Code Section 139A

Code Section	Effective Date	Name of Act	Name of Provision	10yr Revenue Estimate ($millions)
139A	12/31/2012	Patient Protection and Affordable Care Act	Repeal Business Deduction for Federal Subsidies for Certain Retiree Prescription Drug Plans	4,500

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Repeal Business Deduction for Federal Subsidies for Certain Retiree Prescription Drug Plans

Explanation of Provision

The provision eliminates the rule that the exclusion for subsidy payments is not taken into account for purposes of determining whether a deduction is allowable with respect to retiree prescription drug expenses. Thus, under the provision, the amount otherwise allowable as a deduction for retiree prescription drug expenses is reduced by the amount of the excludable subsidy payments received.

For example, assume a company receives a subsidy of $28 with respect to eligible drug expenses of $100. The $28 is excludable from income under section 139A, and the amount otherwise allowable as a deduction is reduced by the $28. Thus, if the company otherwise meets the requirements of section 162 with respect to its eligible drug expenses, it would be entitled to an ordinary business expense deduction of $72.

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