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On January 22, President Trump signed into law H.R. 195, “An Act to amend title 44, United States Code, to restrict the distribution of free printed copies of the Federal Register to Members of Congress and other officers and employees of the United States, and for other purposes” (the Act). Among other things, the Act ends the government shutdown and funds the government through February 8th. It also suspends several Affordable Care Act (ACA, or Obamacare) taxes.

“Cadillac” tax. Under pre-Act law, for tax years beginning after Dec. 31, 2019,1 a 40% excise tax was scheduled to apply to any “excess benefit” provided to any employee who is covered under any “applicable employer-sponsored coverage”. (Code Sec. 4980I) It is known as the “Cadillac” tax because it affects upper-end employer-sponsored insurance coverage. It is imposed on the coverage provider—typically, the health insurance provider or the entity that administers the plan benefits.

The Cadillac tax was originally scheduled to apply for tax years beginning after 2017 but it has been delayed a number of times, most recently by the 2016 Consolidated Appropriations Act.

New law. The Act further delays the Cadillac tax for an additional two years, such that it is now scheduled to apply for tax years beginning after Dec. 31, 2021. (Act Sec. 4002)

Medical device excise tax. Under pre-Act law, for tax years beginning after Dec. 31, 2017, a 2.3%-of-sales-price excise tax was to be imposed under Code Sec. 4191 on the sale of any taxable medical device by the device’s manufacturer, producer, or importer.

The medical device excise tax was scheduled to apply for sales after Dec. 31, 2012, but it has been suspended, most recently by the 2015 Protecting Americans from Tax Hikes (PATH) Act.

New law. The Act further delays the medical device excise tax for an additional two years, such that it is now scheduled to apply to sales after Dec. 31, 2019. The delay goes into effect for sales after Dec. 31, 2017—in other words, the delay is retroactive to the beginning of 2018. (Act Sec. 4001(b))

Annual fee on health insurance providers. Effective for calendar years beginning after Dec. 31, 2013, covered entities engaged in the business of providing health insurance with respect to U.S. health risks face an annual flat fee. The fee is a fixed amount allocated among all covered entities in proportion to their relative market share as determined by each entity’s net premiums written for the data year, which is the year immediately preceding the year in which the fee is paid. (ACA Sec. 9010)

The annual fee on health insurance providers was suspended for 2017 by the 2016 Consolidated Appropriations Act.

New law. The annual fee on health insurance providers has been further suspended, such that it is now scheduled to apply in tax years beginning after Dec. 31, 2019. (Act Sec. 4003)

For more information on this and other tax reform questions, contact Larson & Company today.