The Patient Protection and Affordable Care Act, better known as Obamacare, just can’t stay out of the news. Obviously the biggest update is the Supreme Court’s decision to review the law, though I have a feeling that even if they rule 9-0 in favor of the thing it’s just going to keep on coming up again and again.
Case in point: Not long ago, the US Treasury Inspector General for Tax Administration (TIGTA) issued a report on how few small businesses are taking advantage of tax credits created by Obamacare (If you want to read the report, be my guest, though be warned that it is a PDF link). I’m not really sure why anyone’s concerned that the government can’t give away enough money, but I guess there’s some reasoning behind the whole thing.
Since no government report can be issued without a committee to discuss the possibility of another report, the House Ways and Means Subcommittee on Oversight decided to get to the root of the “Not Enough Credits Given” problem on November 15, 2011.
I can tell you the problem after about 10 minutes of looking through the relevant code section. This credit is dictated by IRC Sec. 45R (the “R” stands for “Really Confusing”). If you want some help going to sleep at night, search for IRC Sec. 45R and try to give that thing a read.
Here’s a taste:
Simple, right? Now, following that is 3 pages of exceptions, phase-outs, limitations, etc.
Yeah…the whole thing make no sense.
The Subcommittee came to the same conclusion. One of the expert witnesses , Patricia Thompson, CPA, stated that small businesses “are perplexed about how the tax law applies to them.” She further added that it was “not uncommon this year for tax preparers to have spent up to 20% of the time necessary to prepare and entire small business return just on the credit calculation, only to learn that the client did not qualify for the credit.”
In other words, accountants have to charge small businesses so much to figure out the credit, that even if the business gets the credit (which it often doesn’t) any gains go straight to the accounting firm.
Additionally, confusing sections like these that offer taxpayers credits are usually the most heavily audited by the IRS (see DPAD and R&D Credit). Which, of course, means audit defense, so more money for the CPA firm.
They really should have named Obamacare “The Accounting Full Employment Act.” It probably helps explain why unemployment for accountants is only about 2.2%.
Remember when Nancy Pelosi famously said that “we have to pass the bill [Obamacare] so you can find out what is in it.” It’s passed. Looks like we still have no clue what the darn thing says.