November 27, 2022

Volume XII, Number 331

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Moratorium on Medical Device Excise Tax Extended for Two Years

With the passage on January 22 of continuing appropriations through February 8 (HR 195), the moratorium on the medical device excise tax has been further extended until January 1, 2020, providing relief to medical device manufacturers for another two years. 

While HR 195 is largely known for opening up the government and delaying another shutdown for a few weeks until February 8, there is a key provision at the end of the bill with a more lasting impact for medical device excise tax manufacturers. The medical device excise tax’s moratorium ended on December 31, 2017, making medical device manufacturers, producers, and importers once again subject to the 2.3% tax. The US Internal Revenue Service (IRS) even issued Notice 2018-10 last week to provide temporary relief of penalties for late deposits of the medical device excise tax as the IRS recognized manufacturers would likely need time to ramp back into compliance with the excise tax. However, such relief is no longer necessary.

The legislation is effective for sales after December 31, 2017, so there is seamless transition from the last moratorium ending in 2017 into this additional two-year extension ending December 31, 2019. This means that no Form 720, “Quarterly Federal Excise Tax Return” needs to be filed, even for the period of time from January 1 to January 22, the latter date being when HR 195 was passed.

Senators Ed Markey and Elizabeth Warren (both D-Massachusetts) went one step further and proposed a complete and permanent repeal of the medical device excise tax in a proposed bill introduced on January 10 (S 2287). We continue to monitor this bill and any other legislation affecting the medical device excise tax. But, for the meantime, medical device manufacturers can breathe easier for another two years.

Copyright © 2022 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume VIII, Number 25
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About this Author

Jenny A Austin, Tax attorney, Morgan Lewis, Chicago, Illinois
Partner

Jenny advises US taxpayers with respect to international tax implications of offshore operations, and handles matters involving transfer pricing, including cross-border transfer pricing of tangible and intangible assets and intellectual property, services, and cost sharing arrangements. She also has experience with transfer pricing issues at the state level. Additionally, Jenny counsels international taxpayers and partnerships with respect to their US tax obligations, and advises on withholding, excise tax, and information reporting obligations.

...
312-324-1487
Michele L. Buenafe, Morgan Lewis, Regulatory and Compliance Attorney
Partner

Michele L. Buenafe advises clients on regulatory, compliance, and enforcement issues related to the development, manufacturing, marketing, labeling, and advertising of medical devices, human tissue products, pharmaceuticals, controlled substances, listed chemicals, and combination products. She also advises clients on emerging legal issues relating to digital health platforms such as mobile medical apps, clinical decision support software, telemedicine systems, wearable devices, and other health information technology. Michele also serves as a co-leader for the firm’s...

202-739-6326
Frances Babb, Morgan Lewis, Tax Attorney
Associate

Frances Emmeline Babb advises clients on tax planning relating to corporate, partnership, international, and tax-exempt matters. With a focus on tax-exempt organizations, Emmeline advises colleges and universities, museums and cultural organizations, scientific and medical research organizations, private and operating foundations, community and economic development organizations, and many other special-purpose charitable organizations and associations. She counsels clients on a wide variety of tax matters.

215-963-5169
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