On July 14, the House Democratic leadership released the text of the ”America’s Affordable Health Choices Act of 2009,” which is slated to be taken up by the House Ways & Means Committee on July 16. Title IV of the Act would make numerous tax changes to pay for the projected $1 trillion price tag of comprehensive national health care reform.
Title IV of the bill includes the following changes to the Code:
- High income individuals married filing a joint return or surviving spouses would face a surtax equal to: 1% of modified adjusted gross income (AGI) over $350,000 but not over $500,000; 1.5% of modified AGI over $500,000 but not over $1 million; and 5.4% of modified AGI over $1 million. The dollar amounts for separate filers would be half of the joint filer amounts; for other filers the amounts would be 80% of the joint filer amounts. The surtax for modified AGI over $350,000 but not over $1 million would rise for post-2012 tax years unless federal health reform savings hit a predetermined target level.
- A tax on individuals who don’t have acceptable health benefit plan coverage (as defined by the bill). In general, the tax would equal 2.5% of modified AGI in excess of the taxpayer’s exemption amount, but not more than the “national average premium” for that year. A number of exceptions would apply (e.g., for dependents, objectors on religious grounds).
- Health insurers would be required to file information returns for the individuals they cover.
- Employers that fail to satisfy the bill’s health coverage participation requirements would face a tax of $100 per day per each non-covered employee.
- Employers electing not to provide health benefits for employees would pay an excise tax equal to 8% of wages (the excise tax would be less for small employers).
- Small businesses would get an employee health coverage tax credit.
- The application of the worldwide allocation of interest would be delayed (until the first tax year beginning after 2019) and as a anti-tax-avoidance measure, there would be new limitations on treaty benefits for certain deductible payments.
- The economic substance doctrine would be codified. An accuracy related penalty would apply for underpayments due to transactions lacking economic substance, and a stiff penalty would apply for nondisclosure of “noneconomic substance transactions.”
