On December 19, the Senate approved an appropriations "minibus" (H.R. 1865) that includes repeal of Affordable Care Act (ACA) taxes including the 40% "Cadillac tax" on employer-sponsored health plans, and also includes tax extenders, the SECURE Act retirement package, and disaster relief. The Further Consolidated Appropriations bill, which extends a portion of the government funding that will expire after December 20, now goes to the President for his signature.

The vote was 71-23. A separate minibus (H.R. 1158) focused on defense appropriations was also set for Senate approval, and the two combined will fund the entire government through the fiscal year ending September 30, 2020.

Health

In addition to the Cadillac tax, the bill includes repeal of the 2.3% tax on medical devices and the health insurer fee. The medical device and health insurance taxes have been intermittently implemented, while Congress had preserved a moratorium on the Cadillac tax until 2022. Repeal of the health insurer fee takes effect in 2021 while repeal of the Cadillac tax and medical device tax takes effect in 2020.

The bill also increases the minimum age to purchase tobacco products to 21, which has been a top priority of Senate Majority Leader Mitch McConnell (R-KY); includes two years of Medicaid funding for Puerto Rico and other U.S. territories; bars HHS from banning "silver-loading" or ending auto-enrollment in the ACA exchanges with respect to plan year 2021; funds the Patient-Centered Outcomes Research Institute (PCORI) for 10 years; and extends funding for other key health care programs through May 22.

The short-term extension of health care "extenders," which includes funding for bipartisan priorities like community health centers and delaying cuts to disproportionate share hospitals (DSH), is intended to create pressure for a deal on legislation to address surprise medical billing and reduce prescription drug prices, as House and Senate negotiators were unable to reach a compromise on leading legislation.

Tax

A tax package made part of the bill and titled the Taxpayer Certainty and Disaster Tax Relief Act of 2019 would extend through 2020 many of the tax extender provisions that expired in 2017 and 2018, and that are expiring in 2019. Biodiesel incentives would be extended longer, through 2022, as would a short-line railroad provision.

Provisions that expired at the end of 2018 that would be extended under the package include the 7.5% deduction floor for medical expenses, the oil spill liability trust fund rate, and the black lung liability trust fund excise tax. Provisions expiring at the end of 2019 that would be extended, through 2020, include the controlled foreign corporation (CFC) look-through rule, the Work Opportunity Tax Credit, and the New Markets Tax Credit. Certain provisions related to beer, wine, and distilled spirits excise taxes would also be extended.

The package would repeal the requirement that the unrelated business taxation income (UBTI) of tax-exempt organizations be increased by expenses related to qualified transportation fringe benefits (the so-called "church parking tax"). It would also provide tax relief for individuals and businesses in Presidentially-declared disaster areas occurring between January 1, 2018, and for a period following the date of enactment of the legislation. It would also change the private foundation excise tax to a simplified tax of 1.39%.

Tax negotiators early this week were not able to reach agreement on broader matters that included expansions of credits for lower-income individuals and electric vehicles, and a TCJA fix for qualified improvement property (QIP), meaning those topics could be the subject of further discussion in 2020.

Retirement

The SECURE Act retirement package includes provisions addressing multiple employer plans, annuities and an increase in the required minimum distribution (RMD) age from 70 ½ to 72. The principal revenue-raising provision would curtail the tax benefits of inherited IRAs, referred to as stretch IRAs. The Gold Star/Kiddie Tax fix is part of this section of the bill and addresses the fact that the TCJA's simplification of the kiddie tax by applying rates applicable to trusts and estates, as high as 37%, to the net unearned income of a child has inadvertently caused higher taxes on military survivor benefits.

The bill also includes the American Miners Act, which provides pension and health benefits for retired coal miners affected by issues such as coal company bankruptcies.

Flood insurance, Ex-Im Bank and terrorism risk insurance

The Further Consolidated Appropriations Act also includes extensions for two programs set to expire on December 20, the National Flood Insurance Program (NFIP) and the Export-Import Bank, as well as the Terrorism Risk Insurance Program (TRIP), which is set to expire at the end of 2020. The NFIP is reauthorized only through September 30, 2020, giving Congress' banking committees until the end of the fiscal year to solve disagreements about affordability of premiums for homeowners and other issues. The bill reauthorizes the Ex-Im Bank for seven years, through the end of 2026. The Terrorism Risk Insurance Program would be reauthorized for seven years, through the end of 2027.

Bill text is available here.

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