Category Archives: PATIENT PROTECTION AND AFFORDABLE CARE ACT
Outline of the Tax Provisions of HR 4872 The Health Care and Education Reconciliation Act
By Stacie Clifford Kitts, CPA
Okay so earlier this week I talked about the passing of HR 3590 aka the Patient Protection and Affordable Care Act which is now a law known as P.L. 111-148.
However, the new law was amended yesterday by the passing of HR 4872 aka the Health Care and Education Reconciliation ACT. This new bill is on its way to the president’s desk for approval.
As the Journal of Accountancy points out, this new bill adds stuff that was not built-in to the Patient Protection Act.
If you need to get up to speed, you can check out my previous post which outlines the original tax provision here Outline of Health Care Act – Tax Provisions of HR 3590.
The following is a list of things that were changed or added. For a complete analysis, check out the J of A’s article.
- Premium Assistance Credit – Updated
- Excise Tax on Uninsured Individuals – Updated
- Adult Dependent – Updated
- Excise Tax on High Cost Employer-Sponsored Coverage Updated
- Medicare Tax on Investment Income ( I thought this one might be of particular interest to taxpayers so I have included the J of A’s analysis here- my take, this provision is likely to tick some folks off)
The Reconciliation Act added a new IRC § 1411 that imposes a tax on individuals equal to 3.8% of the lesser of the individual’s net investment income for the year or the amount the individual’s modified adjusted gross income exceeds a threshold amount. For estates and trusts, the tax equals 3.8% of the lesser of undistributed net investment income or adjusted gross income over the dollar amount at which the highest trust and estate tax bracket begins.
For married individuals filing a joint return and surviving spouses, the threshold amount is $250,000; for married taxpayers filing separately, it is $125,000; and for other individuals it is $200,000.
Net investment income is defined as income from interest, dividends, annuities, royalties and rents, other than such income derived in the ordinary course of a trade or business (however, income from passive activities and from a trade or business of trading in financial instruments or commodities is included in the definition of net investment income).
This provision applies to tax years beginning after Dec. 31, 2012.
- Economic Substance Doctrine – New
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Here is a calendar of dates related to the Act to know:
| Dates to follow | |
| January 1, 2010 | Small Business Tax Credit – For tax Years Beginning on or after 1/1/10 |
| July 1, 2010 | Tax on Indoor Tanning Services – For services on or after 7/1/2010 |
| January 1, 2011 | Tax on HSA Distributions – For tax years beginning on or after 1/1/2011 |
| January 1, 2011 | SIMPLE Cafeteria Plans for Business – For tax years beginning on or after 1/1/11 |
| January 1, 2011 | Charitable Hospitals – For payments made on or after 1/1/2011 |
| January 1, 2012 | Medicare tax on Investment Income – for tax years beginning on or after 1/1/2012 |
| October 1, 2012 | Fees on Health Plans – Beginning for plan years on or after 10/1/12 |
| January 1, 2013 | Medical Care Itemized Deductions Threshold -Beginning on 1/1/13 |
| January 1, 2013 | Additional Hospital Insurance Tax on High Income Taxpayers – For tax years beginning on or after 1/1/13 |
| January 1, 2013 | Flexible Spending Account – Tax years beginning on or after 1/1/13 |
| January 1, 2014 | Premium Assistance Credit – For years beginning on 1/1/14 |
| January 1, 2014 | Excise tax on Uninsured Individuals – Tax years beginning on or after 1/1/14, |
| January 1, 2014 | Reporting Requirements – Beginning on 1/1/14 |
| January 1, 2014 | Cafeteria Plans – Starting 1/1/14 |
| January 1, 2014 | Employer Responsibility – Beginning on 1/1/14 |
| January 1, 2018 | Excise Tax on High-Cost Employer Plans – For tax years beginning on or after 1/1/18 |
An Interesting Rewrite for the Vanity Tax H.R. 3590 Looks As if Congress Found a Vanity Product with Enough Sin to Justify a Tax
By Stacie Clifford Kitts, CPA
It is all over the news; the Dems have enough votes to push the Patient Protection and Affordable Care Act on ward. But what has been eliminated from the latest version of the bill has me wondering – was it – our stimulating online debate that finally killed the dreaded 5% booby tax (i.e. the cosmetic surgery tax). Hmmmm …okay so it was most likely the influential lobbying by the American Health Association who strongly opposed the tax that murdered it.
But you know what; I’m all a-glow just the same. Congress – it appears – has responded to my points from a previous post where I chastise our lawmakers for attempting to tax the sinless personal choice of cosmetic enhancements.
I can’t say that I am totally opposed to taxing
behavior. That is, I agree with sin taxes. Taxes on cigarettes and alcohol for
instance do provide a certain amount of good since these products have been
shown to cause harm to the public welfare. Likewise, the cost of treating people
who have made themselves sick by indulging in unhealthy activities or behaviors
must be considered – I get that – and if a tax on so called unhealthy products
helps to relieve the public burden, then so be it.But is cosmetic surgery really
sinful? Personally, I fail to see how it is. Maybe our lawmakers can explain to
me how slimmer hips, larger breasts, or plumper lips harms the public welfare or
places a financial burden on the government.But what is even more perplexing is
just how or why cosmetic surgery won the tax lottery. I fear that this type of
legislation opens the door for a whole litany of WTF taxes. I mean why not tack
on an additional tax for hair coloring, nail salons, or makeup. These are also
vanity products. Frankly where does it stop?I am all for affordable health care,
balancing the budget, and reducing debt. But come on lawmakers, I find it hard
to believe that you can’t do better.
In response to my argument, it would appear that our lawmakers did find a vanity procedure that fits the sin criteria. The new vanity target – tanning salons. Here is a portion of the amended law:
SEC. 10907. EXCISE TAX ON INDOOR TANNING SERVICES IN LIEU OF ELECTIVE COSMETIC MEDICAL PROCEDURES.
(a) IN GENERAL.—The provisions of, and amendments made by, section 9017 of this Act are hereby deemed null, void, and of no effect.(b) EXCISE TAX ON INDOOR TANNING SERVICES.—
Subtitle D of the Internal Revenue Code of 1986, as amended by this Act, is amended by adding at the end the following new chapter:CHAPTER 49—COSMETIC SERVICES
Sec. 5000B. Imposition of tax on indoor tanning services.
SEC. 5000B. IMPOSITION OF TAX ON INDOOR TANNING SERVICES.(a) IN GENERAL.—There is hereby imposed on any indoor tanning service a tax equal to 10 percent of the amount paid for such service (determined without regard to this section), whether paid by insurance or otherwise.
But what is even more telling is this tid bit found over at Kay Bell’s blog Don’t Mess with Taxes
“Congressional bean counters had estimated the Bo-Tax would bring in $5.8
billion over the next decade. The Tan Tax, which would go into effect next July,
is projected to produce $2.7 billion over 10 years.But that loss of revenue is OK, because the new tax addresses health
concerns.Or as one anonymous aide put it, the tanning tax was added out of
“concern that use of these tanning beds creates a health problem with respect to cancer.”
Well, I guess I got what I wanted, a tax that benefits the public welfare and relieves the public burden by taxing those people who intentionally expose themselves to cancer causing tanning beds.
Geez, I sure do hope that smog doesn’t cause cancer otherwise our lawmakers might tack on an excise smog tax for my sinful choice to live in California and breathe in the foul air.
Stacie's Tax Stuff 