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Posted: Tuesday, August 19th 2014 at 4:19pm

Audit: 'Obamacare' tax not meeting revenue target

By The Associated Press
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WASHINGTON (AP) -- An "Obamacare" tax on medical devices is falling short of its revenue target because thousands of companies aren't paying it, according to a government audit released Tuesday.

The audit by the Treasury inspector general for tax administration says the IRS needs to do a better job policing the tax. The tax agency, however, doesn't have adequate tools to identify which companies owe it, the audit said.

The report could add fuel to efforts to repeal the tax, which is opposed by Republicans and many Democrats.

While the IRS has taken steps to educate companies about the tax, the agency "faces challenges to definitively identify manufacturers subject to the medical device excise tax reporting and payment requirements," said the inspector general, J. Russell George.

To help pay for President Barack Obama's health law, Congress enacted a 2.3 percent tax on the sale of medical devices used chiefly by doctors and hospitals, such as pacemakers and CT scan machines. Consumer items are exempted, including eyeglasses, contact lenses and hearing aids.

The tax took effect in January 2013. For the first six months of that year, the IRS estimated it would collect $1.2 billion from the tax. The audit said the IRS collected only $913 million - 24 percent less than the estimate.

The tax is projected to generate $29 billion over the coming decade, so a 24 percent shortfall - if it were sustained - would be significant.

Companies subject to the tax are required to file quarterly tax forms with the IRS.

The IRS estimated it would receive between 9,000 and 15,600 returns for the first two quarters of 2013, the audit said. But the IRS received only 5,107 returns, suggesting that thousands of companies either don't know about the requirements or are simply ignoring them.

The IRS did not immediately respond to a request for comment. As part of a written response in the audit, the IRS said it conducted extensive outreach to educate medical device companies about the tax. The IRS also said it is working on better ways to identify companies that owe the tax.

The medical device industry has been lobbying hard to get the tax repealed, and there has been movement in Congress. Both the House and the Senate have passed separate pieces of legislation calling for the tax to be repealed, though the Senate vote was on a nonbinding resolution.
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