President Trump signed legislation on January 22 to delay the medical device excise tax, the health insurance provider fee and the excise tax on high-dollar health plans. All three taxes were delayed in a temporary funding bill.
The Affordable Care Act (ACA) created all three of these taxes. Since passage of the ACA, many stakeholders and lawmakers have called for their repeal or delay. Several years ago, Congress delayed the three taxes. Delays of the medical device tax and the health insurance provider fee expired after. The “Cadillac tax” on high-dollar employer plans had been scheduled to be imposed starting in 2020.
The new year brought renewed calls for further delays, especially the medical device tax. Without another delay, taxpayers would be liable for the first payment under the medical device tax before the end of this month.
Comment. Manufacturers or importers of medical devices are responsible for paying the excise tax. The excise tax is reported on Form 720, Quarterly Federal Excise Tax Return. Semi-monthly deposits are generally required if tax liability exceeds $2,500 for the quarter. This payment would have been due January 29.
Under the new law, all three ACA taxes are again delayed. The medical device tax is suspended for 2018 and 2019. The health insurance provider fee is delayed for one more year. The excise tax on high-dollar health plans will now take effect in 2022.
"We applaud Congress for delaying the excise tax on high-dollar health plans, James Klein, President, American Benefits Council, said. “We will continue efforts to fully repeal this tax and appreciate that Congress has passed this two-year delay as a down payment for full repeal," Klein added.
The excise tax on high-dollar health plans has supporters. “The tax is a really important health policy and fiscal policy. Could be reformed or replaced with an alternative instrument. But should not be delayed yet again,” Jason Furman, Past Chair, President’s Council of Economic Advisors, tweeted.
Now that Congress has delayed the three ACA taxes, some lawmakers are looking to attach a package of “extenders” to the next funding bill. A number of extenders expired after 2016, including the higher education tuition and fees deduction, the Indian employment credit, and incentives for biodiesel and alternative fuels.
The funding bill runs through February 8 but the Affordable Care Act extensions/delays won’t change. Lawmakers will need to pass another temporary or long-term funding bill to keep the IRS and the federal government open after February 8.