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ADA asks Senate to consider tax reform legislation to assist dentists, patients

September 20, 2017

By Jennifer Garvin

Washington — The ADA has reached out to the Senate Committee on Finance and asked legislators to consider specific tax reform priorities — including higher education incentives and the use of pretax dollars for health care — that would assist dentists and their patients.

During the committee’s Sept. 19 hearing on business tax reform, the legislators listened to testimonies and examined ways to create a “healthier economic environment” with Sen. Orrin Hatch, R-Utah, chair, Senate Committee on Finance, noting in his opening remarks that the committee is “the starting point for any tax reform legislation that is considered in the Senate.”

In a Sept. 15 letter to Sen. Hatch and Ranking Member Ron Wyden, D-Oregon, ADA President Gary L. Roberts and Executive Director Kathleen T. O’Loughlin thanked the senators for their efforts to “to improve our current tax system” and considering the Association’s priorities.

“For the most part, dental offices are small businesses,” wrote Drs. Roberts and O’Loughlin. “Some are organized as pass-through entities or S corporations, others as C corporations. For this reason, our interests straddle both the business and individual portions of the tax code.”

As it did in a similar letter in July, the Association once again provided brief overviews of four tax policy matters important to ADA members and dental patients:

  • Higher education incentives: “Dentists just starting a practice today are saddled with an average of $261,149 of student loan debt. ADA encourages lawmakers to consider measures that would help relieve this significant debt load when considering options for streamlining the current patchwork of higher education tax incentives.” 
  • Use of pretax dollars for health care: “ADA supports expansion and increasing flexibility of health saving accounts and flexible spending accounts, as well as preservation of the current tax exclusions for employer-provided medical and dental plans. Specifically, the Association supports returning the FSA limits to the pre-Affordable Care Act level of $5,000 and continuation of the index to inflation provision.” The letter said FSA reimbursement is now limited to $2,500. 
  • Cash accounting: “ADA supports the continued use of the cash method of accounting for small businesses, including pass-through entities and professional service corporations. The cash method of accounting is a simpler, fairer system for dentists who often must wait a significant amount of time before being reimbursed by insurance companies.” 
  • Pass-through entities: “As Congress looks to reduce the tax rate on C corporations, ADA encourages you also to consider a rate reduction for S corporations or pass-through entities that are taxed at the individual rate.” Class C corporations' profits are taxed separately from its owners under Subchapter C of the Internal Revenue Code, according to the Internal Revenue Service. In an S corporation, the profits are taxed based on personal returns.
During the hearing, Sen. Pat Toomey, R-Penn., observed that allowing companies to use the cash method of accounting could also “align their cash flow better with their tax obligations” and Ranking Member Wyden noted that President Donald Trump’s “plan to create a special pass-through business income rate” would mostly benefit the “top 1 percent” of the population.

Follow all of the ADA’s advocacy efforts at ADA.org/advocacy.