Year-end action on medical device excise tax remains uncertain

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October 2019

Overview

Congress recessed at the end of September for a two-week period and is scheduled to return October 15 for a six-week legislative work period leading up to Thanksgiving. Having passed a ‘continuing resolution’ (CR) to fund the federal government through November 21, Congress will focus on completing the fiscal year 2020 appropriations process; however, a second CR into early or mid-December appears likely.

As Congress enters the 2019 legislative home stretch, lawmakers possibly could adjourn for the year without passing a year-end tax package addressing expired and expiring tax provisions (‘tax extenders’). If Congress fails to act before year-end, the medical device excise tax (MDET) will be reinstated on January 1, 2020, when the current two-year suspension expires.

There are several factors contributing to the risk that Congress may not address the MDET before 2020. First, the Senate has only 38 legislative days remaining and the House just 28 legislative days. Second, tax issues generally must compete for time on the Congressional agenda with other priorities, such as prescription drug pricing legislation and the US-Mexico-Canada Agreement (USMCA), within the jurisdiction of the House and Senate tax-writing committees. In addition, the House impeachment inquiry adds uncertainty to the fall legislative agenda.

The takeaway

A shrinking legislative calendar and competing legislative priorities, combined with the possible impact of the House impeachment inquiry on the Congressional agenda, could affect prospects for year-end tax legislation. While there is bipartisan interest in further delaying or repealing the MDET, medical device manufacturers and importers should evaluate their readiness to comply with the potential reinstatement of the MDET beginning January 1, 2020. 

This evaluation should include a review of changes to their business since 2015 and an assessment of the availability and flexibility of their legacy compliance procedures (e.g., registration, collection, remittance), as applicable. Given the limited time available, it may be prudent for manufacturers and importers to prioritize needs to make initial deposits and separately consider their long-term compliance strategy. Companies also should consider the potential need for a financial statement disclosure related to the MDET.

Contact us

Michelle Lee

Health Industry & Pharma Life Science Tax Leader, PwC US

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