On March 23, 2010, the President signed the Patient Protection and Affordable Care Act. The tax portion of the legislation includes an excise tax on “Cadillac” health plans, an increase in the Medicare tax for higher income individuals, and tax incentives for individuals to obtain health insurance and for small businesses to provide health insurance to their employees. It also includes penalties on individuals and businesses that fail to obtain or provide health insurance. The legislation scales back the itemized deduction for medical expenses and the dollar limit on health flexible spending accounts. It also expands adoption assistance programs. The legislation includes many additional reporting and disclosure requirements. The enactment date for the legislation now becomes March 23, 2010.
The House-passed companion legislation, the Health Care and Education Tax Credits Reconciliation bill, is now under consideration in the Senate. This legislation makes a number of modifications to provisions in the Patient Protection and Affordable Care Act and addresses some additional matters as well. Modifications to the tax provisions include increasing the limits on the excise tax on “Cadillac” health plans, an expansion of the increase in the Medicare tax for higher income individuals to apply to investment income, and a modification of the penalty for failing to carry health insurance. The legislation also codifies the economic substance doctrine, denies the biofuel credit to “black liquor’, and adjusts corporate estimated tax payments. Procedural hurdles may slow progress in the Senate.