The New York Times reports that Congress has passed a $1.8 trillion package of spending and tax cuts which includes a two-year-long suspension of the medical device tax and a permanent extension of the research and experimentation tax credit (R&D tax credit). This came after an agreement between Republican and Democratic negotiators in the House reached on Tuesday, December 15, 2015. Shortly after its passage by Congress, President Obama signed the bill into law. Under the spending and tax measure, the medical device tax will be suspended for 2 years through the end of 2017, effective January 1, 2016.
According to a press release from Rep. Erik Paulsen (R-MN), the medical device tax was initially passed in the Affordable Care Act in 2010 and took effect in 2013. The Affordable Care Act imposed 2.3% excise tax on the sale of a diverse range of medical devices including pacemakers, ventilators, and artificial hips. The medical device tax has received significant criticism for the burden it placed on new entrants to and small players in the medical device space. Discussion regarding its repeal have been ongoing for quite some time.
In a joint press release, medical device industry groups including the Medical Device Manufacturers Association (MDMA), Advanced Medical Technology Association (AdvaMed), and Medical Imaging & Technology Alliance (MITA) applauded Congress for passage of the two-year suspension of the medical device excise tax in year-end legislation.
The R&D tax credit was originally introduced in the Economic Recovery Act of 1981 and has been temporarily extended since then. According to a press release issued by the Aerospace Industries Association, the most recent R&D tax credit extension lapsed at the end of 2014. Rep. Scott Peters (D-CA) lauded the permanent extension of the R&D tax credit and pointed out that: “with the credit made permanent, innovators know they can rely on this tax incentive to invest in their ideas.”