Tax Alert: Repeal of the Cadillac Tax and other ACA Changes

Among the many provisions included in the end-of-year federal budget bill were the eliminations of the following excise taxes imposed in the Affordable Care Act (ACA). The bill, passed into law on December 20, 2019, made the following changes:

  • The “Cadillac” tax that was scheduled to take effect in tax years beginning after December 31, 2021 has been repealed. This means employers will not be subject to a 40% excise tax on high-cost healthcare plans offered to their employees.
  • The 2.3% tax on the sale, use and lease of medical devices was scheduled to return at the end of 2019 but was repealed just in time, much to the relief of medical manufacturers and importers.
  • 2020 will be the last year that health insurance providers will be subject to The Patient Centered Outcomes Research Institute (PCORI) fee, which has been repealed for tax years beginning after December 31, 2020.

While these repeals were welcomed enthusiastically by the specific segments of taxpayers affected, it will be business as usual this year for most companies that offer health insurance plans, especially “applicable large employers” (ALEs) that continue to be subject to the employer mandate requirement and significant tax consequences for non-compliance.

Jeffrey G. Cohen Jeffrey G. Cohen, CPA is the Partner-in-Charge of Tax Services at Grassi. With over 30 years of experience, Jeff specializes in serving companies within the Manufacturing and Distribution Industry, with an emphasis on the Food & Beverage and Pharmaceutical sectors. A leading tax expert in the New York Metropolitan area, Jeff has enabled his clients to realize significant tax savings through proper Income and... Read full bio