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ACA & The Tax Provisions It Provides



Annette Nellen

Lots of drama on possible repeal/repair of the Affordable Care Act with the House vote postponed to Friday (March 24) (see CNBC story). There are a lot of tax provisions in the ACA. I’ll share a list of created of them based on when they went into effect (and the Cadillac tax has not yet gone into effect). And one provision was only added in December 2016 via bi-partisan legislation!

It’s a long list so I’ll ask my standard question first …

What do you think?

Affordable Care Act Provision

IRC Section

Effective 2010 (or 2009)

COD income exclusion for certain student loans  (effective starting 2009) 108(f)(4)
10% excise tax on indoor tanning services (started July 1) 5000B
Small business health insurance credit [ACA includes later changes such as a requirement starting in 2014 to obtain coverage through the Small Business Health Options Program (SHOP) Marketplace, and that the credit is only available for two consecutive years.] 45R
Expanded dependent coverage exclusion for employer-provided health plans until age 27 105(b)
Codification of economic substance doctrine 6662

7701(o)

Increase in adoption credit and exclusion increased; refundable credit; temporary 23
Credit for Qualifying Therapeutic Discovery Projects (2009 and 2010 only) 48D
Disclosure allowed for certain information to Health and Human Services for the Premium Tax Credit and cost-sharing 6103

Effective 2011

W-2 reporting of cost of employer-provided health insurance (postponed for all employers for 2011 and indefinitely for employers who issued less than 250 Forms W-2 in the prior year) [Notice 2010-69, Notice 2012-9,  and IRS website] 6051(a)(14)
SIMPLE cafeteria plans allowed for small businesses 125(j)
Restricted definition of “medicine” for certain savings arrangements, such as for an Archer MSA 220, 223
Increased tax on distributions from HSA and Archer MSA 223
Annual fee on manufacturers and importers for certain prescription drug sales [Form 8947, Report of Branded Prescription Drug Information and Notice 2011-9] Reg. §51.2(d)

Effective 2012

Information reporting for payments of $600 or more made to C corporations [repealed before effective, P.L. 112-9, 2/14/11] 6041
Fee on health plans to fund Patient-Centered Outcomes Research Trust Fund ($1/year, increasing later) 4375
New requirements for §501(c)(3) hospitals 501(c)(3)

Effective 2013

Increase in Hospital Insurance tax (additional 0.9%) for high income individuals 3101(b)
New tax of 3.8% on unearned income of high income individuals, estates and trusts (net investment income tax) 1411
Increase in medical expense deduction threshold to 10% of AGI unless age 65 or older 213
Salary reduction contributions to health FSA capped at $2,500 (adjusted for inflation after 2013) 125(i)
Limit on deduction of certain excessive employee remuneration paid by certain health insurance providers 162(m)(6)
§139A, Federal subsidies for prescription drug plans,changed as follows: “Gross income shall not include any special subsidy payment received under section 1860D-22 of the Social Security Act. This section shall not be taken into account for purposes of determining whether any deduction is allowable with respect to any cost taken into account in determining such payment.” 139A
2.3% excise tax on sales of certain medical devices [moratorium for 2016 and 2017 per P.L. 114-113(12/18/15)] 4191

Effective 2014

Small business health insurance credit must be offered through SHOP (exchange) 45R(g)(3)
Premium Tax Credit (PTC) available to individuals who obtain coverage on an exchange and meet other eligibility criteria. [Supreme Court holds that individuals in a state without an exchange are eligible for a PTC on the federal exchange. Effect is that individuals in states without an exchange and without coverage must factor in hypothetical PTC to determine if they meet the unaffordability exemption to the individual mandate (King v BurwellNo. 14-114 (6/25/15))] 36B
Individual mandate (penalty) applies if individual and shared responsibility family does not have coverage and does not meet an exemption [Supreme Court found this to be a permissible tax (National Federation of Independent Business, et al v. Sebelius (6/28/12)] 5000A
Employer mandate (penalty) applies if applicable large employer (ALE) does not offer coverage to full-time employees and their dependents up to age 26 (and other provisions). [IRS delays effective date to 2015 and for 2015 provides additional transitional relief. Notice 2013-45 and blog post of 7/2/13 of Assistant Treasury Secretary for Tax Policy Mark J. Mazur.] 4980H
Information reporting by exchanges, insurance providers and ALEs (Form 1095-A, 1095-B and 1095-C, respectively). [IRS make 1095-B and 1095-C reporting optional for 2014.] 36B(f)(3)

6055

6056

Certain types of health coverage reimbursement arrangements (HRA) will fail the “market reforms” exposing the employer to a penalty of $100/day/employee. [Notice 2013-54 and IRS website] [In Notice 2015-17, IRS provided relief through 6/30/15; Congress provided relief through 12/31/16 (P.L. 114-255 (12/13/16))] 4980D
Excise tax on certain health insurance providers Reg. 57.1, et seq. (TD 9643 (11/29/13))
Increase in estimated tax payments for large corporations (assets of $1 billion or more) due in July, August, or September 2014 6655

Effective 2017

Increase in medical expense deduction threshold to 10% of AGI for individuals age 65 or older (applicable to other individuals starting in 2013) 213
Qualified Small Employer Health Reimbursement Arrangement allowed starting 1/1/17 [added by P.L. 114-255 (12/13/16))] 9831(d)

6051(a)(15)

6652(o)

106(g)

36B(c)(4)

Effective 2018

Nondeductible 40% excise tax on high cost employer-sponsored health coverage (“Cadillac” plans) [postponed to 2020 by P.L. 114-113 (12/18/15)] 4980I

 

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Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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