California’s new Managed Care Organization Tax imposes tax burdens as well as provides relief

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May 2016

Overview

On March 1, 2016 California Governor Jerry Brown (D) signed a restructured Managed Care Organization (MCO) tax package, the day after the legislature passed the package.  Beginning on July 1, 2016, the new MCO tax will be imposed on all health plans and will levy an estimated $1.3 billion in tax on the affected health plans in 2016-2017.  The new MCO tax also provides that health plans will receive certain income exclusions for Corporate Franchise Tax purposes and affiliate insurers will receive a reduction of the gross premiums tax rate to zero percent.  With these changes, however, certain questions remain unanswered.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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