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Saturday, July 19, 2014
Using Points to Beat ObamaCare Excise
Originally Published on forbes.com on July 18th,2011
The Patient Protection Care Act of 2010, sometimes derisively referred to as ObamaCare, has a lot of elements. There is a heated constitutional argument going on as to whether doing nothing (i.e. not buying health insurance) constitutes interstate commerce. I’ve written about that previously. That part of the law is not effective yet. At lease one element of the law has gone into effect. The law added Section 5000B to the Internal Revenue. 5000B is an excise tax onindoor tanning services. Whatever the charge is for your indoor tanning services 10% is added to it. I guess that is to help pay for all the bad health things that indoor tanning does to people. At the moment I’m sitting here with a literally crippling sun burn from the free outdoor tanning service provided by the universe. That’s one way to beat the excise tax. For those of you, who like to risk skin cancer indoors, though, the IRS has given you a blueprint for beating the new excise tax.
Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so,rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant. Judge Learned Hand
That was the anthem of the tax shelter industry in the 1980′s. So here is the secret to beating the excise tax on tanning services. Use your bonus points to pay for tanning services. This is not some creative scheme. It comes straight from the IRS Chief Counsel (CCA 201128024):
Reward points redeemed by customers in exchange for indoor tanning services aren’t subject to indoor tanning services excise tax, and such applies only to cash paid for services to extent that any cash is paid in addition to points in exchange for indoor tanning services. And, there may be permissible methods to calculate taxable portion of bundled services other than ratio method under Reg § 49.5000B-1T(d)(3) .