LBA Advisor Winter 2010

Posted December 22, 2010

The Winter 2010 issue of the LBA Advisor contains articles that all relate to the changing times we are in. Will some of the Bush tax incentives sunset or be extended? Will Congress bring back the estate tax? How will all of this affect you when all is said and done? Click here to download the pdf version.

 

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Breaking News for Physicians and Physician Practices

Posted December 3, 2010

Congress Passes Bill to Postpone Physician Pay Cut

 

A 23 percent cut in Medicare payments to physicians scheduled to take effect December 1 has been postponed for one month. The U.S. House of Representatives agreed without objection November 29 to an amended bill the Senate unanimously passed November 18. President Obama signed the bill on November 30. The Physician Payment and Therapy Relief Act of 2010 (HR 5712) as amended by Senate Amendment (SA) 4711 extends the 2.2 percent physician payment update that expired November 30 through December 31.

 

The bill also applies a 20 percent reduction, rather than a 25 percent reduction, in the discount for certain multiple therapy services furnished on or after January 1, 2011; and exempts reduced expenditures attributable to the multiple procedure payment reduction from budget-neutrality requirements.

 

Physicians now face a 25 percent cut in Medicare payments beginning January 1, 2011.

 

According to a U.S. Senate Committee on Finance press release, Senate Finance Committee Chair Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa) intend to "pursue a year-long fix to the formula that could be enacted before the month-long patch expires."

 

10% Raise for Primary Care

 

Physicians who continue providing primary care services to Medicare patients stand to get a 10 percent pay raise under the health reform act.

 

Increasing medical costs and decreasing Medicare reimbursement rates have put a lot of physician practices in a financial bind. To stay afloat, many physicians have made the difficult decision to stop accepting Medicare patients. The Patient Protection and Affordable Care Act of 2010 (commonly referred to as the Affordable Care Act) includes a provision to turn this trend around by offering incentive payments to physicians and non-physician practitioners (NPPs) who continue to provide primary care services to Medicare patients.

 

Under the Primary Care Incentive Payment Program (PCIP), eligible primary care practitioners (PCPs) stand to earn incentive payments for primary care services furnished to Medicare patients on or after January 1, 2011 through December 31, 2015.

 

Quarterly incentive payments to participating PCPs are equal to 10 percent of the amount paid under Medicare Part B for primary care services furnished to Medicare patients.

 

Defining Primary Care Practitioners

 

The Affordable Care Act defines a PCP as:

• A physician who has a primary specialty designation of family medicine, internal medicine, geriatric medicine, or pediatric medicine; or
• A nurse practitioner (NP), clinical nurse specialist (CNS), or physician assistant (PA) for whom primary care services accounted for at least 60 percent of the allowed charges under the Medicare Physician Fee Schedule (MPFS) for the practitioner in a prior period as determined appropriate by Health and Human Services (HHS)—the federal agency that governs Medicare.

 

The PCIP is open to all PCPs who submit claims under their own National Provider Identifier (NPI), which is how they will be identified for incentive payments, and who meet or exceed the required 60 percent threshold of allowed charges for primary care services to Medicare patients. For 2011 payments, Medicare claims data from two years prior will be considered to establish the required threshold. A provision to accommodate newly enrolled Medicare providers will be released in 2011.

 

Services furnished incident-to physicians' services do not qualify for incentive payments.

 

Defining Primary Care Services

 

The Affordable Care Act defines primary care services as those services identified by the following CPT® codes:

 

• 99201 – 99215 for new and established patient office or other outpatient evaluation and management (E/M) visits;
• 99304 – 99340 for initial, subsequent, discharge, and other nursing facility E/M services; new and established patient domiciliary, rest home (e.g., boarding home), or custodial care E/M services; and domiciliary, rest home (e.g., assisted living facility), or home care plan oversight services; and
• 99341 – 99350 for new and established patient home E/M visits.

 

New Rules Slash Improper Pay

 

The Medicare fee-for-service (FFS) error rate dropped from 12.4 percent in 2009 to 10.5 percent, or $34.3 billion, in estimated improper claims payments for 2010, according to the Centers for Medicare & Medicaid Services (CMS). The federal agency credits the implementation of more stringent review criteria for measuring claims.

 

CMS says primary causes of errors in the Medicare FFS program for 2010 are insufficient documentation and medically unnecessary services. CMS contributes the declining error rates to stricter adherence to the documentation requirements outlined in Medicare regulation, statute, and policy, rather than allowing for clinical review judgment based on billing history and other available information.

 

The error rate for Medicare Advantage also declined and a new component measure was developed and reported for the Part D program.

 

CMS plans to report a composite error estimate for Part D beginning in 2011.

 

The 'Physician Payment and Therapy Relief Act of 2010' extends 2.2 percent MPFS update

 

On Tuesday, November 30, 2010, President Obama signed into law, "The Physician Payment and Therapy Relief Act of 2010." This law extends through Friday, December 31, 2010, the 2.2 percent update to the Medicare physician fee schedule (MPFS) that has been in effect for MPFS claims with dates of service of Tuesday, June 1, 2010, through Tuesday, November 30, 2010. Payments for 2010 services under the MPFS will continue without delay.

 

Please watch your listservs and your contractor's website for more information, should Congressional action prevent the 2011 negative update from going into effect on Saturday, January 1, 2011.

 

If you have specific questions related to this bill, please contact your LBA professional directly at 904.396.4015.

 

 

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The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010

Posted December 17, 2010

Late last night, Congress completed work on long overdue tax legislation with bipartisan support in both the Senate and the House of Representatives. President Obama signed this legislation into law today.

 

For over a year, Congress had procrastinated in dealing with four major tax issues which have now been addressed in the last days of its lame‐duck session between last November's mid‐term elections and the seating of the newly elected Congress next January.

 

While this legislation provides some level of certainty to individual and business taxpayers in terms of planning their affairs, you will note below that all of the enacted provisions described below are temporary. Many of the various provisions expire in 2011 while others sunset in 2012. Thus, even though the bipartisan efforts to make this happen are laudable, the deep divide between Democrats and Republicans on tax policy will need to be addressed again most likely in 2012, a Presidential election year, and right before additional income taxes are scheduled to kick in to help pay for Health Care reform passed earlier this year.

 

The four major areas include:

• Extension of the Bush era tax cuts for all Americans for the tax years 2011 and 2012. Absent this extension, all Americans, both rich and poor, faced a relatively significant tax increase beginning January 1, 2011. In fact, it is estimated that up to 40 million lower income individuals would have been returned to the tax rolls for the first time since 2003.
• Extension of the AMT "patch" for the tax years 2010 and 2011. The Alternative Minimum Tax ("AMT") is an alternative tax computation on Form 1040 that was originally intended to keep the richest Americans from avoiding income tax in any tax year. However, since it was never indexed for inflation, it has now begun to impact middle class taxpayers by raising their Federal income tax. The "patch" is a two year extension of an AMT exemption amount which had expired on December 31, 2009. Without the extension of the AMT "patch", it is estimated that 21 million middle class taxpayers would have seen their Federal income tax increase on their soon‐to‐be‐filed 2010 Form 1040s.
• "Tax Extenders" reinstated for the tax years 2010 and 2011. Many individual and business tax provisions, which had expired at the end of 2009, have been retroactively reinstated for 2010 and in to 2011. Most prominent among a long list of provisions includes the Federal Research Credit for business innovation and the individual itemized deduction for state and local sales taxes.
• Reinstate the Estate tax in 2011 and 2012. After inexplicably allowing the Estate tax to lapse in 2010, it will now be reinstated, effective January 1, 2011. For the next two years, the Estate tax will apply to taxable estates exceeding $5,000,000 ($10,000,000 for married couples) at a maximum rate of 35%. Prior to its lapse in 2010, the Estate tax had applied in 2009 to taxable estates exceeding $3,500,000 ($7,000,000 for married couples) at a maximum rate of 45%. Had Congress taken no action on the Estate tax, it was scheduled to be reinstated on January 1, 2011 for taxable estates exceeding $1,000,000 ($2,000,000 for married couples) at a maximum rate of 55%. Of greater potential note, however, is the fact that the lifetime gift tax exemption will now increase from $1,000,000 to $5,000,000 per taxpayer for the two years 2011 and 2012.

The following is a summary of the new tax provisions most likely to impact our clients and friends in the three year period from 2010 through 2012. Many of these are tax provisions related to the four major areas above, some were compromises necessary to secure bipartisan support for the tax legislation, and others are intended to provide additional stimulus to the fragile Domestic economy and help reduce the current unemployment level.

 

Individual Provisions

• Federal income tax rate tables for 2010 remain in place in 2011 and 2012. Absent this legislation, millions of low income taxpayers would have returned to the tax rolls and the maximum tax rate was scheduled to increase from 35% to 39.6%. Middle class taxpayers would have seen their take‐home paycheck amounts reduced by increases in payroll withholding tables beginning January 1, 2011. For an individual making $50,000, this would have resulted in an $890 increase in Federal income taxes.
• Employee's share of Social Security taxes is reduced by 2% for 2011. For an individual making $50,000, this results in a cash savings of $1,000 in 2011. For individuals making up to the maximum withholding limit of $106,800, the savings will be $2,136. Note that the employers share of Social Security taxes is not reduced. The IRS also announced today that employers will have until January 31, 2011 to implement this payroll tax cut retroactively back to January 1, 2011.
• Phase‐outs of personal itemized deductions and personal exemptions are delayed until 2013. Absent this legislation, these "back door" tax increases for higher income individuals would have had the effect of raising the top tax rate of 39.6% to as high as an effective rate of 41%. These phase‐outs would have impacted many middle class taxpayers as well.
• Maximum tax rate on long term capital gains remains at 15%for 2011 and 2012. It had been scheduled to return to 20% effective January 1, 2011. Note that many taxpayers in lower income tax brackets will continue to be eligible for a zero rate tax on long term capital gains and qualified dividends.
• Maximum tax rate on dividend income remains at 15% for 2011 and 2012. Absent this legislation, the top rate on dividend income would have returned to as high as 39.6% in 2011. For businesses which export products overseas, this is good news for the lucrative benefit provided by Interest Charge ‐ Domestic International Sales Corporations ("IC‐DISC's").
• Student loan interest in 2011 and 2012 can continue to be deducted without regard to whether a taxpayer claims a standard deduction or itemizes deductions.
• Estate tax is reinstated for 2011 and 2012. It will apply to estates exceeding $5,000,000 at a maximum rate of 35%. For the first time, the total exemption of $10,000,000 available to spouses will be able to be moved to either spouse's estate, regardless of who owns the underlying assets comprising the taxable estates. This may require many current wills with various trust provisions to be redone to achieve desired results, at least for the next two years.
• Step up in tax basis of inherited assets to fair market value at death reinstated for 2011 and 2012. As noted above, the Estate tax had lapsed in 2010, but subject to certain limitations, so had the ability of an heir to receive a tax basis in assets received from an estate equal to their fair market value at the date of the decedent's death (or an alternate valuation date 6 months later). Rather, there was a carryover of the decedent's tax basis in such assets to the extent it was lower than their fair market value on the date of death. This subjected certain heirs to potentially significant capital gains taxes on the future disposition of any such testamentary assets received. This problem will be alleviated at least for the next two years.
• Estates of decedents dying in 2010 can elect to apply these 2011 provisions. For certain estates, it may be advantageous to pay some Estate tax in 2010 to avoid significant capital gains for heirs on their future sale of estate assets caused by the carryover tax basis issue discussed above.
• Lifetime Gift tax exclusion of $1,000,000 is increased to $5,000,000 per taxpayer for 2011 and 2012. This presents an unprecedented opportunity to gift assets to children, grandchildren and other heirs tax free (it also increases the generation skipping lifetime transfer exemption to $5,000,000). This is in addition to the annual gift tax exclusion which is currently $13,000 per donee (or $26,000 between spouses). Given the recent Domestic economic downturn, it also would appear to be an advantageous time to obtain fair market value asset appraisals which are as low as they may have been in years.
• Maximum rate on taxable gifts remains 35% for 2011 and 2012. Although the Estate tax had lapsed in 2010, a maximum Gift tax rate of 35% had still applied to taxable gifts in excess of annual gift tax exclusions and the lifetime gift tax exemption of $1,000,000 still available. Note that the maximum rate was 45% in 2009 and 55% back in 2001. Absent this legislation, the maximum rate would have returned to 55%.
• Unemployment benefits are extended for a maximum of 13 months from December 1, 2010 through December 31, 2011.

Individual tax extenders reinstated for 2010 and 2011.

• State and local sales tax deductions (of great benefit to Florida residents who pay no state income tax)
• Higher education tuition deduction
• Teacher's classroom expense deduction
• Charitable contribution of certain appreciated property
• Charitable contribution of IRA proceeds
• Credits relating to energy efficient home improvements and home appliances are extended one year into 2011 but are much less lucrative than in 2010

Business Provisions

• 100% bonus depreciation deduction for assets placed in service between September 9, 2010 and December 31, 2011 (reverting to 50% for assets placed in service in 2012). The surprise here was the inclusion of assets placed in service in the last part of 2010. Bonus depreciation typically applies to only the acquisition of new property with an assigned useful life of 20 years or under. It also applies to computer software and qualified leasehold improvements. Note that this enhanced write‐off will apply to assets purchased before September 9, 2010 but not placed in service until after September 8, 2010. Otherwise, assets placed in service before September 9, 2010 are still eligible for a 50% bonus depreciation deduction. Bonus depreciation is not limited by the amount of a taxpayer's annual fixed asset investments and can be used to generate net operating losses which may be able to be carried back to recapture taxes paid in the prior two years.
• Sec. 179 Small Business Expensing enhanced for 2012. Absent this legislation, the maximum Sec. 179 deduction for 2012 would have been $25,000 with a phase‐out when total fixed asset additions exceed $200,000. The new 2012 provision provides for a $125,000 Sec. 179 deduction with a phase‐out when total fixed asset additions exceed $500,000. Under previously enacted legislation for both 2010 and 2011, the maximum Sec 179 deduction is $500,000 and gets reduced when total fixed asset additions for a tax year exceed $2,000,000. In addition to the above investment limitations, Sec. 179 deductions can only be used in a current tax year to the extent the taxpayer has taxable income; they cannot be used to create a net operating loss. Unused Sec. 179 deductions can be carried forward to future years where there is taxable income.
• Federal Research credit for innovation reinstated for 2010 and 2011. Applies to all businesses which create innovation in the form of new or enhanced products, new or enhanced production processes or internally developed software applications. It is estimated than less than 40% of eligible Federal research credits are claimed by U.S. businesses even though it is a benefit Congress clearly wants them to get in return for competing in a global economy.
• Extension until December 31, 2011 to purchase certain small business stock which can avoid all capital gains taxes if held at least 5 years. Under previous legislation, this had applied to certain small business stock purchased between September 28, 2010 and December 31, 2010. Note that similar qualified small business stock purchased in earlier years and held at least 5 years may qualify for either 50% or 75% capital gains exclusions.

Business tax extenders reinstated for 2010 and 2011.

• 15‐year depreciation life for leasehold improvements, restaurant building and improvements and retail improvements
• Empowerment zone credits of potentially $3,000 per employee, per year for businesses located within a Federally designated area, several of which exist here in Duval County
• 5‐year depreciation life for farm machinery and equipment
• Enhanced deductions for charitable contributions of food inventories

 

 

 

 

 

 

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