The Patient Protection and Affordable Care Act of 2010 (111 P.L. 148) and the Health Care and Education Reconciliation Act of 2010 (111 P.L. 152) , together commonly referred to as “ObamaCare,” along with the ongoing emergence of related regulations will, in due course, impact the behavior of virtually every U.S. taxpayer.
Until now, the approaching tax effects have impressed most casual observers as not much more than an abstraction. But as time marches on to 2014 and beyond, the taxpayer masses face challenges of varying intensity. And, although the impact will be benign for many, others may face potentially significant exposure to taxes and/or penalties, some of which were unforeseen when ObamaCare became law in 2010. Moreover, regulatory action since the law was enacted, and going forward, may present unanticipated tax/penalty complications in the future.
The media have trumpeted a host of taxpayer groups taking notice. Other affected groups, while not as prominently profiled in the national media, carry profound importance in the total mix of health care dynamics. Nonprofit hospitals serve as an example. Nonprofit hospitals have historically been required to satisfy operational tests to obtain or maintain federal income tax-exempt status as charitable organizations as defined in IRC § 501(c)(3).
Challenges to avoid losing tax-exempt status require 501(c)(3) hospitals to constantly monitor their adherence to standards prescribed by the IRC and Revenue Rulings.
Four new additional daunting standards introduced by ObamaCare burden 501(c)(3) hospitals with:
At best, the new parameters are detailed and difficult to understand and comply with. Under the new regime, how can 501(c)(3) hospitals best manage to protect their tax-exempt status in a compliance environment that is understandably perceived by affected institutions as harsh and adversarial? Moreover, what must 501(c)(3) hospitals do when faced with challenges requiring them to defend threats to their tax-exempt status? In addition, how will the IRS manage to enforce this taxpayer group's compliance, and the compliance of other groups to their respective obligations? In essence, the truth is that only time will tell.
Aside from nonprofit hospitals, the scope and breadth of taxpayer groups and/or tax types that ObamaCare affects, or will affect, includes, but may not be limited to:
“Cadillac” (High-Cost) Health Plan Excise Tax
Medical Device Excise Tax
Health Savings Accounts, Health Reimbursement Arrangements, Flexible Spending Accounts, Med Savings Accounts: deduction restrictions, penalties
Employer-Sponsored Plan Medical Loss Ratio Rebate Tax (Insurance Plan, Plan Sponsor, Plan Participants)
Medicare Tax on Investment Income
Patient-Centered Outcomes Research (PCOR) Fees (Insurance Companies)
Increased Medicare Tax on High Income Earners
Indoor Tanning Salon Excise Tax
Small Employer Health Insurance Tax Credit
Minimum Health Care Coverage Excise Tax
Individual Insurance Mandate Enforcement Tax
Health Insurance Provider Excise Tax
Premium Assistance Tax Credit
Shared Responsibility Employer Health Care Excise Taxes
Tax-Enforced Employer Mandate
Adoption Credit, Adoption Assistance Provisions
Blue Cross – Blue Shield § 833 Deduction and Eligibility Restrictions
Employer Health Insurance Reporting Requirements
Nonprofit Hospital § 501(r) Tax-Exemption Eligibility and Reporting Requirements
Individual Health Insurer Reporting Requirements
Health Insurance Provider Remuneration Deduction
Employer W-2 Reporting
As new developments unfold in the coming months - and years - taxpayers may be less able to maintain a proactive posture, and may instead be required to assume a more defensive, reactionary posture in efforts to protect their flanks.
RELATED LINKS: For more information and insight regarding challenges facing nonprofit hospitals under the ObamaCare regime, see:
1-4 Taxation of Hospitals and Health Care Organizations 4.03(2)(c) – Nonprofit Hospitals: The Section 501(r) Criteria
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