- 1 ObamaCare Tax Provisions
- 1.0.1 The following is from the IRS website: Affordable Care Act Tax Provisions
- 1.0.2 Health Coverage for Older Children
- 1.0.3 Excise Tax on Indoor Tanning Services — First Quarterly Payment Due Nov. 1, 2010
- 1.0.4 Employer-Provided Health Coverage — Not Taxable; Reporting Requirement Optional in 2011
- 1.0.5 Adoption Credit
- 1.0.6 Qualified Therapeutic Discovery Project Program
- 1.0.7 Group Health Plan Requirements
- 1.0.8 Medicare Part D Coverage Gap “donut hole” Rebate
- 1.0.9 Additional Requirements for Tax-Exempt Hospitals
- 1.0.10 Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers
- 1.0.11 Modification of Section 833 Treatment of Certain Health Organizations
- 1.0.12 Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers
- 1.1 Obamacare Tax Provisions // //
ObamaCare Tax Provisions
Full Employment For 17, 000 New IRS Agents, Accountants, and Lawyers
The tax consequences of the Affordable Care Act are voluminous, and should provide full employment for many accountants, lawyers, and the soon to be hired 17,000+ new IRS agents for years to come.
The following is from the IRS website: Affordable Care Act Tax Provisions
The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that take effect this year and more that will be implemented during the next several years. The following is a list of provisions now in effect; additional information will be added to this page as it becomes available.Small Business Health Care Tax CreditThis new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers.Changes to Flexible Spending ArrangementsEffective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions for 2011.
For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers.
FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128Notice 2011-5. and
IRS partners can spread the word to their clients with the help of a Health Plan Changes flyer and a drop-in article, Does your Healthcare Program need a checkup?
Health Coverage for Older Children
Health coverage for an employee’s children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.
Excise Tax on Indoor Tanning Services — First Quarterly Payment Due Nov. 1, 2010
A 10-percent excise tax on indoor UV tanning services went into effect on July 1, 2010. The first payment of the tax was due Monday, Nov. 1. Payments are made along with Form 720, Quarterly Federal Excise Tax Return. The tax doesn’t apply to phototherapy services performed by a licensed medical professional on his or her premises. There’s also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee. For more information on the tax and how it will be administered, see our news release, video, questions and answers and legal guidance.
Employer-Provided Health Coverage — Not Taxable; Reporting Requirement Optional in 2011
Starting in tax year 2011, the Affordable Care Act requires employers to report the value of the health insurance coverage they provide employees on each employee’s annual Form W-2. However, to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with this requirement, the IRS will defer the reporting requirement for 2011, making that reporting by employers optional in 2011.
The revised Form W-2 for 2011 is now available in draft for viewing. This is the W-2 that most employees will receive in early 2012. The draft form includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.
This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee’s income, and it is not taxable.
For information, see our news release, draft form and guidance.
The Affordable Care Act raises the maximum adoption credit to $13,170 per child, up from $12,150 in 2009. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply. In addition to filling out Form 8839, Qualified Adoption Expenses, eligible taxpayers must include with their 2010 tax returns one or more adoption-related documents.
For more information, see our news release, questions and answers, flyer, Notice 2010-66, Revenue Procedure 2010-31 and Revenue Procedure 2010-35.
Qualified Therapeutic Discovery Project Program
This program was designed to provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support U.S. jobs and increase U.S. competitiveness. Applicants were required to have their research projects certified as eligible for the credit or grant. IRS guidance describes the application process.
Submission of certification applications began June 21, 2010, and applications had to be postmarked no later than July 21, 2010, to be considered for the program. Applications that were postmarked by July 21, 2010, were reviewed by both the Department of Health and Human Services (HHS) and the IRS. All applicants were notified by letter dated October 29, 2010, advising whether or not the application for certification was approved. For those applications that were approved, the letter also provided the amount of the grant to be awarded or the tax credit the applicant was eligible to take.
The IRS published the names of the applicants whose projects were approved as required by law. Listings of results are available by state.
Learn more by reading the IRS news release, the news release issued by the U.S. Department of the Treasury, the page on the HHS website and our questions and answers.
Group Health Plan Requirements
The Affordable Care Act establishes a number of new requirements for group health plans. Interim guidance on changes to the nondiscrimination requirements for group health plans can be found in Notice 2011-1, which provides that employers will not be subject to penalties until after additional guidance is issued. Other information on requirements is available on the websites of the Departments of Health and Human Services and Labor and in additional guidance.
Medicare Part D Coverage Gap “donut hole” Rebate
The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. More information can be found at www.medicare.gov.
Additional Requirements for Tax-Exempt Hospitals
The Affordable Care Act adds requirements in the Internal Revenue Code that tax-exempt hospitals must meet to maintain their tax-exempt status. More information can be found in Notice 2010-39, which solicits written comments on the application of the new requirements. Comments must have been submitted by July 22, 2010.
Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers
The Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers and importers of brand name pharmaceuticals. More information can be found in Notice 2010-71, which provides proposed guidance and solicits comments on the new fee, and on Form 8947, Report of Branded Prescription Drug Information.
Modification of Section 833 Treatment of Certain Health Organizations
The Affordable Care Act amended section 833 of the Code, which provides special rules for the taxation of Blue Cross and Blue Shield organizations and certain other organizations that provide health insurance. Guidance can be found in Notice 2011-04, which provides procedures for a taxpayer to obtain automatic consent to change its method of accounting for unearned premiums.
Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers
The Affordable Care Act amended section 162(m) of the Code to limit the compensation deduction available to certain health insurance providers. The amendment goes into effect for taxable years beginning after Dec. 31, 2012, but may affect deferred compensation attributable to services performed in a taxable year beginning after Dec. 31, 2009. Initial guidance on the application of this provision can be found in Notice 2011-2, which also solicits comments on the application of the amended provision.
For More Information
For tips, fact sheets, questions and answers, videos and more, see our Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance page.