Within days of releasing the revised IRS Form 720, the IRS Office of Chief Counsel released a memorandum addressing whether fees paid by issuers and self-insured plan sponsors to fund the Patient-Centered Outcomes Research (PCOR) Trust Fund are ordinary and necessary business expenses, and, thus, deductible business expenses.
The Affordable Care Act (ACA) establishes a private, non-profit corporation, the Patient-Centered Outcomes Research Institute, to assist the public in making informed health decisions. The Institute is funded in part by fees to be paid annually by issuers of specified health insurance policies and sponsors of applicable self-insured health plans. The fee is required to be paid for each policy year ending after September 30, 2012, and before October 1, 2019, with no exceptions. The final regulations implementing the fees are silent on the subject of deductibility.
Some taxes imposed by the ACA, such as the employer shared responsibility tax, the excise tax on high cost employer-sponsored health coverage, and the annual fee on health insurance providers, are expressly treated as nondeductible. Yet there is no provision specifically providing that PCOR fees are nondeductible.
Generally, all ordinary and necessary business expenses incurred in carrying on a trade or business are deductible under IRS Code section 162(a). Finding the PCOR fee to be both an “ordinary” and “necessary” business expense paid or incurred in carrying on the business of issuers and self-insured health plan sponsors, the IRS memorandum concludes that fees will be deductible under section 162.
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