When contemplating any type of business transaction, especially those in the unique landscape of healthcare, there are tax considerations to keep in mind. While there are several considerations, these six are key to conducting a successful transaction.

Tax Structure: Buyers and sellers have different preferences in a healthcare deal. Generally, the buyer prefers asset transactions to help produce a tax shield, while sellers prefer selling equity to limit future tax liability, increase administrative ease, and secure capital gains tax treatment. Not only should taxpayers consider the type of transaction, but the structure to adhere to in favor of state and federal regulations as many state laws require these entities to be owned by licensed taxpayers.

Related Party Transactions: Within the healthcare industry, it is often seen that organizations engage with related parties. A challenges that come with this is ensuring that transactions are conducted at arm’s length to be compliant with tax regulations, which is crucial for healthcare taxpayers to review.

Accounting Methods: Accounting methods influence the valuation and tax liabilities of the healthcare entity. For example, entities that follow the cash method of accounting still need to consider uncollected receivables or outstanding payables in the overall transaction. Valuations can be affected by differences in revenue income recognition under the different methods of accounting.

Sales Tax: With numerous variations in sales tax regulations and rates, this can make healthcare deals more complicated. Sales tax rules can vary by the nature of the service, medical equipment, or supplies in question. Additionally, review of nexus rules and sales tax reporting is also important to address.

Unclaimed Property: Issues may arise around transactions such as uncashed payroll checks, uncashed accounts payable/vendor checks, and account receivable credit balances. Account reconciliation issues can result from patient refunds, insurance payments and reimbursements, medical equipment deposits, and patient credit balances. The burden to prove whether funds are due or not is on the owner of these funds and can result in penalties and financial consequences.

Payroll Tax: Considering the compensation structures that are found within healthcare organizations is important. All employees or independent contractors should be properly classified for accurate tax withholdings and treated properly under federal and state payroll regulations. Buyers should consider examining the payroll tax structure and eliminate any exposures to error.

Need more insights on what to consider when entering a healthcare-related transaction? We would be happy to discuss these tax considerations and how it could impact your tax situation. Give us a call!

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Our Healthcare Team:

The Employee Retention Credit Voluntary Disclosure Program is an IRS initiative for businesses that mistakenly claimed the Employee Retention Credit. It helps avoid severe penalties and potential criminal charges due to unintentional misfiling or erroneous claims.

The program requires you to:
• Voluntarily pay back the ERC, minus 20%,
• Cooperate with any requests from the IRS for more information, and
• Sign a closing agreement.

Advantages of the ERC Voluntary Disclosure Program

There are several benefits to using the ERC-VDP if you received the ERC but weren’t entitled to it and now want to pay the money back. If you apply to the ERC-VDP:
• You need to repay only 80% of the ERC you received as a credit on your return or as a refund.
• You don’t need to repay any interest you received on your ERC refund.
• You don’t have to amend income tax returns to reduce wage expense.
• The 20% reduction is not taxable as income.
• The IRS will not charge penalties or interest on the claimed ERC amount if you pay it in full (claimed ERC minus 20%) by the time you return your signed closing agreement to IRS.
• The IRS won’t examine ERC on your employment tax return for tax period(s) resolved within the terms of ERC-VDP.

Who can apply to the ERC Voluntary Disclosure Program?

Businesses, tax-exempt organizations, and government entities are eligible to apply for the ERC-VDP for each tax period that meets all of the below-listed requirements.
• Your ERC claimed on an employment tax return has been processed and paid as a refund, which you have cashed or deposited, or paid in the form of a credit applied to the tax period or another tax period.
• You now think that you were entitled to $0 ERC.
• You’re not under employment tax examination (audit) by the IRS.
• You’re not under criminal investigation by the IRS.
• The IRS has not reversed or notified you of intent to reverse your ERC to $0. For example, you received a letter or notice from the IRS disallowing your ERC.

If you used a third-party payer to file your employment tax returns or claim your ERC, you can’t apply to the ERC-VDP yourself. You must contact the third-party payer to apply.
Please note that if you willfully claimed an ERC that is fraudulent, or if you assisted or conspired in such conduct, applying to the ERC-VDP will not exempt you from potential criminal investigation and prosecution.

If you’re not eligible to participate in ERC-VDP because your ERC hasn’t been paid or if you have not yet deposited the ERC check, you may be able to use the ERC claim withdrawal process instead.

For more information on the withdrawal process go to: https://www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim

For more information on the ERC-VDP go to: https://www.irs.gov/coronavirus/employee-retention-credit-voluntary-disclosure-program

Critical Deadline: March 22, 2024
Apply by this date to repay only 80% of the previously received ERC, significantly easing your business’s financial burden. Miss this chance, and you may face larger repayments and penalties.

If you have any questions or concerns, please do not hesitate to contact your HSC service leader or call our office at 800.880.7800.

Indiana Medicaid Rate Equalization

Good news for Indiana Medicaid providers.  Due to a 2020 CMS final rule, Indiana Medicaid is required to reimburse with consistent rates across all programs.  Instead of reducing the HIP rates to Medicaid rates, they have agreed to raise the Medicaid rates for professional services to 100% of the prior year’s Medicare rates.  Thus, all Indiana Medicaid and Indiana HIP plans will pay at the 2023 Medicare rates starting in January 2024. 

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American Medical Association Announcement

American Medical Association announced 2024 Medicare fee schedule.  The final rule includes a 3.37 percent reduction in the 2024 Medicare conversion factor, lowering it from $33.8872 to $32.7442. Additionally, the anesthesia conversion factor is finalized to be reduced from $21.1249 to $20.4349.  Please see link for additional information.   

In honor of Manufacturing Day, we are excited to present this insightful video featuring experts John Rittichier and Brant Kennedy, Vice Presidents at Harding Shymanski.

Join us for an exclusive discussion on “Industry Dynamics: 3 Things Manufacturers Need to Know”!

Discover the latest insights on key topics that impact manufacturers like you:

1️⃣ Indiana Readiness Grant: Eligibility criteria, successes, and KPIs

2️⃣ Inventory Management: Optimization, solutions, and strategies

3️⃣ Section 174 Research Expenditures: Tax benefits, qualifying activities, and compliance updates

Don’t miss out on this opportunity to hear from industry experts and get the knowledge you need to stay ahead in the dynamic world of manufacturing! 

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Harding, Shymanski & Company is proud to once again make the Inside Public Accounting’s Top Accounting Firms list.

The IRS has recently announced a significant change in the Affordable Care Act (ACA) affordability percentage for employer healthcare plans in 2024. In Revenue Procedure 2023-29, the IRS stated that the new affordability percentage will be 8.39%. This is the largest decrease in the affordability percentage since its inception.

This change has important implications for employers and their health plans. If a health plan fails to meet the affordability safe harbor, employers may be exposed to penalties under IRC Section 4980H(b). The safe harbors include the rate of pay, W-2, and federal poverty line (FPL) methods for determining affordability.

Under IRC Section 36B, individuals are eligible for a premium tax credit if their employer does not offer them affordable coverage that provides minimum value. Previously, family coverage was considered affordable if the employee’s self-only coverage was affordable. However, the new regulations now require employers to consider the affordability of family coverage.

Under IRC Section 4980H, employers can be responsible for employer-shared responsibility payments if they fail to offer full-time employees and their dependents minimum essential coverage, or if the coverage offered is unaffordable. An employer-shared responsibility payment is only triggered when a full-time employee enrolls in coverage through a state or federal healthcare marketplace and qualifies for a premium tax credit.

To demonstrate that their coverage is affordable, employers can use the three affordability safe harbors. These safe harbors allow employers to show that the amount they charge for self-only coverage satisfies the affordability requirement. If an affordability safe harbor is met, the employer will not be liable for an employer-shared responsibility payment.

The affordability percentage is indexed annually and is used to determine if an employer’s self-only coverage meets the ACA’s affordability requirements. The 2024 affordability percentage of 8.39% represents a decrease from the previous years (9.12% in 2023 and 9.61% in 2022). This means that employers will need to adjust their premiums to ensure they meet the new affordability threshold.

Employers who use the federal poverty line safe harbor will need to charge an employee-only premium rate of $101.93 or less for plans beginning in 2024. Employers using the rate of pay or W-2 safe harbors will also need to evaluate their premiums in light of the 8.39% threshold.

In light of these changes, employers should carefully review their health insurance premiums with their brokers or consultants. If the 2024 health plan rates remain the same as 2023, an employer may end up with an unaffordable offer of coverage. To maintain affordability, employers may need to lower their health plan rates in 2024.

Overall, employers must stay informed about these changes in the ACA affordability percentage and take appropriate measures to ensure compliance with the law.