N.C. Research Triangle might get major tax relief under budget deal

Rep. Renee Ellmers and other House Republicans are championing the tax plan as a major hit to President Barack Obama’s Affordable Care Act.
Rep. Renee Ellmers and other House Republicans are championing the tax plan as a major hit to President Barack Obama’s Affordable Care Act.

A proposed Affordable Care Act tax freeze affecting nearly 100 North Carolina manufacturers would keep millions of dollars in the state over the next two years if Congress passes this week’s negotiated budget deal.

Some in Congress have had an eye on axing the ACA’s medical device manufacturing tax since it went into effect with other mandates and taxes on Jan. 1, 2013. The Congressional Budget Office estimates a repeal of the tax would cost the federal government more than $24 billion over the next decade in revenue, adding to the national deficit.

But supporters on both sides of the aisle have argued for freezing or eliminating the tax, citing the burden it places on industry through a 2.3 percent sales tax. Some pushing for such a freeze, such as U.S. Rep. Alma Adams, D-N.C., have said the tax hampers the biotechnology and medical industries’ ability to innovate and expand, creating jobs.

North Carolina’s Republican members of the House of Representatives support repealing the tax, as well as postponing the ACA’s “Cadillac tax” on the most expensive health insurance plans.

A vote on the $1.1 trillion spending deal is expected in the House on Friday. The Senate also might take up the issue as early as Friday, following the House vote.

As proposed in this week’s major omnibus spending bill – hammered out by House leaders while the federal government has operated under stopgap spending measures to avoid a shutdown – the medical device tax would be frozen in 2016 and 2017. The sales tax applies to medical devices sold to physicians and other health care professionals, not retail medical equipment sold for in-home use.

The tax freeze would give relief to one of the Research Triangle’s largest employment sectors. Across the state, there are more than 100 medical-device production and manufacturing businesses, according to the North Carolina Biotechnology Center, an economic development nonprofit entity funded by the state.

Those affected companies include N.C. manufacturers who make imaging and X-ray machines and those that produce orthopedic devices and prosthetics.

Also in North Carolina, 360 companies specialize in biotechnology research and development – another industry that would see tax credits proposed under the federal budget deal.

While the tax relief and tax credits are “not a done deal” without a vote, said U.S. Rep. Renee Ellmers of North Carolina, she and other House Republicans are championing the plan as a major hit to President Barack Obama’s Affordable Care Act.

A moratorium on the medical device tax, as well as two other brewing delays of ACA taxes – the “Cadillac tax” and an annual tax imposed on health insurance providers – provides a foundation for what she hopes is the future repeal and replacement of the ACA, Ellmers said Wednesday.

Both the state’s Biotechnology Center and the North Carolina Chamber of Commerce support repealing the medical device tax. Information about how much state companies have paid under the tax since 2013 was not available Wednesday.

Ellmers said the Congressional Budget Office’s finding that the tax moratorium would add to the federal government’s growing deficits presented a “catch-22.” The CBO, she said, can’t measure the industry growth and future investment in the medical manufacturing industry that she thinks would result from tax relief.

Even with a loss in federal tax revenue, she said, “we will see a bigger hit from the loss of innovation” and private investment.

The negotiated spending bill also includes two health-care-related provisions Ellmers shepherded through the House. One places a pause on a federal task force’s recommendation that insurance companies no longer pay for breast cancer screenings for women ages 40 to 49. The other, co-sponsored by U.S. Rep. G.K. Butterfield, D-N.C., expands Medicare coverage for seniors using disposable medical equipment, such as in-home devices diabetics use to treat wounds.

Anna Douglas: 202-383-6012, @ADouglasNews