On Tuesday, December 15, 2015, the U.S. House of Representatives released a tax bill called the Protecting Americans From Tax Hikes Act of 2015, which, if passed into law, will place a two-year moratorium on the Affordable Care Act’s (ACA) medical device tax and the excise tax on high cost employer-sponsored health coverage (the “Cadillac tax”), and a one-year moratorium on the ACA’s annual fee on health insurers.
The bill also extends several expiring tax breaks and could be voted on as early as Thursday, although it seems that a Friday vote is more likely, as the tax package was also negotiated alongside a $1.1 trillion omnibus spending bill that was not released along with the tax bill. If passed by the House of Representatives, the bill will still have to pass the Senate and be signed by the President to take effect.
Although the Obama administration seemingly opposes a delay of the Cadillac tax, the tax bill includes a two-year delay of its 2018 effective date to tax years beginning after December 31, 2019.
Medical Device Tax
The tax bill will place a two-year moratorium on the ACA’s 2.3% tax on the sale of medical devices. The tax imposed under this provision will not apply to sales during the period beginning on January 1, 2016, and ending on December 31, 2017. This applies to sales after December 31, 2015.
Health Insurance Industry Tax
The tax bill places a one-year moratorium on the so-called HIT tax (Health Insurance Industry Tax). If passed, the industry tax will not apply for calendar year 2017, which should result in less of an increase to group health insurance premiums for 2017.
About The Authors. This alert was prepared for Benefit Advisors Network by Peter Marathas and Stacy Barrow. Mr. Marathas and Mr. Barrow are nationally recognized experts on the Affordable Care Act. Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm. They can be reached at email@example.com or firstname.lastname@example.org.
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