Tax Planning & Compliance Blog

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