Reimbursement of Branded Prescription Drug Fee
The IRS concluded in aChief Counsel Advice Memorandum, how a branded prescription drug (BPD) fee is determing. EY analyzes this topic in a deep, clear way.
The five-factor test
- The CCA analysis began by defining gross income, as all income from whatever source derived.
- The IRS described circumstances under which a taxpayer generally doesn’t have income upon receiving various types of reimbursements.
- When a taxpayer must pay a certain expense and is reimbursed by another party, the IRS determined that the reimbursement amount is not income to the taxpayer.
- The IRS pointed out that a portion of the reimbursement may be excludable from the taxpayer’s gross income even if the expense benefits both the taxpayer and the reimbursing party.
- The IRS concluded that the existence of joint and several liabilities “does not result in a per se exclusion from Taxpayer’s gross income of reimbursements of all or a portion of the BPD fee by” the foreign members.
The Patient Protection and Affordable Care Act (ACA)
Imposes a BPD fee on entities that manufacture or import BPDs for sale to certain government programs. The fee is a nondeductible excise tax. As well, it requires controlled groups to be treated as a single entity and to select a designated entity to file any reports related to the BPD fee and pay the fee.