Short-Term Spending Bill Retroactively Suspends Medical Device Excise Tax

After a weekend-long government shutdown, Congress approved the Extension of Continuing Appropriations Act of 2018 (ECAA). The stopgap spending measure was approved by the Senate with 81 voting in favor and 18 voting against, and then by the House with 266 voting in favor and 150 voting against. The bill funds the government until February 8, 2018, and suspends several Affordable Care Act (ACA, or Obamacare) healthcare taxes.

• Medical Device Tax. The 2.3% medical device excise tax was suspended until 2020, an additional two years. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) provided the most recent moratorium on the medical device excise tax, which ended on December 31, 2017. The ECAA extends the moratorium retroactively for two years, until December 31, 2019. The provision applies retroactively to sales occurring after December 31, 2017.
• Cadillac Tax. The 40% excise tax on high-cost employer health insurance plans, commonly known as the “Cadillac tax,” was delayed until 2022, an additional two years. The Cadillac tax was also most recently delayed under the PATH Act and was scheduled to take effect in 2020.
• Health Insurance Tax. The annual fee imposed on health insurance providers, known as the health insurance tax was suspended for calendar year 2019. The PATH Act suspended this fee for calendar year 2017. The fee will still apply for 2018.

The Takeaway

Congress has averted further disruption from a government shutdown for now with the approved short-term spending patch, which expires on February 8, 2018. Taxpayers who would have been subject to the medical device tax for sales occurring starting in 2018 can breathe a sigh of relief with an additional two-year moratorium in place. Please contact us if you would like more information on how this or other recent legislative developments may affect you and your personal or business tax position.