IRS Rules on Medical Device Tax Could Spark Repeal Efforts in Congress

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Proposed regulations from the IRS on the 2.3 percent excise tax on medical devices, designed to generate $20 billion as part of the Patient Protection and Affordable Care Act, will fire up congressional legislative efforts to repeal the tax, analysts tell Bloomberg BNA. Although several measures have been introduced for a repeal, one bill by Rep. Paulsen continues to gain momentum, and industry analysts said there is talk of a vote on the House measure this year before the tax can be fully implemented. “We have time to fix this, and it's related to jobs, it's related to health care … so it's in the sweet spot for where our conference wants to be and what we should be talking about,” Paulsen says. In the proposed rule, IRS says manufacturers excise taxes will generally apply to the 2.3 percent tax on sales of taxable medical devices. Chapter 32 definitions of manufacturer and importer generally apply, while facts and circumstances will be used in determining such roles when more than one person is involved in the manufacture or importation of an item. “The substance rather than the form of the transaction is determinative,” IRS says.