Medical Device Tax Returns; Repeal Draws Bipartisan Support

Revival of the medical device tax and the health insurance provider fee have lawmakers from both parties calling for repeal or further delay of the taxes. Temporary suspensions of both taxes expired after 2017. Although proposals have been unveiled to repeal the taxes, hearings have yet to be held. However, that could change this month as repeal draws bipartisan support.

Two Revenue Raisers

The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) put in place the medical device tax and the health insurance provider fee. Both measures were revenue raisers to offset costs of the ACA.

Medical device tax. A 2.3-percent excise tax applies to the sale of certain medical devices by the manufacturer or importer of the device. Generally, the manufacturer or importer of a taxable medical device is responsible for filing Form 720, Quarterly Federal Excise Tax Return, and paying the tax.

Health insurance provider fee. Some insurance companies and others that provide health insurance for U.S. citizens and residents generally are liable for the fee. The fee is based on a ratio that reflects a provider’s relative share of U.S. health insurance business. The IRS calculates each provider’s fee.

Temporary Suspension

Year-end legislation in 2015 suspended the medical device tax for two years. Because of the suspension, the medical device tax did not apply to sales of taxable medical devices 2016 and 2017. The health insurance provider fee was also suspended but only for one year: 2017.

In the weeks leading up to passage of the Tax Cuts and Jobs Act (P.L. 115-97), there was speculation that congressional leaders would add repeal or further delay of the medical device tax and the health insurance provider fee to the bill. They did not. As a result, both taxes returned January 1, 2018.

Repeal Draws Bipartisan Support

Repeal of the medical device tax and the health insurance provider fee have attracted support from both sides of the aisle. Several repeal proposals have been introduced in the House and Senate.

Rep. Erik Paulsen, R-Minn., has introduced legislation to repeal the medical device tax. “We cannot allow the medical device tax to start up again. This tax should be eliminated and fully repealed, but short of that, we should at least suspend this tax for another five years.” Paulsen said.

Another bill, introduced by Rep. Josh Gottheimer, D-N.J., would repeal the health insurance provider fee. “The health insurance tax would crush seniors, small businesses, and families,” Gottheimer said. According to Gottheimer, the health insurance provider fee results in higher premiums for seniors, small businesses and families.

House Ways and Means Committee Chair Kevin Brady, R-Tex., has appeared open to repealing the medical device tax and the health insurance provider fee. Brady said in 2017 that the Ways and Means Committee would take up repeal of the medical device tax and the health insurance provider fee after passage of the Tax Cuts and Jobs Act.

By George L. Yaksick, Jr., Wolters Kluwer News Staff

Login to read more tax news on CCH® AnswerConnect or CCH® Intelliconnect®.

Not a subscriber? Sign up for a free trial or contact us for a representative.

AUTHOR

CCHTaxGroup

All stories by: CCHTaxGroup