• IRS Proposes Regulations on $500,000 Compensation Deduction Limit for Health Insurers: Regulations Follow Prior IRS Guidance, Adding New Exceptions and Rules for Calculating Compensation; Consistent with Prior Guidance, Limit can Apply to Non-Insurers Affiliated with a Health Insurance Provider
  • April 11, 2013
  • Law Firm: Sullivan Cromwell LLP - New York Office
  • On April 1, 2013, the IRS proposed regulations on the section of the Patient Protection and Affordable Care Act of 2010 (sometimes referred to as “Obamacare”) that limits to $500,000 the deduction for compensation paid to an “applicable individual” that is attributable to a taxable year in which the payor is a “covered health insurance provider” (a “CHIP”). Under the Internal Revenue Code and the proposed regulations, a CHIP includes not just a health insurance provider itself but also various related parties, even if the related party “is not a health insurance issuer and does not provide health insurance coverage.” Accordingly, groups that contain a health insurance provider should evaluate the potential application of this compensation deduction limitation to all affiliated entities.