healthcare tax update september 28, 2012 · 2019. 9. 17. · 2010 nj forms 990 irs community...

WithumSmith+Brown, PC ▪ BE IN A POSITION OF STRENGTH

1 withum.com

HEALTHCARE TAX UPDATE

SEPTEMBER 28, 2012


2 withum.com

AGENDA

1. Expiring individual income tax cuts? 2012 Election.

2. Tax provisions of the Affordable Care Act.

3. Schedule H – State of New Jersey hospitals and American Hospital Association special project.

4. New IRS Code Section 501(r) hospital requirements.

5. Affordable Care Act timeline.


3 withum.com

EXPIRING FEDERAL TAX PROVISIONS

PART ONE


4 withum.com


Individual Income Tax Rates

Starting in 2013, the marginal Federal individual income tax rates for the top two brackets rise from 33% and 35% will revert to the year 2000 rates of 36% and 39.6%, respectively.

Dividend Tax Rate

Starting in 2013, qualified dividends would no longer be taxed at a rate of 15%; they will revert to being taxed as ordinary income.


5 withum.com


Capital Gains Tax Rates

Starting in 2013, the long term capital gains tax rate

will increase from 15% to 20%.

Child Tax Credit

Starting in 2013, the child tax credit for eligible

households will be reduced from $1,000 per child to

$500.


6 withum.com


Dependent Care Tax Credit

Starting in 2013, the dollar amount limit for

creditable expenses is reduced from $3,000 to

$2,400 ($6,000 to $4,800 for two or more children),

thereby reducing the credit.

Effective January 1, 2013 there are 64 additional

Federal tax provisions due to expire.


7 withum.com


New York Times, August 2, 2012

Average savings per T/P from tax cuts, 2004-2010

► Taxable income less than $10,000 $335

► Taxable income $10,000 - $19,999 $1,448

► Taxable income $20,000 - $29,999 $4,302

► Taxable income $30,000 - $39,999 $6,127

► Taxable income $40,000 - $49,999 $7,040

► Taxable income $50,000 - $74,999 $9,839

► Taxable income $75,000 - $99,999 $15,009

► Taxable income $150,000 - $199,999 $28,894


8 withum.com


New York Times, August 2, 2012; continued

Taxpayers with taxable incomes $19,999 and below

comprise approximately 29% of U.S. taxpayers with

those whose taxable income is $20,000 and above

comprising approximately 65.9% of U.S. taxpayers.

Those taxpayers with taxable incomes above

$200,000 make up the remaining 5.1%.


9 withum.com

TAX UPDATE & THE PATIENT PROTECTION

AND AFFORDABLE CARE ACT

PART TWO


10 withum.com

AFFORDABLE CARE ACT PROVISIONS

Form W-2 healthcare benefit reporting.

.9% Surtax.

3.8% tax on unearned income.

Small Business Health Care Tax Credit.

Changes to FSAs.

Medical Device Excise Tax.

Health Insurance Premium Tax Credit.


11 withum.com

FORM W-2 HEALTHCARE BENEFIT REPORTING

Mandatory for 2012.

Relief for small employers:

Less than 250 Forms W-2 in the prior year.

Method of reporting:

Form W-2, Box 12, Code DD.

Includes employer and employee portions.

Three methods of calculation.

Penalties for non-reporting:

$200 per Form W-2, maximum $3 million.


12 withum.com

MAJOR TAX PROVISIONS - 2013

A new 0.9% surtax will be added to the 1.45% Hospital

Insurance (Medicare) payroll taxes paid by individuals

earning more than $200,000 per year ($250,000 for joint

filers). Subject to payroll withholding.

New IRS Code Section 1411 imposes a 3.8% tax on

unearned income of individuals earning more than

$200,000 per year ($250,000 for joint filers).

Contributions to health care FSA’s limited to $2,500 as

of 1/1/2013.


13 withum.com

2014 AND BEYOND

Individual mandate.

Employer “play or pay” mandate.

State-based health insurance exchanges.

Provide refundable and advanceable tax credits to

individuals and families.

Prohibit all pre-existing condition exclusions.

Eliminate all lifetime caps for essential benefits.

Reinsurance program.

High cost insurance plans.


14 withum.com

INDIVIDUAL MANDATE

Penalties:

Pay a tax penalty of $695 per year up to a maximum

of 3X that amount; $2,085.

Flat fee phase-in schedule; $95 – 2014, $325 – 2015

and $695 – 2016, or

Percentage of taxable income phase-in schedule;

1% - 2014, 2% - 2015 and 2.5% - 2016.


15 withum.com

INDIVIDUAL MANDATE

Exemptions:

Financial hardship, religious objections,

incarcerated individuals.

lowest cost option exceeds 8% of an individual’s

income.


16 withum.com

EMPLOYER “PLAY OR PAY” MANDATE

If Employer does not offer coverage

Effects Large Employers; those who employ more

than 50 full-time employees.

Minimum essential coverage.

At least one employee enrolled in a Qualified

Health Plan.

Annual fee equal to $2,000 times the number of

employees exceeding thirty.


17 withum.com

EMPLOYER “PLAY OR PAY” MANDATE

If Employer offers coverage:

Required to pay annual fee equal to the lesser of:

$2,000 times the number of employees exceeding

thirty; or

$3,000 for each employee receiving a premium tax

credit.


18 withum.com

STATE-BASED HEALTH INSURANCE EXCHANGES

American Health Benefit Exchanges and Small Business

Health Options Program (SHOP) Exchanges.

Individuals and small businesses with up to 100

employees.

Exchanges will have four levels of coverage – bronze,

silver, gold or platinum.

Beginning in 2017, businesses with more than 100

employees may purchase coverage in SHOP

Exchange.

www.healthcare.gov


19 withum.com

REFUNDABLE AND ADVANCEABLE PREMIUM CREDITS

Eligible individuals and families with incomes

between 100-400% of Federal Poverty Level (“FPL”)

to purchase insurance through Exchanges.

FPL in 2011 for individual was $43,650; family of four

was $89,400.

Premium credits provided on a monthly basis and

are on sliding scale.


20 withum.com

Premium contributions are limited to the following

percentages of income for specified income levels:

100-133% FPL: 2% of income

133-150% FPL: 3-4% of income

150-200% FPL: 4-6.3% of income

200-250% FPL: 6.3-8.05% of income

250-300% FPL: 8.05-9.0% of income

300-400% FPL: 9.5% of income

REFUNDABLE AND ADVANCEABLE PREMIUM CREDITS


21 withum.com

HIGH COST INSURANCE PLANS

Effective for tax years beginning after December

31, 2017.

Excise tax on insurers of employer-sponsored health

plans with aggregate values exceeding $10,200 for

individual coverage and $27,500 for family

coverage.

40% excise tax on amount by which annual

coverage exceeds threshold amounts.


22 withum.com

SCHEDULE H

STATE OF NEW JERSEY HOSPITALS

AHA SPECIAL PROJECT

PART THREE


23 withum.com

FORM 990 – SCHEDULE H

Schedule H background.

New Jersey hospitals benchmarking.

NJ Senate, S-782, NJ For-Profit Hospital Information

Disclosure Agreement.

American Hospital Association Schedule H project.

1. Community benefit – IRS definition.

2. Total benefits to the community.


24 withum.com

SCHEDULE H, PART I, COMMUNITY BENEFIT

Community Benefit

1. AHA versus CHA model (excludes bad debt at cost

and Medicare shortfall).

2. Schedule H, Part III reports bad debt and Medicare

shortfall. Also asks for why you feel bad debt and

Medicare shortfall should be treated as community

benefit.

3. Costs not charges.

4. Senate Finance Committee – 5% Test.


25 withum.com

Categories of Community Benefit

a. Financial Assistance at Cost.

b. Medicaid shortfall.

c. Community Health Improvement Services and

Community Benefit Operations.

d. Health Professions Education.

e. Subsidized Health Services.

f. Research.

g. Cash and in-kind contributions.

SCHEDULE H, PART I, COMMUNITY BENEFIT


26 withum.com

SCHEDULE H, PARTS II AND III

Form 990, Schedule H, Part II

a) Community Building Activities.

Form 990, Schedule H, Part III

a) Bad debt expense.

b) Estimated amount of bad debt attributable to

patients eligible under the organization’s

financial assistance policy.

c) Medicare Shortfall.


27 withum.com

2010 AND 2009 NJ FORMS 990

IRS COMMUNITY BENEFIT

2010 NJ hospital community benefit percentage average

7.66% (omits Hoboken which did not file Schedule H)

2009 NJ hospital community benefit percentage average

7.59% (omits Hoboken which did not file Schedule H)


28 withum.com

2010 NJ FORMS 990

IRS COMMUNITY BENEFIT – THE TOP 5

1. Christ Hospital 27.54%

2. Palisades Medical Center 12.22%

3. Jersey City Medical Center 12.17%

4. Monmouth Medical Center 11.64%

5. Christian Health Care Center 11.48%


29 withum.com

2010 NJ FORMS 990

IRS COMMUNITY BENEFIT – THE BOTTOM 5

1. Valley Hospital 2.21%

2. St. Mary’s Hospital (Passaic) 3.57%

3. Hackettstown Regional Medical Center 4.02%

4. Trinitas Regional Medical Center 4.12%

5. St. Francis Medical Center (Trenton) 4.46%


30 withum.com

2010 AND 2009 NJ FORMS 990

IRS COMMUNITY BENEFIT

Atlantic Health 7.08% and 7.20%

AtlantiCare Regional Medical Ctr 9.91% and 8.95%

Cooper Health System 9.80% and 9.41%

Hackensack University Medical Ctr 7.06% and 7.20%

Meridian Health 9.48% and 8.95%

Robert Wood Johnson Univ. Hosp. 8.65% and 8.57%


31 withum.com

AMERICAN HOSPITAL ASSOCIATION

AHA project, 2009 Form 990, Schedule H, Part I;

IRS community benefit.

a) Small hospitals; 7.3%

b) Medium hospitals; 8.0%

c) Large hospitals; 9.8%

d) Hospital systems; 9.3%

e) Overall; 8.4%


32 withum.com

AHA 2009 SCHEDULE H PROJECT

1. Based upon first year filings of Form 990, Schedule H.

2. AHA released in February, 2012; www.aha.org

3. Results based upon 571 Schedule H’s; 477 individual

hospitals and 94 hospital systems. The 94 hospital

systems are estimated to represent 400 individual

hospitals.

4. The 900 hospitals in the AHA project represent

approx. 30% of the 2,900 NFP U.S. hospitals.

http://www.aha.org/


33 withum.com

AHA 2009 SCHEDULE H PROJECT

1. AHA publicized the average of the 571 participating

hospitals and hospital systems.

2. “Total benefits to the community” of 11.3%.

a) Total charity care, means tested govt programs

and other benefits: 8.4%

b) Community building activities: 0.1%

c) Bad debt expense attributable to charity care:

0.4%

d) Medicare shortfall: 2.4%


34 withum.com

IRS CODE SECTION 501(R)

HOSPITAL REQUIREMENTS

PART FOUR


35 withum.com

HOSPITAL REQUIREMENTS - AFFORDABLE CARE ACT

1. Code Section 501(r)(3); community health needs

assessment (“CHNA”) and written implementation

strategy– 2013 Forms 990.

2. Code Section 501(r)(4); Financial Assistance Policy –

2011 Forms 990.

3. Code Section 501(r)(5); Limitation on Patient Charges –

2011 Forms 990.

4. Code Section 501(r)(6); Limitation on Collection Efforts –

2011 Forms 990.


36 withum.com

IRS NOTICE 2011-52, JULY OF 2011

Requirements effective for tax years beginning after

March 23, 2012.

Two written reports; hospital facility by facility basis

1. A CHNA (make widely available).

2. Written implementation strategy (adopt and

attach to the Form 990).

Treasury and IRS to issue proposed regulations.


37 withum.com

IRS ISSUES PROPOSED REGULATIONS

Code Section 501(r)(4); (5) and (6); respectively,

released on June 26, 2012 and public comments are

due to IRS by September 24, 2012. The proposed

regulations are ninety-four (94) pages in length.

Does not address CHNA requirements.

Effective for tax year beginning after publication of

temporary or final regulations in the Federal Register.

IRS estimated hours to comply annually: 11.5


38 withum.com

IRS ISSUES PROPOSED REGULATIONS

Key terms

1. Financial Assistance Policy (FAP).

2. Amounts generally billed (AGB).

• Look back method.

• Prospective method.

3. Extraordinary collection actions (ECA).

• Notification period.

• Application period.


39 withum.com

PUBLIC COMMENTS

AHA submitted letter dated August 23, 2012

Estimated hours to comply annually: 250 - 2,000

HFMA submitted letter dated August 27, 2012

Estimated hours to comply annually: 120 – 2,700


40 withum.com

AFFORDABLE CARE ACT TIMELINE

PART FIVE


41 withum.com

Early retiree re-insurance program

Non-discrimination rules

Extension of dependent coverage to age 26

No lifetime limits

No unreasonable annual limits

Free preventive care

No pre-existing condition exclusion for those

under age 19

Uniform benefit plan documents

No rescissions

Holding insurance companies accountable

for unreasonable rate hikes

Small business health insurance tax credits

FSA contribution limits

Elimination of deduction for

Medicare Part D drug subsidy

Medical expense deduction floor

increases to 10%

Increase in employee Medicare

payroll tax by 0.9% on earned

income

Increase in additional individual

hospital insurance tax by 3.8% on

unearned income

HSA, FSA and HRA

restriction on over-the

counter drugs

Increase to 20% penalty

for HSA non-qualified

distributions

Bringing down healthcare

premiums

Addressing overpayments

to big insurance

companies

Cap on certain insurers' tax deductions for

compensation

Employee notice on exchange options

Linking payment to quality outcomes

Encouraging integrated health systems

Mandatory Form W2 reporting

Coverage expansion

Employer "play or pay" mandate

Individual mandate

Exchanges begin

No annual limits

No excessive wait periods

Small business tax credit

(second phase)

40% excise tax

on high-cost

plans

State may permit

large employers

to purchase

through exchange

2011

2012

2013

2014

2017

2010

PPACA TIMELINE


42 withum.com

Scott J. Mariani, JD, Partner

Karen L. Henderson, Tax Manager

WithumSmith+Brown, PC

465 South Street, Suite 200

Morristown, NJ 07960

973-898-9494

healthcare tax update september 28, 2012 · 2019. 9. 17. · 2010 nj forms 990 irs community...

Documents