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5 federal health tax provisions that are set to expire

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Aides on Capitol Hill recently created a big catalog of potential triggers for legislative fights: a list of the federal tax provisions that are set to expire from now through 2025.

The staff of the Joint Committee on Taxation, a panel that serves both the U.S. House and the U.S. Senate, prepared the list to show lawmakers what tax provision issues might be coming up over the next decade. (The aides excluded temporary measures meant to help taxpayers with the transition from one set of tax rules to another.)

Most of the provisions on the list have nothing what to do with medical insurance or other health-related insurance products.

Many have something to do with fuel. On March 31, for example, the federal air cargo tax, air passenger ticket taxes, and most of the tax on noncommercial aviation fuel are set to expire.

Some of the “sunsetting” tax provisions appear to be… odd.

On Dec. 31, horse breeders could lose access to three-year depreciation for race horses that are two years old or younger. 

On that same date, the developers of motorsports entertainment complexes could lose a seven-year recovery period provision. Taxpayers normally have to recover the cost of purchasing an asset over the life of the asset.

Five have an obvious connection with health care or health insurance, and one of those is on track to expire in less than a year.

Of course, legislation is a mysterious, complicated process, and provisions that have no apparent connection with health insurance may have everything to do with health insurance.

Some health insurers are the subsidiaries of life insurers, the parents of life insurers or the sister companies of life insurers. Life insurers have huge investments in bonds and other fixed-income assets. Some sunsetting tax provisions that have nothing to do with insurance may have a big effect on the value of insurers’ investment portfolios.

In other cases, supporters of sunsetting health insurance tax provisions who want to get those provisions renewed (or killed) may have to try to stay on the good side of supporters (or enemies) of other, unrelated provisions.

In the past, tax provision expirations have set off many ferocious congressional fights.

See also: 9 tax breaks expiring at year’s end

For a list of the five expiring provisions of obvious interest to the health insurance community, read on.



Only one major health care tax provision on the JCT list is set to expire this year, but that measure is a big one: the provision that determines how much taxpayers ages 65 and older have to spend on qualified medical expenses before they can take a medical expense deduction.

The provision, which is governed by Section 213(f) of the Internal Revenue Code (IRC), now lets individuals ages 65 and older, and their spouses qualify for the deduction if they spend at least 7.5 percent of their adjusted gross income on medical expenses.

For other taxpayers, the floor is 10 percent.

See also: 7 benefits of HSAs

2019 - rising and falling


Two health insurance tax provisions created by the Patient Protection and Affordable Care Act of 2010 (PPACA) are set to expire Sept. 30, 2019.

One is IRC Section 4375(e), which imposes a fee of $2.17 per enrollee on health insurance policy issuers, to pay for the operations of the Patient-Centered Outcomes Research Institute (PCORI). The other is IRC Section 4376(e), which imposes the same PCORI fee on providers of self-insured health plans.

See also: PCORI fee rises 4.3%

On Dec. 31, 2019, IRC Section 35(b) could sunset. That provision provides a health insurance cost tax credit for people who have lost their jobs due to imports or who have been affected by pension plan shutdowns.

See also: What the fiscal cliff compromise means for your clients’ taxes  



On Dec. 31, 2015, IRC Section 420(b)(4) could expire.

The provision seems meaningless today: It governs the process defined benefit pension plans should use when they transfer excess assets to retiree health or retiree life insurance accounts.

At this point, it may seem more relevant to set the rules for the kind of champagne a defined benefit pension plan should buy to celebrate if it actually has enough assets to meet basic benefits obligations. The idea that a plan might have access assets may seem fantastic.

But a lot has changed since 2006, and a lot could change between now and 2025.

See also:

View: Closing tax ‘loopholes’ would choke middle class

AEI: Replace group health tax deduction

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