IRS Issues Guidance on Cadillac Tax

By Larry Grudzien
Attorney-At-Law
February 26, 2015
 
The IRS issued Notice 2015-16 which is intended to initiate and inform the process of developing regulatory guidance regarding the excise tax on high cost employer-sponsored health coverage under § 4980I of the Internal Revenue Code (Code). Section 4980I, which was added to the Code by the Affordable Care Act, applies to taxable years beginning after December 31, 2017. Under this provision, if the aggregate cost of “applicable employer-sponsored coverage” (referred to in this notice as applicable coverage) provided to an employee exceeds a statutory dollar limit, which is revised annually, the excess is subject to a 40% excise tax.
 
This notice describes potential approaches with regard to a number of issues under § 4980I, which could be incorporated in future proposed regulations, and invites comments on these potential approaches. The issues addressed in this notice primarily relate to:
 
(1) the definition of applicable coverage,
 
(2) the determination of the cost of applicable coverage, and
 
(3) the application of the annual statutory dollar limit to the cost of applicable coverage.
 
Treasury and IRS anticipate issuing another notice, before the publication of proposed regulations under § 4980I, describing and inviting comments on potential approaches to a number of issues not addressed in this notice, including procedural issues relating to the calculation and assessment of the excise tax. After considering the comments on both notices, Treasury and IRS anticipate publishing proposed regulations under § 4980I. The proposed regulations will provide further opportunity for comment, including an opportunity to comment on the issues addressed in the preceding notices.
 
For a copy of Notice 2015-16, click on the link below:
 
http://www.irs.gov/pub/irs-drop/n-15-16.pdf
 
If you have any comments or questions regarding any of the above information, please do not hesitate to call me at (708) 717-9638 or e-mail me at larry@larrygrudzien.com.