Tax News & Views: Health Care Edition

Treasury and IRS release proposed regulations on required minimum distributions from certain retirement plans, contracts, accounts, and annuities

On February 24, 2022, Treasury and the IRS released proposed regulations (REG-105954-20) that propose to make certain amendments to the current regulations governing required minimum distributions (RMDs) from qualified plans, 403(b) plans, individual retirement accounts and eligible deferred compensation plans under section 457. These amendments are being proposed on account of statutory amendments made by sections 114 and 401 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), enacted on December 20, 2019, as Division O of the Further Consolidated Appropriations Act of 2019, Public Law 116-94, 133 Stat. 2534 (2019), and other statutory amendments that have been made since the applicable regulations were last issued. The proposed regulations also clarify certain issues that have been raised in public comments or private letter ruling requests. These proposed regulations also replace the question-and-answer format of the existing regulations, and therefore, the existing regulations are largely restated in these proposed regulations with respect to rules in which there have been no amendments to the relevant Code provisions.

Congress passes omnibus spending bill

H.R. 2471, the “Consolidated Appropriations Act, 2022”, which provides funding through September 30, 2022 for projects and activities of the Federal Government, was signed into law on March 15, 2022. The bill includes an allocation of $12.6 billion for the Internal Revenue Service, representing an increase of roughly 6 percent over the funding level enacted for FY 2021.

Across the Service’s four program areas, the $12.6 billion allocation in the omnibus breaks down this way: $2.8 billion for taxpayer services, $5.4 billion for enforcement, $4.1 billion for operations support, and $275 million for business systems modernization. Issues around the IRS budget—particularly for taxpayer services and business systems modernization—have been in the spotlight recently as the agency struggles to complete work on millions of income tax returns from tax year 2020 in the wake of COVID-related staffing shortages and facilities shutdowns.

Reporting compensation paid to management companies on Form 990 series annual returns

IRS Announcement 2021-18 revokes Announcement 2001-33 that provided tax-exempt organizations with reasonable cause for purposes of relief from the penalty imposed under § 6652(c)(1)(A)(ii) of the Internal Revenue Code if they reported compensation on their annual information returns in the manner described in Announcement 2001-33 instead of in accordance with Form 990 series instructions. Announcement 2001-33 allowed tax-exempt organizations that pay a management company directly for services provided by an officer, director, trustee, or key employee to report the amount paid directly to the management company on their annual tax return instead of reporting the compensation paid to each officer, director, trustee, or key employee who performed the services for the tax-exempt organization. The new Announcement 2021-18 instructs affected tax-exempt organizations to follow the specific instructions to the Form 990, Form 990-EZ, and Form 990-PF, effective for annual information returns required for taxable years beginning on or after January 1, 2022. Announcement 2021-18 asserts that having all tax-exempt organizations report compensation in accordance with the specific Form 990 series instructions will improve transparency and compliance by making it easier for the public and the IRS to understand financial operations, including compensation arrangements.

Did you know?

Treasury and IRS announce plan to end pandemic inventory backlog
On March 10, 2022 Treasury and the IRS announced and aggressive plan to end the pandemic backlog this year. The IRS indicated it plans to hire 10,000 new employees, with plans to fill 5,000 open positions in the coming months and another 5,000 hires over the course of the next year. The IRS is also in the process of creating a new 700-person surge team to process new returns to avoid further backlog. The IRS has further committed to increased taxpayer assistance to reduce processing delays, including sending taxpayers information to prevent such delays, and providing direct help online, in-person, and on the phone. There is a focus on developing and deploying updated technology to automate functions to correct return errors and improve taxpayer assistance.

Additional Resources

Deloitte Center for Health Solutions
The source for health care insights: The Deloitte Center for Health Solutions (DCHS) is the research division of Deloitte’s Life Sciences and Health Care practice. The goal of DCHS is to inform stakeholders across the health care system about emerging trends, challenges, and opportunities.

Health Forward blog
Connect to the forces of change across life sciences and health care today. Explore our latest leadership insights to stay ahead of industry trends and key issues on health care, medtech, and biopharma.

Related highlights

Deloitte’s 2022 Chief Strategy Officer Survey
The 2022 Chief Strategy Officer (CSO) Survey is the third annual study in a longitudinal series designed to provide unique insight to help Strategy Executives shape their own roles, evolve their Strategy function capabilities, and set strategic priorities. The survey revealed key themes and insights for how Strategy can be positioned for success in the long term, despite continued short-term uncertainty. Participants will learn the state and evolution of Strategy as a corporate function, including the growing importance of technology fluency and purpose motivation, and key strategic challenges and priorities for CSOs as uncertainty and volatility continue.

Working capital roundup: A look back at 2021
Rising inflation and the residual impacts of COVID-19 have continued to highlight the importance of cash and working capital for businesses. In this session, we’ll look back at the working capital performance of companies across all industries over 2021. Participants can gain insights into how companies can remain clear on their levels of liquidity and be more confident that their working capital can help them weather future storms.