A monthly roundup of recent important tax developments affecting pfractitioners.

• Author: Schreiber, Sally P.

Legislation

Year-end appropriations act has many tax changes

The federal government spending bill passed by Congress on Dec. 19 repeals three health care taxes that were originally enacted as part of 2010 health care reform legislation, makes many changes to retirement plan rules, extends several expired tax provisions, provides disaster tax relief, and repeals the provision that taxed exempt organizations when they provided parking to their employees. The Further Consolidated Appropriations Act, 2020, P.L. 116-94, was signed by President Donald Trump on Dec. 20,2019.

Health care taxes

The three repealed health care taxes are the Sec. 49801 excise tax on certain high-cost employer health plans, popularly called the Cadillac tax; the Sec. 4191 medical device excise tax; and the annual fee on health insurance providers contained in Section 9010 of the Patient Protection and Affordable Care Act, P.L. 111-148.

All three taxes had previously been postponed or suspended, most recently by P.L. 115-120 (a fiscal year 2018 federal appropriations continuing resolution). The Sec. 49801 Cadillac tax had been delayed until 2022. The 2.3% medical device excise tax was suspended through Dec. 31,2019. And the health insurance fee was suspended for 2019.

Retirement plan changes

The act also incorporates the text of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which passed the House of Representatives in May but was never voted on by the Senate.

The act is designed to encourage retirement savings in various ways and to simplify administrative requirements in order to make it easier for employers to offer retirement plans.

The act introduces many other changes. Among them, the legislation:

* Increases the age after which required minimum distributions from certain retirement accounts must begin to 72 (from 70%);

* Modifies requirements for multiple-employer plans to make it easier for small businesses to offer those plans to their employees by allowing otherwise completely unrelated employers to join in the same plan;

* Reduces Pension Benefit Guaranty Corporation premiums for certain multiple-employer defined benefit plans of cooperatives and charities;

* Allows penalty-free distributions from qualified retirement plans and IRAs for births and adoptions;

* Makes it easier for long-term, part-time employees to participate in elective deferrals;

* Allows consolidated filings of Forms 5500, Annual Return/Report of Employee Benefit Plan, for similar plans;

* Allows certain home health care workers to contribute to a defined contribution plan or IRA; and

* Requires beneficiaries of IRAs and qualified plans, with the exception of surviving spouses and some other beneficiaries, to withdraw all money from inherited accounts within

10 years.

The act repeals the maximum age for IRA contributions (currently 70%). It also amends Sec. 408 to reduce the amount of deductible charitable IRA contributions allowed to taxpayers over 70% by the aggregate IRA contribution deductions allowed to them after they turn 70%.

The act allows certain expenses associated with registered apprenticeship programs to count as qualified higher education expenses for purposes of Sec. 529.

The Sec. 6651 failure-to-file penalty is increased to $435.

The new kiddie tax in Sec. 1(j)(4), which was introduced by the law

known as the Tax Cuts and Jobs Act (TCJA), RL. 115-97, is repealed.

Extenders

The act also extends many expired tax provisions. Among those extended through 2020 are:

* Sec. 108(a)(1)(E), which excludes from gross income the discharge of qualified principal residence indebtedness income;

* The Sec. 163(h)(3) treatment of mortgage insurance premiums as qualified residence interest, which permits a taxpayer whose income is below certain thresholds to deduct the cost of premiums on mortgage insurance purchased in connection with acquisition indebtedness on the taxpayer's principal residence;

* The 7.5% (instead of 10%) adjusted-gross-income floor for medical expense deductions in Sec. 213(f)...