IRS rule for medical device tax favorable for home care

WASHINGTON, D.C., Dec. 5, 2012—The Internal Revenue Service (IRS) issued greatly improved final regulations for the application of a medical device excise tax, compared to the proposed rule issued earlier this year. While AAHomecare continues to examine the impact of the guidance, it appears that the vast majority of home medical equipment devices will not be subject to the tax.

Under the proposal contained in the Affordable Care Act, home medical device makers could have been subject to a 2.3 percent excise tax on their gross revenues, regardless of profits, to raise $1.8 billion in federal revenue in 2013 and $20 billion through 2019.

Over the past year, AAHomecare strenuously argued that home medical equipment should be exempted from the medical device tax. AAHomecare is pleased that the IRS accepted nearly all of its recommendations, including the exemption for telephone and Internet sales, and devices requiring minimal or no training from a medical professional. Additionally, AAHomecare is pleased with the guidance provided by the IRS in the final rule, which gives specific examples of how the criteria outlined in the regulation will be used to determine the excise tax exemption.

A decision tree presented in the rule outlines the criteria to determine whether a device will be subject to the 2.3 percent tax. The rule highlights numerous examples, applying the decision tree to various medical devices. A number of these examples were home medical equipment devices such as portable oxygen concentrators, diabetic testing supplies, manual and power wheelchairs, beds, and ostomy supplies and they illustrate how these devices would be exempted from the tax.

To view the final rule, click here. Also contact Jay Witter at [email protected] or (202) 372-0751. Visit online at www.aahomecare.org.