Revised Senate health bill would retain taxes on higher-income individuals

By Alistair M. Nevius

Senate Republicans on Thursday released a revised version of their Better Care Reconciliation Act of 2017; the new version, if enacted, would retain several taxes first imposed as part of the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148. As in the first version of the Senate bill, released on June 22, most of PPACA’s tax provisions would be repealed, but the 3.8% net investment income tax and the 0.9% Medicare surtax under Sec. 3101 would remain in effect.

The net investment income tax (Sec. 1411) imposes a tax equal to 3.8% of the lesser of an individual’s net investment income for the tax year or the excess (if any) of the individual’s modified adjusted gross income for the tax year over a threshold amount. The threshold amounts are $250,000 for married taxpayers filing jointly and surviving spouses, $125,000 for married taxpayers filing separately, and $200,000 for other taxpayers. The tax also applies to estates and trusts, with different threshold amounts.

The 0.9% Medicare surtax applies to wages received in a calendar year in excess of $200,000 ($250,000 for married couples filing jointly; $125,000 for married filing separately) (Sec. 3101(b)(2)).

The revised Senate bill would also leave in place the Sec. 162(m)(6) $500,000 federal income tax deduction limitation for compensation paid by a covered health insurance provider.

In another change from the original proposal, the revised bill would allow taxpayers to receive a premium tax credit even if their insurance was defined as a “catastrophic plan” under PPACA. Currently, Sec. 36B(c)(3)(A) forbids a premium tax credit for taxpayers insured by such a plan. A catastrophic plan is defined in Section 1302(e) of PPACA as a plan that does not provide bronze, silver, gold, or platinum coverage (as PPACA Section 1302 defines those terms), that provides no benefits for any plan year until the covered individual has incurred cost-sharing expenses in an amount equal to PPACA’s annual limitation on cost-sharing expenses (but covers at least three primary care visits), and is available to individuals who are under age 30 and exempt from the individual mandate.

Finally, in addition to the health savings account (HSA) changes in the original Senate bill (allowing them to be used to pay for over-the-counter medications, reducing the penalty on distributions not used for medical expenses, increasing the contribution limit, and allowing married taxpayers to make catch-up contributions to the same HSA), the revised bill would exclude from HSA eligibility any high-deductible plans that include coverage for abortion (other than abortions to save the life of the mother or in the case of incest or rape).

It is unclear whether, and to what extent, the bill may be amended before it is brought to a vote. It still differs significantly from the health care bill passed by the House, the American Health Care Act of 2017, H.R. 1628, so if the Senate does pass this bill, it would still need to go back to the House of Representatives for a vote.

Alistair Nevius ( is the JofA’s editor-in-chief, tax.

Where to find May’s flipbook issue

The Journal of Accountancy is now completely digital. 





Leases standard: Tackling implementation — and beyond

The new accounting standard provides greater transparency but requires wide-ranging data gathering. Learn more by downloading this comprehensive report.