Senate Republicans Propose Repeal of ACA Taxes

CCH Tax Day Report

Taxes imposed by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) would be repealed within the larger repeal-and-replace discussion draft of the “Better Care Reconciliation Act of 2017,” unveiled by Senate Republican leaders on June 22. Senate Democrats have rejected this draft, which means Republicans can afford to lose only a few GOP votes if they want to pass a bill through reconciliation before Congress’ July 4 recess. The Congressional Budget Office (CBO) announced that it aims to release a score of the Senate GOP proposal early during the week of June 26. A vote on the proposal could come quickly after the CBO score, GOP leaders have indicated.

The tax provisions in the Senate GOP-proposed amendment to House-passed American Health Care Act (AHCA) (HR 1628) (TAXDAY, 2017/05/05, C.1) share many similarities with the House in their efforts to repeal taxes enacted under the ACA. See the Wolters Kluwer AHCA Tax Briefing (May 5, 2017) on IntelliConnect for more details.

Tax Provisions

The ACA contains a number of tax provisions, put in place to encourage compliance or help offset the cost of the health care reform. The proposed Senate measure would repeal all of the ACA’s tax provisions, except the so-called “Cadillac tax” on high-dollar health plans, which is instead delayed, until 2026, to better accommodate reconciliation rules.

Net investment income tax. The ACA imposes a 3.8-percent net investment income (NII) tax on higher-income taxpayers. The Senate GOP proposal repeals the NII tax, effective retroactively to January 1, 2017.

Other ACA taxes. Other ACA taxes that would be repealed (in some cases repeal would carry a delayed effective dates) include, among others:

—Additional Medicare tax;

—Medical device excise tax;

—Indoor tanning excise tax; and

—Health insurance providers fee.

The Senate GOP proposal would also repeal limitations on health flexible spending accounts (health FSAs) and expand health savings accounts (HSAs). Cost-sharing subsidies would also be repealed.

Shared Responsibility

The ACA imposes shared responsibility requirements on individuals and certain employers. Generally, individuals must carry minimum essential health benefits or make a shared responsibility payment, unless exempt. Senate Republicans would effectively repeal the individual shared responsibility requirement by retroactively reducing the penalties to zero. The proposal takes the same approach to the employer shared responsibility requirement.


Individuals currently may claim the Code Sec. 36B premium assistance tax credit to help offset the cost of health insurance obtained through the Health Insurance Marketplace. The Senate GOP proposal modifies the credit in several ways, including with respect to the age. It also replaces benchmark silver plan references to median cost benchmark plans. Additionally, the plan would increase the penalty for erroneous claims of the credit.

Another current credit, the Code Sec. 45R credit, is available to qualified small employers. The Senate GOP proposal eliminates the credit after 2019.


“For seven and a half years, Republicans like myself have pleaded with our Democratic colleagues and with the previous administration to work with us to address the failures of (the ACA),” Senate Finance Committee (SFC) Chair Orrin G. Hatch, R-Utah, said. “By no honest or reasonable measure is (the ACA) living up to the promises that were made at the time it was passed. As a result, the American people are saddled with a healthcare system that has been poorly designed and recklessly implemented,” Hatch said.

“After all the talk about throwing out the House bill and starting fresh, the Senate proposal still slashes Medicaid to fund big tax breaks for the wealthy, raises costs and guts protections for people with pre-existing conditions,” Sen. Ron Wyden, D-Ore., SFC ranking member, said. Wyden has criticized Senate Republicans for not moving health care through the committee process. “Leader McConnell has kept Finance members from even seeing the bill, much less doing their jobs as representatives of their state by actually legislating,” Wyden said.

Next Steps

The next steps in the process as Senate members discuss the draft is to await the CBO score, which is expected early during the week of June 26, senior Senate Republican policy staff told reporters during a June 22 press call.

Next, the Senate bill will be aligned with the House bill through the parliamentarian, followed by Majority Leader Mitch McConnell, R-Ky., bringing the bill to the floor. Twenty hours of debate, equally divided, on the legislation will then follow. Members will also have the ability to offer amendments. “Then, the so-called “vote-a-palooza” will continue until the Senate decides to move on to [a vote on] final passage,” a senior Senate policy staff member said during the press call. The measure would then go back to the House, or to a conference committee, for resolution before the House and Senate can agree on a final bill that would be sent to the president.

McConnell emphasized in a June 22 statement that the discussion draft is just that, a draft. Changes to the draft are expected. “There will be ample time to analyze, discuss, and provide thoughts before legislation comes to the floor,” McConnell said. “I hope every senator takes that opportunity.”

By Jessica Jeane, George Jones and George L. Yaksick, Jr., Wolters Kluwer News Staff

Senate Discussion Draft of the Amendment to HR 1628

Senate Budget Committee Summary of the Discussion Draft – Senate Republican Health Care Bill



All stories by: CCHTaxGroup

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