On April 14, the Senate passed H.R.1473, the Department of Defense and Full-Year Continuing Appropriations Act, by a vote of 81-19. The measure, which includes a repeal of sections of the Patient Protection and Affordable Care Act (PPACA) and associated Code provisions dealing with “free choice vouchers,” had been approved by the House earlier on April 14 by a vote of 260-167. Thus, H.R. 1473 (the Act) is now cleared for the President's expected signature. Here are highlights of the tax changes in the Act. After Dec. 31, 2013, under the PPACA, employers that offered minimum essential coverage through an eligible employer-sponsored plan and paid a portion of that coverage would have been required to provide “qualified employees” with a voucher, the value of which could be applied to the purchase of a qualified health plan (QHP) through the Insurance Exchange (i.e., a federally supervised marketplace for health insurance policies meeting specific eligibility and benefit criteria). Qualified employees included those: ... who did not participate in the employer's health plan; ... whose required contribution for employer-sponsored minimum essential coverage (if they did participate in the plan) was greater than 8%, but did not exceed 9.8%, of household income (indexed to reflect the rate of premium growth over income growth between the preceding calendar year and 2013); and ... whose total household income did not exceed 400% of the poverty line for the family. In effect, free choice vouchers would have allowed a qualified employee to take the funds that his employer would have contributed towards his employer-sponsored insurance and use these funds to buy more affordable insurance on the exchange. An employee whose total household income is at or below 400% of the poverty line, and whose share of his employer-sponsored health insurance premiums exceeds 9.8% of his total household income, would have been eligible to acquire more affordable, subsidized health insurance in the Insurance Exchange. (PPACA Sec. 1401) Under prior law, an employee whose household income is at or below 400% of the poverty line, and whose share of his employer-sponsored health insurance premiums is 8 to 9.8% of his total household income, would have qualified for so-called “free choice” vouchers. The voucher program was reflected in numerous provisions throughout the Code. These included: ... Code Sec. 36B , which allowed a refundable “premium assistance” credit for coverage under a QHP; ... Code Sec. 139D , which excluded from gross income the value of any free choice voucher provided by an employer to the extent that the amount of the voucher doesn't exceed that amount paid for a QHP; ... Code Sec. 162 , which provided in Code Sec. 162(a) that the amount of a free choice voucher is treated as compensation for personal services for business deduction purposes; ... Code Sec. 4980H , which imposed an excise tax on “large employers” (generally, employers with at least 50 full-time employees) that don't offer affordable health insurance coverage after 2013; and ... Code Sec. 6056 , which imposed information reporting requirements on certain employers that are required to offer their full-time employees and their dependents the opportunity to enroll in “minimal essential coverage” under an eligible employer-sponsored plan. New law. The Act eliminates free choice vouchers by repealing subsections (a), (b), (c), (d), and (e) of PPACA Sec. 10108 (Act Sec. 1858(a)). The Act will also: ... amend Code Sec. 36B(c)(2) by striking Code Sec. 36B(c)(2)(D) , which, for purposes of calculating a taxpayer's premium assistance credit, excludes from the definition of “coverage month” any month in which a qualified employee has a free choice voucher (Act Sec. 1858(b)(1)); ... repeal Code Sec. 139D (Act Sec. 1858(b)(2)); ... amend Code Sec. 162(a) by striking the last sentence treating the amount of a free choice voucher as compensation for Code Sec. 162 purposes (Act Sec. 1858(b)(3)); ... amend Code Sec. 4980H(b) by striking Code Sec. 4980H(b)(3) , which provides that in computing the excise tax under Code Sec. 4980H , no payment will be imposed for any month with respect to any employee to whom the employer provides a free choice voucher (Act Sec. 1858(b)(4)); and ... amend Code Sec. 6056 by striking language relating to offering and large employers (Act Sec. 1858(b)(5)). The Act does not provide any sort of replacement mechanism for free choice vouchers to help lower-income employees who determine that participation in employer-sponsored insurance is too expensive. Effective date. When the Act is signed into law, these changes will be effective “as if included in the provisions of” the PPACA. In other words, the law will be applied as if these provisions had never been enacted (Act Sec. 1858(d)). President's expected signature. On April 12, the Administration issued a Statement of Administration Policy (SAP) saying that it supported passage of the Act. The SAP stated that although the Administration “would not have agreed to many of these cuts under better fiscal circumstances, the bill reflects a compromise that will help the Federal Government live within its means while protecting those investments that will help America compete for new jobs.” Thus, the Act is expected to be signed into law. The Act reflects the second time that last year's health care legislation has been cut back. The first time was the repeal of broadened information reporting provisions that had been designed to help raise revenue to offset the cost of health care overhaul. EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF MANAGEMENT AND BUDGET WASHINGTON, D.C. 20503 April 12, 2011 (House Rules) STATEMENT OF ADMINISTRATION POLICY H.R. 1473 – Department of Defense and Full-Year Continuing Appropriations Act, 2011 (Rep. Rogers, R-KY) The Administration supports H.R. 1473, making continuing appropriations for the Department of Defense and other departments and agencies of the Government for the fiscal year ending September 30, 2011, and for other purposes. The legislation makes the largest annual spending cuts in the Nation’s history, while at the same time investing in America's future in significant ways. Although the Administration would not have agreed to many of these cuts under better fiscal circumstances, the bill reflects a compromise that will help the Federal Government live within its means while protecting those investments that will help America compete for new jobs. These include investments in education, clean energy, and life-saving medical research. However, the Administration strongly opposes any attempts to include language in the underlying bill that would deny funding for critical women’s health services or prohibit funding to implement the Affordable Care Act that is making health care more affordable and accessible for all Americans. The Administration is committed to cutting spending and reducing the deficit to put the Nation on a sustainable fiscal path. The Administration looks forward to working with the Congress to do so in a manner that supports the economic recovery and near-term job creation, protects key investments, and promotes long-term growth. * * * * * * * www.irstaxattorney.com 888-712-7690