CHA News Article

Tax Cuts and Jobs Act Would Impact Hospitals

House Republican leaders unveiled a tax plan today that would make sweeping changes in corporate and individual taxes, including provisions that would impact investor-owned and not-for-profit hospitals. The “Tax Cuts and Jobs Act” reduces the corporate tax rate to a flat 20 percent rate beginning in 2018. Personal services corporations would be subject to a flat 25 percent corporate tax rate. Changes to employee compensation include a repeal of the $1 million deduction limitation for commissions and performance-based compensation to “covered employees” in corporations. 

Additionally, the Act makes revisions to the definition of “covered employee” to align with current Securities and Exchange Commission disclosure rules, which include the chief executive officer, chief financial officer and the three other highest paid employees. Tax-exempt organizations would be subject to a 20 percent excise tax on compensation in excess of $1 million paid to any of their five highest paid employees for tax years beginning after 2017. Under current law, interest on governmental bonds and private activity bonds is tax exempt. The proposed plan would make taxable the interest on private activity bonds issued after 2017. One of the specific health care provisions calls for a repeal of tax credits for clinical testing expenses for certain drugs for rare diseases or conditions. Attached is a copy of the section-by-section summary issued by the House of Representatives Committee on Ways and Means.