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Small-business health credit, refundable adoption credit -- gone? (Bumped)

February 01, 2011

(Note: I posted this in the evening 1/31, but I will keep this on top of the posts this morning as a place to track any developments as the day unfolds. Scroll to the bottom of the post for updates. Newer posts today will be below this one.)

When Judge Vinson overturned the Obama health care plan today, he also may have thrown a wrench into the current tax season. Overturning the entire plan -- apparently effective right now -- would also overturn the small business health care credit and the refundable adoption credit enacted as part of the legislation. Both credits were enacted to be retroactively effective for all of 2010. The ruling apparently also invalidates the 10% tanning tax that took effect July 1 of last year.

The current tax season is already delayed by the huge Bush-era rate extension passed at the end of last year. This would further delay the business return season while retroactively changing some tax returns already filed.

The ruling also threatens the other tax provisions in the bill, including the new limits to flex plans and HSAs, the requirements that adults up to 26 be included in family health coverage, and the increased 1099 reporting requirement set to take effect next year. It undoes the .9% wage surtax and the 2.9% tax on "unearned" income set to take effect in 2013.

Hat-tip to Roger McEowen, who will have more on this issue at the ISU Center for Agricultural Law and Taxation site tomorrow. Will these effects be stayed until the inevitable Supreme Court decision settling the constitutionality of the bill? If Judge Vinson's ruling stands up, will penalties be waived for underpayments resulting from the loss of the health care and adoption tax credits? Interesting times...

UPDATE: More from Russ Fox.

UPDATE II: Roger McEowen's analysis is up.

Tags: health care.Ilya Shapiro.Obama tax policy.Patient Protection and Affordable Care Act.

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