The IRS may have a new problem on its hands with a dramatic shortfall in revenues collected for the 2.3% medical device tax.
The agency expected between 40%-66% more filed returns during the 1st half of 2013 than it received, according to a report from the Star Tribune.
Add that to reports that the IRS is having trouble figuring out who does and does not owe the tax and that the total collected was about a quarter shy last year, and you’ve got a situation that’s ripe for miscalculation.
The IRS collected around 5,100 medical device tax returns in the 1st 6 months of 2013, falling far short of the 9,000-15,000 it estimated it would received when it began collecting the tax last year. Now federal agents are looking for delinquent payers.
While it’s true that many in the medtech industry are dedicated to seeing the medical device tax repealed, industry lobbyists told reporters that, despite some speculation, there is no "tax revolt" taking hold.
"I’d be surprised to find many – if any – in our community who haven’t paid the tax. We focused our [device tax education] program on smaller and mid-size companies and made sure they had access to expertise," Minnesota medtech lobbying group LifeScience Alley’s CEO Shaye Mandle told the Tribune. "Nobody is skirting this tax."
National group AdvaMed reiterated that sentiment, adding that the group as has pressed the IRS for more clarity on who owes the tax to begin with. The IRS collected about $1.4 billion in medtech tax revenues last year, according to a MassDevice.com exclusive.
Ongoing reports of trouble in administering the medical device tax have helped fuel arguments for repeal. Opponents of the tax landed a recent victory when the House passed a measure just last week that would both remove and refund the tax.
The House voted 253-163 to approve the "Jobs for America Act," a package of bills that had already individually passed the lower chamber. The package includes a measure that would roll back the 2.3% excise tax on U.S. sales of medical devices and issue a retroactive refund to companies for payments made on the tax since it went into effect last year.
The Joint Committee on taxation estimates that repealing and refunding the medical device tax will cost $4.48 billion in revenues in fiscal 2015 and $25.74 billion over fiscal years 2015-2024. Estimates on how much the tax would raise have varied wildly over the years, with federal officials projecting that the tax will raise about $30 billion over 10 years and a coalition of medical device lobbying groups estimating the tab at $1 billion during the 1st 6 months of last year.
It remains to be seen whether a lame-duck Senate, controlled for now by Democrats, will take up a jobs bill that would roll back a portion of the Affordable Care Act. Although there’s bipartisan support for repealing the medical device tax – including a symbolic 79-20 Senate vote for repeal last year – Senate majority leader Harry Reid (D-Nev.) has been steadfast in opposing any changes to Obamacare.