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 Issues Remain to be Decided in House, Senate Tax Conference

With the Senate passage of Republican tax reform legislation this past weekend, the next phase of the process to enact a sweeping overhaul of the nation’s tax code will soon begin with Senate and House conferees likely meeting this week to start work on resolving the differences in the Senate bill and one approved last month in the House.

Republican leaders hope to have a final unified bill ready for President Trump to sign before Christmas.

Inside the two pieces of legislation are issues pertinent to long term and post-acute care providers. Some of the provisions must be ironed out in a conference committee. For example, the House bill proposes to eliminate the use of private activity (lower-tax rate) and advance refunding (tax-exempt) bonds beginning on Jan. 1, 2018. 

The American Health Care Association/National Center for Assisted Living (AHCA/NCAL) has said that such a move would adversely impact the ability of nonprofit providers to fund new construction, infrastructure improvements, acquisitions, and other capital expenditures for their operations, including skilled nursing and assisted living centers and many affordable housing projects. For-profit operators would also see negative effects from the elimination of the debt instruments.

In addition, the House tax reform plan would repeal the medical expense deduction, which would be detrimental to many seniors. Current law allows individuals to deduct certain health care expenses that add up to more than 10 percent of their annual income. The Senate bill would maintain the deduction and actually expand it by lowering the threshold to 7.5 percent of income.

AHCA/NCAL is part of an AARP-led coalition advocating for the medical expense deduction.

Among the broader issues related to health care that must still be worked out in conference are whether to repeal the Affordable Care Act’s (ACA’s) individual mandate that makes having health insurance mandatory. The Senate version repeals the mandate, while the House bill does not.

Speaking on the chances to rectify the difference, House Ways and Means Committee Chairman Kevin Brady (R-Texas) on Dec. 6 said most House Republicans will back the repeal of the ACA individual mandate. In a report in The Hill newspaper, he said: “We'll be asking our members where do they want us to be on that position. I suspect there will be strong support.”
On pharmaceuticals, the House legislation would repeal the tax credit that drug companies receive for orphan drugs, the name for drugs to treat rare diseases. Current law permits drug makers to take a 50 percent deduction for clinical trials of orphan drugs. The Senate bill would limit the deduction but not repeal the credit entirely.

There are many other non-health care differences between the House and Senate bills, which must be worked out in the conference committee before final passage. For instance, the House bill makes tax cuts for individuals permanent while the Senate bill sunsets the reductions in 2025. The Senate legislation also maintains the alternative minimum tax for individuals and corporations. The House bill does not.
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