"Numerous Tax Provisions Hang In Balance as Supreme Court Reviews Health Care Reform"CCH Federal Tax Weekly
Garrett Fenton discusses the numerous tax provisions potentially impacted in the Supreme Court's review of the health care reform law. "There are myriad tax-related provisions woven throughout the law which affect virtually all individuals, employers, and health insurers, as well as other entities in the health care industry," Fenton said. "Some of these provisions are completely unrelated to health care, such as an increase in the individual tax credit for certain adoption expenses that applied for 2010 and 2011 only, and some, while related to health care reform, seem more at the periphery of the individual mandate and coverage components of the statute, such as the cap on FSA contributions, the prohibition against pre-tax reimbursements to pay for over-the counter drugs from FSAs, HRAs, and HSAs, the increase in Medicare taxes, and the elimination of the tax deduction for employers for certain retiree prescription drug expenses."
"If only part of health care reform is overturned, it will be interesting to see which (if any) of these more peripheral tax provisions are also invalidated," Fenton said. "The impact, from a tax perspective, literally could fall anywhere within the range of minimal (for example, only selected provisions relating to the mandate, like Code section 5000A), to far reaching (not only the tax provisions that enforce the mandate and the "market reform" provisions, but also conceivably other related funding provisions of the Act)."
The parties' briefs generally referred to the health care reform legislation in terms of one consolidated statute. "That, coupled with the fact that the individual mandate—which is the cornerstone provision of the law under constitutional review—was, itself, amended under HCERA, makes for a reasonable assumption that the Court will consider the constitutionality of, and specifically the severability of the individual mandate from, the entire, consolidated law," Fenton observed. "However, we will not know whether the Court will draw a severability distinction between the provisions of the two statutes until a decision is issued in this case."