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Federal Register / Vol. 86, No. 124 / Thursday, July 1, 2021 / Proposed Rules the states that utilize it. With that noted, HHS would be open to inquiries and further discussion with states that are developing section 1332 waiver proposals and are interested in potential technical collaboration. For example, over the past few years HHS has offered assistance to states implementing statebased reinsurance programs.121
Currently, states can request that the federal government assist with the calculation of issuers eligible state reinsurance payments based on the state reinsurance parameters as part of the states approved section 1332 waiver plan. Under this arrangement, states are still responsible for making reinsurance payments to issuers and otherwise administering and overseeing their programs.
States that are interested in this assistance should notify HHS early in the process about the states interest and the states parameters that is, claims cost-based, conditions-based, or other for HHS to assess the feasibility of providing this support. Should a final proposal involve any customized or specialized federal technical or operational capabilities, states would be responsible for funding the development and operation of these capabilities under the Intergovernmental Cooperation Act ICA.122 Under the ICA, a federal agency generally may provide certain technical and specialized services to state governments, so long as the state covers the full costs of those services.
Accordingly, where a state intends to rely on HHS for technical services related to its section 1332 waiver proposal, the state would be required to cover HHSs costs. For example, states implementing state-based reinsurance programs that request technical or specialized services from HHS with respect to calculating state reinsurance payments are responsible for the federal costs associated with providing this service, including development, implementation, maintenance, operations, and customer support. For this reason, under this proposal, should HHS and a state agree to such technical or specialized services to support an approved section 1332 waiver plan, the Departments would not consider costs for HHS services covered under the ICA
as an increase in federal spending resulting from the states waiver plan for 121 As of plan year 2021, HHS is providing this support for six states: Colorado, Delaware, Maryland, New Hampshire, North Dakota, and Pennsylvania.
122 Public Law 90577 found here: https
www.govinfo.gov/content/pkg/STATUTE-82/pdf/
STATUTE-82-Pg1098.pdf.

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purposes of the deficit neutrality analysis.
As noted in the preamble of this proposed rule for the deficit neutrality guardrail, costs associated with changes to federal administrative processes that are not covered under the ICA would be taken into account in determining whether a waiver application satisfies the deficit neutrality requirement.
Regulations at 31 CFR 33.108f4 and 45 CFR 155.1308f4, require that such costs be included in the 10-year budget plan submitted by the state. As specific section 1332 waiver proposals are submitted, HHS would work closely with states to determine which federal costs are covered under the ICA and thus are not subject to deficit neutrality guardrail, and which are not covered under the ICA and thus are subject to the deficit neutrality guardrail.
ii. IRS Functionality Certain changes that affect IRS
administrative processes may make a section 1332 waiver proposal infeasible for the Departments to accommodate. At this time, the IRS generally is not able to administer different sets of federal tax rules for different states. As a result, while a state may propose to entirely waive the application of one or more of the federal tax provisions listed in section 1332 for taxpayers in the state, it is generally not feasible to design a section 1332 waiver that would require the IRS to administer a program that alters these provisions for taxpayers in the state.
In some limited circumstances, the IRS may be able to accommodate small adjustments to the existing systems for administering federal tax provisions.
However, it is generally not feasible to have the IRS administer a different set of PTC eligibility or PTC computation rules for individuals in a particular state. Thus, states contemplating a waiver proposal that includes a modified version of a federal tax provision could consider waiving the provision entirely and creating a subsidy program administered by the state as part of a section 1332 waiver proposal.
In addition, a section 1332 waiver proposal that partly or completely waives one or more federal tax provisions in a state may create administrative costs for the IRS. As noted in the preamble for the deficit neutrality guardrail of this proposed rule, costs associated with changes to federal administrative processes would be taken into account in determining whether a waiver application satisfies the deficit neutrality requirement.
Regulations at 31 CFR 33.108f4 and
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45 CFR 155.1308f4, require that such costs be included in the 10-year budget plan submitted by the state. States contemplating to waive any part of a federal tax provision should engage with the Departments early in the section 1332 waiver application process to assess whether the waiver proposal is feasible for the IRS to implement, and, if applicable, to assess the administrative costs to the IRS of implementing the waiver proposal.
5. Public Input on Waiver Proposals 31
CFR 33.112 and 45 CFR 155.1312
Section 1332a4Bi of the ACA, and regulations at 31 CFR 33.112 and 45
CFR 155.1312, require states to provide a public notice and comment period for a section 1332 waiver application sufficient to ensure a meaningful level of public input prior to submitting an application. In this proposed rule, the Departments are not proposing any regulatory changes to 31 CFR 33.112
and 45 CFR 155.1312. Under the current requirements, as part of the states public notice and comment period, a state with one or more federallyrecognized tribes must conduct a separate process for meaningful consultation with such tribes.123 In addition, a state must make available, at the beginning of its public notice and comment period, through its website or other effective means of communication, a public notice that includes all of the information outlined in 31 CFR 33.112b and 45 CFR
155.1312b. The state must also update this information, as appropriate. After issuance of this notice and prior to submission of a new section 1332
waiver application, the state must conduct public hearings and provide interested parties an opportunity to learn about and comment on the contents of the states section 1332
waiver application.124 Because section 1332 waiver applications may vary significantly in their complexity and breadth, the regulations provide states with flexibility in determining the length of the comment period required to allow for meaningful and robust public engagement. Consistent with federal civil rights law, including Section 1557 of the ACA, Section 504 of the Rehabilitation Act of 1973, and Title II of the Americans with Disabilities Act, section 1332 waiver applications must be posted online in a manner that is accessible to individuals with disabilities. To assist with ensuring website accessibility, states may look to 123 See 31 CFR 33.112a2 and 45 CFR
155.1312a2.
124 See 31 CFR 33.112c and 45 CFR 155.1312c.

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