Final regs define “controlled group” for branded prescription drug fee purposes

The IRS has issued final regulations that define the term “controlled group” for purposes of the branded prescription drug fee. The final regulations affect persons engaged in the business of manufacturing or importing certain branded prescription drugs and supersede and adopt the text of temporary regulations that define the term “controlled group.” The final regulations are effective July 24, 2017.
On July 28, 2014, the IRS had released final and proposed regulations, and temporary regulations, that provided guidance on the annual fee imposed on manufacturers and importers of branded prescription drugs (T.D. 9684, I.R.B. 2014-33, 345). The fee was imposed under section 9008 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), as amended by section 1404 of the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152).
The 2014 temporary regulations provided a definition of the term “controlled group” that was broader than the definition of the term “controlled group” in §51.2T(e)(3). The 2011 temporary regulations had initially defined the term “controlled group” to mean a group of at least two covered entities that are treated as a single employer under Code Secs. 52(a), 52(b), 414(m), or 414(o). The 2014 temporary regulations defined the term “controlled group” more broadly to mean a group of two or more persons, including at least one person that is a covered entity, that is treated as a single employer under Code Secs. 52(a), 52(b), 414(m), or 414(o). Neither the Treasury nor the IRS received any written comments with respect to the notice of proposed rulemaking and no public hearing was requested or held.
The 2014 temporary regulations applied beginning on January 1, 2015 (i.e., starting with 2015 sales years), and are effective until July 24, 2017. These final regulations apply on and after July 24, 2017. Because both the 2014 temporary regulations and these final regulations provide the same definition of controlled group for purposes of section 9008 of the ACA, that definition applies continuously beginning with the 2015 sales year and 2017 fee year.

SOURCE: 82 FR 34611, July 26, 2017.

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