The Paent Protecon and Aﬀordable Care Act Bill Po5er, Senior Tax Director
• Businesses organized in multiple formsmay be considered as a single employer• Controlled groups can be parent-subsidiary, brother-sister, combinations oraﬃliated service groupsDetermination of FTE in a Controlled Group
• Control exists if parent owns 80% of thesubsidiary• Could involve multiple subsidiariesParent - Subsidiary Controlled Group
• Where the same five or fewer individualsown 80% of the related entities, AND• Eﬀectively control more than 50%(identical ownership)• Attributiono Family Members – spouse, children, grandchildren,parentso Partner to Partnero Estates and Trusts and Beneficiarieso Corporations and ShareholdersBrother – Sister Controlled Group
ExamplePercentage of OwnershipMember A Corp B LLC EﬀecveA 80% 20% 20%B 10% 50% 10%C 5% 15% 5%D 5% 15% 5%Total 100% 100% 40%The four owners have morethan 80% of A and B, so thatrequirement is satisfied. Butidentical ownership is only40% so they fail the 50%test. They are two separateemployees
• Subjective determination• Related entities may or may not haveownership relationships• Performing services to or on behalf of theother entity, and when capital is not amaterial income producing factorAﬃliated Service Groups
Expansion of Coverage – Individual Mandate• Individual Mandateo With limited exceptions, ALL individuals must maintain“minimum essential coverage”or pay a penalty.§ Government provided coverage§ Employer sponsored coverage§ Exchange coverage.• Exemption from mandateo if required contribution to purchase insurance exceeds 8% ofhousehold income.o Religious objectiono American Indianso Incarcerated Individualso Those with incomes below the tax filing threshold
Expansion of Coverage – Individual Mandate• Penalty amount is the lesser of a flat dollaramount of percentage of income.o 2014: $95 or 1% of household incomeo 2015: $325 or 2% of household incomeo 2016 and later: $695 or 2.5% of household income
• Eﬀective in 2014 for employers with at least 50 fulltime employees• Large employer must oﬀer full time employees(FTE) and their dependents the opportunity toenroll in minimum essential coverage under aneligible employer sponsored plan• FTE must generally not be asked to pay more than9.5% of their modified household income forcoverage• Exceptions for new employeesLarge Employer Penalties
• Employer not oﬀering coverage• Employer oﬀering coverage whose employeereceives a creditPenalty for Non-Compliance
• Such employers are subject to a penalty if one ormore FTE is certified to the employer as beingcovered by an Exchange and received a premiumtax credit• Penalty for any month is an amount equal to thenumber of FTE’s in excess of 30 times 1/12th of$2,000• Regardless of the number of FTE’s who areenrolled in the Exchange and received a premiumcreditEmployers Not Oﬀering Coverage
• Some employers who oﬀer healthinsurance coverage to FTE’s may be subjectto a penalty• Penalty can apply based on the number ofFTE’s who purchase coverage through anExchange and receive a credit or cost-sharing reductionEmployers Oﬀering Coverage
Expansion of Medicare Taxes (2013)• Employee portion of Medicare tax increased by 0.9%• Applies to wages or self-employment income in excess of$200,000 ($250,000 in the case of a joint return, $125,000 inthe case of a married taxpayer filing separately).• The additional Medicare tax increases the employee portionto 2.35% or a total Medicare rate of 3.8%.• Employer has the obligation to withhold the additional taxon wages (without regard to spouse’s wages) if its employeeearns more than $200,000; Employee is liable to the extentnot withheld by employer.• Self-employed are not allowed a deduction for ½ of theadditional 0.9% tax.
Expansion of Medicare Taxes (2013)• Individuals, estates and trusts required to pay 3.8% taxon net investment income such as interest, dividends,annuities, royalties, rents, capital gains and income frompassive activities.• Applies to the income in excess of $250,000 for jointreturns, $125,000 for married filing separate and$200,000 for all others
Thank YouWilliam C. PotterSenior Tax Directorhealthcarereform@pncpa.comOﬃce: 225-922-4600
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