Coronavirus Aid, Relief, and Economic Security Act Implementations (Jan. 10,

2022), available at https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-51.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/Downloads/FAQs-Part-51.pdf.

FAQs About Affordable Care Act Implementation Part 54 (July 28, 2022), available at https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/acapart-54.pdf and https://www.cms.gov/files/document/faqs-part-54.pdf.

Burwell v. Hobby Lobby Stores, Inc, 134 S. Ct. 2751 (2014).

Id. at 2775–79.

Zubik v. Burwell, 136 S. Ct. 1557, 1560 (2016).

Id.

578 U.S. 901.

March for Life v. Burwell, 128 F. Supp. 3d 116 (D.D.C. 2015).

August 7, 2023

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Bulletin No. 2023–32

protection claim and the employees’

RFRA claims, and while not ruling on the

APA claim, issued a permanent injunction

against the Departments.21 That injunction

remains in place. Conversely, in another

case, the U.S. Court of Appeals for the

Third Circuit (Third Circuit) on August

4, 2017 held that Real Alternatives—a

non-religious section 501(c)(3) nonprofit

organization and a moral objector—was

not similarly situated to a religious organization and was therefore not entitled to an

exemption.22 The Third Circuit concluded

that “a secular antiabortion group mirrors

a single-issue interest group and not a religious organization that takes advantage of

the Exemption.”23 In refusing to extend

the exemption to a secular nonprofit organization, the Third Circuit recognized the

“vast history of legislative protections that

single out and safeguard religious freedom but not moral philosophy.”24

In October 2017, the Departments

issued the October 2017 Moral Exemption

interim final rules and the October 2017

Religious Exemption interim final rules

(together, the October 2017 interim final

rules), each of which went into effect

immediately upon release. Those rules

expanded exemptions and accommodations to include employers that object to

contraceptive coverage on nonreligious

moral grounds, along with expanding the

available religious exemptions. As stated

in the October 2017 Moral Exemption

interim final rules, with respect to the new

exemption for non-religious nonprofit

organizations, the Departments were

aware of two small nonprofit organizations that had filed lawsuits raising non-religious moral objections to coverage of

some contraceptives. HHS noted in the

2017 Moral Exemption interim final rules

that both of those entities had fewer than

five employees enrolled in health coverage, and both required all of their employees to agree with their opposition to the

coverage as a condition of employment.25

In the November 2018 Moral Exemption

final rules, without data available to estimate the actual number of entities that

would make use of the expanded exemption for for-profit entities without publicly

traded ownership interests and that object

to the contraceptive coverage requirement

based on sincerely held moral convictions,

the Departments estimated that fewer than

10 entities, if any, would do so.26

Numerous states filed lawsuits challenging the October 2017 interim final

rules, contending that the October 2017

interim final rules were both procedurally

invalid and arbitrary and capricious, and

thus violated the APA. Pennsylvania and

New Jersey sued in the Eastern District

of Pennsylvania, while Massachusetts

sued in the District of Massachusetts, and

California, Delaware, Maryland, New

York, and Virginia sued in the Northern

District of California.27 They all asked the

courts to enjoin the interim final rules.

Two Federal district courts issued

preliminary injunctions blocking the

October 2017 interim final rules nationwide. The Northern District of California

did so based on the states’ likelihood of

success on their procedural APA claim—

that the interim final rules were invalid

for failing to follow notice and comment

rulemaking.28 On appeal, the Ninth Circuit

affirmed the district court decision though

it limited the geographic scope of the

injunction to the five states that were then

plaintiffs in the case. The Eastern District

of Pennsylvania enjoined the interim final

rules nationwide, holding that plaintiffs

were likely to succeed on their claims

that the Departments did not follow

proper procedures in issuing the interim

final rules, and that the interim final rules

contradict the statute.29 While the preliminary injunctions were on appeal, the

Departments issued the November 2018

Religious Exemption final rules and the

November 2018 Moral Exemption final

rules (together, the November 2018 final

rules). The district courts in California

and Pennsylvania both enjoined enforcement of the November 2018 final rules,

and the courts of appeals upheld those

injunctions.30

The November 2018 Religious

Exemption final rules ultimately expanded

existing exemptions for individuals

and entities with religious objections to

coverage of contraceptive services. All

nonprofit and for-profit employers with

sincerely held religious objections to

contraceptive coverage became eligible

for religious exemptions, as did private

universities and colleges with religious

objections with respect to student health

insurance coverage. Those rules retained

the existing accommodation process but

made it optional.31

In January 2020, the Supreme Court

granted petitions for writ of certiorari in the

Trump v. Pennsylvania and Little Sisters

of the Poor Saints Peter and Paul Home

v. Pennsylvania cases and consolidated

them, to review whether the Departments

had the authority to promulgate rules

exempting employers with religious or

moral objections from the requirement

to cover contraceptive services.32 The

Court held that the Departments have

broad authority to identify and create

both moral and religious exemptions and

that the final rules were not procedurally

Id. at 134.

Real Alternatives v. Sec’y of HHS, 150 F. Supp. 3d 419, affirmed 867 F. 3d 338 (3d Cir. 2017).

Id. at 349.

Id. at 350.

82 FR 47856-47857.

83 FR 57627.

Nine other states later joined the California litigation: Connecticut, Hawaii, Illinois, Minnesota, North Carolina, Rhode Island, Vermont, Washington, and Oregon, along with the District of

Columbia, and an additional three states (Colorado, Michigan, and Nevada) moved to intervene in June 2019.

California v. Azar, 281 F. Supp. 3d 806 (N.D. Cal. 2017), affirmed, 911 F.3d 558 (9th Cir. 2018).

See Pennsylvania v. Trump, 281 F. Supp. 3d 553 (E.D. Pa. 2017), affirmed, 930 F.3d 543 (3d Cir. 2019).

See Pennsylvania v. Trump, 351 F. Supp. 3d 791 (E.D. Pa. 2019), affirmed, 930 F.3d 543 (3d Cir. 2019); and California v. Azar, 351 F. Supp. 3d 1267 (N.D. Cal. 2019) (enjoining the final

rules with respect to 14 plaintiff states and the District of Columbia); affirmed, 941 F.3d 410 (9th Cir. 2019).

83 FR 57536, 57537-38.

Little Sisters of the Poor Saints Peter & Paul Home v. Pennsylvania, 140 S. Ct. 918 (2020).

Little Sisters of the Poor Saints Peter & Paul Home v. Pennsylvania, 140 S. Ct. 2367, 2386 (2020).

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August 7, 2023

invalid.33 The Court indicated that it was

proper for the Departments to take RFRA

into account when considering religious

exemptions, but the Court did not decide

whether the rules violated the APA’s

arbitrary-and-capricious standard.34 In

litigation following the Supreme Court’s

decision, some plaintiffs continue to argue

that the Departments did not sufficiently

weigh the benefits of expanded employer

exemptions against the harms of depriving

more women of contraceptive coverage.35

Individuals also filed lawsuits claiming

that the contraceptive coverage requirement forced them to choose between (1)

purchasing health insurance that forces

them to subsidize abortion or (2) forgoing health insurance. The District Court

for the Northern District of Texas agreed

with the plaintiffs in a class action lawsuit,

DeOtte v. Azar, and issued a permanent

injunction covering a class of individuals

and a class of employers, which was ultimately vacated by the Fifth Circuit.36

The states continue to challenge

the November 2018 final rules as arbitrary and capricious in three lawsuits. In

Massachusetts v. Dept. of Health & Human

Services, Massachusetts argued that the

moral exemption is overbroad, and that

the Departments failed to consider the

reliance interests of women who stand to

lose contraceptive coverage due to either of

the exemptions.37 The U.S. District Court

for the District of Massachusetts ruled

that the November 2018 final rules were

neither arbitrary and capricious nor unconstitutional.38 The Massachusetts litigation

(now on appeal) is currently being held in

abeyance, while California v. Becerra and

Pennsylvania v. Biden are stayed.39

B. Basis for Rulemaking

Section 2713(a)(4) of the PHS Act,

also known as the Women’s Health

Amendment, was enacted as part of the

ACA to ensure that plans and health insurance issuers cover women’s preventive

health needs. Access to contraception is

an essential component of women’s health

care in part because contraception is effective at reducing unintended pregnancy.

Studies report that 99 percent of sexually-active women have used at least one

method of contraception at some point

during their lifetime,40 regardless of religious affiliation.41 The Centers for Disease

Control and Prevention (CDC) found that

65.3 percent of American women aged 15

to 49 years were using contraception from

2017 to 2019.42 The contraceptive coverage

requirement has resulted in more women

using contraception, especially long-acting reversible contraceptives (LARCs),

such as intrauterine devices (IUDs) and

implants.43 Without health insurance or

other health coverage, contraception can

be prohibitively expensive,44 and the cost

may deter women from obtaining needed

care.45 Unintended pregnancies have

negative health consequences for both

women and children.46 Poor and low-income women are most likely to have an

unintended pregnancy47 and are also more

likely to be unable to afford contraception.

Further, the U.S. Supreme Court’s decision in Dobbs v. Jackson Women’s Health

Organization,48 which allows for Federal

and State laws that significantly limit

access to abortion and thus removes one

key option for women in making health

care decisions, has placed a heightened

importance on access to contraceptive

services nationwide. Ensuring access to

contraception at no cost (other than the

premium or contribution paid for health

coverage49) is a national public health

imperative, as it is a means to prevent

unintended pregnancies and help provide

better health and economic outcomes for

women, so that they can exercise control

over their reproductive health and family

planning decisions, particularly in states

with prohibitions or tight restrictions on

abortion.

rulemakings,

the

Departments established exemptions and

accommodations for a variety of entities. Although the November 2018 final

rules expanded religious exemptions, the

Departments have concluded that these

rulemakings did not give sufficient consideration to women’s significant interests in access to contraceptive services.

Requiring individuals with low incomes

to pay out-of-pocket for contraceptive services creates a disproportionate

Id. at 2383-84.

See appellees supplemental brief, State of California v. Azar, Nos. 19-15072, 19-15118, 19-15150 (9th Cir., Aug. 28, 2020). (“For example, the court will have to determine…whether defendants’ justifications are implausible because the Exemption Rules are not tailored to address the purported problems that the Rules identify…”)

DeOtte v. Azar, 393 F. Supp. 3d 490 (N.D. Tex. 2019), DeOtte v. Nevada, No. 19-10754 (5th Cir. Dec. 17, 2021).

See Mem. & Order (Op.), Massachusetts v. Dept. of Health & Human Services, No. 17-cv-11930 (D. Mass. Jan. 15, 2021), ECF No. 139.

Id.

See Stay Order, Massachusetts v. Dept. of Health & Human Services, No. 21-1076 (1st Cir. Mar. 12, 2021); Joint Status Report, California v. Becerra, No. 4:17-cv-5783-HSG (N.D. Cal.

Oct. 29, 2021); and Stay Order, Pennsylvania v. Biden, No. 2:17-cv-04540-WB (E.D. Pa. March 8, 2021).

Daniels, K., Mosher, W., & Jones, J. (2013). Contraceptive Methods Women Have Ever Used: United States, 1982–2010. National Health Statistics Reports, 62: 1-15.

Jones, R.K. (2020). People of all Religions Use Birth Control and Have Abortions. Guttmacher Institute. https://www.guttmacher.org/print/article/2020/10/

people-all-religions-use-birth-control-and-have-abortions.

National Center for Health Statistics, Current Contraceptive Status Among Women Aged 15-49: United States, 2017-2019. Daniels, K., & Abma, J.C. (2020) Current contraceptive status

among women aged 15–49: United States, 2017–2019. NCHS Data Brief, no 388. Hyattsville, MD: National Center for Health Statistics. Available at https://www.cdc.gov/nchs/products/

databriefs/db388.htm.

Snyder, A. H., Weisman, C. S., Liu, G., Leslie, D., & Chuang, C. H. (2018). The Impact of the Affordable Care Act on Contraceptive Use and Costs among Privately Insured Women. Women’s

health issues: official publication of the Jacobs Institute of Women’s Health, 28(3), 219–223. https://doi.org/10.1016/j.whi.2018.01.005.

Becker, N.V. & Polsky, D. (2015). Women Saw Large Decrease in Out-Of-Pocket Spending for Contraceptives After ACA Mandate Removed Cost Sharing. Health Affairs, 34(7): 12041208. Available at https://www.healthaffairs.org/doi/10.1377/hlthaff.2015.0127.

Sonfield, A. (2011). “The Case for Insurance Coverage of Contraceptive Services and Supplies Without Cost-Sharing.” Guttmacher Policy Review, 14(1): 7-15.

“Preventing Unplanned Pregnancy.” National Conference of State Legislatures (2021). Available at: https://www.ncsl.org/research/health/preventing-unplanned-pregnancy.aspx.

Guttmacher Institute (2019). “Unintended Pregnancy in the United States.” Available at https://www.guttmacher.org/sites/default/files/factsheet/fb-unintended-pregnancy-us.pdf.

Dobbs v. Jackson Women’s Health Organization, No. 19-1392, 597 U.S. __ (2022).

For ease of reference, this preamble describes the proposed individual contraceptive arrangement as providing access to contraceptive services “at no cost.” However, individuals eligible

for the individual contraceptive arrangement would typically have to pay a premium or contribution to enroll in the group health plan or health insurance coverage sponsored, arranged, or

provided by an objecting entity.

August 7, 2023

436

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financial burden and unnecessary barrier to care for those individuals who

must spend a greater percentage of their

income on contraceptive services.50 The

exemptions also ignore the government

interest in promoting coverage for contraceptive services and assuring access

to contraception. Furthermore, section 1

of Executive Order 13985, “Executive

Order on Advancing Racial Equity and

Support for Underserved Communities

Through the Federal Government” (E.O.

13985), instructs the Federal Government

to consider ways to affirmatively advance

equity, civil rights, racial justice, and

equal opportunity, with an emphasis

on including historically marginalized

communities and individuals. As noted

previously, requiring individuals to pay

out-of-pocket for contraceptive services

will disproportionately burden low-wage

workers. A considerable percentage of

low-income women in the U.S. already

rely on safety-net clinics for contraception

services.51 Low-income women also have

the least access to contraception through

employer-sponsored health insurance.52

Given that non-white women are overrepresented among low-wage workers,

exemptions for employers of low-wage

workers from requiring coverage for contraceptive services could further disproportionately burden non-white women

by limiting their access to contraceptive

coverage and reproductive care through

employer-sponsored

coverage.

This

decrease in access to health care has also

resulted in an increase in the prevalence of

unplanned pregnancies for non-white and

low-income individuals.53 In addition, historically marginalized communities and

individuals are disproportionately affected

by racial biases in health care. Racial bias

has led to more skepticism about the

safety of women’s health care and less

knowledge about the efficacy of various

forms of birth control for family planning

among non-white women.54

The disparities in maternal health

among women of different races can be

addressed in part by removing financial

barriers to accessing contraceptive services. Racial-ethnic disparities in access

to reproductive health care, including

contraceptive services, are widespread.55

Improving access to contraceptive services is critical to narrowing disparities in

reproductive health access and outcomes,

as well as longer-term outcomes. Access

to postpartum contraception is important

to increase spacing between pregnancies,

as short intervals between pregnancies

can be associated with adverse health

outcomes.56 Access to contraceptive

services without cost sharing increases

knowledge about safe and effective forms

of birth control planning and decreases

financial constraints that prevent continuation of appropriate contraception use

for women in marginalized communities.

Additionally, access to contraceptive services has wide-ranging economic effects

for women, from increased educational

attainment to increases in labor force participation and lifetime earnings.57

In addition to addressing the policy

objectives discussed previously, these

proposed rules are consistent with meeting the objectives of several Executive

Orders and a Presidential Memorandum

issued by President Biden. On January 28,

2021, President Biden issued Executive

Order 14009, “Strengthening Medicaid

and the Affordable Care Act” (E.O.

14009).58 Section 3 of E.O. 14009 directs

HHS, and the heads of all other executive

departments and agencies with authorities

and responsibilities related to Medicaid

and the ACA, to review all existing regulations, orders, guidance documents, policies, and any other similar agency actions

to determine whether they are inconsistent

with policy priorities described in section

1 of E.O. 14009, to include protecting

and strengthening the ACA and making

high-quality health care accessible and

affordable for all individuals.59 The ACA

is fundamentally “designed to broaden

access to healthcare and insurance coverage.”60 Further, the Women’s Health

Amendment was designed to expand

access to the preventive care and screenings that women require.61 HHS issued

the HRSA-Supported Guidelines pursuant to the Women’s Health Amendment

Although many women try and use multiple contraceptive methods for various reasons, nearly one in five women (18 percent) say they are not currently using their preferred method of

birth control. The primary reason women say they are not using their preferred method of contraception is because they cannot afford it. See Frederiksen, B., Ranji, U., Salganikoff, A., &

Long, M., (2021), Women’s Sexual and Reproductive Health Services: Key Findings from the 2020 KFF Women’s Health Survey. https://www.kff.org/womens-health-policy/issue-brief/

womens-sexual-and-reproductive-health-services-key-findings-from-the-2020-kff-womens-health-survey/.

Ranji, U., Salganicoff, A., Sobel, L., & Gomez, I. (2017). Financing family planning services for low-income women: The role of public programs. The Henry J. Kaiser Family Foundation.

https://www.kff.org/wp-content/uploads/2019/10/Issue-Brief-Financing-Family-Planning-Services-for-Low-income-Women-1.pdf

Sawhill, I. & Guyot, K. (2019). “Preventing unplanned pregnancy: Lessons from the states.” Brookings. https://www.brookings.edu/research/preventing-unplanned-pregnancy-lessonsfrom-the-states/.

Finer, L. & Zolna, M. (2016). “Declines in Unintended Pregnancy in the United States, 2008-2011.” N Engl J Med, 374(9):843-52 and Behn, M., Pace, LE. et al.(2019). “The Trump

Administration’s Final Regulations Limit Insurance Coverage of Contraception.” Women’s Health Issues, 29(2): 103-106.

Payne, C., & Fanarjian, N. (2014). Seeking causes for race-related disparities in contraceptive use. Virtual Mentor, 16(10), 805–809. https://doi.org/10.1001/virtualmentor.2014.16.10.

jdsc1-1410.

Sutton, M. Y., Anachebe, N. F. & Skanes H. (2021). “Racial and Ethnic Disparities in Reproductive Health Services and Outcomes, 2020.” Obstetrics and gynecology, 137(2), 225–233.

https://doi.org/10.1097/AOG.0000000000004224.

See The White House. (2022). White House Blueprint for Addressing the Maternal Health Crisis. https://www.whitehouse.gov/wp-content/uploads/2022/06/Maternal-Health-Blueprint.pdf.

See also Schummers, L., Hutcheon, J. A., Hernandez-Diaz, S., Williams, P. L., Hacker, M. R., VanderWeele, T. J., & Norman, W. V. (2018). Association of Short Interpregnancy Interval With

Pregnancy Outcomes According to Maternal Age. JAMA Internal Medicine, 178(12), 1661–1670. https://doi.org/10.1001/jamainternmed.2018.4696.

See Bernstein, Anna and Kelly M. Jones (2019). “The Economic Effects of Contraceptive Access: A Review of the Evidence.” Institute for Women’s Policy Research. Available at https://

iwpr.org/wp-content/uploads/2020/07/B381_Contraception-Access_Final.pdf.

86 FR 7793 (February 2, 2021).

E.O. 14009 also revoked Executive Order 13765 of January 20, 2017 (Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal). The Departments

adopted the moral exemption and accommodation in part to further this now revoked Executive Order by relieving a regulatory burden imposed on entities with moral convictions opposed

to providing certain contraceptive coverage.

Religious Sisters of Mercy v. Azar, 513 F. Supp. 3d 1113 (D.N.D. 2021).

To implement the Women’s Health Amendment, HRSA commissioned the independent Institute of Medicine, now known as the National Academy of Medicine, to conduct a scientific

review and provide recommendations on specific preventive measures that meet women’s health needs.

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August 7, 2023

that included contraceptives as a category

of preventive services recommended for

women. If finalized, these proposed rules

would better align the preventive services regulations with the policy priorities

described in section 1 of E.O. 14009 by

expanding access to contraceptive services without cost sharing to individuals

whose health plans currently do not or

would not offer such coverage due to a

religious or moral objection.

Also, on January 28, 2021, President

Biden issued a Memorandum on

“Protecting Women’s Health at Home and

Abroad.”62 Section 1 of the Memorandum

stated “[w]omen should have access to the

healthcare they need. For too many women

today, both at home and abroad, that is not

possible… The Federal Government must

take action to ensure that women at home

and around the world are able to access

complete medical information, including

with respect to their reproductive health.”

These proposed rules would, if finalized,

help to support women’s access to reproductive health care services at home.

On April 5, 2022, President Biden issued

Executive Order 14070, “Continuing

to Strengthen Americans’ Access to

Affordable, Quality Health Coverage”

(E.O. 14070).63 Section 2 of E.O. 14070

requires the heads of appropriate agencies to, in addition to taking the actions

directed pursuant to E.O. 14009, take

several other actions, including examine

policies or practices that make it easier for

all consumers to enroll in and retain coverage, understand their coverage options,

and select appropriate coverage; that

strengthen benefits and improve access

to health care providers; that improve

the comprehensiveness of coverage and

protect consumers from low-quality coverage; that expand eligibility and lower

costs for coverage in the ACA Exchanges,

Medicaid, Medicare, and other programs;

that help improve linkages between the

health care system and other stakeholders

to address health-related needs; and that

help reduce the burden of medical debt on

households. These proposed rules would

further the goals of E.O. 14070.

On July 8, 2022, President Biden issued

Executive Order 14076, “Protecting Access

to Reproductive Healthcare Services (E.O.

14076).”64 Section 3 of E.O. 14076 requires

the Secretary of HHS to submit a report to

the President identifying potential actions

to “protect and expand access to the full

range of reproductive healthcare services,

including actions to enhance family planning services such as access to emergency

contraception” and “identifying ways to

increase outreach and education about

access to reproductive healthcare services,

including by launching a public awareness

initiative to provide timely and accurate

information about such access, which

shall include promoting awareness of and

access to the full range of contraceptive

services.” These proposed rules would

take critical steps to further the goals in

E.O. 14076 by expanding access to the

full range of contraceptive services for

women enrolled in coverage established

or maintained by an objecting entity, or

in health insurance coverage offered or

arranged by an objecting entity.

In addition to addressing the directives

in the Executive Orders discussed above,

these proposed rules also address the concerns about limiting access to contraception that have been raised by litigants. The

Supreme Court remanded the Little Sisters

cases to the U.S. Courts of Appeals for the

Third and Ninth Circuits, respectively,

to consider whether the November 2018

final rules adequately considered women’s

health and access to contraceptives or were

arbitrary and capricious. Under the current

exemptions, objectors are not required

to inform participants, beneficiaries, or

enrollees that the plan or coverage does

not cover contraceptive services or invoke

the optional accommodation, and no alternative mechanisms provide contraceptive

coverage for affected women—leaving

many women without coverage.65 Given

that the November 2018 final rules allow,

but do not require, objecting entities to

invoke the accommodation process, many

women in plans subject to an exemption

may be unable to access contraceptive services due to financial, logistical, or administrative barriers.

These proposed rules seek to ensure

that women who are enrolled in either a

group health plan established or maintained by an objecting entity, or in health

insurance coverage offered or arranged by

an objecting entity, including an employer,

institution of higher education, or health

insurance issuer, have access to cost-free

contraceptive coverage, even when the

objecting entity claims the regulatory

exemption without voluntarily using the

accommodation process. This proposed

approach would further the government’s

interest in protecting women’s health and

their right to make reproductive decisions.

In light of these considerations, the

Departments are issuing these proposed

rules to further the government’s interest

in promoting coverage for contraceptive

services for all women,66 and in eliminating barriers to access, while respecting

the religious objections of employers,

health insurance issuers, and institutions

of higher education to coverage of contraceptive services.

II. Overview of the Proposed Rules—

Departments of HHS, Labor, and the

Treasury

A. Introduction

As discussed in section I.B of this preamble, the Departments have engaged in

several rounds of rulemaking and other

initiatives that solicited public input in an

effort to address the claims of those religious employers, institutions of higher

education, and health insurance issuers

that object to providing coverage for contraceptive services while also ensuring

women’s access to seamless coverage for

contraceptive services. Previously, under

the July 2015 final rules, many of the

objecting entities that are now covered by

the November 2018 Religious Exemption

final rules could avoid the contraceptive

86 FR 33077.

87 FR 20689.

87 FR 42053.

In the November 2018 final rules, the Departments estimated that between 70,500 and 126,400 women may have lost contraceptive coverage as a result of the November 2018 Religious

Exemption final rules, and that approximately 15 women may have incurred contraceptive costs due to use of the November 2018 Moral Exemption final rules by for-profit entities.

See Section VI.B.2. of this preamble, under the Benefits heading.

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Bulletin No. 2023–32

coverage requirement only by invoking

an accommodation. The accommodation

was designed so that these entities were

not required to contract, arrange, pay, or

provide a referral for contraceptive coverage. At the same time, the accommodation was intended to generally ensure that

women enrolled in a health plan established, maintained, or arranged by the

eligible organization, similar to women

enrolled in health plans maintained by

other employers, received contraceptive

coverage seamlessly—that is, through the

same issuers or third party administrators

that provided or administered the health

coverage furnished by the eligible organization, and without financial, logistical, or

administrative obstacles.

As explained in section I.A of this preamble, several employers challenged the

contraceptive coverage accommodation

under RFRA. These religious-objector

employers alleged that the accommodation violated RFRA by making them

complicit in the provision of contraceptive services and care. These employers

also asserted that the public interest of

ensuring women have access to contraceptive coverage can be accomplished in

a way that complies with RFRA, that is,

in a less restrictive way than the accommodation. Ultimately, the Departments

issued the November 2018 final rules,

which significantly expanded the types

of entities eligible for a religious exemption, created an exemption for entities

with a non-religious moral objection, and

made the aforementioned accommodation optional.

As noted previously, a number of

states challenged the November 2018

final rules in court, arguing that these

rules are unlawfully arbitrary and capricious. In light of this litigation, and upon

further consideration, the Departments

have determined that the November 2018

final rules failed to adequately account

for women’s legal entitlement to access

preventive care, critically including contraceptive services, without cost sharing

as Congress intended; the impact on the

number of unintended pregnancies; the

costs to states and individuals of such

pregnancies; and the government’s interest in ensuring women have access to this

coverage.

These proposed rules, if finalized, seek

to resolve the long-running litigation with

respect to religious objections to providing contraceptive coverage, by respecting

the objecting entities’ religious objections

while also ensuring that women enrolled

in plans or coverage sponsored, arranged,

or provided by objecting entities have the

opportunity to obtain contraceptive services at no cost. These rules propose to

maintain the November 2018 final rules’

religious exemption for entities with sincerely held religious objections to providing coverage for contraceptive services,

under the preventive services guidelines

pursuant to 26 CFR 54.9815‑2713(a)(1)

(iv), 29 CFR 2590.715‑2713(a)(1)(iv), and

45 CFR 147.130(a)(1)(iv). Additionally,

under these proposed rules, entities that

sponsor insured or self-insured group

health plans or arrange student health

insurance coverage and that are exempt

based on their religious objections would

continue to be able to choose to invoke

the optional accommodation set forth in

the November 2018 Religious Exemption

final rules at 26 CFR 54.9815‑2713A,

29 CFR 2590.715-2713A, and 45 CFR

147.131 (as applicable). These proposed

rules would confirm that this optional

accommodation for exempt religious-objector entities is available to entities that

are institutions of higher education.

While these proposed rules would

maintain the religious exemption rule,

they also would provide an independent

pathway through which women enrolled

in plans or coverage sponsored, arranged,

or provided by objecting entities can

access contraceptive services at no cost.

With respect to participants and beneficiaries in insured or self-insured group health

plans sponsored by an exempt entity, or

enrollees in individual health insurance

coverage (including student health insurance coverage) arranged or provided by

an exempt entity, and that does not invoke

the optional accommodation (if eligible), these proposed rules would create a

pathway, independent from the employer,

group health plan, plan sponsor, or issuer,

through which individuals could obtain

at no cost from a willing provider of contraceptive services67 (that meets certain

requirements), contraceptive services for

which their plan or issuer would otherwise

be required to provide coverage absent

the religious exemption. These proposed

rules refer to this pathway as the individual contraceptive arrangement. This individual contraceptive arrangement would

be available to the participant, beneficiary,

or enrollee without the plan sponsor or

issuer having to take any action that would

facilitate the coverage to which it objects.

Simply put, the action is undertaken by

the individual, for the individual. Through

the individual contraceptive arrangement,

a provider of contraceptive services, who

provides these services at no cost to the

women receiving them, would be able to

seek reimbursement from an issuer with

whom it has a signed agreement for the

cost of providing contraceptive services to

women covered under these plans. These

proposed rules also would amend 45 CFR

156.50(d) so that a qualified health plan

(QHP) issuer that has agreed to reimburse

an eligible provider of contraceptive services that participates in the individual

contraceptive arrangement would be eligible for an adjustment to the issuer’s

federally-facilitated Exchange (FFE) or

State Exchange on the Federal platform

(SBE-FP) fee through the same mechanism for the user fee adjustment previously established in 45 CFR 156.50(d).

Finally, as discussed in section II.C.2

of this preamble, this proposed rule would

eliminate the exemption and the availability of the optional accommodation for entities that object to contraceptive coverage

based on non-religious moral beliefs. As

more fully explained in that section, there

have not been a large number of entities

that have expressed a desire for an exemption based on a non-religious moral objection, the Departments are under no legal

obligation to provide such an exemption,

and RFRA would never apply to require

such an exemption. Additionally, in light

of the Supreme Court’s decision in Dobbs,

the Departments have concluded that it is

These proposed rules refer to providers, consistent with the proposed definition of the term “provider of contraceptive services,” as including both health care providers and facilities. This

definition is discussed later in this preamble.

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August 7, 2023

all the more critical now to ensure women’s access to reproductive health care and

contraceptive services without cost sharing, and have determined that it is necessary to provide women enrolled in plans

with respect to which the sponsor or issuer

has non-religious moral objections to contraceptive coverage, with such coverage

directly through their plan.

The Departments are of the view that

these proposed rules would respect the

religious objections to contraceptive coverage of employers, institutions of higher

education, and health insurance issuers, by allowing them to continue to rely

upon the religious exemptions, while also

advancing the public interest of ensuring

that women enrolled in such plans and

coverage have access to contraceptives

with no cost.

B. Coverage of Preventive Health

Services (26 CFR 54.9815-2713, 29 CFR

2590.715-2713, and 45 CFR 147.130)

1. Background on Requirement to Cover

Contraceptive Services

Pursuant to 26 CFR 54.9815-2713(a)

(1)(iv), 29 CFR 2590.715-2713(a)(1)

(iv), and 45 CFR 147.130(a)(1)(iv), a

group health plan, or a health insurance

issuer offering group or individual health

insurance coverage, generally must provide coverage and must not impose any

cost-sharing requirements (such as a

copayment, coinsurance, or a deductible)

for, with respect to women, such additional preventive care and screenings not

described in 26 CFR 54.9815‑2713(a)(1)

(i), 29 CFR 2590.715-2713(a)(1)(i), and

45 CFR 147.130(a)(1)(i), as provided for

in comprehensive guidelines supported by

HRSA for purposes of section 2713(a)(4)

of the PHS Act. The currently applicable68

HRSA-Supported Guidelines, as updated

on December 17, 2019, include a guideline that adolescent and adult women have

access to the full range of female-controlled FDA-approved contraceptive

methods,69 effective family planning practices, and sterilization procedures to prevent unintended pregnancy and improve

birth outcomes.70 The currently applicable HRSA-Supported Guidelines state

that contraceptive care should include

contraceptive counseling, initiation of

contraceptive use, and follow-up care

(for example, management and evaluation as well as changes to, and removal

or discontinuation of, the contraceptive

method), and that instruction in fertility

awareness-based methods, including the

lactation amenorrhea method, should be

provided for women desiring an alternative method.

The Departments have clarified in

guidance the obligation of a plan or issuer

to provide coverage of contraceptive services in accordance with these HRSASupported Guidelines. On February 20,

2013, the Departments issued FAQs about

Affordable Care Act Implementation Part

XII (FAQs Part XII) stating that the HRSASupported Guidelines ensure women’s

access to the full range of FDA-approved

contraceptive methods71 including, but

not limited to, barrier methods, hormonal

methods, and implanted devices, as well

as patient education and counseling, as

prescribed by a health care provider.72

The FAQs further clarified that plans and

issuers may use reasonable medical management techniques to control costs and

promote efficient delivery of care, such as

covering a generic drug without cost sharing and imposing cost sharing for equivalent branded drugs. However, FAQs Part

XII stated that, in these instances, a plan

or issuer must accommodate any individual for whom a particular drug (generic or

brand name) would be medically inappropriate, as determined by the individual’s

health care provider, by having a mechanism for waiving the otherwise applicable

cost sharing for the brand or non-preferred brand version. The FAQs also clarified that contraceptive products that are

generally available over-the-counter are

required to be covered only if they are

both FDA‑approved, cleared, or granted

and prescribed by a health care provider.73

On May 11, 2015, the Departments

issued FAQs about Affordable Care

Act Implementation Part XXVI (FAQs

Part XXVI) clarifying that plans and issuers must cover, without cost sharing, at

least one form of contraception in each

category that is identified by the FDA in its

Birth Control Guide.74 The FAQs further

clarified that, to the extent plans and issuers use reasonable medical management

techniques within a specified category

of contraception, plans and issuers must

have an easily accessible, transparent,

and sufficiently expedient exceptions process that is not unduly burdensome on the

As explained in FN 4, in December 2021, HRSA approved updates to the contraception guidelines that apply to plan years (in the individual market, policy years) starting on and after

December 30, 2022. See changes at https://www.hrsa.gov/womens-guidelines.

The Departments note that the FDA approves, clears, and grants contraceptive products and not methods.

See https://www.hrsa.gov/womens-guidelines-2019.

The FDA does not and never has approved, granted, or cleared contraceptive methods, only contraceptive products. See FN 4, supra.

See Q14, available at https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-xii.pdf and www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs12.html. See also FN 61.

Id. at Q15.

See Q2 and Q3, available at https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-xxvi.pdf and https://www.cms.gov/CCIIO/Resources/

Fact-Sheets-and-FAQs/Downloads/aca_implementation_faqs26.pdf. In prior FAQs related to contraceptive coverage such as FAQs Part XXVI, the Departments referenced the FDA Birth

Control Guide as the source for categories of contraceptives that must be covered without cost sharing. The Departments now cite the HRSA-Supported Guidelines for the list of contraceptive

categories to better align with the language of the Affordable Care Act’s preventive service coverage requirements. Despite the change in wording, there is no substantive difference and the

requirements for plans and issuers remain the same. The range of identified categories of contraception in the currently applicable 2019 HRSA-Supported Guidelines include: (1) sterilization

surgery for women; (2) surgical sterilization via implant for women; (3) implantable rods; (4) copper intrauterine devices; (5) intrauterine devices with progestin (all durations and doses); (6)

the shot or injection; (7) oral contraceptives (combined pill); (8) oral contraceptives (progestin only); (9) oral contraceptives (extended or continuous use); (10) the contraceptive patch; (11)

vaginal contraceptive rings; (12) diaphragms; (13) contraceptive sponges; (14) cervical caps; (15) female condoms; (16) spermicides; (17) emergency contraception (levonorgestrel); and (18)

emergency contraception (ulipristal acetate), and additional methods as identified by the FDA. The 2021 HRSA-Supported Guidelines clarified that, in addition to the enumerated categories,

the full range of contraceptives includes any additional contraceptives approved, granted, or cleared by the FDA. The 2021 HRSA-Supported Guidelines also expanded the recommendation

to encompass contraceptives that are not female-controlled, such as male condoms (which must be covered with a prescription by plans and issuers for plan years (in the individual market,

policy years) that begin on or after December 30, 2022). The 2021 HRSA-Supported Guidelines do not include male sterilization. See https://www.hrsa.gov/womens-guidelines. See also

Preamble to Final Rules regarding coverage of certain preventive services at 78 FR 39870 (July 2, 2013).

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individual or provider (or other individual

acting as a patient’s authorized representative) to ensure coverage without cost

sharing of any service or FDA-approved

item within the specified category of

contraception. FAQs Part XXVI stated

that if an individual’s attending provider recommends a particular service or

FDA‑approved item based on a determination of medical necessity with respect

to that individual, the plan or issuer must

cover that service or item without cost

sharing. The FAQs made clear that a plan

or issuer must defer to the determination of

the attending provider. FAQs Part XXVI

stated that medical necessity may include

considerations such as severity of side

effects, differences in permanence and

reversibility of contraceptives, and ability

to adhere to the appropriate use of the item

or service, as determined by the attending

provider. The FAQs also clarified that the

exceptions process must provide for making a determination of the claim according to a timeframe and in a manner that

takes into account the nature of the claim

(for example, pre-service or post-service)

and the medical exigencies involved for

a claim involving urgent care. FAQs Part

XXVI additionally clarified that a plan or

issuer cannot limit sex‑specific recommended preventive services based on an

individual’s sex assigned at birth, gender

identity, or recorded gender.75

On April 20, 2016, the Departments

issued FAQs about Affordable Care

Act Implementation Part 31, Mental

Health Parity Act Implementation, and

Women’s Health and Cancer Rights Act

Implementation (FAQs Part 31) stating

that if a plan or issuer utilizes reasonable

medical management techniques within

a specified method of contraception, the

plan or issuer may develop and utilize

a standard exception form and instructions as part of its steps to ensure that it

provides an easily accessible, transparent,

and sufficiently expedient exceptions process that is not unduly burdensome on the

individual or a provider (or other individual acting as a patient’s authorized representative).76 The FAQs suggested that the

Medicare Part D Coverage Determination

Request Form may serve as a model for

plans and issuers when devel

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