Ohio Healthcare Consulting

Seven Steps for Delegating Work
 
Do you own a small business? You may feel that the success-or the failure-of the business rests entirely on your shoulders. So you try to be in all places at all times. However, in most cases, this will result in problems for the operation and decreased productivity by other workers.

Solution: Practice the fine art of delegation. (It is an art, not a science.) If you parcel out certain jobs among other staff members, you can devote more of your time to areas with greater profit potential. Furthermore, this will enable you to develop a workforce of thinkers, not just doers.

Of course, you will still have to fight your natural tendencies.

Click here for seven practical suggestions for getting or here if you'd like to learn more about how your staff can learn to better use QuickBooks.

Locking in a Partial Home-sale Exclusion

Despite the recent nationwide real estate slump, you may realize a significant gain if you sell your home, particularly if you bought the place before prices soared in prior years. What about the tax consequences? Generally, the amount of the proceeds is subject to tax at capital gain rates. Currently, the maximum tax rate on net long-term capital gain is 15%, but rates are scheduled to increase in future years.

Click here to read more.

Prescription for the New Health Care Credit
Federal Reserve Board Compensation Guidance
By: Theodore R. Ginsburg, JD, CPA

As we are all aware, one of the side effects of the nation's recovery from the financial crisis has been a dramatic increase in financial institution regulation from Congress, the executive branch   and from the Federal Reserve Board ("FRB").  One of the primary areas of the FRB's focus has been the compensation practices of member banks.  On June 21, 2010, the FRB (in conjunction with the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation) issued its "Final Guidance on Sound Incentive Compensation Policies" (the "Guidance"). 

In general, the FRB believes that incentive compensation programs caused bank employees to take actions that put their employers at risk.  While this is important information for banks, the overall guidance that the FRB provides is worth noting by all employers.

This brief article will summarize some of the key points of the 47 pages of guidance that the FRB issued.

Aurum Capital Markets Summary

Please click here for a summary from Aurum Wealth Management Group on the performance of the major market indices through the end of June as well as a recap of the significant events influencing the markets.

Click here for 2010 Second Quarter Commentary from Aurum.

Florida Tax Amnesty

The state of Florida is currently administering a tax amnesty program that runs through September 30, 2010. Eligible taxes are sales tax, fuel tax, corporate income tax, communications services tax, gross receipts tax, and Florida's intangible tax. The amnesty applies to tax liabilities due prior to July 1, 2010.

If a taxpayer owes any tax liabilities to Florida, this could be an excellent opportunity. Florida will waive ½ of the interest and all penalties on the tax due.

Click here to learn more.

Go Directly From a 401(k) to a Roth  

Do you want to transfer your 401(k) plan assets to a Roth IRA? Under a recent tax law change, you can make the move in one fell swoop. Previously, it took two separate steps. In addition, another tax law provision taking effect this year may encourage this direct approach.

Click here to read more or here to register for our free Roth IRA Conversion Seminar.

To read this issue of Special Delivery in its entirety, click here.

Funding for biomedical projects, like jobs, is tough to find in a down economy, but the federal government is an often untapped resource. In FY08 and FY09, Congress directed over $150 million dollars for medical research on various topics from prevention of combat-induced injuries to physiological health to cancer. In FY10, Congress has earmarked millions of dollars for various research topics, with breast cancer ($300 million) and prostate cancer ($160 million) as the highest funded. When applying for a federal grant, consider the following key tips from your job-searching days:

• Understand your project and the grant that you're applying for. Focus on grants in research categories your project fits into. Before submitting your white paper, read the grant's specific requirements. Your success depends on how closely your project matches the grant's specific requirements.

• Write a targeted white paper.  Your white paper should illustrate how your project specifically satisfies the needs of the grant. Also, it's not the top federal experts in your field of science that is reading your submission - it's their staff, so excessive use of scientific language is not necessary.

• Be persistent. Currently grants may not fit your project, but consistently search for new grant announcements, because federal grant initiatives change from year to year and may eventually be requesting your company's specific technology or product. 

If you'd like help identifying grants that fit your project or learn more about applying for grants, please leave a comment or contact our Biotech Group at (440) 449-6800.

Advisor Insights

For the past several months, our Real Estate and Construction Group has been authoring a monthly column in Builders Exchange Magazine that offers advice to real estate and construction professionals.

So far this year, the following topics have been covered:

• The Benefits of Subprime Bonding  
• Selecting and Implementing Financial Software  
• The Value of a Niche Marketing Plan 
• Lessons Learned From the Construction Industry  
• Cancellation of Debt Income 
• Preventing Financial Fraud 
   

• Health insurers and group health plan sponsors are now prohibited from imposing pre-existing condition limitations on individuals who have not yet attained age 19 and from denying coverage to such individuals based on the existence of a preexisting condition. All such limitations and coverage denials, regardless of age, begin in 2014.
• Health insurers and group health plan sponsors are prohibited from imposing lifetime dollar limits on essential health benefits, and are required to sharply increase annual dollar limits on essential health benefits. Such annual limits will be eliminated starting in 2014.
• Coverage rescissions (except in the case of fraud or intentional misrepresentation) are prohibited.
• Plan-covered and insured individuals are given greater control over choosing a primary care physician and greater access to emergency services and related care.

To read more about these new rules, see this Executive alert from Baker Hostetler.

Go Directly From a 401(k) to a Roth  

Do you want to transfer your 401(k) plan assets to a Roth IRA? Under a recent tax law change, you can make the move in one fell swoop. Previously, it took two separate steps. In addition, another tax law provision taking effect this year may encourage this direct approach.

Click here to read more.

Should You Give to a Donor-advised Fund?

Wealthy entrepreneurs with charitable intentions may choose to set up a private foundation. But a more convenient alternative is gaining in popularity: the donor-advised fund.

This technique may be especially appropriate if you need to devote more time to business activities in the current economic environment. The fund does most of the hard work for you and requires less personal attention than a private foundation. In some cases, you might even convert an existing private foundation into a donor-advised fund.

Click here to read more.

New Law Revamps Student Loan Program

The new Health Care and Education Reconciliation Act of 2010—recently signed in conjunction with the monumental new health care law—includes dramatic reforms in the federal student loan program. This new legislation could affect families of all stripes for years to come.

Click here for a brief summary of four points you should know about.

Aurum Capital Markets Summary 

Please click here for a summary from Aurum Wealth Management Group on the performance of the major market indices through the end of May as well as a recap of the significant events influencing the markets.

According to the code section 179D, the designer primarily responsible for designing the energy efficient aspects of government buildings (including new construction and rehabilitation) may be able to take the federal energy efficient commercial property tax deduction for doing so instead of the owner of the property. This deduction is passed to them from the government agency for which the building was designed as the government agency does not pay tax and therefore would not get the benefit for this deduction. The designer is defined as the person(s) that create the technical specifications for installation of the energy efficient commercial building property, and can include architects, engineers, environmental consultants, and contractors in certain cases. Under this section, the word government includes Federal, state, and local government agencies, and although all government building categories have benefited from this, the most frequent projects are K-12 public schools, state universities and colleges. Other categories include post offices, military bases, libraries, courthouses, and hospitals.

The amount of the deduction passed to the designer is the lesser of the actual cost of the property or the calculation below:

(The square footage for the building (new construction) or area improved (rehabilitation))
x ($0.60 per each of the three areas that you pass ($1.80 total) the energy efficiency test (HVAC/Lighting/Building Envelope))

Section 179D has been beneficial for designers of this property who work with government agencies to build government buildings, depending on the size and level of energy efficiency, because they can take an additional tax deduction for the energy efficient improvements that were made. This deduction is a tax only deduction on the tax return of the designer.

In order to take this deduction, the designer will need two items to claim the deduction:

• First, a letter from the government agency must be provided to the designer allowing them to take the deduction. This letter essentially gives the permission to pass the deduction.
• The second item is an engineers report which must be prepared to support the energy efficient improvement of the building design. Of course, this report has a cost with it and companies need to compare that cost to the amount of tax they will save through the deduction.

Originally, this was only passed as a one or two year item and there was not much support for it, which is why it was not very popular and many firms were not acting on it. This past year, they extended it to include units completed or renovated between December 31, 2005 and January 1, 2013 and passed more tax guidelines to support these deductions. With that being said, it may makes sense to look at prior years as well to see if prior year returns can be amended to take advantage of the deduction.

With a small amount of information, we can quantify the deduction you would get and compare it to an estimate of how much the engineer’s report will cost in order to quantify the net savings.

To determine if your company can benefit from the Federal Energy Tax Credit, contact me or Nick Delguyd at 440-449-6800.
 

Real estate professionals may want to keep a close eye on the American Jobs and Closing Tax Loopholes Act (H.R. 4213). The bill, which would extend the filing deadline for existing tiers of unemployment benefits and extend COBRA health care subsidies for the unemployed, contains a provision to alter the way “carried interest” is taxed.

Carried interest, according to Building Owners and Managers Association International, is described as follows –

“Real estate is a long-term, risk–based investment which is regularly structured as a partnership, and therefore often involves a component known as “carried interest.” The partnerships are made up of limited partners and general partners. The limited partner(s) provides the money and capital, has very little say in the operation of the investment and is simply looking for a particular return on the investment. The general partner(s) brings the “sweat equity” to the investment and does the day-to-day work making sure the property is properly managed and is compensated by a flat fee that is taxed as ordinary income. They are also offered an additional percentage of the profits as incentive to make the investment prosperous without contributing any capital of their own; this compensation is what is known as “carried interest.” When the general partner receives the “carry” it is taxed as a capital gain. It is paid only when, and if, the real estate investment actually is successful.”

Current law taxes the “carried interest” of a general partner in a real estate partnership as a capital gain. The House bill treats carried interest as 50% ordinary income and 50% long-term capital gains for two years, then moves to a permanent 25/75 split (25% long-term capital gains/75% ordinary income) with an effective date of Jan. 1, 2011.  

This change in tax law could disrupt the investment relationship between entrepreneurs and their capital finance partners.

The U.S. Senate is expected to consider action on the House bill this week. Real Estate professionals who will be affected by the new law may want to consider contacting their senator.

For more information on how this potential law change may affect your real estate operation, please contact our Real Estate & Construction Group at 440-449-6800.

Advisor Insights

With the passage of the the Patient Protection and Affordable Care Act both businesses and individuals will be feeling major effects of this bill in the coming years. To help you better understand how this bill impacts you and your business, we have put together several resources that you should find useful.

Health Care Reform Webinar

On May 5th, our own Jim Sacher participated in a Smart Business Live webinar presentation on health care reform. You can view the outline from his presentation here or you can view the webinar here.

Health Care Reform Blog Posts

Earlier this year, we covered many of the effects of health care reform in our blog:

• Effects of Health Care Reform on Small Businesses
• Effects of Health Care Reform on Employers
• Effects of Health Care Reform on Individuals
• Offsetting the Cost of the Health Care Package: Revenue Raisers
• Health Care Reform & Medical Expense Deduction
• Health Care Reform & FSAs and HSAs
• Health Care Reform & Market Sector Fees
• Health Care Reform & High-Cost Plans
• Health Care Reform & Additional Medicare Tax

For more information on the tax treatment of healthcare coverage for adult children under age 27, please click here.

Healthcare Reform Article

Finally, keep an eye out for the June issue of CPA Voice where my article on the tax implications of health care reform on individuals will appear. We will provide a link to the article in the June Special Delivery e-newsletter.

If you have any questions on how health care reform may affect you or your business, please contact me at 440-449-6800 or jsacher@skodaminotti.com. 

Six Ways to Improve Debt Collection

In the current economy, it is not enough to generate sales. It is just as important to ensure that your business is actually paid for your services or products. That is why debt collection is increasingly becoming a concern of small-business owners.

When pursuing debt collection activities, be careful to avoid violating any federal laws designed to protect debtors, including the Fair Debt Collection Practices Act and related legislation. In brief, you may be fined or forced to pay damages, or both. State law may also restrict these practices. In addition, debtors may be able to initiate civil actions.

The key is to maximize collections for your business without exposing it to liability.

Click here for six practical suggestions.

Are You in the AMT Danger Zone?

The alternative minimum tax (AMT) was originally designed to ensnare only the wealthiest individuals. But this "stealth tax" has been steadily hitting a far wider group of taxpayers than initially intended. If you are in danger of incurring AMT liability, you should familiarize yourself with the rules.

Basic premise: The AMT runs on a separate track beside your regular tax liability. After you have figured out your regular taxable income, your AMT liability must be computed.

Click here for the four basic steps.

Aurum Capital Markets Summary 

Please click here for a summary from Aurum Wealth Management Group on the performance of the major market indices through the end of April as well as a recap of the significant events influencing the markets.

Worker's Compensation: Reminder to Businesses Participating in Group-Rating Programs

The Ohio Bureau of Worker's Compensation Board passed a rule that requires group participants that have experienced a workers' compensation claim in the past two years (2007 and 2008) to complete two hours of safety training by 6/30/2010. If you have not completed your training by June 30, 2010, you will lose your group discount. 

For more information on how you can comply with this training requirement, including a low-cost and easy to use on-line training system, please contact Roger Gingerich at 440-449-6800 or rgingerich@skodaminotti.com.
 

With the passage of Health Care Reform, the big question is, "How will it affect my business?" SmartBusiness Cleveland recently hosted a webinar series which looked at this topic from five angles: tax implications, legal issues, economy, benefits, and health care.

Click here to download my segment which looked at how the accounting and tax implications of the health care reform will affect your business, and how you should react and adapt to absorb the changes.

For more information on how health care reform will affect your business, post a comment below or contact our Tax Group at 440-449-6800.

We would like to make you aware of a new tax credit that could significantly benefit your business.

As you know, on March 23rd, President Obama signed into law the Patient Protection and Affordable Care Act. As part of this Act, new Internal Revenue Code Section 48D was created. Section 48D provides an incentive that may offer you a significant benefit.

Overview of Benefit

• The Act establishes a new investment tax credit for certain expenditures related to “Qualifying Therapeutic Discovery Projects” (QTDPs) made in 2009 and 2010.
  
• Section 48D provides a tax credit equal to 50 percent of the “qualified investment” of an “eligible taxpayer.”
  
• In an interesting variation from other tax credits, companies that cannot currently use tax credits may apply for a cash grant for the same amount as the credit.

What is a “Qualified Investment”?

The amount of the credit depends on a business’s investment in a “Qualifying Therapeutic Discovery Project (“QTDP”).

The government defined QTDP Objectives are:

• The development a product, process, or technology to further the delivery or administration of therapeutics;
• The diagnosis of diseases or conditions, or determination of molecular factors related to diseases or conditions, by developing molecular diagnostics to guide therapeutic decisions; or
• The treatment or prevention diseases or conditions by:
  • Conducting pre-clinical activities, clinical trials, and clinical studies; or
  • Carrying out research protocols, for the purpose of securing approval fo a product government guidelines.

In order to qualify for the grant/credit, certification by the Treasury Department is required; therefore, the ability to qualify for the credit requires careful consideration and presentation.

In deciding which projects to certify, Treasury must find that the projects show “reasonable potential” to:

• Result in new therapies to treat areas of unmet medical need, or prevent, detect, or treat chronic or acute diseases or conditions;
• Reduce long-term health care costs in the United States; or
• Significantly advance the goal of curing cancer within 30 years.

As part of their determination, Treasury also will consider which projects have the greatest potential to:

• Create and sustain, directly or indirectly, high-quality, high-paying jobs in the United States; and
• Advance United States competitiveness in the fields of life, biological, and medical sciences.

Treasury is required to take action to approve or deny applications within 30 days of their submission.

Who is eligible?

• A taxpayer that employs 250 employees or less in all its related businesses at the time it submits an application is eligible, but complex rules determine related businesses.
  
• Eligible taxpayers include C corporations as well as pass-through entities like S corporations, LLCs, and partnerships.
  
• Most not-for-profit entities are not eligible for grants.

Application Process

The application guidelines are required to be published no later than May 21, 2010, within 60 days of the Act’s signing, and could be published even sooner.

No one knows what the application will look like just yet, but due to the complex rules, the application will likely be complicated, particularly since a considerable amount of information will be required related to the QTDP merits and the likelihood of job creation. We believe the application could be as complex as any government grant request.

Only $1 billion is available for expenditures in 2009 and 2010. If past history, like the credits for Advanced Energy Projects are any indication, the funds could be depleted quickly, so time is of the essence.

As the available funds (only $1 billion) may go quickly, we encourage you to contact Skoda Minotti as soon as you have identified that you may be eligible for a credit or grant. As we have been researching and studying this opportunity since its announcement, we are most qualified to help you position yourself by gathering and organizing the information that will be needed to demonstrate your qualification for the grant/credit. It is advisable to be prepared to fill out the application and prepare the grant request as quickly as possible once guidance is released in order to put yourself in the best position to receive funding.

If you have any questions about moving forward with a Section 48D application, feel free to contact Jim Sacher at Skoda Minotti at 440-449-6800.

Details

The Patient Protection and Affordable Care Act, signed into law on March 23, 2010, Pub. L. No. 111-148 (the “Act”), provides additional requirements for hospitals to qualify as charitable organizations under section 501(c)(3). In order to qualify as a section 501(c)(3) hospital, a facility must meet the following requirements of new section 501(r):

1. The community health needs assessment requirement;
2. The financial assistance policy requirements;
3. The charges requirement; and
4. The billing and collection requirement.

Community Health Needs Assessment

An organization will meet this requirement if, in the applicable year or in either of the two taxable years immediately preceding such taxable year, the hospital (1) conducts a community health needs assessment made widely available to the public which takes into account input from representatives of a broad cross section of the community, including those with public health expertise, and (2) adopts an implementation strategy to meet the community health needs identified through such assessment.

Financial Assistance Policy (Including Emergency Care Policy)

An organization will meet this requirement if it establishes a written financial assistance policy which includes eligibility criteria for financial assistance and whether such assistance includes free or discounted care; the basis for calculating amounts charged to patients; the method for applying for financial assistance, and in the case of an organization which does not have a separate billing and collections policy, the actions the organization may take in the event of non-payment, including collections action and reporting to credit agencies; and measures to widely publicize the policy within the community to be served by the organization.

The policy must also provide that the organization will provide emergency medical care regardless of an individual’s eligibility under the financial assistance policy.

Charges Policy

The organization must have a policy that limits amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under the financial assistance policy to not more than the lowest amounts charged to individuals who have insurance covering such care, and prohibits the use of gross charges.

Billing and Collection Requirements

An organization will meet this requirement only if the organization does not engage in extraordinary collection actions before the organization has made reasonable efforts (to be defined by future regulation) to determine whether the individual is eligible for assistance under the financial assistance policy described above.

Penalties and Reporting Requirements

If an organization fails to meet the requirements of new section 501(r), then new section 4959 imposes a $50,000 excise tax for any taxable year for which there is such failure.

The law imposes new reporting requirements (section 6033(b)(15)) so that a hospital will have to provide a description of how the organization is addressing the needs identified in the community health needs assessment and a description of any such needs that are not being addressed, together with the reasons why such needs are not being addressed. Hospitals will have to provide this report and their audited financial statements as attachments to Form 990, Return of Organization Exempt from Income Tax.

Effective Dates and Mandatory Review

The new provisions are generally effective for taxable years beginning after the date of enactment of the Act. Thus, for example, if an organization uses a March 31 taxable year, most of the new requirements are currently effective as of April 1, 2010. The community health needs assessment requirement is effective for taxable years beginning two years after the date of the enactment of the Act, i.e., March 23, 2012.

Finally, the new law provides that there will be mandatory review of tax exemption for hospitals at least once every three years regarding the community benefit activities of each hospital organization to which the new provisions apply.

For more information, post a comment below or contact our Healthcare Consulting Group at 440-449-6800.

Information Courtesy: BDO

Overview:

Great news was recently received by university medical institutions with pending claims for a refund of FICA taxes remitted on amounts of compensation paid to medical residents. The Internal Revenue Service made an administrative determination to concede that amounts paid to medical residents for  taxable periods ending before April 1, 2005, are exempt from FICA taxes under the student exception.

Unfortunately, the refund opportunity does not apply to any payments made after the Treasury’s final regulations went into effect on April 1, 2005. These regulations were contested but, in June 2009, they were upheld by the United States Court of Appeals for the Eighth Circuit. See Mayo Foundation for Medical Education & Research v. United States, 568 F.3d 675 (8th Cir. 2009). The court of appeals decision reversed two separate decisions by a federal district court in Minnesota involving medical residents of the Mayo Foundation for Medical Education and Research as well as the University of Minnesota.

The refund opportunity also does not apply to taxpayers that did not timely file claims for refund of the taxes. The normal three-year statute of limitations applies to such claims.

The Service has said that it will begin contacting hospitals, universities, and medical residents who filed FICA refund claims for these periods with more information and procedures within 90 days and stated that employers and those with pending claims do not have to take any action at this time. However, once they are notified, employers are expected to have a limited time to perfect their claims, many of which were filed as protective claims showing one dollar of refund due.

What Should Organizations be Doing Now?

Those organizations that filed protective claims for refunds for periods ending before April 1, 2005, should start the process of gathering the information that will be needed to perfect or verify their refund claims before ultimate processing by the Service:

1. Review the type of claim previously filed, i.e., protective or actual.
2. Quantify the total amounts paid to medical residents that qualify for the exclusion from FICA wages.
3. Identify each recipient of the payments in order to build a contact list that will be used to obtain the required consents regarding employees’ share of FICA.
4. Compare the list to alumni records, professional data banks, etc., for current mailing addresses.
5. Develop a plan to find missing individuals who received payments.
6. Begin seeking consents from affected wage earners with respect to their share of FICA taxes.
7. Identify resources within the organization or externally to timely complete this process.

You've heard about it on the radio; you've read about it in various newspapers.  The Issue 1 bond renewal, which funds the Ohio Third Frontier (OTF) program, will be on the state-wide ballot on May 4.  Some facts and figures since OTF's inception in 2002:

• 570 new companies created
• Over 300 projects state-wide
• 48,000 direct and indirect jobs created; goal of 96,000 jobs over the OTF period
• Estimated $6.6 billion in economic impact
• $2.4 billion in wages and benefits to Ohioans
• Over 65% increase in private equity investment in Ohio due to OTF
• Since 2000, the number of bioscience jobs has increased by almost 18%

Issue 1 is not a new tax, but rather an extension of a bond issue initially approved in 2005 for $500 million.  OTF funds are highly competitive, and are available throughout the state.  Large, notable beneficiaries of the funds include the Cleveland Clinic Foundation and Case Western Reserve University in Cleveland, the University of Akron, CincyTech and Children's Hospital Medical Center in Cincinnati, the University of Dayton and GE Aviation in Dayton, and the Regional Growth Partnership in Toledo.

OTF supports research, entrepreneurship, private investment, and jobs by focusing on technology and innovation.  Some of the programs OTF funds include:  Advanced Energy, Entrepreneurial Signature Program, and Biomedical Research and Commercialization.

Despite the economic impact, there are numerous barriers to passage: 

• The stigma of "stimulus", and bigger government hand-outs
• The long-term payback of such endeavors
• The need for funds throughout the state for transportation and infrastructure

In addition to health-care related taxes and fees, several other areas have been targeted  to raise more revenue as an offset to the overall cost of the entire Health Care package. These additional provisions are estimated to raise $28.1 billion over the 2010-2020 scoring period.


Biofuel Credit

The cellulosic biofuel credit was intended to reward taxpayers that use alternative fuels in industrial and other processes. The Patient Protection Act, as amended by the House Reconciliation Act, targets what some lawmakers perceive as certain industries’ abuse of the credit by denying the credit to a by-product known as “black liquor.” The provision applies to fuels sold or used on or after January 1, 2010.

Impact

This nonmedical revenue provision is a money maker, raising $23.6 billion. However, both this provision and the codifi cation of the economic substance doctrine are used as the primary revenue raisers in the version of the Extenders bill the Senate passed on March 10, thus jeopardizing a quick resolution of that bill between House and Senate negotiators.


Economic Substance Doctrine

The Patient Protection Act, as amended by the House Reconciliation Act, codifies the economic substance doctrine. A transaction would have economic substance only if the taxpayer’s economic position (other than its federal tax position) changed in a meaningful way and the taxpayer had a substantial purpose (other than a federal tax purpose) for engaging in the transaction. The provision applies to transactions entered into after date of enactment.

Impact

Violations are subject to stiff, automatically-applied penalties of 20 or 40 percent, depending on the underlying transaction and level of disclosure. This no-fault penalty regime concerns many advisors, especially in connection with corporate and partnership tax planning strategies in which tax reduction has been an acceptable principal reason for structuring certain deals.


Corporate Estimated Tax Payments

The Patient Protection Act, as amended by the House Reconciliation Act, increases the required corporate estimated tax payments factor for corporations with assets of at least $1 billion for payments due in July, August, and September 2014 by 14.5 percentage points.


Imformation Reporting

The Patient Protection Act, as amended by the House Reconciliation Act, imposes new information reporting requirements. Generally, businesses that pay any amount greater than $600 during the year to corporate and noncorporate providers of property and services will be required to fi le an information report with each provider and with the IRS.

Source: CCH, a Wolters Kluwer business

The Patient Protection Act, as amended by the House Reconciliation Act, imposes annual nondeductible fees on various health-related industries, such as medical device manufacturers and importers, health insurance providers and others. The annual fees would be allocated across industry sectors according to market share. The patient Protection Act, as amended, delays the effective dates of the taxes on brand name pharmaceuticals sales by one year until 2011 and on health insurance providers for three years until 2014. The Patient Protection Act, as amended, also exempts qualified nonprofi t insurance providers serving lower-income and other targeted groups and some voluntary employee benefit associations.

Comment

The Patient Protection Act, as amended by the House Reconciliation Act, removes an annual fee that would have been imposed on medical device manufacturers. However, as a trade-off, the Patient Protection Act, as amended, adds an excise tax on medical device sales. However, certain medical devices routinely purchased by consumers, such as eyeglasses and hearing aids, would be exempt from the excise tax.

The Patient Protection Act, as amended by the House Reconciliation Act, would also require Code Sec. 501(c)(3) hospitals to conduct periodic community health needs assessments and adopt written financial assistance policies. Individuals who qualify for fi nancial assistance would be billed at the same rates as insured individuals. The bill would also add some consumer protection provisions to debt collection activities by nonprofi t hospitals.

Comment

The IRS would be required to review a nonprofi t hospital’s community benefi t activities at least once every three years.

Comment

The Patient Protection Act, as amended by the House Reconciliation Act, authorizes the IRS to share return information with the U.S. Department of Health and Human Services to curb Medicare fraud.

Heath Insurance Executive Pay. The Patient Protection Act modifies Code Sec. 162(m) as it applies to remuneration paid by health insurance providers to high-level executives. If at least 25 percent of the premium income to the insurer does not meet minimum essential coverage requirements under the Act, no Code Sec. 162(m) deduction would be allowed to the extent the remuneration exceeds $500,000, with a special provision for deferred compensation. No further changes were made in the House Reconciliation Act to this provision.

Indoor Tanning Tax. The Patient Protection Act, as amended by the House Reconciliation Act, imposes a tax of 10 percent on qualified indoor tanning services effective for services provided on or after July 1, 2010.

New Therapies Tax Credit. On the positive side of the ledger for the health industry, the Patient Protection Act creates a new two-year temporary tax credit to encourage investments in new health care therapies for tax years beginning in 2009 and 2010.

Source: CCH, a Wolters Kluwer business

The Patient Protection Act, as amended by the House Reconciliation Act, broadens the Medicare tax base for higher income taxpayers by:

1. Imposing an additional of 0.9 percent on earned income in excess of $200,000 for individuals and $250,000 for families; and

2. Imposing an unearned income Medicare contribution of 3.8 percent on investment income for individuals with AGI above $200,000 and joint fi lers with AGI above $250,000.

Impact

The 3.8 percent Medicare “contribution” would be effective starting in 2013. This additional Medicare tax would apply only to the employee portion of the tax. When added to the 0.9 percent tax also imposed by the Patient Protection Act on these high-income earners’ portion of their Hospital Insurance (HI) payroll tax, $210 billion is estimated to be raised over the 2013 to 2019 period.

Impact

Neither the $200,000 nor $250,000 amounts are indexed for inflation.

Net investment income includes interest, dividends, royalties, rents, gain from disposing of property, and income earned from a trade or business that is a passive activity. Self-employed individuals, as well as estates and trusts, would also be liable for the additional tax.

Distributions from qualified retirement plans, including pensions and certain retirement accounts, would be exempt from paying the additional tax. For example, income from individual retirement accounts (IRAs), 401(a) money purchase plans, 403(b) and 457(b) plans would be exempt.

Comment

The final version of the additional Medicare payroll tax appears to be a compromise between the House’s proposed income tax surtax on higher-income individuals and the Senate’s original “Cadillac plan” excise tax.

Impact

The additional Medicare tax on qualified higher income taxpayers would not start until 2013. Issues over how certain deferred compensation arrangements would be taxed are certain to arise.

Source: CCH, a Wolters Kluwer business

The Patient Protection Act, as amended by the House Reconciliation Act, provides a temporary sliding-scale small employer tax credit to help offset the cost of employer-provided coverage. Generally, a small employer is one with fewer than 25 employees and average annual wages of less than $40,000.

In 2011 through 2013, eligible employers may qualify for a tax credit for up to 35 percent of their contribution toward the employee’s health insurance premium. In 2014 and beyond, eligible employers who purchase coverage through a state exchange may qualify for a credit for two years of up to 50 percent of their contribution. Qualified tax-exempt employers would be eligible for a reduced credit. Salary reduction contributions are not counted.

Impact

Employers with 10 or fewer employees and average annual wages of less than $20,000 would be eligible for the full credit.

Comment

Qualified small businesses would be able to purchase insurance for their employees through state-based web portals to be known as  mall Business Health Options Programs (SHOP). These insurance exchanges would allow small businesses to pool together to spread their financial risk.

Cafeteria Plans. The Patient Protection Act relaxes the cafeteria plan rules to encourage more small employers to offer tax-free benefi ts to employees, including those related to health insurance coverage. It does so by carving out a safe harbor from the nondiscrimination requirements for cafeteria plans for qualifi ed small employers.



Source: CCH, a Wolters Kluwer business