Proposed Regulations Issued On Deduction Limit For Compensation Paid By Health Insurance Providers

The Internal Revenue Service has released proposed regulations on the application of the $500,000 deduction limitation for remuneration provided by certain health insurance providers under Code Sec. 162(m)(6). These regulations affect health insurance providers that pay such remuneration, and apply to tax years that begin after Dec. 31, 2012, and end on or after April 2, 2013. The proposed regulations were issued in the April 2 Federal Register.

In Notice 2011-2, the IRS had requested comments on the guidance it was issuing on the application of the $500,000 deduction limitation to deferred deduction remuneration that is earned during tax years beginning after Dec. 31, 2009, and before Jan. 1, 2013, and deductible in a tax year beginning after Dec. 31, 2012. In response to the comments received, these proposed regulations address: (1) the determination of who is a covered health insurance provider; (2) premiums; (3) disqualified tax years; (4) applicable individuals; (5) applicable individual remuneration; (6) deferred deduction remuneration; (7) attribution of applicable individual remuneration and deferred deduction remuneration to services performed; (8) application of the $500,000 limitation; (9) corporation transactions; (10) grandfathered amounts attributable to services performed before Jan. 1, 2010; and (11) the transition rules for certain deferred deduction remuneration.

Comments must be received July 1, 2013, and may be sent electronically to (IRS REG-106796-12); or mailed to CC:PA:LPD:PR (REG-106796-12), Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044.

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