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Internal Revenue Code, § 275. Certain Taxes

I.R.C. § 275(a) General Rule
No deduction shall be allowed for the following taxes:
I.R.C. § 275(a)(1)
Federal income taxes, including—
I.R.C. § 275(a)(1)(A)
the tax imposed by section 3101 (relating to the tax on employees under the Federal Insurance Contributions Act);
I.R.C. § 275(a)(1)(B)
the taxes imposed by sections 3201 and 3211 (relating to the taxes on railroad employees and railroad employee representatives); and
I.R.C. § 275(a)(1)(C)
the tax withheld at source on wages under section 3402.
I.R.C. § 275(a)(2)
Federal war profits and excess profits taxes.
I.R.C. § 275(a)(3)
Estate, inheritance, legacy, succession, and gift taxes.
I.R.C. § 275(a)(4)
Income, war profits, and excess profits taxes imposed by the authority of any foreign country or possession of the United States if the taxpayer chooses to take to any extent the benefits of section 901.
I.R.C. § 275(a)(5)
Taxes on real property, to the extent that section 164(d) requires such taxes to be treated as imposed on another taxpayer.
I.R.C. § 275(a)(6)
Taxes imposed by chapters 41, 42, 43, 44, 45, 46, and 54.
Paragraph (1) shall not apply to any taxes to the extent such taxes are allowable as a deduction under section 164(f).
I.R.C. § 275(b) Cross Reference
For disallowance of certain other taxes, see section 164(c).
(Added by Pub. L. 88-272, title II, 207(b)(3)(A), Feb. 26, 1964, 78 Stat. 42, and amended by Pub. L. 93-406, title II, 1016(a)(1), Sept. 2, 1974, 88 Stat. 929; Pub. L. 94-455, title XIII, 1307(d)(2)(A), title XVI, 1605(b)(1), title XIX, 1901(a)(39), Oct. 4, 1976, 90 Stat. 1727, 1754, 1771; Pub. L. 95-600, title VII, 701(t)(3)(B), Nov. 6, 1978, 92 Stat. 2912; Pub. L. 97-248, title III, 305(a), 308(a), Sept. 3, 1982, 96 Stat. 588, 591; Pub. L. 98-21, title I, 124(c)(5), Apr. 20, 1983, 97 Stat. 91; Pub. L. 98-67, title I, 102(a) Aug. 5, 1983, 97 Stat. 369; Pub. L. 98-369, div. A, title I, 67(b)(2), title VIII, 801(d)(5), July 18, 1984, 98 Stat. 587, 996; Pub. L. 99-499, title V, 516(b)(2)(B), Oct. 17, 1986, 100 Stat. 1771; Pub. L. 100-203, title X, 10228(b), Dec. 22, 1987, 101 Stat. 1330-418; Pub. L. 106-519, Sec. 4(2), Nov. 15, 2000; Pub. L. 108-357, title I, VIII, Sec. 101(b)(5), 802(b)(1), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 110-172, Sec. 11(g)(5), Dec. 29, 2007, 121 Stat. 2473; Pub. L. 113-295, Div. A, title II, Sec. 221(a)(12)(E), Dec. 19, 2014, 128 Stat. 4010.)
BACKGROUND NOTES
AMENDMENTS
2014 - Subsec. (a). Pub. L. 113-295, Div. A, Sec. 221(a)(12)(E), amended subsec. (a) by striking the last sentence. Before it was struck, it read as follows: “Paragraph (1) shall not apply to the tax imposed by section 59A.”
2007 - Subsec. (a)(4). Pub. L. 110-172, Sec. 11(g)(5), amended par. (4) by substituting “if the taxpayer chooses to take to any extent the benefits of section 901.” for “if—(A) the taxpayer chooses to take to any extent the benefits of section 901, or (B) such taxes are paid or accrued with respect to foreign trade income (within the meaning of section 923(b)) of a FSC. A rule similar to the rule of section 943(d) shall apply for purposes of paragraph (4)(C).”
2004-Subsec. (a). Pub. L. 108-357, Sec. 101(b)(5), amended subsec. (a) by striking the last sentence. Before being struck, it read as follows:
Subsec. (a)(4). Pub. L. 108-357, Sec. 101(b)(5), amended par. (4) by inserting “or” at the end of subpar. (A), by substituting a period for “or” at the end of subpar. (B), and by striking subpar. (C). Before being struck, subpar. (C) read as follows:
“(C) such taxes are paid or accrued with respect to qualifying foreign trade income (as defined in section 941).”
Subsec. (a)(6). Pub. L. 108-357, Sec. 802(b)(1), amended par. (6) by inserting “45,” before “46”.
2000--Subsec. (a)(4). Pub. L. 106-519 amended par. (4) by striking “, or” at the end of subpar. (A); by substituting “or," for the period; and adding subpar. (C).
Subsec. (a)(4). Pub. L. 106-519 amended par. (4) by adding a sentence at the end.
1987--Subsec. (a)(6). Pub. L. 100-203 substituted “46, and 54” for “and 46”.
1986--Subsec. (a). Pub. L. 99-499 inserted at end “Paragraph (1) shall not apply to the tax imposed by section 59A.”
1984--Subsec. (a)(4). Pub. L. 98-369, 801(d)(5), inserted provision disallowing a deduction for income, war profits, and excess profits taxes if such taxes are paid or accrued with respect to foreign trade income, within the meaning of section 923(b), of a FSC.
Subsec. (a)(6). Pub. L. 98-369, 67(b)(2), inserted reference to chapter 46.
1983--Subsec. (a)(1). Pub. L. 98-67 repealed amendments made by Pub. L. 97-248. See 1982 Amendment note below.
Subsec. (a). Pub. L. 98-21, 124, amended subsec. (a) by adding the sentence at the end..
1982--Subsec. (a)(1). Pub. L. 97-248 provided that, applicable to payments of interest, dividends, and patronage dividends paid or credited after June 30, 1983, par. (1) is amended by striking out “and” at end of subpar. (B), by substituting “;and” for the period at end of subpar. (C), and by inserting subpar. (D) relating to the tax withheld at source on interest, dividends, and patronage dividends under section 3451. Section 102(a), (b) of Pub. L. 98-67, title I, Aug. 5, 1983, 97 Stat. 369, repealed subtitle A (301-308) of title III of Pub. L. 97-248 as of the close of June 30, 1983, and provided that the Internal Revenue Code of 1954 [now 1986] [this title] shall be applied and administered (subject to certain exceptions) as if such subtitle A (and the amendments made by such subtitle A) had not been enacted.
1976--Subsec. (a)(1)(C). Pub. L. 94-455, 1901(a)(39), struck out “,and corresponding provisions of prior revenue laws” after “under section 3402”.
Subsec. (a)(6). Pub. L. 94-455, 1307(d)(2)(A), 1605(b)(1), inserted reference to chapters 41 and 44.
1974--Subsec. (a)(6). Pub. L. 93-406 added par. (6).
EFFECTIVE DATE OF 2014 AMENDMENT
Amendment by Pub. L. 113-295, Div. A, Sec. 221(a)(120(E), effective on the date of the enactment of this Act [Enacted: Dec. 19, 2014].
Section 221(b)(2) of Pub. L. 113-295, Div. A, provided the following Savings Provision:
“(2) SAVINGS PROVISION.—If—
“(A) any provision amended or repealed by the amendments made by this section applied to—
“(i) any transaction occurring before the date of the enactment of this Act [Enacted: Dec. 19, 2014],
“(ii) any property acquired before such date of enactment, or
“(iii) any item of income, loss, deduction, or credit taken into account before such date of enactment, and
“(B) the treatment of such transaction, property, or item under such provision would (without regard to the amendments or repeals made by this section) affect the liability for tax for periods ending after date of enactment, nothing in the amendments or repeals made by this section shall be construed to affect the treatment of such transaction, property, or item for purposes of determining liability for tax for periods ending after such date of enactment.”
EFFECTIVE DATE OF 2007 AMENDMENT
Amendment by Pub. L. 110-172 effective on the date of the enactment of this Act [Enacted: Dec. 29, 2007].
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendments by Pub. L. 108-357 effective for transactions after December 31, 2004. Sec. 101(d)-(f) of Pub. L. 108-357, as amended by Pub. L. 113-295, Div. A, Sec. 219(a), provided the following rules:
“(d) TRANSITIONAL RULE FOR 2005 AND 2006-
“(1) IN GENERAL- In the case of transactions during 2005 or 2006, the amount includible in gross income by reason of the amendments made by this section shall not exceed the applicable percentage of the amount which would have been so included but for this subsection.
“(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage shall be as follows:
“(A) For 2005, the applicable percentage shall be 20 percent.
“(B) For 2006, the applicable percentage shall be 40 percent.
“(3) COORDINATION WITH SECTION 199.—This subsection shall be applied without regard to any deduction allowable under section 199.
“(e) REVOCATION OF ELECTION TO BE TREATED AS DOMESTIC CORPORATION- If, during the 1-year period beginning on the date of the enactment of this Act, a corporation for which an election is in effect under section 943(e) of the Internal Revenue Code of 1986 revokes such election, no gain or loss shall be recognized with respect to property treated as transferred under clause (ii) of section 943(e)(4)(B) of such Code to the extent such property--
“(1) was treated as transferred under clause (i) thereof, or
“(2) was acquired during a taxable year to which such election applies and before May 1, 2003, in the ordinary course of its trade or business.
“The Secretary of the Treasury (or such Secretary's delegate) may prescribe such regulations as may be necessary to prevent the abuse of the purposes of this subsection.
Editor's Note: Sec. 513(b) of Pub. L. 109-222 struck Sec. 101(f) of Pub. L. 108-357, effective for taxable years beginning after the date of the enactment of this Act [Enacted: May 17, 2006].
“(f) BINDING CONTRACTS- The amendments made by this section shall not apply to any transaction in the ordinary course of a trade or business which occurs pursuant to a binding contract--
“(1) which is between the taxpayer and a person who is not a related person (as defined in section 943(b)(3) of such Code, as in effect on the day before the date of the enactment of this Act), and
“(2) which is in effect on September 17, 2003, and at all times thereafter.
“For purposes of this subsection, a binding contract shall include a purchase option, renewal option, or replacement option which is included in such contract and which is enforceable against the seller or lessor.”
Amendment by Sec. 802(b)(1) of Pub. L. 108-357 effective on March 4, 2003; except that periods before such date shall not be taken into account in applying the periods in subsections (a) and (e)(1) of section 4985 of the Internal Revenue Code of 1986, as added by Sec. 802 of Pub. L. 108-357.
EFFECTIVE DATE OF 2000 AMENDMENT
Amendment by Pub. L. 106-519 generally applicable to transactions after September 30, 2000.
EFFECTIVE DATE OF 1987 AMENDMENT
Amendment by Pub. L. 100-203 applicable to consideration received after Dec. 22, 1987, in taxable years ending after such date, except not applicable in the case of any acquisition pursuant to a written binding contract in effect on Dec. 15, 1987, and at all times thereafter before the acquisition, see section 10228(d) of Pub. L. 100-203, set out as an Effective Date note under section 5881 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-499 applicable to taxable years beginning after Dec. 31, 1986, see section 516(c) of Pub. L. 99-499, set out as a note under section 26 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 67(b)(2) of Pub. L. 98-369 applicable to payments under agreements entered into or renewed after June 14, 1984, in taxable years ending after such date, with contracts entered into before June 15, 1984, which are amended after June 14, 1984, in any significant relevant aspect to be treated as a contract entered into after June 14, 1984, see section 67(e) of Pub. L. 98-369, set out as an Effective Date note under section 280G of this title.
Amendment by section 801(d)(5) of Pub. L. 98-369 applicable to transactions after Dec. 31, 1984, in taxable years ending after such date, see section 805(a)(1) of Pub. L. 98-369, set out as an Effective Date note under section 921 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by section 124 of Pub. L. 98-21 effective for taxable years beginning after December 31, 1989.
EFFECTIVE DATE OF 1976 AMENDMENT
For effective date of amendment by section 1307(d)(2)(A) of Pub. L. 94-455, see section 1307(e) of Pub. L. 94-455, set out as a note under section 501 of this title.
For effective date of amendment by section 1605(b)(1) of Pub. L. 94-455, see section 1608(d) of Pub. L. 94-455, set out as a note under section 856 of this title.
Amendment by section 1901(a)(39) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by Pub. L. 93-406 applicable, except as otherwise provided in section 1017(c) through (i) of Pub. L. 93-406, for plan years beginning after Sept. 2, 1974, but, in the case of plans in existence on Jan. 1, 1974, amendment by Pub. L. 93-406 applicable for plan years beginning after Dec. 31, 1975, see section 1017 of Pub. L. 93-406, set out as a note under section 410 of this title.
IMPOSITION OF ANNUAL FEE ON BRANDED PRESCRIPTION PHARMACEUTICAL MANUFACTURERS AND IMPORTERS
Pub. L. 111-148, Sec. 9008, as amended by Pub. L. 111-152, Sec. 1404(a), provided:
“(a) IMPOSITION OF FEE-
“(1) IN GENERAL- Each covered entity engaged in the business of manufacturing or importing branded prescription drugs shall pay to the Secretary of the Treasury not later than the annual payment date of each calendar year beginning after 2010 a fee in an amount determined under subsection (b).
“(2) ANNUAL PAYMENT DATE- For purposes of this section, the term ‘annual payment date’ means with respect to any calendar year the date determined by the Secretary, but in no event later than September 30 of such calendar year.
“(b) DETERMINATION OF FEE AMOUNT-
“(1) IN GENERAL- With respect to each covered entity, the fee under this section for any calendar year shall be equal to an amount that bears the same ratio to the applicable amount as--
“(A) the covered entity's branded prescription drug sales taken into account during the preceding calendar year, bear to
“(B) the aggregate branded prescription drug sales of all covered entities taken into account during such preceding calendar year.
“(2) SALES TAKEN INTO ACCOUNT- For purposes of paragraph (1), the branded prescription drug sales taken into account during any calendar year with respect to any covered entity shall be determined in accordance with the following table:
With respect to a covered entity's aggregate branded prescription drug sales during the calendar year that are: The percentage of such sales taken into account is:
Not more than $5,000,000 0 percent
More than $5,000,000 but not more than $125,000,000 10 percent
More than $125,000,000 but not more than $225,000,000 40 percent
More than $225,000,000 but not more than $400,000,000 75 percent
More than $400,000,000 100 percent.
“(3) SECRETARIAL DETERMINATION- The Secretary of the Treasury shall calculate the amount of each covered entity's fee for any calendar year under paragraph (1). In calculating such amount, the Secretary of the Treasury shall determine such covered entity's branded prescription drug sales on the basis of reports submitted under subsection (g) and through the use of any other source of information available to the Secretary of the Treasury.
“(4) APPLICABLE AMOUNT- For purposes of paragraph (1), the applicable amount shall be determined in accordance with the following table:
“Calendar year Applicable amount
2011 $2,500,000,000
2012 $2,800,000,000
2013 $2,800,000,000
2014 $3,000,000,000
2015 $3,000,000,000
2016 $3,000,000,000
2017 $4,000,000,000
2018 $4,100,000,000
2019 and thereafter $2,800,000,000.
“(c) TRANSFER OF FEES TO MEDICARE PART B TRUST FUND- There is hereby appropriated to the Federal Supplementary Medical Insurance Trust Fund established under section 1841 of the Social Security Act an amount equal to the fees received by the Secretary of the Treasury under subsection (a).
“(d) COVERED ENTITY-
“(1) IN GENERAL- For purposes of this section, the term ‘covered entity’ means any manufacturer or importer with gross receipts from branded prescription drug sales.
“(2) CONTROLLED GROUPS-
“(A) IN GENERAL- For purposes of this subsection, all persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 or subsection (m) or (o) of section 414 of such Code shall be treated as a single covered entity.
“(B) INCLUSION OF FOREIGN CORPORATIONS- For purposes of subparagraph (A), in applying subsections (a) and (b) of section 52 of such Code to this section, section 1563 of such Code shall be applied without regard to subsection (b)(2)(C) thereof.
“(3) JOINT AND SEVERAL LIABILITY- If more than one person is liable for payment of the fee under subsection (a) with respect to a single covered entity by reason of the application of paragraph (2), all such persons shall be jointly and severally liable for payment of such fee.
“(e) BRANDED PRESCRIPTION DRUG SALES- For purposes of this section--
“(1) IN GENERAL- The term ‘branded prescription drug sales’ means sales of branded prescription drugs to any specified government program or pursuant to coverage under any such program.
“(2) BRANDED PRESCRIPTION DRUGS-
“(A) IN GENERAL- The term ‘branded prescription drug’ means--
“(i) any prescription drug the application for which was submitted under section 505(b) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(b)), or
“(ii) any biological product the license for which was submitted under section 351(a) of the Public Health Service Act (42 U.S.C. 262(a)).
“(B) PRESCRIPTION DRUG- For purposes of subparagraph (A)(i), the term ‘prescription drug’ means any drug which is subject to section 503(b) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353(b)).
“(3) EXCLUSION OF ORPHAN DRUG SALES- The term ‘branded prescription drug sales’ shall not include sales of any drug or biological product with respect to which a credit was allowed for any taxable year under section 45C of the Internal Revenue Code of 1986. The preceding sentence shall not apply with respect to any such drug or biological product after the date on which such drug or biological product is approved by the Food and Drug Administration for marketing for any indication other than the treatment of the rare disease or condition with respect to which such credit was allowed.
“(4) SPECIFIED GOVERNMENT PROGRAM- The term ‘specified government program’ means--
“(A) the Medicare Part D program under part D of title XVIII of the Social Security Act,
“(B) the Medicare Part B program under part B of title XVIII of the Social Security Act,
“(C) the Medicaid program under title XIX of the Social Security Act,
“(D) any program under which branded prescription drugs are procured by the Department of Veterans Affairs,
“(E) any program under which branded prescription drugs are procured by the Department of Defense, or
“(F) the TRICARE retail pharmacy program under section 1074g of title 10, United States Code.
“(f) TAX TREATMENT OF FEES- The fees imposed by this section--
“(1) for purposes of subtitle F of the Internal Revenue Code of 1986, shall be treated as excise taxes with respect to which only civil actions for refund under procedures of such subtitle shall apply, and
“(2) for purposes of section 275 of such Code, shall be considered to be a tax described in section 275(a)(6).
“(g) REPORTING REQUIERMENT- Not later than the date determined by the Secretary of the Treasury following the end of any calendar year, the Secretary of Health and Human Services, the Secretary of Veterans Affairs, and the Secretary of Defense shall report to the Secretary of the Treasury, in such manner as the Secretary of the Treasury prescribes, the total branded prescription drug sales for each covered entity with respect to each specified government program under such Secretary's jurisdiction using the following methodology:
“(1) MEDICARE PART D PROGRAM- The Secretary of Health and Human Services shall report, for each covered entity and for each branded prescription drug of the covered entity covered by the Medicare Part D program, the product of--
“(A) the per-unit ingredient cost, as reported to the Secretary of Health and Human Services by prescription drug plans and Medicare Advantage prescription drug plans, minus any per-unit rebate, discount, or other price concession provided by the covered entity, as reported to the Secretary of Health and Human Services by the prescription drug plans and Medicare Advantage prescription drug plans, and
“(B) the number of units of the branded prescription drug paid for under the Medicare Part D program.
“(2) MEDICARE PART B PROGRAM- The Secretary of Health and Human Services shall report, for each covered entity and for each branded prescription drug of the covered entity covered by the Medicare Part B program under section 1862(a) of the Social Security Act, the product of--
“(A) the per-unit average sales price (as defined in section 1847A(c) of the Social Security Act) or the per-unit Part B payment rate for a separately paid branded prescription drug without a reported average sales price, and
“(B) the number of units of the branded prescription drug paid for under the Medicare Part B program.
“The Centers for Medicare and Medicaid Services shall establish a process for determining the units and the allocated price for purposes of this section for those branded prescription drugs that are not separately payable or for which National Drug Codes are not reported.
“(3) MEDICAID PROGRAM- The Secretary of Health and Human Services shall report, for each covered entity and for each branded prescription drug of the covered entity covered under the Medicaid program, the product of--
“(A) the per-unit ingredient cost paid to pharmacies by States for the branded prescription drug dispensed to Medicaid beneficiaries, minus any per-unit rebate paid by the covered entity under section 1927 of the Social Security Act and any State supplemental rebate, and
“(B) the number of units of the branded prescription drug paid for under the Medicaid program.
“(4) DEPARTMENT OF VETERANS AFFAIRS PROGRAMS- The Secretary of Veterans Affairs shall report, for each covered entity and for each branded prescription drug of the covered entity the total amount paid for each such branded prescription drug procured by the Department of Veterans Affairs for its beneficiaries.
“(5) DEPARTMENT OF DEFENSE PROGRAMS AND TRICARE- The Secretary of Defense shall report, for each covered entity and for each branded prescription drug of the covered entity, the sum of--
“(A) the total amount paid for each such branded prescription drug procured by the Department of Defense for its beneficiaries, and
“(B) for each such branded prescription drug dispensed under the TRICARE retail pharmacy program, the product of--
“(i) the per-unit ingredient cost, minus any per-unit rebate paid by the covered entity, and
“(ii) the number of units of the branded prescription drug dispensed under such program.
“(h) SECRETARY- For purposes of this section, the term ‘Secretary’ includes the Secretary's delegate.
“(i) GUIDANCE- The Secretary of the Treasury shall publish guidance necessary to carry out the purposes of this section.
“(j) EFFECTIVE DATE- This section shall apply to calendar years beginning after December 31, 2010.
“(k) CONFORMING AMENDMENT- Section 1841(a) of the Social Security Act is amended by inserting ‘or section 9008(c) of the Patient Protection and Affordable Care Act of 2009’ after ‘this part’.”
IMPOSITION OF ANNUAL FEE ON HEALTH INSURANCE PROVIDERS
Pub. L. 111-148, Sec. 9010 and 10905, as amended by Pub. L. 111-152, Sec. 1406, Pub. L. 114-113, Div. P, Sec. 201, and Pub. L. 115-120, Sec. 4003(b), provided:
“SEC. 9010. IMPOSITION OF ANNUAL FEE ON HEALTH INSURANCE PROVIDERS.
“(a) IMPOSITION OF FEE-
“(1) IN GENERAL- Each covered entity engaged in the business of providing health insurance shall pay to the Secretary not later than the annual payment date of each calendar year beginning after 2013 a fee in an amount determined under subsection (b).
“(2) ANNUAL PAYMENT DATE- For purposes of this section, the term ‘annual payment date’ means with respect to any calendar year the date determined by the Secretary, but in no event later than September 30 of such calendar year.
“(b) DETERMINATION OF FEE AMOUNT-
“(1) IN GENERAL- With respect to each covered entity, the fee under this section for any calendar year shall be equal to an amount that bears the same ratio to the applicable amount as-
“(A) the covered entity's net premiums written with respect to health insurance for any United States health risk that are taken into account during the preceding calendar year, bears to
“(B) the aggregate net premiums written with respect to such health insurance of all covered entities that are taken into account during such preceding calendar year.
“(2) AMOUNTS TAKEN INTO ACCOUNT- For purposes of paragraph (1)—
“(A) IN GENERAL- The net premiums written with respect to health insurance for any United States health risk that are taken into account during any calendar year with respect to any covered entity shall be determined in accordance with the following table:
With respect to a covered entity's net premiums written during the calendar year that are: The percentage of net premiums written that are taken into account is:
Not more than $25,000,000 0 percent
More than $25,000,000 but not more than $50,000,000 50 percent
More than $50,000,000 100 percent
“(B) PARTIAL EXCLUSION FOR CERTAIN EXEMPT ACTIVITIES.-After the application of subparagraph (A), only 50 percent of the remaining net premiums written with respect to health insurance for any United States health risk that are attributable to the activities (other than activities of an unrelated trade or business as defined in section 513 of the Internal Revenue Code of 1986) of any covered entity qualifying under paragraph (3), (4), (26), or (29) of section 501(c) of such Code and exempt from tax under section 501(a) of such Code shall be taken into account.
“(3) SECRETARIAL DETERMINATION- The Secretary shall calculate the amount of each covered entity's fee for any calendar year under paragraph (1). In calculating such amount, the Secretary shall determine such covered entity's net premiums written with respect to any United States health risk on the basis of reports submitted by the covered entity under subsection (g) and through the use of any other source of information available to the Secretary.
“(c) COVERED ENTITY-
“(1) IN GENERAL- For purposes of this section, the term ‘covered entity’ means any entity which provides health insurance for any United States health risk during the calendar year in which the fee under this section is due.
“(2) EXCLUSION- Such term does not include--
“(A) any employer to the extent that such employer self-insures its employees' health risks, or
“(B) any governmental entity,
“(C) any entity-
“(i) which is incorporated as a nonprofit corporation under a State law,
“(ii) no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in section 501(h) of the Internal Revenue Code of 1986), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office, and
“(iii) more than 80 percent of the gross revenues of which is received from government programs that target low-income, elderly, or disabled populations under titles XVIII, XIX, and XXI of the Social Security Act, and
“(D) any entity which is described in section 501(c)(9) of such Code and which is established by an entity (other than by an employer or employers) for purposes of providing health care benefits.
“(3) CONTROLLED GROUPS-
“(A) IN GENERAL- For purposes of this subsection, all persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 or subsection (m) or (o) of section 414 of such Code shall be treated as a single covered entity (or employer for purposes of paragraph (2)).
“(B) INCLUSION OF FOREIGN CORPORATIONS- For purposes of subparagraph (A), in applying subsections (a) and (b) of section 52 of such Code to this section, section 1563 of such Code shall be applied without regard to subsection (b)(2)(C) thereof.
“If an entity described in subparagraph (C) or (D) of paragraph (2) is treated as a covered entity by reason of the application of the preceding sentence, the net premiums written with respect to health insurance for any United States health risk of such entity shall not be taken into account for purposes of this section.
“(4) JOINT AND SEVERAL LIABILITY- If more than one person is liable for payment of the fee under subsection (a) with respect to a single covered entity by reason of the application of paragraph (3), all such persons shall be jointly and severally liable for payment of such fee.
“(d) UNITED STATES HEALTH RISK- For purposes of this section, the term ‘United States health risk’ means the health risk of any individual who is--
“(1) a United States citizen,
“(2) a resident of the United States (within the meaning of section 7701(b)(1)(A) of the Internal Revenue Code of 1986), or
“(3) located in the United States, with respect to the period such individual is so located.
“(e) Applicable Amount- For purposes of subsection (b)(1)--
“Calendar year Applicable amount
2014 $8,000,000,000
2015 $11,300,000,000
2016 $11,300,000,000
2017 $13,900,000,000
2018 $14,300,000,000.
“(2) YEARS AFTER 2018- In the case of any calendar year beginning after 2018, the applicable amount shall be the applicable amount for the preceding calendar year increased by the rate of premium growth (within the meaning of section 36B(b)(3)(A)(ii) of the Internal Revenue Code of 1986) for such preceding calendar year.
“(f) Tax Treatment of Fees- The fees imposed by this section--
“(1) for purposes of subtitle F of the Internal Revenue Code of 1986, shall be treated as excise taxes with respect to which only civil actions for refund under procedures of such subtitle shall apply, and
“(2) for purposes of section 275 of such Code shall be considered to be a tax described in section 275(a)(6).
“(g) REPORTING REQUIREMENT-
“(1) IN GENERAL- Not later than the date determined by the Secretary following the end of any calendar year, each covered entity shall report to the Secretary, in such manner as the Secretary prescribes, the covered entity's net premiums written with respect to health insurance for any United States health risk for such calendar year.
“(2) PENALTY FOR FAILURE TO REPORT-
“(A) IN GENERAL- In the case of any failure to make a report containing the information required by paragraph (1) on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause, there shall be paid by the covered entity failing to file such report, an amount equal to--
“(i) $10,000, plus
“(ii) the lesser of--
“(I) an amount equal to $1,000, multiplied by the number of days during which such failure continues, or
“(II) the amount of the fee imposed by this section for which such report was required.
“(B) TREATMENT OF PENALTY- The penalty imposed under subparagraph (A)--
“(i) shall be treated as a penalty for purposes of subtitle F of the Internal Revenue Code of 1986,
“(ii) shall be paid on notice and demand by the Secretary and in the same manner as tax under such Code, and
“(iii) with respect to which only civil actions for refund under procedures of such subtitle F shall apply.
“(3) ACCURACY-RELATED PENALTY-
“(A) IN GENERAL- In the case of any understatement of a covered entity's net premiums written with respect to health insurance for any United States health risk for any calendar year, there shall be paid by the covered entity making such understatement, an amount equal to the excess of--
“(i) the amount of the covered entity's fee under this section for the calendar year the Secretary determines should have been paid in the absence of any such understatement, over
“(ii) the amount of such fee the Secretary determined based on such understatement.
“(B) UNDERSTATEMENT- For purposes of this paragraph, an understatement of a covered entity's net premiums written with respect to health insurance for any United States health risk for any calendar year is the difference between the amount of such net premiums written as reported on the return filed by the covered entity under paragraph (1) and the amount of such net premiums written that should have been reported on such return.
“(C) TREATMENT OF PENALTY- The penalty imposed under subparagraph (A) shall be subject to the provisions of subtitle F of the Internal Revenue Code of 1986 that apply to assessable penalties imposed under chapter 68 of such Code.
“(4) TREATMENT OF INFORMATION- Section 6103 of the Internal Revenue Code of 1986 shall not apply to any information reported under this subsection.
“(h) ADDITIONAL DEFINITIONS- For purposes of this section--
“(1) SECRETARY- The term ‘Secretary’ means the Secretary of the Treasury or the Secretary's delegate.
“(2) UNITED STATES- The term ‘United States’ means the several States, the District of Columbia, the Commonwealth of Puerto Rico, and the possessions of the United States.
“(3) HEALTH INSURANCE- The term ‘health insurance’ shall not include—
“(A) any insurance coverage described in paragraph (1)(A) or (3) of section 9832(c) of the Internal Revenue Code of 1986,
“(B) any insurance for long-term care, or
“(C) any medicare supplemental health insurance (as defined in section 1882(g)(1) of the Social Security Act).
“(i) GUIDANCE- The Secretary shall publish guidance necessary to carry out the purposes of this section and shall prescribe such regulations as are necessary or appropriate to prevent avoidance of the purposes of this section, including inappropriate actions taken to qualify as an exempt entity under subsection (c)(2)..
“(j) EFFECTIVE DATE.- This section shall apply to calendar years—
“(1) beginning after December 31, 2013, and ending before January 1, 2017,
“(2) beginning after December 31, 2017, and ending before January 1, 2019, and
“(3) beginning after December 31, 2019.’’
EFFECTIVE DATE
The amendments made by this section shall apply to calendar years beginning after December 31, 2018, see section 4003(b) of Pub. L. 115-120.
IMPOSITION OF ANNUAL FEE ON MEDICAL DEVICE MANUFACTURERS AND IMPORTERS
Pub. L. 111-148, Sec. 9009 and 10904, which was repealed by Pub. L. 111-152, Sec. 1405(d), effective as of the date of the enactment of Pub. L. 111-148, provided:
“(a) IMPOSITION OF FEE.-
“(1) IN GENERAL.-Each covered entity engaged in the business of manufacturing or importing medical devices shall pay to the Secretary not later than the annual payment date of each calendar year beginning after 2010 a fee in an amount determined under subsection (b).
“(2) ANNUAL PAYMENT DATE.-For purposes of this section, the term ‘’annual payment date” means with respect to any calendar year the date determined by the Secretary, but in no event later than September 30 of such calendar year.
“(b) DETERMINATION OF FEE AMOUNT.-
“(1) IN GENERAL.-With respect to each covered entity, the fee under this section for any calendar year shall be equal to an amount that bears the same ratio to $2,000,000,000 ($3,000,000,000 after 2017) as-
“(A) the covered entity's gross receipts from medical device sales taken into account during the preceding calendar year, bear to
“(B) the aggregate gross receipts of all covered entities from medical device sales taken into account during such preceding calendar year.
“(2) GROSS RECEIPTS FROM SALES TAKEN INTO ACCOUNT.- For purposes of paragraph (1), the gross receipts from medical device sales taken into account during any calendar year with respect to any covered entity shall be determined in accordance with the following table:
With respect to a covered entity's aggregate gross receipts from medical device sales during the calendar year that are: The percentage of gross receipts taken into account is:
Not more than $5,000,000 0 percent
More than $5,000,000 but not more than $25,000,000. 50 percent
More than $25,000,000 100 percent.
(3) SECRETARIAL DETERMINATION.-The Secretary shall calculate the amount of each covered entity's fee for any calendar year under paragraph (1). In calculating such amount, the Secretary shall determine such covered entity's gross receipts from medical device sales on the basis of reports submitted by the covered entity under subsection (f) and through the use of any other source of information available to the Secretary.
“(c) COVERED ENTITY.-
“(1) IN GENERAL.-For purposes of this section, the term ‘’covered entity” means any manufacturer or importer with gross receipts from medical device sales.
“(2) CONTROLLED GROUPS.-
“(A) IN GENERAL.-For purposes of this subsection, all persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 or subsection (m) or (o) of section 414 of such Code shall be treated as a single covered entity.
“(B) INCLUSION OF FOREIGN CORPORATIONS.-For purposes of subparagraph (A), in applying subsections (a) and (b) of section 52 of such Code to this section, section 1563 of such Code shall be applied without regard to subsection (b)(2)(C) thereof.
“(d) MEDICAL DEVICE SALES.-For purposes of this section-
“(1) IN GENERAL.-The term ‘’medical device sales” means sales for use in the United States of any medical device, other than the sales of a medical device that-
“(A) has been classified in class II under section 513 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360c) and is primarily sold to consumers at retail for not more than $100 per unit, or
“(B) has been classified in class I under such section.
“(2) UNITED STATES.-For purposes of paragraph (1), the term ‘’United States” means the several States, the District of Columbia, the Commonwealth of Puerto Rico, and the possessions of the United States.
“(3) MEDICAL DEVICE.-For purposes of paragraph (1), the term ‘’medical device” means any device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h))) intended for humans.
“(e) TAX TREATMENT OF FEES.-The fees imposed by this section? (1) for purposes of subtitle F of the Internal Revenue Code of 1986, shall be treated as excise taxes with respect to which only civil actions for refund under procedures of such subtitle shall apply, and (2) for purposes of section 275 of such Code, shall be considered to be a tax described in section 275(a)(6).
“(f) REPORTING REQUIREMENT.-
“(1) IN GENERAL.-Not later than the date determined by the Secretary following the end of any calendar year, each covered entity shall report to the Secretary, in such manner as the Secretary prescribes, the gross receipts from medical device sales of such covered entity during such calendar year.
“(2) PENALTY FOR FAILURE TO REPORT.-
“(A) IN GENERAL.-In the case of any failure to make a report containing the information required by paragraph (1) on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause, there shall be paid by the covered entity failing to file such report, an amount equal to-
“(i) $10,000, plus
“(ii) the lesser of-
“(I) an amount equal to $1,000, multiplied by the number of days during which such failure continues, or
“(II) the amount of the fee imposed by this section for which such report was required.
“(B) TREATMENT OF PENALTY.-The penalty imposed under subparagraph (A)-
“(i) shall be treated as a penalty for purposes of subtitle F of the Internal Revenue Code of 1986,
“(ii) shall be paid on notice and demand by the Secretary and in the same manner as tax under such Code, and
“(iii) with respect to which only civil actions for refund under procedures of such subtitle F shall apply.
“(g) SECRETARY.-For purposes of this section, the term ‘’Secretary” means the Secretary of the Treasury or the Secretary's delegate.
“(h) GUIDANCE.-The Secretary shall publish guidance necessary to carry out the purposes of this section, including identification of medical devices described in subsection (d)(1)(A) and with respect to the treatment of gross receipts from sales of medical devices to another covered entity or to another entity by reason of the application of subsection (c)(2).
“(i) APPLICATION OF SECTION.-This section shall apply to any medical device sales after December 31, 2009.”
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31, 1963, see section 207(c) of Pub. L. 88-272, set out as an Effective Date of 1964 Amendment note under section 164 of this title.
CODIFICATION
Pub. L. 95-600, 701(t)(3)(B) (effective Oct. 4, 1976, see Pub. L. 95-600, 701(t)(5), set out as an Effective Date of 1978 Amendment note under section 859 of this title) repealed 1605(b)(1) of Pub. L. 94-455, cited as a credit to this section, which had duplicated the amendment to subsec. (a)(6) made by 1307(d)(2)(A) of Pub. L. 94-455.