PCORI Fee Update: PCORI Fees May Be Tax Deductible as a Business Expense

On May 31, 2013, the IRS’s Office of Chief Counsel released a memorandum explaining the office’s opinion that PCORI fees are a deductible business expense. The memo explains that Section 162(a) permits a deduction for “all ordinary and necessary business expenses.” The PCORI fee is required to be paid by both insurers and the sponsors of self-funded plans; therefore, the fee is both “ordinary” and “necessary” in conducting a trade or businesses. The memorandum can be found here:

http://www.irs.gov/pub/irs-utl/AM2013-002.pdf

Annual PCORI fees are used to fund the newly created Patient-Centered Outcomes Research Institute. Form 720 is used in connection with paying PCORI fees. The form must be filed on or before July 31, 2013 by all employers that sponsor self-funded insurance plans with plan years ending on or after October 1, 2012. Information on the newly updated Form 720 can be found here.

About Jim Hamilton

I am an employee benefits partner with Bose McKinney & Evans LLP. My broad-based practice covers health and welfare arrangements, insurance, executive compensation and federal and state taxation. Among other areas, I have specific experience with PPACA, HIPAA, COBRA, ERISA and numerous other state and federal laws affecting employee benefit plans.
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