AICPA comments on deductibility of health insurance premiums, controlled foreign corporation look-through provision.

• Position: Tax info

A proposed Revenue Ruling the AICPA developed was recently sent to the Internal Revenue Service for consideration. The proposed ruling would provide clarifying guidance regarding the deductibility of health insurance premiums covering S corporation shareholders.

In May 2006, the IRS published Headliner Volume 163 on its Web site indicating that medical insurance policies must be held in the name of a corporation (rather than the owners) for S corporation shareholders to receive the deduction for health insurance premiums for the self-employed. The AICPA does not agree with this policy and, in response, is proposing that the IRS clarify and modify such guidance to shift the emphasis from the titling of policies to the payor of the premiums (whether payment is direct or indirect).

The AICPA's proposal also makes clear that simply because certain state laws require group policies to cover more than one employee (and therefore many corporations are not eligible for group policies), this should not prevent shareholders in small organizations from deducting premiums above-the-line. How...