Tax News & Views: Health Care Edition

What a congressional spending clash this fall could mean for a year-end tax bill

Legislation to fund the federal government for fiscal year 2024, which begins in just a few short weeks, is likely to dominate the congressional agenda as lawmakers make their way back to Washington following their extended summer recess; but for tax professionals, the appropriations process deserves even closer scrutiny than usual, as the resolution of that debate could well set the tone for discussions over a potential tax package later this year. The September 8, 2023 edition of Tax News & Views explores this in greater detail.

Treasury and the IRS release additional corporate AMT guidance

On September 12, 2023, Treasury and the IRS released Notice 2023-64, which provides additional interim guidance to further clarify the application of the corporate alternative minimum tax (CAMT).

Notice 2023-64 provides rules for determining a taxpayer’s applicable financial statement (AFS) and adjusted financial statement income (AFSI). In addition, Notice 2023-64 provides guidance on when corporations are subject to CAMT, CAMT foreign tax credits, tax consolidated groups, foreign corporations, AFSI adjustments for depreciable property, wireless spectrum, duplications and omissions of certain items, and financial statement net operating losses.

Treasury and the IRS intend to publish forthcoming proposed regulations regarding application of CAMT that would include proposed rules consistent with the interim guidance provided in Notice 2023-7 (as modified and clarified by Notice 2023-64), Notice 2023-20, and Notice 2023-64 (collectively, the “CAMT Notices”). It is anticipated that the forthcoming proposed regulations would apply for taxable years beginning on or after January 1, 2024. A taxpayer may rely on the interim guidance in the CAMT Notices for any taxable year that begins before January 1, 2024, and, if applicable, for taxable years ending on or before the date forthcoming proposed regulations are published in the Federal Register.

IRS announces relief from mandatory Roth treatment for catch-up contributions

On August 25, 2023, the IRS issued Notice 2023-62 (the “Notice”) to address certain issues arising from section 603 of the SECURE 2.0 Act of 2022 (the “Act”). Section 603 of the Act (“Section 603”) changed some of the requirements applicable to catch-up contributions. Catch-up contributions are additional amounts that a participant in a 401(k) plan, a 403(b) arrangement or an eligible governmental deferred compensation plan under section 457(b) may contribute to the plan over and above plan or statutory limits if the participant has attained age 50 (or will attain age 50 by the end of the year). The main change made by Section 603 was to mandate that catch-up contributions made by certain individuals be made on a Roth after-tax basis (referred to herein as the “Roth mandate”). This change was to be effective beginning in 2024 and applies to individuals who had FICA wages from the employer sponsoring the plan in excess of $145,000 (adjusted for inflation) for the prior year. Section 603 also requires employers who employ individuals subject to the Roth mandate to add a Roth feature to their plan if they do not already have one.

Many employers and trade organizations expressed concern about the ability of employers to administer these mandates timely. To address those concerns, the Notice provides for a two-year administrative transition period to implement these provisions. During this administrative transition period, employers will not be required to mandate Roth treatment of catch-up contributions for any participant. Until the first taxable year beginning after December 31, 2025, participants may continue to designate catch- up contributions (or any elective deferrals) as Roth contributions, provided their employer’s plan has such a feature. In addition, employers who would otherwise be required to add a Roth feature will not need to add any such feature until after the end of the administrative transition period.

The Notice also provides technical clarifications on the availability of pre-tax catch-up contributions and discusses other issues related to Section 603 and what might be provided for in future guidance.

Did you know?

Digital asset reporting regulations issued
The IRS and the US Department of the Treasury issued the long-anticipated proposed regulations under Sections 6045 and 6050W and other relevant code sections, providing guidance for information reporting of digital assets. These regulations require brokers to report digital asset transactions by customers on or after January 1, 2025, on new Form 1099-DA.

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.

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