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April 2015

TSCPA Committees Request Additional Guidance and Relief for Section 4980D Excise Tax

TSCPA’s Federal Tax Policy and Relations with IRS Committees recently issued a joint letter to the U.S. Treasury Department requesting further guidance on IRC Sec. 4980D excise tax. This provision imposes a penalty on certain employers of up to $100 per day for affected participants whose health coverage reimbursement arrangements do not meet the market reform requirements of the Affordable Care Act. Among those impacted are many small businesses that assist older employees with Medicare costs as an alternative to including them in the plan available to others in order to avoid higher insurance premiums for everyone. These businesses still face an onerous and largely unnecessary excise tax when the temporary relief for them in Notice 2015-17 expires June 30, 2015. 

The committees also request clarification and possible administrative relief for the greater than 2 percent shareholder-employees of S corporations. Notice 2008-1 provides that an S corporation may deduct premiums paid by the corporation if the payments are reported on the shareholder-employee’s W-2 as wages that are not subject to Social Security and Medicare taxes. Notice 2015-17 provided transition relief through 2015 while the IRS determines if or how the application of Sec. 4980D applies to 2 percent shareholder-employee health care arrangements.