Three ACA Taxes Suspended

Post Date: 1/25/18
Last Updated: 1/25/18


Cross References
- HR 195

On January 22, 2018, the President signed into law HR 195 which extends funding to federal agencies through February 8, 2018. The law contains a number of other provisions, including the suspension of three taxes imposed under the Affordable Care Act (ACA).

Medical Device Manufacturers Tax
- IRC ยง4191

The new law suspends the tax under IRC section 4191 for all sales made through December 31, 2019.

IRC section 4191 imposes a tax equal to 2.3% of the sale price on the sale of any taxable medical device by the manufacturer, producer, or importer of the device. A taxable medical device is any device, defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act, intended for humans. Section 201(h) defines a medical device as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, which is:
1) Recognized in the official National Formulary, or the United States Pharmacopeia, or any supplement to them,
2) Intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or
3) Intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of its primary intended purposes.

The excise tax does not apply to eyeglasses, contact lenses, hearing aids, and any other medical device determined by the IRS to be of a type that is generally purchased by the general public at retail for individual use. A specific medical device is exempt if the device is generally sold at retail establishments (including over the internet) to individuals for their personal use. The exemption for these items is not limited by device class as defined in section 513 of the Federal Food, Drug, and Cosmetic Act.

For example, items purchased by the general public at retail for individual use include items such as certain bandages and tipped applicators, items such as certain pregnancy test kits and diabetes testing supplies, and items such as certain denture adhesives and snake bite kits. Such items would only be exempt if they are generally designed and sold for individual use. The determination of whether a specific item is a device designed and sold for individual use is generally made on a facts and circumstances basis.

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