A clutch of lawmakers are calling on Senate Majority Leader Harry Reid (D-Nev.) to delay implementation of the 2.3% medical device tax, hoping to push the levy past its January 1 start date.
Senators Amy Klobuchar (D-Minn.) and Kay Hagan (D-N.C.) led the letter, which was signed by 16 additional current and elected senators, asking that Senator Reid help them in efforts to "ensure that our country maintains its global leadership position in the medical technology industry and keeps good jobs here at home."
The group specifically called for Sen. Reid to support delaying the start date for the 2.3% medical device tax, citing the lack of sufficient guidance for medical device companies to prepare to pay the tax at the start of next year.
"The medical technology industry directly employs over 400,000 people in the United States and is responsible for a total of 2 million high-skilled manufacturing jobs. Additionally, this industry is also one of the few that enjoys a net trade surplus, significantly boosting U.S. exports around the globe," according to the letter. "As we work together to develop a long-term solution to help move our economy forward, reduce our debt and reform our tax code, we urge you to support delaying enactment of this provision in a fiscally responsible manner."
Medical device industry stakeholders have been fighting for repeal of the medical device tax since its inception, with efforts ongoing despite the looming start date. The tax became more of a reality last week when the IRS released proposed regulations on who and what will and won’t be subject to the 2.3% medical device tax.
Under the new law medical device manufacturers will be required to make semimonthly tax deposits to the IRS in the amount of 2.3% of every sale, unless the manufacturer’s net tax liability does not exceed $2,500 for the quarter.
The news touched off another salvo from industry and its friends on Capitol Hill, which quickly mobilized in calling for swift action in repealing the top-line tax, part of the the Patient Protection & Affordable Care Act and slated to go into effect January 1st.
The IRS included some conciliations for device makers, waiving some late fees during the early months of the levy and allowing companies with smaller tax liabilities to pay on a more relaxed time line.
"The IRS was smart in doing that, because it takes away the argument that, ‘well, you published this rule 23 days before, or 27 days before or something, because they have this grace period of 3 quarters where, yes they have to start paying the estimated amount but it doesn’t have to be a perfect amount," Kristian Werling, partner at the legal firm of McDermott Will & Emery where his focus is on medical device and lifesciences companies, told MassDevice.com during an interview last week. "It strategically takes away this argument that these regulations are too late so you should delay this tax by a year."
That may bode ill for the device tax delay efforts, but medtech companies are still "cautiously optimistic" that the measure will be repealed, even if not before it takes effect.
"Pure and simple, this is bad policy and it’s clearly costing jobs," Paulsen said in a statement issued last week. "The regulations released by the IRS today, just 26 days before the tax goes into effect, are placing further burdens on the backs of med tech small businesses that are credited with creating thousands of jobs for our state. There is still time to stop the regulations and stop the tax, but the Senate must act now."
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