Practice Alert: Roundup Of Tax Changes for Businesses and Health Plans Taking Effect in 2015
Article from Federal Taxes Weekly Alert, 01/08/2015-Volume 61, No. 2
Practice Alert: Roundup of tax changes for businesses and health plans taking effect in 2015
There are many important tax changes taking effect in 2015. They are the result of the Tax
Increase Prevention Act of 2014 (TIPA) as well as other tax legislation, or are triggered by effective
dates in regs, rulings and other guidance. Also, a number of important final regs go into effect in
2015.This article highlights key non-inflation-indexed 2015 tax changes affecting businesses and
Numerous other tax changes will go into effect by default because a long
list of business and individual tax breaks (the so-called “extender provisions”), which were
extended for a year only by TIPA, expire at the end of 2014. Employer shared responsibility
payment under the Affordable Care Act (ACA). In general, beginning Jan. 1, 2015, employers with
at least 100 full-time and full-time equivalent employees
must offer affordable health coverage that provides minimum value to their full-time employees
and their dependents, or they will be subject to an employer shared responsibility payment. Under
the employer shared responsibility rules, if a covered employer does not offer affordable health
coverage that provides a minimum level of coverage to their full-time employees (and their
dependents), it may be subject to an employer shared responsibility payment if at least one of its
full-time employees receives a premium tax credit for purchasing individual coverage on one of the
new Affordable Insurance Exchanges, also called Health Insurance Marketplaces.
The employer responsibility provisions will not apply until 2016 to employers with at least 50 but
fewer than 100 full-time employees if the employer provides an appropriate certification described
in regs. Employers that are subject to the employer responsibility provisions in 2015 must offer
coverage to at least 70% of full-time employees as one of the conditions for avoiding an assessable
payment; that percentage will increase to 95% in 2016.
Final regs on the ACA’s 90-day waiting period limit for employer health coverage. For plan
years beginning on or after Jan. 1, 2014, the ACA provides that an employer group health plan or
group health insurance issuer offering employer group health insurance cannot have any waiting
period (for employee coverage) that exceeds 90 days. Final regs that apply to group health plans
and group health insurance
issuers for plan years beginning on or after Jan. 1, 2015, clarify the 90-day rule; they provide that:
(1) h no group health plan or group health insurance issuer may impose a waiting period that
exceeds 90 days after an employee is otherwise eligible for coverage; and (2) all calendar days are
counted beginning on the enrollment date, including weekends and holidays.
Under the final regs, a requirement to successfully complete a reasonable and bona fide
employment-based orientation period may be imposed as a condition of eligibility for coverage
under the plan. The final regs do not specify the circumstances under which the duration of an
orientation period would be considered reasonable or bona fide. However, under new proposed
regs, one month would be the maximum length of any orientation period.
For plan years beginning in 2014, compliance with either previously issued proposed regs or the
new final regs would constitute compliance with the ACA’s 90-day waiting period limitation.
Exclusion of dividends from controlled foreign corporations from the definition of personal
holding company income. For tax years ending on or after Dec. 19, 2014 (date of enactment), TIPA
excludes dividends received from a foreign subsidiary from personal holding company income,
though the dividends will remain subject to corporate income tax.
Expatriate health plans excluded from the ACA. For plans issued or renewed on or after July 1,
2015, the Consolidated and Further Continuing Appropriations Act of 2015 (the Act) provides that,
with limited exceptions, “expatriate health plans” are exempt from various ACA provisions.
Expatriate health plans are group health plans and similar plans, that meet various requirements,
one of which is that substantially all of the primary enrollees in the plan are “qualified expatriates.”
Revised definition of controlled group for purposes of branded prescription drug fee. Sec.
9008 of the ACA provides that each “covered entity” (i.e., any manufacturer or importer with gross
receipts from branded prescription drug sales) with aggregate branded prescription drug sales of
over $5 million to any specified government program or pursuant to coverage under any such
program must pay an annual nondeductible fee for calendar years beginning after Dec. 31, 2010.
The calculation of the annual fee is a two-step process; IRS makes a preliminary calculation and
then, a year later, makes a final calculation. The term “covered entity” includes a controlled group.
Beginning on Jan. 1, 2015, the term controlled group means a group of two or more persons,
including at least one person that is a covered entity, that are treated as a single employer under
Code Sec. 52(a) , Code Sec. 52(b) , Code Sec. 414(m) , or Code Sec. 414(o) .
Through Dec. 31, 2014, the term “controlled group” means a group of at least two covered entities
that are treated as a single employer under Code Sec. 52(a) , Code Sec. 52(b) , Code Sec. 414(m) ,
or Code Sec. 414(o) .
Plans lacking hospitalization coverage don’t provide minimum value; online MV calculator
can’t be relied on. The Code Sec. 36B premium tax credit is designed to make health insurance
affordable to individuals with modest incomes who are not eligible for other qualifying coverage,
such as Medicare, or “affordable” employer-sponsored health insurance plans that provide MV
(minimum value). Under Code Sec. 36B(c)(2)(C)(ii) , a plan fails to provide MV if the plan’s share
of the total allowed costs of benefits provided under the plan is less than 60% of the costs. Under
Code Sec. 4980H , an
applicable large employer may be liable for an assessable payment if one or more full-time
employees receives a premium tax credit.
One way to determine whether a plan provides MV is to use a MV calculator (available at
http://cciio.cms.gov/resources/regulations/index.html), which determines if a plan provides MV
based on information about the plan’s benefits, coverage of services, and cost-sharing terms.
IRS has warned that employer-sponsored health plans failing to provide substantial coverage for
in-patient hospitalization services or physician services do not provide MV for purposes of the
Sec. 36B premium tax credit. Forthcoming regs, which are intended to be finalized during 2015 and
applicable upon finalization, will provide that an employer can’t use the MV Calculator (or any
actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services
Plan provides MV.
IRS has warned employers to consider the consequences of the inability to rely solely on the MV
Calculator (or, alternatively, on any actuarial certification or valuation) to demonstrate that a
Non-Hospital/Non-Physician Services Plan provides MV for any portion of any tax year ending on or
after Jan. 1, 2015 that follows finalization of such regs, and says that employers generally should
not adopt such a plan for the 2015 plan year.
If an employer has entered into a binding written commitment to adopt, or has begun enrolling
employees in, a Non-Hospital/Non-Physician Services Plan before Nov. 4, 2014 based on the
employer’s reliance on the MV Calculator (a Pre-Nov. 4, 2014 Non-Hospital/Non-Physician Services
Plan), HHS and IRS anticipate that final regs, when issued, will not apply for purposes of Code Sec.
4980H (i.e., the employer shared responsibility payment) with respect to the plan before the end
of the plan year (as in effect under the terms of the plan on Nov. 3, 2014) if that plan year begins
no later than Mar. 1, 2015.
However, pending issuance of final regs, an employee will not be required to treat a
Non-Hospital/Non-Physician Services Plan as providing MV for purposes of an employee’s eligibility
for a premium tax credit under Code Sec. 36B , regardless of whether the plan is a Pre-Nov. 4,
Non-Hospital/Non-Physician Services Plan.
Higher standard mileage allowance rate. The optional mileage allowance for owned or leased autos
(including vans, pickups or panel trucks) increases by 1.5¢ to 57.5¢ per mile for business travel
after 2014. This rate can also be used by employers to provide tax-free reimbursements to
employees 2015. who supply their own autos for business use, under an accountable plan, and to
value personal use of certain
low-cost employer-provided vehicles. However, the rate for using a car to get medical care or in
connection with a move that qualifies for the moving expense decreases by 0.5¢ to 23¢ per mile
New regs on retail inventory method go into effect. A final reg on the retail inventory accounting
method restates and clarifies the computation of ending inventory values and provides a special
rule for taxpayers that receive margin protection payments or certain vendor allowances. The final
reg applies to tax years beginning after Dec. 31, 2014.
Article Source: 2015 Thomson Reuters/Tax & Accounting