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<meta http-equiv="content-type" content="text/html; charset=UTF-8"></head><body><font new="" roman="" face="times" size="5"><strong>O</strong></font><strong><font face="arial" size="2">n June 28, the Supreme Court</font></strong><font face="arial" size="2"> upheld the constitutionality of the <em>Patient Protection and Affordable Care Act of 2010.</em>
Numerous tax changes are included in the law. Some have already gone
into effect and others are scheduled to kick in over the next several
years.<p><font size="2"><font face="Arial">This chart briefly summarizes
some of the most important tax changes, organized by the year when they
are effective. The Supreme Court's decision means the following
changes will stay in effect or will continue to go into effect as
scheduled (unless Congress or the IRS takes additional action).<br></font> </font></p><font size="2"><table style="width: 569px; height: 6359px;" align="center" border="1" bordercolor="#000080" cellpadding="4" cellspacing="0" width="569"> <tbody> <tr> <td bgcolor="#000080"><font face="Arial"> </font></td> <td bgcolor="#000080"> <p align="center"><b><font color="#ffffff" size="3"><font face="Arial">CHANGES THAT TOOK EFFECT BEFORE 2010 </font></font></b><font color="#ffffff" size="3"></font></p></td> <td bgcolor="#000080"><font face="Arial"> </font></td></tr> <tr> <td bgcolor="#7f7f7f"> <p align="center"><strong><font size="2"><font color="#ffffff" face="Arial">Tax Change</font></font></strong></p></td> <td bgcolor="#7f7f7f"> <p align="center"><strong><font size="2"><font color="#ffffff" face="Arial">Description</font></font></strong></p></td> <td bgcolor="#7f7f7f"> <p align="center"><strong><font size="2"><font color="#ffffff" face="Arial">Effective Date/<br>Tax Code or Law Section/ IRS Guidance</font></font></strong></p></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><font size="2"><strong><font face="Arial">Exclusion <br>for Certain <br>Forgiven <br>Student Loans</font></strong></font></p><font size="2"><strong></strong></font></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2">
A retroactive federal income tax exclusion for student loan amounts
paid off or forgiven under certain state loan repayment/ forgiveness
programs intended to increase the presence of healthcare professionals
in underserved areas.</font></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2">Amounts received or forgiven in tax years after 2008.<br><br>IRC Section <br>108(f)(4)</font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"><p align="center"><strong><font size="2"><font face="Arial">Therapeutic Discovery <br>Projects<br></font></font></strong></p><strong><font size="2"><font face="Arial"></font></font></strong><strong><font size="2"></font></strong><font size="2"></font></td> <td bgcolor="#c0c0c0" valign="top"><font face="Arial" size="2">
A retroactive tax credit for qualified investments in therapeutic
discovery projects, as defined in the law. Only available to taxpayers
with 250 or fewer employees.</font></td> <td bgcolor="#c0c0c0" valign="top"><font face="Arial" size="2">Eligible expenses paid or incurred in 2009 and 2010 ($1 billion limit on total credits allowed).<br><br>IRC Section 48D</font></td></tr> <tr> <td bgcolor="#000080"><font face="Arial"> </font></td> <td bgcolor="#000080"> <p align="center"><b><font color="#ffffff" size="3"><font face="Arial">CHANGES THAT TOOK EFFECT <br>IN 2010</font></font></b><font color="#ffffff" size="3"></font></p></td> <td bgcolor="#000080"><font face="Arial"> </font></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><span><strong><font face="Arial" size="2">New Health Insurance <br>Tax Credit <br>for Small <br>Employers (Including <br>Not-for-Profit Organizations)</font></strong></span></p></td> <td bgcolor="#ffffcc" valign="top"><span><font face="Arial" size="2">
Qualifying small employers can claim a credit to cover up to 35 percent
of the cost of providing health insurance to employees.<br>
Qualifying small employers that are tax-exempt non-profits can claim
credits to cover up to 25 percent of employee health insurance costs. </font><font size="2"><font face="Arial"><span>A
qualifying small employer is one that: has no more than 24
full-time-equivalent (FTE) workers; pays an average FTE wage of less
than $50,000; and has a qualifying healthcare arrangement in place.<br>
A qualifying arrangement requires employers to: pay at least 50 percent
of the cost of each enrolled employee's coverage and pay the same
percentage for all employees (even those with more-expensive family
coverage or self-plus-one coverage).</span></font></font></span></td> <td bgcolor="#ffffcc" valign="top"> <p><font face="Arial" size="2">Tax
years beginning in 2010 to 2013. The credit can be claimed for eligible
costs incurred in tax years beginning in 2010 before the healthcare law
was enacted.<br><br>IRC Sections 45R, </font><font size="2"><font face="Arial"><em>and IRS Notice <br>2010-44<br></em> <br>For more information from the IRS: </font><a href="http://www.irs.gov/newsroom/article/0,,id=220839,00.html"><font face="Arial"><i>Small Business Healthcare Tax Credit: Frequently Asked Questions</i>.</font></a></font></p></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><span><strong><font face="Arial" size="2">Healthcare-<br>Related <br>Tax Breaks <br>Granted <br>to Adult <br>Children</font></strong></span></p></td> <td bgcolor="#c0c0c0" valign="top"><span><font face="Arial" size="2"> Effective for plan years beginning after September 22, 2010, health plans that cover dependent children <i>must</i> continue to cover adult children until they turn 26.<br> </font></span><font size="2"><font face="Arial">In
conjunction, employer-provided health coverage for an employee's adult
child is now treated as a tax-free fringe benefit as long as the child
hasn't reached age 27 by the end of the year. It doesn't matter if the
adult child is the employee's dependent or not.<br>
The IRS stated that tax-free treatment also applies to reimbursements
from an employer-provided cafeteria plan, healthcare flexible spending
account (FSA) plan, or health reimbursement arrangement (HRA) to cover
an under-age 27 adult child's qualified medical expenses.<br>
If you're self-employed and pay your own health coverage, the cost of
covering an adult child is eligible for the above-the-line deduction for
self-employed health premiums, as long as the adult child hasn't
reached age 27 by year end (regardless of whether the child is a
dependent).<br> There is a discrepancy between the age-26 coverage requirement and the age-27 tax breaks. </font></font></td> <td bgcolor="#c0c0c0" valign="top"><font face="Arial" size="2">Effective in 2010<br><br><br>IRC Sections 105(b) and 162(l)<br><br></font><font size="2"><font face="Arial"><em>IRS Notice <br>2010-38</em><br><br><br><br><br></font></font></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><span><strong><font size="2"><font face="Arial">Liberalized <br>Adoption <br>Tax Breaks</font></font></strong></span></p><strong><font size="2"></font></strong></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2"> Increased the annual cap on tax-free employer adoption assistance payments by $1,000 through 2012.<br> </font><font size="2"><font face="Arial"><span>Similarly, the healthcare legislation increased the maximum annual adoption credit by $1,000 through 2012.<br>
Also, for 2010 through 2012, the adoption credit is refundable so it
can be collected in full even if you don't owe federal income tax.</span></font></font></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2">Tax years beginning in 2010 through 2012.<br><br><br>IRC Sections 36C and 137<br></font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><strong><font face="Arial" size="2">New Rules <br>for Not-for-Profit Hospitals</font></strong></p></td> <td bgcolor="#c0c0c0" valign="top"><span><font face="Arial" size="2"> Established new rules for hospitals to qualify for tax-exempt nonprofit status.</font></span></td> <td bgcolor="#c0c0c0" valign="top"><font face="Arial" size="2">Tax years after March 23, 2010.<br><br>IRC Sections 501(r) and 6033(b)</font></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><span><strong><font face="Arial" size="2">No More <br>Tax Credit <br>for "Black <br>Liquor"</font></strong></span></p></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2"> Disallowed the cellulosic biofuel producer credit for so-called black liquor fuels.</font></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2">Fuels sold or used after 2009.<br><br>IRC Section <br>40(b)(6)(E)</font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><span><strong><font face="Arial" size="2">New Loss Ratio <br>Rule for Health Organizations</font></strong></span></p></td> <td bgcolor="#c0c0c0" valign="top"><font face="Arial" size="2">
Required a medical loss ratio of at least 85 percent for health
organizations to qualify for certain insurance company tax breaks. </font></td> <td bgcolor="#c0c0c0" valign="top"><font face="Arial" size="2">Tax years after 2009.<br><br>IRC Section 833</font></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><strong><font face="Arial" size="2">New Tanning Excise Tax</font></strong></p></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2"> Imposed a 10 percent excise tax on indoor tanning services. </font></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2">Services after June 30, 2010.<br><br>IRC Section 5000B</font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><font face="Arial" size="2"><strong>Economic Substance Doctrine is Codified</strong></font></p> <p align="center"><strong><font face="Arial" size="2"></font></strong> </p> <p align="center"><strong><font face="Arial" size="2"></font></strong> </p></td> <td bgcolor="#c0c0c0" valign="top"><font face="Arial" size="2">
The legislation provided a place in the tax code for the economic
substance doctrine. It is deemed to exist only if the transaction in
question: changes the taxpayer's economic position in a meaningful way
without regard to tax consequences and is entered into for a substantial
non-tax purpose. A 20 percent penalty can be assessed on tax
underpayments attributable to transactions that are disallowed because
they lack of economic substance. The penalty rises to 40 percent for
"undisclosed economic substance transactions." Other penalties may also
apply.</font></td> <td bgcolor="#c0c0c0" valign="top"> <p><font face="Arial" size="2">For
transactions entered into after March 30, 2010 and tax underpayments,
understatements, refunds, and credits attributable to transactions
entered into after that date. </font></p><font face="Arial" size="2"></font> <p><font face="Arial" size="2">IRC Sections 7701(o), 6662(i), and 6676(c)</font></p></td></tr> <tr> <td bgcolor="#000080"><font face="Arial"> </font></td> <td bgcolor="#000080"> <p align="center"><font color="#ffffff" size="3"><strong><font face="Arial">CHANGES THAT TOOK EFFECT <br>IN 2011</font></strong></font></p></td> <td bgcolor="#000080"><font face="Arial"> </font></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><span><strong><font size="2"><font face="Arial">No More <br>Tax-Free Reimbursements for<br>Non-Prescription Drugs</font></font></strong></span></p></td> <td bgcolor="#ffffcc" valign="top"><span><font face="Arial" size="2">
If you participate in an employer-sponsored healthcare FSA or HRA or
have your own health savings account (HSA) or medical savings account
(MSA), former rules allowed you to take tax-free withdrawals to pay
for non-prescription drugs like pain and allergy relief medications.
Starting in 2011, this tax-favored treatment is only available for
prescription drugs, insulin, and doctor-prescribed over-the-counter
medications. </font></span></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2">For expenses incurred in tax years beginning after 2010.<br><br>IRC Sections 106(f), 220(d), and 223(d)</font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><strong><font face="Arial" size="2">Stiffer <br>Penalty <br>on Nonqualified <br>HSA and <br>MSA <br>Withdrawals</font></strong></p></td> <td bgcolor="#c0c0c0" valign="top"><span><font face="Arial" size="2">
If you take money out of your HSA or MSA for any reason other than to
cover qualified medical expenses, the former rules allowed you to
usually owe federal income tax plus a 10 percent penalty tax, or a 15
percent penalty tax for an MSA. The healthcare law increased the penalty
tax rate to 20 percent for nonqualified withdrawals. </font></span></td> <td bgcolor="#c0c0c0" valign="top"><font face="Arial" size="2">Withdrawals in tax years beginning after 2010.<br><br>IRC Secs. 220(f) and 223(f)</font></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><strong><font face="Arial" size="2">New Simple <br>Cafeteria Plans <br>for Small <br>Employers</font></strong></p></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2">
Established a new, simpler Section 125 cafeteria benefit plan for
employers with 100 or fewer employees. These plans are deemed to
automatically satisfy all applicable cafeteria benefit plan
nondiscrimination rules if they satisfy certain minimum standards for
eligibility, participation, and contributions.</font></td> <td bgcolor="#ffffcc" valign="top"><font face="Arial" size="2">Tax years beginning after 2010.<br><br>IRC Section 125(j)</font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><span><strong><font face="Arial" size="2">New Tax <br>on Drug Companies</font></strong></span></p></td> <td bgcolor="#c0c0c0" valign="top"><font face="Arial" size="2">
Imposed a new nondeductible fee on manufacturers and importers of
branded prescription drugs. Each targeted company must pay an allocable
portion of the total annual fee. The fee is apportioned among targeted
companies based on each company's share of sales in the preceding year.</font></td> <td bgcolor="#c0c0c0" valign="top"><font size="2"><font face="Arial">Calendar year 2011.<br><br>Section 9008 of the <em>Patient Protection Act</em></font></font></td></tr> <tr> <td bgcolor="#000080" valign="top"><font face="Arial"> </font></td> <td bgcolor="#000080" valign="top"><p align="center"><b><span><font color="#ffffff" face="Arial" size="3">CHANGES THAT TAKE EFFECT IN 2012</font></span></b></p></td> <td bgcolor="#000080" valign="top"><font face="Arial"> </font></td></tr> <tr><td bgcolor="#ffffcc" valign="top"><p align="center"><span><strong><font face="Arial" size="2">Employers Must Report Healthcare Costs to Employees</font></strong></span></p></td><td bgcolor="#ffffcc" valign="top"><p><font face="Arial"><font size="2">
Requires employers to report to employees on their annual W-2 forms the
value of employer-provided health insurance coverage (not including
salary-reduction amounts contributed to healthcare flexible spending
accounts).<br> </font></font><font face="Arial"><font size="2">The
reporting requirement is informational only. It does not affect whether
coverage is excludable from gross income under the tax code and does
not affect the amount includable in income or the amount reported in any
other box on Form W-2. It also does not cause otherwise excludable
employer-provided healthcare coverage to become taxable.<br> </font></font><font face="Arial"><font size="2"><font face="Arial">"The
purpose of the reporting is to provide useful and comparable consumer
information to employees" on the cost of their coverage, according to
the IRS. </font></font></font></p><font face="Arial"></font></td><td bgcolor="#ffffcc" valign="top"><p><font face="Arial" size="2">Originally
scheduled to begin in 2011, this provision was delayed until the 2012
calendar year on annual W-2 forms, which must generally be issued to
employees by January 31, 2013.</font> <font face="Arial" size="2">(<em>IRS Notice 2012-9</em>)</font></p><p><font size="2">IRC Section <br>6051(a)(14) </font></p></td></tr><tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><b><span><font size="2">New Tax <br>on Health <br>Insurance <br>Policies</font></span></b></p></td> <td bgcolor="#c0c0c0" valign="top"><font size="2">
Health insurers and sponsors of applicable self-insured health plans
have to pay an annual fee of $2 per covered life ($1 per life for
affected policy or plan years that end by September 30, 2013). </font></td> <td bgcolor="#c0c0c0" valign="top"><font size="2">Policy years ending after September 30, 2012.<br><br>IRC Sections 4375, 4376, and 4377</font></td></tr> <tr> <td bgcolor="#000080"> </td> <td bgcolor="#000080"> <p align="center"><strong><font color="#ffffff" size="3">CHANGES TAKING EFFECT <br>IN 2013</font></strong></p></td> <td bgcolor="#000080"> </td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><span><strong><font size="2">Additional <br>0.9 percent<br>Medicare Tax <br>on Salaries <br>and <br>Self-Employment <br>Income <br>Earned by <br>Higher Income<br>Taxpayers</font></strong></span><strong><font size="2"><br><br></font></strong><strong><font size="2"></font></strong></p></td> <td bgcolor="#ffffcc" valign="top"> <p><span><font size="2">
Right now, the Medicare tax on salary and/or self-employment (SE)
income is 2.9 percent (1.45 percent is withheld from employee paychecks,
and the other half is paid by the employer. Self-employed people pay
the whole 2.9 percent).<br> </font></span><span><font size="2">Starting in 2013, an extra .9 percent Medicare tax will be charged on:</font></span></p> <ul> <li><span><font size="2">Salary and/or SE income above $200,000 for an unmarried individual;</font></span></li> <li><span><font size="2">Combined salary and/or SE income above $250,000 for a married joint-filing couple; and</font></span></li> <li><span></span><span><font size="2">Salary and/or SE income above $125,000 for those who use married filing separate status. </font></span></li></ul> <p><span><font size="2"> These thresholds will not be adjusted for inflation. </font></span><font size="2"><span>For
self-employed people, the additional .9 percent Medicare tax hit will
come in the form of a higher SE tax bill. However, the additional .9
percent will <i>not</i> qualify for the above-the-line deduction for 50 percent of SE tax. (</span><span>The additional .9 percent Medicare tax must be taken into account for estimated tax purposes.) </span></font></p></td> <td bgcolor="#ffffcc" valign="top"> <p><font size="2">Tax years beginning after 2012.<br><br><br>IRC Sections 164(f), 1401(b), 3101(b), 3102, and 6654</font></p></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><strong><font size="2">Additional <br>3.8 percent<br>Medicare Tax <br>on Net <br>Investment<br>Income <br>Collected <br>by High<br>Income Folks<br>and Trusts</font></strong> </p><p align="center"><span><strong><font size="2"></font></strong></span> </p></td> <td bgcolor="#c0c0c0" valign="top"><font size="2"> </font><span><font size="2">Right
now, the maximum federal tax rate on long-term capital gains and
dividends is 15 percent. In 2013, the top rate is scheduled to go
up to 20 percent as the "Bush tax cuts" expire. Starting in 2013, all or
part of the net investment income, including long-term capital gains
and dividends, collected by high-income folks can get hit with a 3.8
percent "Medicare contribution tax." Therefore, the top federal rate on
long-term gains and dividends for 2013 and beyond will be 23.8 percent
(unless Congress acts to extend the 15 percent rate).<br> </font></span><span><font size="2">The
additional 3.8 percent Medicare tax won't apply unless modified
adjusted gross income (MAGI) exceeds: $200,000 for an unmarried
individual; $250,000 for married joint-filers; or $125,000 for married
filing separately. These thresholds won't be adjusted for inflation.<br> </font></span><span><font size="2">The additional 3.8 percent Medicare tax will apply to the <i>lesser</i> of: net investment income or the amount of MAGI in excess of the applicable threshold.<br> </font></span><span><font size="2">Net
investment income includes interest, dividends, royalties, annuities,
rents, gross income from passive business activities, gross income from
trading in financial instruments or commodities, and net gain from
property held for investment (but not for business purposes) reduced by
deductions allocable to such income.<br> </font></span><font size="2"><span>The additional Medicare tax must be taken into account for estimated tax payment purposes.<br> </span><span>For a trust, the extra 3.8 percent Medicare tax will apply to the <i>lesser</i> of: undistributed net investment income or the AGI in excess of the threshold for the top trust federal tax bracket. </span></font></td> <td bgcolor="#c0c0c0" valign="top"> <p><font size="2">Tax years beginning after 2012.<br><br></font><br><font size="2">IRC Sections 1411 and 6654</font> </p><p><font size="2"></font> </p> <p> </p> <p><font size="2"></font> </p> <p><font size="2"></font> </p></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><span><strong><font size="2">New $2,500 Cap on Healthcare FSA Contributions</font></strong></span></p></td> <td bgcolor="#ffffcc" valign="top"><span><font size="2">
Right now, there's no tax-law limit on salary-reduction contributions
to an employer healthcare FSA (although many plans impose their own
annual limits). Starting in 2013, the maximum annual FSA contribution by
an employee will be capped at $2,500. After that, the cap will be
indexed for inflation.</font></span></td> <td bgcolor="#ffffcc" valign="top"><font size="2">Tax years beginning after 2012. (<em>IRS Notice 2012-40</em>)<br><br><br>IRC Section 125(i)</font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><span><strong><font size="2">Higher Threshold <br>for Itemized <br>Medical <br>Expense <br>Deductions</font></strong></span></p></td> <td bgcolor="#c0c0c0" valign="top"><span><font size="2">
You can now claim an itemized deduction for medical expenses paid for
you, your spouse, and dependents, to the extent the expenses exceed 7.5
percent of AGI. Starting in 2013, the hurdle is raised to 10 percent of
AGI. But if you or your spouse is age 65 or older at year end, the new
10 percent-of-AGI threshold will not take effect until 2017. The medical
deduction threshold for AMT purposes remains at 10 percent of AGI. </font></span></td> <td bgcolor="#c0c0c0" valign="top"><font size="2">Tax years after 2012 (2016 if taxpayer or spouse is 65 or older at year end).<br><br>IRC Section 213(a) and (f)</font></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><span><strong><font size="2">No More <br>Deductions <br>for Retiree <br>Drug Plan <br>Subsidies</font></strong></span></p></td> <td bgcolor="#ffffcc" valign="top"><font size="2">
Employers that sponsor qualified retiree prescription drug plans are
entitled to collect tax-free federal subsidies for a portion of the
cost. Employers are currently allowed to deduct the full cost of retiree
drug plans without any reduction for the tax-free federal subsidies. In
effect, deductions are allowed for amounts that are actually paid by
the government. The healthcare law reduces deductions by the amount of
tax-free federal subsidies.</font></td> <td bgcolor="#ffffcc" valign="top"> <p><font size="2">Tax years beginning after 2012.<br><br><br>IRC Section 139A</font></p></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><span><strong><font size="2">New Excise <br>Tax on <br>Medical <br>Device Manufacturers</font></strong></span></p><strong><font size="2"></font></strong></td> <td bgcolor="#c0c0c0" valign="top"><span><font size="2">
Manufacturers have to pay a 2.3 percent excise tax on taxable sales of
medical devices for humans. However, devices retailed to the general
public will be exempt. The tax will not apply to eyeglasses, contact
lenses, hearing aids, etc. </font></span></td> <td bgcolor="#c0c0c0" valign="top"><font size="2">Sales after 2012.<br><br>IRC Section 4191</font></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><span><strong><font size="2">New Deductible Compensation <br>Limit for <br>Health Insurers</font></strong></span></p><strong><font size="2"></font></strong></td> <td bgcolor="#ffffcc" valign="top"><span><font size="2">
Affected health insurance providers face a $500,000 per-person
deduction limit on compensation paid to "applicable individuals," which
can include officers, employees, directors, and certain other service
providers such as consultants.</font></span></td> <td bgcolor="#ffffcc" valign="top"> <p><font size="2">Tax years beginning after 2012.</font></p> <p><font size="2">IRC Section 162(m)(6)(A)</font></p></td></tr> <tr> <td bgcolor="#000080"><font size="2"></font><br></td> <td bgcolor="#000080"> <p align="center"><b><font color="#ffffff" size="3">CHANGES TAKING EFFECT <br>IN 2014</font></b></p></td> <td bgcolor="#000080"><font size="2"> </font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><span><strong><font size="2">New <br>Penalties <br>on <br>Individuals <br>without <br>"Adequate" Coverage</font></strong></span> </p><p align="center"><span><strong><font size="2"></font></strong></span> </p></td> <td bgcolor="#c0c0c0" valign="top"><span><font size="2">
In general, U.S. citizens and legal residents will be required to pay
penalties if they don't obtain "adequate" health insurance coverage.<br> </font><font size="2">The <i>tentative</i> penalty will equal the <i>greater</i>
of: the applicable percentage of household income above the threshold
that requires filing a federal income tax return; or the applicable
dollar amount times the number of uninsured individuals in the
household. </font><font size="2">The applicable income percentage is 1 percent for 2014, 2 percent for 2015, and 2.5 percent for 2016 and beyond.<br>
The applicable dollar amount is $95 for 2014, $325 for 2015, and $695
for 2016. After that, the $695 amount will be adjusted for inflation.
For under-age-18 household members, the applicable dollar amounts will
be 50 percent of the aforementioned amounts.<br> </font><font size="2">The <i>final</i>
penalty amount for each household will be limited to 300 percent of the
applicable dollar amount. For example, the maximum 2016 penalty will be
$2,085 (3 times $695). However, if the national average cost of "bronze
coverage" (a new term of art) for the household is less, the maximum
penalty will be limited to the cost of bronze coverage.<br> </font><font size="2">If
an affected individual is uninsured for only part of the year, the
penalty will be calculated monthly using pro-rated annual figures.</font></span></td> <td bgcolor="#c0c0c0" valign="top"> <p><font size="2">Tax <br>years <br>beginning <br>in 2014.<br><br><br>IRC Section 5000A</font></p></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><strong><font size="2">New <br>Penalties <br>on <br>Employers</font></strong><strong><font size="2"><br><br><br><br><br> </font></strong></p><strong><font size="2"></font></strong></td> <td bgcolor="#ffffcc" valign="top"><font size="2">
Employers with at least 50 full-time employees that do not provide them
with affordable health coverage that meets certain minimum standards
will be charged a penalty if even one full-time employee purchases his
own government-subsidized coverage through a state-run exchange.<br> </font><font size="2">Government-subsidized coverage means coverage for which a federal cost-sharing subsidy (explained below) is available.<br> </font><font size="2">The
penalty will be $167 per month ($2,000 per year) for each employee who
is not provided with "adequate" coverage for that month (even if a
particular employee purchases subsidized coverage from a state-run
exchange). However, no penalty is charged for the first 30 employees.<br> </font><font size="2"><span>An
employer can still owe penalties even when employees are offered the
opportunity to enroll in a plan that provides minimum essential
coverage, but one or more employees choose to instead buy subsidized
coverage through a state-run exchange. In this case, the penalty is $250
per month for each applicable employee, but the total penalty cannot
exceed the penalty that would be charged for outright failure to offer
"adequate" coverage.<br> </span><span>Employers cannot deduct these penalties as a business expense. </span></font></td> <td bgcolor="#ffffcc" valign="top"> <p><font size="2">Coverage <br>months <br>beginning <br>in 2014.<br><br><br>IRC Section 4980H</font><font size="2"><br><br><br><br><br> </font></p><font size="2"></font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><span><strong><font size="2">New <br>"Cost-Sharing Subsidies" <br>for <br>Eligible <br>Individuals</font></strong></span><span><strong><font size="2"><br> </font></strong></span></p><strong><font size="2"></font></strong></td> <td bgcolor="#c0c0c0" valign="top"><font size="2"><span>
Government paid "cost-sharing subsidies" will be provided to help
individuals ineligible for Medicaid, employer-provided coverage, or
other "adequate" coverage. This has been explained as a low-income
benefit, but you can be eligible with income up to 400 percent of the
federal poverty level.<br> </span><span>The
cost-sharing subsidy is sometimes called a "premium assistance tax
credit," because the enabling language is found in the tax code. In most
cases, however, the subsidy will be paid directly to the insurer. If
that doesn't happen, the subsidy amount can be claimed as a refundable
tax credit on the eligible individual's federal tax return.</span></font></td> <td bgcolor="#c0c0c0" valign="top"> <p><font size="2">Tax <br>years <br>beginning <br>in 2014.<br><br><br>IRC Section 36B</font></p></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><strong><font size="2">More <br>Generous <br>Health <br>Insurance <br>Tax Credit <br>for Small <br>Employers</font></strong></p></td> <td bgcolor="#ffffcc" valign="top"><span><font size="2">
As explained in the 2010 changes, qualifying small employers can claim a
new tax credit to help cover the cost of providing employee health
coverage. For 2010-2013, the maximum credit percentage is 35 or 25
percent for tax-exempt employers. Starting in 2014, the maximum credit
percentage increases to 50 or 35 percent for tax-exempt employers.
However, employers must purchase qualifying health coverage from
state-run insurance exchanges to be eligible for the higher credit
percentages. Also, the FTE wage caps for credit qualification and
calculation purchases are indexed for inflation, starting in 2014. </font></span></td> <td bgcolor="#ffffcc" valign="top"> <p><font size="2">Tax years beginning in 2014. <br><br><br>IRC Section 45R and Section 1421 of the healthcare legislation. </font></p></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><b><font size="2">Some <br>Employers <br>Must Give Employees <br>"Free Choice<br>Vouchers"</font></b></p></td> <td bgcolor="#c0c0c0" valign="top"><font size="2">
An affected employer must give a "free choice voucher" to any eligible
employee who chooses to buy his or her own coverage instead of
participating in the company plan. The voucher amount equals what the
employer would have contributed on behalf of the employee if he or she
participated. As long as the employee spends at least the amount of the
voucher on qualified health coverage, the voucher is tax-free to the
employee. However, an employee who takes advantage of the voucher is
ineligible to receive any cost-sharing subsidy for buying coverage from a
state-run exchange. </font></td> <td bgcolor="#c0c0c0" valign="top"> <p><font size="2">Calendar year 2014.</font></p> <p><font size="2">Section 10108 of the healthcare legislation.</font></p></td></tr> <tr> <td bgcolor="#ffffcc" valign="top"> <p align="center"><strong><font size="2">New <br>Excise <br>Tax <br>on Health Insurance Providers</font></strong></p></td> <td bgcolor="#ffffcc" valign="top"><span><font size="2">
A new fee is imposed on health insurance providers. Each targeted
company must pay an allocable portion of the total annual fee, which is
$8 billion for 2014. The fee is apportioned among targeted companies
based on each company's share of applicable net premiums. </font></span></td> <td bgcolor="#ffffcc" valign="top"><font size="2">Calendar year 2014. <br><br>Section 9010 of the <em>Patient Protection Act.</em></font></td></tr> <tr> <td bgcolor="#000080"><font size="2"></font><br></td> <td bgcolor="#000080"> <p align="center"><b><font color="#ffffff">CHANGE TAKING EFFECT <br>IN 2018</font></b></p></td> <td bgcolor="#000080"><font size="2"> </font></td></tr> <tr> <td bgcolor="#c0c0c0" valign="top"> <p align="center"><b><span><font size="2">New <br>Excise <br>Tax <br>on "Cadillac <br>Health <br>Plans"</font></span></b></p></td> <td bgcolor="#c0c0c0" valign="top"><span><font size="2">
Health insurance companies that service the group market and
administrators of employer-sponsored health plans will get socked with a
40 percent excise tax on premiums that exceed the applicable threshold
of $10,200 for self-only coverage or $27,500 for family coverage. For
retired individuals and plans that cover employees in high-risk
professions, the thresholds will be $11,850 and $30,950, respectively.
These thresholds may be increased to reflect higher-than-expected
inflation in health premiums. Plans sold in the individual market will
be exempt, except for coverage that is eligible for the above-the-line
deduction for self-employed health premiums.</font></span></td>
<td bgcolor="#c0c0c0" valign="top"><font size="2">Tax years beginning <br>
in 2018. <br><br><br>IRC Section 4980I</font></td></tr></tbody></table><span></span></font><p></p><font size="2"></font> </font>
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