Health Care Reform Act by changtian

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									CCH Tax Briefing:
              HEALTH CARE REFORM ACT

March 23, 2010
                                                                                     Special Report

    HIGHLIGHTS:                              President Signs Health
 ✔ Individual Responsibility                 Care Reform; Senate
   Requirement
 ✔ No Employer Mandate                       Reconciliation Vote Next
                                             P
 ✔ Small Business Tax                                resident Obama on March 23               health-care package would im-
   Credit                                            signed the massive health care           pose an additional Medicare tax
 ✔ Additional Medicare                               reform package approved by the           on higher-income individuals,
                                             House on March 21, 2010. The Patient             including a Medicare tax on in-
   Tax On Higher-Income                      Protection and Affordable Care Act (the          vestment income, in addition to
   Individuals                               Patient Protection Act), approved by             changing aspects of the excise tax
 ✔ Excise Tax On High                        the Senate on December 24, 2009, is              to be imposed on high-dollar in-
   Dollar Plans                              now law. It contains over $400 billion           surance plans. And while the
                                             in revenue raisers and new taxes on              health-care package does not
 ✔ Market Sector Fees                        employers and individuals. The House             mandate employer-provided cov-
 ✔ Codification Of                            also passed on March 21 H.R. 4872, the           erage, it does include “play or
   Economic Substance                        Health Care and Education Tax Credits            pay” language.
                                             Reconciliation Act of 2010 (the House
   Doctrine
                                             Reconciliation Act). The House Recon-                       The IRS would be respon-
 ✔ And More                                  ciliation Act serves as a “sidecar” bill,                   sible for overseeing a
                                             that will allow amendments to the Patient        significant part of health care re-
                                             Protection Act to be passed by the Sen-          form, such as the administration of
                                             ate with only 51 votes using the budget          additional taxes on individuals and
               Inside                        reconciliation rules.                            employers, determinations of vari-
                                                  What’s next: While the Patient              ous exemptions from those taxes,
 Individuals ........................... 2   Protection Act is now law, the House             and oversight of new information
                                             Reconciliation Act strikes out or modi-          reporting requirements. Many of
 Employers ............................ 3
                                             fies a number of provisions in the Patient        the new requirements have phased-
 Small Businesses ................ 4         Protection Act to which House members            in or delayed effective dates, giving
                                             objected, The Senate now must pass this          the IRS – and taxpayers – a window
 Additional Medicare Tax ..... 4             “sidecar” Reconciliation bill before it be-      of time to prepare.
                                             comes law. The Senate Democrats’ goal
 High-Cost Plans .................. 4
                                             is to send a final package to the White
                                                                                           KEY OFFSETS
 Market Sector Fees ............. 5          House before a scheduled Congressional
                                             recess begins on March 29.                    To help finance health care reform, the
 FSAs and HSAs ................... 6                                                       Patient Protection Act, as amended by
                                                          The Patient Protection           the House Reconciliation Act, includes
 Medical Expense
                                                          Act, as amended by the           (1) a 40 percent excise tax on high-dollar
 Deduction ............................ 6       House Reconciliation Act, does             health insurance plans to begin in 2018,
 Other Revenue Raisers ....... 6                not impose the income tax surtax           (2) an increase in Medicare payroll
                                                on higher-income individuals               taxes starting in 2013 on taxpayers in
                                                originally proposed in the House           the $200,000-plus income category
                                                last year. However, the House              ($250,000 for joint filers), and (3) new
2
              2010 Legislation Update


    fees on certain health-related industries.   eligible for Medicaid or Medicare or        without minimum essential coverage in
    A dozen other “revenue raisers” are also     other government-sponsored coverage         2014. The nondeductible penalty rises
    included in the final bill.                   to maintain minimum essential coverage      to $325 per person without minimum
                                                 beginning after 2013. Individuals who       essential coverage in 2015, then to $695
    CORE CONCEPTS                                fail to maintain minimum essential cov-     per person without minimum essential
                                                 erage would be liable for a penalty. The    coverage in 2016 and is indexed for
    The Patient Protection Act, as amended       Patient Protection Act uses a formula to    inflation thereafter.
    by the House Reconciliation Act, will        calculate the penalty taking into account
    fundamentally alter the health care          the taxpayer’s household income and a                    For individuals under the
    landscape for individuals and employers.     flat dollar amount.                                       age of 18, the applicable
    All individuals not covered by Medicaid                                                    flat dollar penalty would be one-half
    or Medicare will be required to obtain                                                     of the above amounts.
    health care coverage or pay penalties.
    Employer-provided coverage will gen-                “To help finance                                  The flat dollar penalty on
    erally satisfy the universal coverage             health care reform,                                any taxpayer for any tax
    requirement. Lower-income individuals,                                                     year with respect to all individuals
    as well as some middle-class families,          the Patient Protection                     for whom the taxpayer is liable
    will receive a credit or voucher to help          Act, as amended by                       (generally family members) cannot
    pay for health insurance. Employers              the House Reconcili-                      exceed an amount equal to 300
    electing not to offer qualifying coverage        ation Act, includes a                     percent of the applicable dollar
    will be subject to an additional tax to         40 percent excise tax                      amount for the year.
    help finance the health care coverage for
    their employees. Exceptions are made             on high-dollar health                        Additionally, amendments made
    for small businesses.                             insurance plans to                     by the House Reconciliation Act raise
                                                     begin in 2018, an in-                   the percentage of income that is the
                 Individuals who cur-                 crease in Medicare                     alternative to the fl at dollar annual
                 rently have coverage                payroll taxes starting                  penalty from 0.5 percent to 1.0 percent
      and wish to retain that coverage                                                       in 2014, 1.0 to 2.0 percent in 2015,
      can do so under a “grandfather”                 in 2013 on taxpay-                     and 2.0 to 2.5 percent for 2016 and
      provision in the heath care pack-             ers in the $200K-plus                    subsequent years.
      age and the coverage will be                     income category
      deemed to meet the individual’s                 ($250K for joint fil-                                Abby, a 34-year old
      responsibility to have health cov-            ers), and new fees on                                 single, does not have
      erage. A similar grandfather provi-                                                       minimum essential coverage in
      sion applies to employers that                certain health-related                      2016 and is not exempt from hav-
      currently offer coverage.                           industries.”                          ing minimum essential coverage.
                                                                                                Abby would be liable for a pen-
                                                                                                alty the greater of: $695 or 2.5
    INDIVIDUALS                                                                                 percent of her modified adjusted
                                                      The Patient Protection Act, as            gross income.
    The Patient Protection Act, as amended       amended by the House Reconcilia-
    by the House Reconciliation Act, re-         tion Act, imposes a nondeductible flat                    The Patient Protection
    quires most individuals not otherwise        dollar-amount penalty of $95 per person                  Act, as amended by the
                                                                                                House Reconciliation Act, com-
                                                                                                pletely exempts taxpayers below
                     INDIVIDUAL RESPONSIBILITY                                                  the threshold for filing an income
              Year                    Penalty               Percent of Income*                  tax return from the minimum es-
              2014                      $95                           1%                        sential coverage penalty. The
              2015                     $325                           2%                        House Reconciliation Act also
                                                                                                lowered the penalty set in the
              2016                     $695**                        2.5%
                                                                                                Patient Protection Act effective for
     * In lieu of the flat penalty if greater                                                    2015 from $495 to $325 and for
     ** Indexed for inflation thereafter                                                         2016 from $750 to $695.


    C C H     T A X     B R I E F I N G                                                       ©2010 CCH. All Rights Reserved
                                                                                                                                    3
March 23, 2010



COVERAGE SUBSIDIES                                     Individuals with Medicare,      not require employers to provide health
The Patient Protection Act, as amend-                   Medicaid, Veterans’ Af-        insurance coverage. However, “large”
ed by the House Reconciliation Act,        fairs, or other government-sponsored        employers that do not provide minimum
also provides premium assistance           coverage would be treated as having         essential coverage will be liable for an
tax credits and reduced cost sharing       minimum essential coverage.                 additional tax; “small” employers will be
to qualified individuals, on a slid-                                                   encouraged to provide coverage through
ing scale. The credit is designed to          The Patient Protection Act, as           an available tax credit. The health care
guarantee that qualified individuals     amended by the House Reconciliation           package also requires automatic enroll-
would not spend more than a specific     Act, creates a reinsurance program for        ment in health insurance plans sponsored
percentage of their income on medi-      employer-sponsored early retiree cover-       by large and mid-size employers.
cal insurance premiums. Generally,       age. Payments made under the reinsur-         “Large “ employers (essentially busi-
these are individuals who cannot         ance program for retirees would be ex-        nesses with 50 or more full-time employ-
afford minimum essential coverage        cluded from gross income. Additionally,       ees for purposes of the House amended
based on the relationship of their       health services provided or purchased by      Patient Protection Act) that fail to offer
income to the federal poverty level.     the Indian Health Service would also be       minimum essential coverage during any
The health care package allows for       excluded from gross income.                   month for which a full-time employee
the advanced payment of premium                                                        has enrolled in a subsidized plan using
assistance tax credits.                               The IRS would be respon-         the premium assistance tax credit or
                                                      sible for determining eli-       cost-sharing reductions would be liable
            The subsidy credit starts      gibility for the premium assistance         for an additional tax. That penalty would
            at 133 percent of the          tax credit. Further, premium assis-         equal the product of the applicable
  federal poverty level (FPL). At the      tance tax credits would be disre-           payment amount (with respect to any
  same time, the health-care package       garded for federal or federally-as-         month, 1/12 of $2,000) and the number
  expands Medicaid to cover those          sisted programs.                            of full-time employees employed by the
  with income less than 133 percent                                                    employer during such month.
  of FPL.                                     The Patient Protection Act, as amend-
                                         ed by the House Reconciliation Act, also                   The penalty would apply
     The federal poverty level is        creates a national voluntary insurance                     to employers with 50 or
determined based on family size.         program for purchasing community living          more workers but would subtract the
For example, a family of four with       assistance services and support. Premiums        first 30 workers from the payment
household income between $29,327         will be paid through payroll deductions          calculation. Businesses with fewer
(approximately 133 percent of the        if an individual’s employer decides to           than 50 employees would be exempt
current FPL) and $88,000 (approxi-       participate in the program.                      from any employer responsibility.
mately 400 percent of current FPL)
would qualify for a premium subsidy.                                                                 ABC Co. has 51 full-time
                                         EMPLOYERS
Likewise, individuals with household                                                                 employees and does not
incomes between approximately            The Patient Protection Act, as amended           offer its employees minimum es-
$14,000 and $43,000 would qualify.       by the House Reconciliation Act, does            sential coverage. ABC Co. will pay
     The Patient Protection Act, as
amended by the House Reconciliation
Act, includes a religious conscience         PREMIUM TAX CREDITS FOR AFFORDABILITY
exception, excludes undocumented                                       Initial premium                 Final premium
individuals in the U.S. from coverage     Household income*               percentage                     percentage
and provides special rules for quali-
                                               Up to 133%                      2.0                            2.0
fied members of Native American
tribes, certain hardship cases, depen-      133% up to 150%                    3.0                            4.0
dents and incarcerated individuals.         150% up to 200%                    4.0                            6.3
The health care package also provides       200% up to 250%                    6.3                           8.05
for cost sharing for lower-income in-
                                            250% up to 300%                   8.05                            9.5
dividuals enrolled in qualified health
insurance plans and the advance pay-       300 % up to 400%                    9.5                          9.5
ment of cost-sharing reductions for                                                             (and special indexing rules)
eligible individuals.                     * Household income expressed as a percent of the federal poverty level


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              2010 Legislation Update


       an amount equal to 51 minus 30               average annual wages of less than          is estimated to be raised over the
       (or 21) times the applicable per             $25,000 would be eligible for the          2013 to 2019 period.
       employee payment amount (up to               full credit.
       $2,000 per full-time employee).                                                                  Neither the $200,000
                                                             Qualified small businesses                  nor $250,000 amounts
                 Generally, employees                        would be able to purchase         are indexed for inflation.
                 could be eligible for             insurance for their employees
      premium tax credits when em-                 through state-based web portals to            Net investment income includes
      ployer-provided insurance costs              be known as Small Business Health        interest, dividends, royalties, rents, gain
      9.5 percent or more of the em-               Options Programs (SHOP). These           from disposing of property, and income
      ployee’s household income or the             insurance exchanges would allow          earned from a trade or business that is a
      employer plan’s share of benefits             small businesses to pool together to     passive activity. Self-employed individ-
      is less than 60 percent. This type           spread their financial risk.              uals, as well as estates and trusts, would
      of coverage will not qualify as                                                       also be liable for the additional tax.
      minimum essential coverage.                     Cafeteria Plans. The Patient Pro-          Distributions from qualified retire-
                                                 tection Act relaxes the cafeteria plan     ment plans, including pensions and
                 Employers and other enti-       rules to encourage more small employers    certain retirement accounts, would be
                 ties providing minimum          to offer tax-free benefits to employees,    exempt from paying the additional tax.
      essential coverage would be re-            including those related to health insur-   For example, income from individual re-
      quired to file information returns          ance coverage. It does so by carving out   tirement accounts (IRAs), 401(a) money
      with the IRS identifying the indi-         a safe harbor from the nondiscrimination   purchase plans, 403(b) and 457(b) plans
      vidual, the coverage and the amount        requirements for cafeteria plans for       would be exempt.
      of premium, if any, paid by the in-        qualified small employers.
      dividual. Penalties would be im-                                                                   The final version of the
      posed for failure to file an informa-                                                               additional Medicare pay-
                                                 ADDITIONAL MEDICARE
      tion return.                                                                            roll tax appears to be a compromise
                                                 PAYROLL TAX                                  between the House’s proposed in-
                                                                                              come tax surtax on higher-income
    SMALL BUSINESSES                             The Patient Protection Act, as amended       individuals and the Senate’s original
                                                 by the House Reconciliation Act, broad-      “Cadillac plan” excise tax.
    The Patient Protection Act, as amended       ens the Medicare tax base for higher-
    by the House Reconciliation Act, pro-        income taxpayers by:                                    The additional Medicare
    vides a temporary sliding-scale small        1. Imposing an additional of 0.9 per-                   tax on qualified higher-
    employer tax credit to help offset the          cent on earned income in excess            income taxpayers would not start
    cost of employer-provided coverage.             of $200,000 for individuals and            until 2013. Issues over how cer-
    Generally, a small employer is one with         $250,000 for families; and                 tain deferred compensation ar-
    no more than 25 employees and average        2. Imposing an unearned income Medi-          rangements would be taxed are
    annual wages of less than $50,000.              care contribution of 3.8 percent on        certain to arise.
         In 2010 through 2013, eligible             investment income for individuals
    employers may qualify for a tax credit          with AGI above $200,000 and joint
    for up to 35 percent of their contribution      filers with AGI above $250,000.          TAX ON HIGH-COST
    toward the employee’s health insurance                                                  INSURANCE
    premium. In 2014 and beyond, eli-                         The 3.8 percent Medi-
    gible employers who purchase coverage                     care “contribution”           The Patient Protection Act, as amended
    through a state exchange may qualify            would be effective starting in          by the House Reconciliation Act, will
    for a credit for two years of up to 50          2013. This additional Medicare          impose a 40 percent nonrefundable
    percent of their contribution. Qualified         tax would apply only to the em-         excise tax on group insurers if annual
    tax-exempt employers would be eligible          ployee portion of the tax. When         premium payments exceed an inflation-
    for a reduced credit. Salary reduction          added to the 0.9 percent tax also       adjusted $10,200 for individual coverage
    contributions are not counted.                  imposed by the Patient Protection       and $27,500 for family coverage begin-
                                                    Act on these high-income earners’       ning in 2018.
                 Employers with 10 or               portion of their Hospital Insur-            The Patient Protection Act, as
                 fewer employees and                ance (HI) payroll tax, $210 billion     amended by the House Reconciliation


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March 23, 2010



Act, also provides higher premium             adjusted calculation for 2018 and 2019         providers serving lower-income and
levels for retirees and employees in          only. Thereafter, the amounts would be         other targeted groups and some voluntary
certain high-risk professions: $11,850        adjusted only using the base CPI-U. The        employee benefit associations.
for individual coverage and $30,950 for       dollar thresholds will be increased auto-
family coverage. Retired individuals age      matically in 2018 if the Congressional                      The Patient Protection
55 and older would also be eligible for       Budget Office is incorrect in its forecast                   Act, as amended by the
the higher thresholds.                        of the premium inflation rate between             House Reconciliation Act, removes
     Employers will be required to dis-       2010 and 2018. Estimates are that the            an annual fee that would have been
close the value of employer-provided          new indexing will more than offset any           imposed on medical device manu-
health insurance to employees annually        benefits given under the higher base              facturers. However, as a trade-off,
on Form W-2.                                  dollar premium levels.                           the Patient Protection Act, as amend-
                                                   The House Reconciliation Act                ed, adds an excise tax on medical
              Designed principally to         removes completely from the Patient              device sales. However, certain
              limit so-called “Cadil-         Protection Act the value of dental and vi-       medical devices routinely purchased
   lac plans,” the excise tax for these       sion plan benefits from determining the           by consumers, such as eyeglasses
   high-end policies would be im-             excise tax thresholds. The House Recon-          and hearing aids, would be exempt
   posed pro rata on issuers. For             ciliation Act also provides adjustments          from the excise tax.
   self-insured plans, the plan ad-           to the thresholds to account for plans that
   ministrator (including employers           carry a higher premium cost because of              The Patient Protection Act, as
   that act as plan administrators)           the participants’ age or gender.               amended by the House Reconciliation
   would pay the excise tax. The                                                             Act, would also require Code Sec.
   Patient Protection Act, as amend-                        Dan, age 40, elects fam-         501(c)(3) hospitals to conduct periodic
   ed by the House Reconciliation                           ily coverage under an            community health needs assessments
   Act, delays application of the                employer-provided fully-insured             and adopt written financial assistance
   excise tax from 2013 until 2018 to            health care policy covering major           policies. Individuals who qualify for
   give plans “time to implement and             medical and dental with a value             financial assistance would be billed at
   realize the cost savings of re-               of $37,000. The amount subject to           the same rates as insured individuals.
   form.” Because of this delay,                 the proposed excise tax would be            The bill would also add some consumer
   however, the Reconciliation Act               the $9,500 above the $27,500                protection provisions to debt collection
   eliminates the three-year transi-             threshold for family coverage.              activities by nonprofit hospitals.
   tion relief that had been available           Dan’s employer would report
   in the Patient Protection Act for             $9,500 as taxable to the insurer.                        The IRS would be required
   coverage in 17 high-cost states.              The insurer calculates and pays                          to review a nonprofit hos-
                                                 the tax to the IRS.                           pital’s community benefit activities at
              An insurer would be free                                                         least once every three years.
              to pass along the excise
   tax to consumers in the form of            MARKET SECTOR FEES                                          The Patient Protection
   higher premiums as an alternative                                                                      Act, as amended by the
   to, or in combination with, finding         The Patient Protection Act, as amended           House Reconciliation Act, autho-
   cost-cutting opportunities.                by the House Reconciliation Act, imposes         rizes the IRS to share return infor-
                                              annual nondeductible fees on various             mation with the U.S. Department of
     Cost of living adjustments. While        health-related industries, such as medi-         Health and Human Services to curb
the House Reconciliation Act raises the       cal device manufacturers and importers,          Medicare fraud.
base dollar premium levels for classifica-     health insurance providers and others. The
tion as Cadillac plans (the original levels   annual fees would be allocated across in-           Heath Insurance Executive Pay.
had been set at $8,500 for individuals        dustry sectors according to market share.      The Patient Protection Act modifies Code
and $23,000 for families), it takes away      The patient Protection Act, as amended,        Sec. 162(m) as it applies to remunera-
the more generous inflation-index in           delays the effective dates of the taxes on     tion paid by health insurance providers
the original Patient Protection Act. The      brand name pharmaceuticals sales by one        to high-level executives. If at least 25
threshold amounts originally would            year until 2011 and on health insurance        percent of the premium income to the
have been indexed for inflation using          providers for three years until 2014. The      insurer does not meet minimum essential
CPI-U plus one percent. The House             Patient Protection Act, as amended, also       coverage requirements under the Act, no
Reconciliation Act keeps that inflation-       exempts qualified nonprofit insurance            Code Sec. 162(m) deduction would be


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              2010 Legislation Update


    allowed to the extent the remuneration       vides that, if a benefit is available under     eral employees in same-sex partner-
    exceeds $500,000, with a special pro-        a cafeteria plan through employer pro-         ships currently provided to married
    vision for deferred compensation. No         vided contributions to a health FSA, the       federal employees and their spous-
    further changes were made in the House       benefit will not be treated as a qualified       es, including healthcare, retirement,
    Reconciliation Act to this provision.        benefit unless the cafeteria plan provides      family leave, and other benefits.
         Indoor Tanning Tax. The Patient         that an employee may not elect for any
    Protection Act, as amended by the House      taxable year to have salary reduction             Adult children coverage. The Pa-
    Reconciliation Act, imposes a tax of         contributions in excess of $2,500 made       tient Protection Act, as amended by the
    10 percent on qualified indoor tanning        to the arrangement.                          House Reconciliation Act, extends the
    services effective for services provided                                                  employer-provided health coverage gross
    on or after July 1, 2010.                                                                 income exclusion to coverage for adult
                                                 MEDICAL EXPENSE
         New Therapies Tax Credit. On the                                                     children up to age 26. To be eligible, they
    positive side of the ledger for the health
                                                 DEDUCTION/                                   must be also eligible to be claimed as a
    industry, the Patient Protection Act cre-    EXCLUSION                                    dependent for tax purposes.
    ates a new two-year temporary tax credit                                                       Adoptions. The Patient Protection
    to encourage investments in new health       The Patient Protection Act, as amended       Act makes the adoption credit refund-
    care therapies for tax years beginning in    by the House Reconciliation Act, raises      able. It also raises the dollar limitation
    2009 and 2010.                               the threshold for the itemized medical       for the credit to $13,170 and extends the
                                                 expense deduction from 7.5 percent of        credit through 2011. The health care
                                                 adjusted gross income (AGI) to 10 percent    package also enhances the incentives for
    FSAS AND HSAS
                                                 of AGI for regular income tax purposes       adopting children with special needs.
    The Patient Protection Act, as amended       effective for tax years beginning after
    by the House Reconciliation Act, modi-       December 31, 2012. However, individuals      MEDICARE PART D
    fies the definitions of qualified medical       age 65 and older (and their spouses) would
    expenses for health FSAs, HSAs, and          be temporarily exempt from the increase.     The Patient Protection Act eliminates
    HRAs to conform them to the definition        The exemption for seniors would apply to     the deduction for the subsidy for em-
    used for the medical expense itemized        any tax year beginning after December 31,    ployers that maintain prescription drug
    deduction (excluding over-the-counter        2012 and ending before January 1, 2017       coverage for retirees who are eligible
    medicines prescribed by a health care        if the taxpayer or the taxpayer’s spouse     for Medicare Part D.
    professional). The health care package       attained age 65 for the tax year.
    also caps health FSA contributions at                                                                 The House Reconcilia-
    $2,500 per year after 2012, which is in-                 The Patient Protection                       tion bill delays the effec-
    dexed annually for inflation after 2013.                  Act, as amended by the             tive date of this provision by two
         The Patient Protection Act, as             House Reconciliation Act, makes             years until 2013.
    amended, also increases the additional          no adjustment to the allowable
    tax on nonqualified distributions from           medical expense deduction for
    health savings accounts (HSAs) from 10          purposes of computing alternative         OTHER REVENUE RAISERS
    percent to 20 percent and from Archer           minimum tax (AMT) liability. For
    MSAs from 15 to 20 percent.                     now, the AGI floor for AMT pur-            In addition to health-care related taxes
                                                    poses remains at 10 percent.              and fees, several other areas have been
                  The Patient Protection                                                      targeted to raise more revenue as an off-
                  Act as passed by the Sen-                   The Patient Protection          set to the overall cost of the entire Health
       ate would have applied to health                       Act, as amended by the          Care package. These additional provi-
       FSA distributions and reimburse-            House Reconciliation Act, does not         sions are estimated to raise $28.1 billion
       ments for tax years beginning after         extend the employer-provided               over the 2010-2020 scoring period.
       December 31, 2010. The House                health coverage gross income ex-
                                                                                              BIOFUEL CREDIT
       Reconciliation bill delays the effec-       clusion for employees’ spouses and
       tive date by two years, to tax years        dependent children to coverage             The cellulosic biofuel credit was in-
       beginning in 2013.                          provided to domestic partners.             tended to reward taxpayers that use
                                                   Pending legislation, the Domestic          alternative fuels in industrial and other
         To prevent an end-run around the          Partnership Benefits and Obliga-            processes. The Patient Protection Act,
    new FSA restrictions using cafeteria plan      tions Act of 2009 would provide the        as amended by the House Reconcilia-
    rules, the House Reconciliation Act pro-       same employment benefits to fed-            tion Act, targets what some lawmakers


    C C H     T A X     B R I E F I N G                                                        ©2010 CCH. All Rights Reserved
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March 23, 2010



perceive as certain industries’ abuse of    economic substance doctrine. A transac-        CORPORATE ESTIMATED TAX
the credit by denying the credit to a by-   tion would have economic substance only        PAYMENTS
product known as “black liquor.” The        if the taxpayer’s economic position (other     The Patient Protection Act, as amend-
provision applies to fuels sold or used     than its federal tax position) changed in a    ed by the House Reconciliation Act,
on or after January 1, 2010.                meaningful way and the taxpayer had a          increases the required corporate
                                            substantial purpose (other than a federal      estimated tax payments factor for
              This nonmedical revenue       tax purpose) for engaging in the transac-      corporations with assets of at least
              provision is a money mak-     tion. The provision applies to transactions    $1 billion for payments due in July,
   er, raising $23.6 billion. However,      entered into after date of enactment.          August, and September 2014 by 14.5
   both this provision and the codifica-                                                    percentage points.
   tion of the economic substance                        Violations are subject to
                                                                                           INFORMATION REPORTING
   doctrine are used as the primary                      stiff, automatically-ap-
   revenue raisers in the version of the       plied penalties of 20 or 40 percent,        The Patient Protection Act, as amend-
   Extenders bill the Senate passed on         depending on the underlying trans-          ed by the House Reconciliation Act,
   March 10, thus jeopardizing a quick         action and level of disclosure. This        imposes new information reporting
   resolution of that bill between House       no-fault penalty regime concerns            requirements. Generally, businesses
   and Senate negotiators.                     many advisors, especially in con-           that pay any amount greater than
                                               nection with corporate and part-            $600 during the year to corporate and
ECONOMIC SUBSTANCE                             nership tax planning strategies in          noncorporate providers of property
DOCTRINE                                       which tax reduction has been an             and services will be required to file an
The Patient Protection Act, as amended by      acceptable principal reason for             information report with each provider
the House Reconciliation Act, codifies the      structuring certain deals.                  and with the IRS.




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                              Act of 2009. The Guide provides reliable answers to tax                                  It features succinct coverage of hot topics in legal,
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                              tax returns and includes time-savers such as the Quick                                   tax—and alerts practitioners of planning opportunities
                              Tax Facts card, taxpayer specific return flowcharts, rate                                  and pitfalls, and rules being developed in Washington.
                              tables, depreciation tables and much more.
       Book #                    # Pages                    Pub.                 Price          Book #                  # Pages                    Pub.                   Price
       05950401                     912                 Nov. 2009               $84.00          09510001                    48                   Monthly               $349.00
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                   E
           COVERAG
INCLUDES g Incentives
OF THE Hirin ployment
           Em
to Restore Act                 Internal Revenue Code, Income, Estate, Gift,                                            Income Tax Regulations, Summer 2010
       (HIRE)                                                                                                          The full, official text of the Treasury regulations that
                               Employment and Excise Taxes, Summer 2010
                               The full, unabridged text of the complete Internal                                      explain the IRS’s position, prescribe operational rules,
                               Revenue Code formatted with large easy-to-read pages                                    and provide the mechanics for compliance with the
                               and a legible type font. This edition will reflect all the code                          Internal Revenue Code including unemployment
                               changes resulting from the Hiring Incentives to Restore                                 insurance regulations and all estate, gift, generation-
                               Employment (HIRE) Act of 2010 and all subsequent                                        skipping transfer tax, and special valuation regulations.
                               statutory tax changes through May 1, 2010 that affect
                                                                                                                       Formatted with easy-to-read large type, to making it easy
                               income, estate, gift, employment and excise taxes, along
                                                                                                                       to research tax regulations issued through May 1, 2010.
                               w procedural and administrative provisions.
                               with
       Book #                 # Pages                     Pub.                 Price            Book #                 # Pages                   Pub.             Price
       04622401        4,785 – 2 volumes               Jun. 2010             $118.00            04681401           11,700 – 6 volumes          Jun. 2010         $169.00
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                               g                               FRE                                     CCH’s Law, Explanation and Analysis of the Patient
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