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IRS Won’t Enforce Penalties on Medical Device Tax

Thursday, January 18, 2018   (0 Comments)
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The U.S. Internal Revenue Service yesterday said it won’t enforce penalties on companies making late payments on the medical device tax for the first three months of this year.

The 2.3% excise tax on U.S. medical device revenues was in effect for two years before a two-year moratorium went into effect for 2016 and 2017. It went back into effect at the beginning of this year, but there are nearly 10 bills pending in the House and Senate that would further delay or outright repeal the levy.

Yesterday the Treasury Dept.’s collection arm said the quick turnaround required by the §6656 tax statute – the first semi-monthly payment covering the first 15 days of the year is due Jan. 29 – it won’t collect penalties on late payments.

“In consideration of the short time frame between the end of the moratorium period and the due date of the first deposit and in the interest of sound tax administration, the IRS and the Treasury Dept. have decided to provide temporary relief from the §6656 penalty for the first three calendar quarters of 2018,” the agency said in a statement, noting that normal penalty enforcement is slated to resume during the fourth quarter.

Medtech companies must demonstrate a good-faith attempt to make the payments on time and prove that any failure was not from willful neglect, the IRS said. It will also forbear from revoking the right to use safe harbor rules during Q3 and Q4 for failing to pay the tax on time, according to the statement.

Congress could soon make the entire issue moot, at least temporarily, with at least nine measures aimed at delaying or repealing the tax.

“A bill to repeal the medical device excise tax, and for other purposes,” or S.2287, co-sponsored by the Massachusetts Senate delegation, would eliminate the medtech levy and replace the lost revenue by deleting tax loopholes for the energy industry.

Late last year Reps. Kevin Brady (R-Texas), Erik Paulsen (R-Minn.) and Jackie Walorski (R-Ind.) introduced a bill, H.R. 4617, that would suspend the tax for five years. Just before the 2017 holiday break the so-called “Problem Solvers Caucus” in the House filed a bill to amend Obamacare, H.R. 4695, containing a series of amendments to the Affordable Care Act including outright repeal of the medical device tax retroactive to Dec. 31, 2017.

There are at least six other bills in both the House and Senate that would affect the tax, according to, mainly aiming to amend Obamacare. The provisions in a pair of house bills, H.R. 184 and H.R. 1628, include repeal of the tax retroactive to Dec. 31, 2016, and Dec. 31, 2017, respectively; another House proposal, H.R. 1436, would repeal the tax but does not specify a date. And H.R. 286 would exempt emergency medical devices used by first responders.

In the Senate, S. 108 would enact an outright repeal retroactive to the end of last year. Another measure out of the Upper Chamber, S. 554, includes repealing the tax in a laundry list of ACA amendments.


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