Tax News & Views: Health Care Edition

October 2017 | Vol. 12 No. 40

Tax News & Views: Health Care Edition is a timely news summary bulletin authored by the Health Care Industry Group, Deloitte Tax LLP. The newsletter contains highlights from the latest tax developments in health care on Capitol Hill, at the White House, at the Internal Revenue Service, at the Treasury Department and in the courts. It is a valuable resource for tax and other professionals involved in the tax-exempt health care providers and health plans sectors, helping them remain current on tax developments that stand to have an impact on their businesses.

Hurricane Relief Guidance

Qualifying Tax Relief

In order to qualify for the tax relief measures provided by the Internal Revenue Service (“IRS”) (some of which are provided below), the victims must be located in a federally declared disaster relief area as defined in Treasury Regulation Section 301.7508A-1(d)(1) (The IRS has a listing of counties for both Hurricanes Harvey and Irma). Qualifying taxpayers receive until the extended due date to file most tax returns and payments where the return or payment date falls on or after the onset date of the disaster and on or before the extended date.

Employee Leave Donation

The IRS issued Notices 2017-48 and 2017-52 to provide guidance on employee leave donation programs in relation to Hurricane Harvey and Hurricane Irma, respectively. These Notices allow for the donation of vacation, sick or personal leave time in exchange for cash payments the employer will make directly to a charitable organization described in Internal Revenue Code Section (“IRC Sec.”) 170(c). The IRS will not assert the donation of leave time is gross income or wages to the employees or that there is constructive receipt of the wages as long as the payments by the employers are paid to IRC Sec. 170(c) organizations for relief of the victims of Hurricane Harvey and Irma before January 1, 2019. However, there is no charitable contribution deduction for the employee. The employer however can still make a deduction under IRC Sec. 162.

Retirement Plan Loans

The IRS Issued IR 2017-138 and 2017-151, permitting employer– sponsored retirement plans to make loans and hardship distributions to victims of Hurricane Harvey and Hurricane Irma, respectively. The relief relaxes the procedural and administrative rules around loans and early distributions allowing eligible persons to receive money more quickly. In order to make a loan or distribution the plan must contain authorizing language or be amended to include such language. The relief granted by the IRS is the plan will not be considered failing to follow procedural requirements for plan loans and distributions from August 23, 2017 through January 31, 2018. The maximum amount of the loan or distribution is the maximum permitted to be available for a hardship distribution under the plan. The relief applies to victims of the Hurricanes as well as certain family members can take out loans or distributions to assist qualifying family members in the affected areas. However, the IRS is not waiving the 10% penalty on early withdrawals.

Tax News & Views: Health Care Edition October 2017

IRS Issues Publications on IRC Section 403(b) Plans

The IRS has issued Publications 4483 and 4882, Tax Sheltered Annuities for Sponsors and Participants, respectively. The publications highlighted the unique benefits of the 403(b) plans to both participants and sponsors. Two such benefits highlighted were the ability to make catch-up contributions and the ability to make post-severance contributions.

The 2017 general limit under 403(b) for employee elective deferrals is $18,000 and $54,000 for total employer and employee contributions. However, if allowed in the plan employees may be able to make catch-up contributions that come in two varieties. The first is for employees with at least 15 years of service and the second is for employees who will be 50 or older by the end of the year. The 15-year catch-up must be applied first, if available. Additionally, the 15-year catch-up is included in the annual contribution limited but the 50-year is not.

Additionally, 403(b) plans may permit elective deferrals and employer contributions after the participant separates from the organization. The participant can electively defer up to the annual limit amounts of accumulated sick, vacation or back pay if done before the end of the calendar year when the participant left employment or within 2 ½ months of leaving, if later. The employer may contribute up to the combined annual employer and employee contribution limit for the participant for up to five years following the end of the year after the participant left employment but must end at the participant’s death.

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Tax Reform
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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 Care Current
Weekly insights to keep you informed and ahead. This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.

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Employment tax compliance: Year-end hot topics
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Companies routinely modify the terms of outstanding debt instruments. Modifications that are considered to be significant under the rules of Treas. Reg. § 1.1001-3 result in a deemed satisfaction and reissuance of the outstanding debt. In light of the regulations, what are the important considerations when modifying the terms of debt? Participants will explore ways to modify terms of outstanding debt instruments while complying with the rules associated with financing transactions.

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