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.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
John C. Dodds
Randall B. Sunberg