Support Appears to be Growing to Delay the Medical Device Tax

By Carmelina G. Allis –

Earlier this month, the IRS published final regulations and interim guidance on the excise tax imposed on the sale of certain medical devices intended for human use pursuant to the Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act (see our previous post here, and additional guidance from the IRS here).  But while the regulations have been finalized, it appears that there is growing support to delay and/or repeal the tax, which goes into effect on January 1, 2013.

Device industry advocates claim that the tax will stifle innovation and adversely affect middle-class jobs.  They are pushing Congress to clear legislation that would abolish the tax before the end of the year.  An outright repeal of the tax before the end of the year appears difficult, but there is talk about the possibility that the Democrat-led Senate will agree to delay the tax (see here).

In the U.S. House, Rep. Erick Paulsen already sponsored a repeal measure (H.R. 436).  Rep. Paulsen’s bill passed the House in June, but was stalled by the Senate.  However, it appears that he is obtaining bipartisan support in his efforts against the medical device tax.

This week, 18 Senate Democrats sent a letter to Senate Majority Leader Harry Reid asking to delay the tax.  An overall poor economy and lack of guidance for compliance with the tax provisions were cited in the letter as reasons for delaying enactment of the tax.  The Democrats also cited the importance of the medical device industry to U.S. exports, high-tech manufacturing jobs, and small businesses – three areas that would be adversely affected by the tax.